HELIOS TECHNOLOGIES, INC. Fourth Quarter 2020 Earnings
March 1, 2021
Josef Matosevic
President & CEO
Tricia Fulton
Chief Financial Officer
Tania Almond
VP, IR and Corp. Comm.
Safe Harbor Statement
This presentation and oral statements made by management in connection herewith that are not historical facts are "forward‐looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward‐looking statements involve risks and uncertainties, and actual results may differ materially from those expressed or implied by such statements. They include statements regarding current expectations, estimates, forecasts, projections, our beliefs, and assumptions made by Helios Technologies, Inc. ("Helios" or the "Company"), its directors or its officers about the Company and the industry in which it operates, and assumptions made by management, and include among other items, (i) the Company's strategies regarding growth, including its intention to develop new products and make acquisitions; (ii) the timing of completion of the proposed acquisition of Balboa Water Group (the "Acquisition") and the expected benefits and synergies from the Acquisition; (iii) the Company's financing plans; (iv) trends affecting the Company'sfinancial condition or results of operations; (v) the Company's ability to continue to control costs and to meet its liquidity and other financing needs; (vi) the declaration and payment of dividends; and (vii) the Company's ability to respond to changes in customer demand domestically and internationally, including as a result of standardization. In addition, we may make other written or oral statements, which constitute forward-looking statements, from time to time. Words such as "may," "expects," "projects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. Similarly, statements that describe our future plans, objectives or goals also are forward-looking statements. These statements are not guaranteeing future performance and are subject to a number of risks and uncertainties. Our actual results may differ materially from what is expressed or forecasted in such forward- looking statements, and undue reliance should not be placed on such statements. All forward-looking statements are made as of the date hereof, and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Factors that could cause the actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to, (i) conditions in the capital markets, including the interest rate environment and the availability of capital; (ii) the risk that the Acquisition will not be consummated in a timely manner or at all, our failure to realize the benefits expected from the Acquisition, our failure to promptly and effectively integrate the Acquisition and the ability of Helios to retain and hire key personnel, and maintain relationships with suppliers; (iii) risks related to health epidemics, pandemics and similar outbreaks, including, without limitation, the current COVID-19 pandemic, which may have material adverse effects on our business, financial position, results of operations and cash flows; (iv) changes in the competitive marketplace that could affect the Company's revenue and/or costs, such as increased competition, lack of qualified engineering, marketing, management or other personnel, and increased labor and raw materials costs; and (v) new product introductions, product sales mix and the geographic mix of sales nationally and internationally. Further information relating to factors that could cause actual results to differ from those anticipated is included but not limited to information under the heading Item 1. "Business", Part I, Item 1A. "Risk Factors" in the Company's Form 10-K for the year ended December 28, 2019 and Part II, Item IA, "Risk Factors" in the Company's Form 10-Q for the quarter ended September 26, 2020 and other filings with the Securities and Exchange Commission.
Helios has presented forward-looking statements regarding non-GAAP cash EPS and Adjusted EBITDA margin. These non-GAAP financial measures are derived by excluding certain amounts, expenses or income from the corresponding financial measures determined in accordance with GAAP. The determination of the amounts that are excluded from these non-GAAP measures is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income recognized in a given period. Helios is unable to present a quantitative reconciliation of forward-looking non-GAAP cash EPS and Adjusted EBITDA margin to their most directly comparable forward-looking GAAP financial measures because such information is not available, and management cannot reliably predict all the necessary components of such GAAP measures without unreasonable effort or expense. In addition, the Company believes that such reconciliations would imply a degree of precision that would be confusing or misleading to investors. The unavailable information could have a significant impact on Helios's full year 2020 financial results. These non-GAAP financial measures are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter-end and year-end adjustments. Any variation between Helios's actual results and preliminary financial data set forth above may be material.
This presentation includes certain historical non-GAAP financial measures, which the Company believes are useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. The Company has provided reconciliations of comparable GAAP to non-GAAP measures in tables found in the Supplemental Information portion of this presentation.
Q4 2020 Business Summary
EXECUTING TO PLAN diversification of end markets; CREATING GROWTH opportunities; delivering results
SPINNING THE M&A FLYWHEEL: acquired BALBOA WATER GROUP AC (alternating current) Electronic Controls Technology currently for Health/Wellness industry
Established HELIOS CENTER OF ENGINEERING EXCELLENCE: Expanded engineering talent with acquisition of BJN Technologies in January 2021
STRONG DEMAND IN ALL END MARKETS, in particular AGRICULTURE, MARINE and
HEALTH/WELLNESS drove continued sequential top line growth
Demonstrated SIGNIFICANT CASH GENERATION CAPABILITIES: $31.5 million cash from operations in the quarter with Cash conversion of 204% for 2020
Helios Subsidiary Receives John Deere Supplier
Innovation Award
➢ Helios's subsidiary, Faster S.r.l., has been selected as a recipient of the
John Deere Supplier Innovation Award for 2020 for its multi-connection couplings with integrated valve system.
➢ Award selections are based on four factors: creativity, feasibility, collaboration, and bottom-line impact.
➢ "Our subsidiary, Faster S.r.l., supplies quick release couplings to John Deere operations throughout the world. In synergy with our Sun Hydraulics LLC business, our engineering teams have combined the advantages and features of MultiFaster® and Sun electro-hydraulic cartridge valves into an integrated manifold, reducing complexity and increasing reliability of the hydraulic circuit as a result." - commented Josef Matosevic, the Company's President and Chief Executive Officer
Picture: The Helios Technologies multi-connection couplings with integrated valve system
($ in millions, except per share data)
Q4 2020 Financial Results Highlights
(1) Note: Q4 2020 Operating margin includes $1.9 million of inventory step-up amortization related to Balboa acquisition, $7.1 million of acquisition- and financing-related costs and $0.4 million of integration and officer transition costs.
($ in millions, except per share data)
Q4 2020 Financial Results Highlights
$5.6
Net Income
(60%) YoY
(57%) QoQ
$0.60
Non-GAAP Cash EPS(2)
11% YoY
13% QoQ
23.2%
Adj. EBITDA Margin(1)YoY
QoQ
Sales ➢ Strong sequential and year-over-year growth
Adjusted EBITDA Margin ➢ 23.2% was inline with prior year
Non-GAAP Cash EPS ➢ Balboa performance exceeded expectations
(1) See supplemental slide for Adjusted EBITDA reconciliation and other important information regarding Helios's use of Adjusted EBITDA
(2) See supplemental slide for Non-GAAP Cash Net Income reconciliation and other important information regarding Helios's use of Non-GAAP Cash Net Income and EPS
Note: YoY = year-over-year | QoQ = quarter-over-quarter
($ in millions, except per share data)
Q4 - Consolidated Results
Sales
Gross Profit/Gross Margin(1)
$151.6
Q4 2019
6000.0%
5000.0%
4000.0%
3000.0%
2000.0%
1000.0%
0.0%
Q1 2020
Q2 2020
Hydraulics
Q3 2020
Electronics
Q4 2020
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Operating/Adj. Op. Margin
Net Income(3)
-$17.2
Q4 2019
Q1 2020
Operating Margin
Q2 2020
Q3 2020
Q4 2020
(2)
Adjusted Operating Margin
(1) Note: Q4 2020 gross margin includes $1.9 million of inventory step-up amortization related to Balboa acquisition
Q4 2019
Q1 2020
(2) See supplemental slide for Adjusted Operating Margin reconciliation and other important information regarding Helios's use of Adjusted Operating Margin
(3) In Q1 2020 a goodwill impairment charge of $31.9 million is included in Net Income
Q2 2020
Q3 2020
Q4 2020
($ in millions, except per share data)
Adjusted EBITDA Margin(1)
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Non-GAAP Cash EPS(2)
Q4 2020
Q4 2020
Q4 - Consolidated Results
Gross Margin ➢ Impact from gross margin difference of Balboa
Acquisition product profile, with lower SEA expenses compared to Helios Electronics segment
Adjusted EBITDA Drivers ➢ Strong operating margin profile of Balboa Acquisition
➢
Effective cost management efforts, productionefficiencies
Non-GAAP Cash EPS Drivers
Q4 2019
Q1 2020
Q2 2020
Q3 2020
➢ Better than expected performance of Balboa acquisition
EFFECTIVE EXECUTION OF STRATEGY DEMONSTRATED BY STRONG RESULTS
(1) See supplemental slide for Adjusted EBITDA reconciliation and other important information regarding Helios's use of Adjusted EBITDA
(2) See supplemental slide for Non-GAAP Cash Net Income reconciliation and other important information regarding Helios's use of Non-GAAP Cash Net Income and EPS
Q4 2020 Sales by Region
Q4 - Hydraulics Segment
Gross Profit
($ in millions)
Sales
$102.5
$103.0
$37.2
$37.6
36.3% | 36.5% |
Operating Income
$20.3
$19.6
19.8% | 19.0% |
Fourth Quarter Highlights
Sales Drivers ➢ Gaining new customers, leveraging customer relationships, deeper geographic reach, new products
➢ Broad end market recovery and strength in Agriculture drove sales $4.8 million, or 5% higher sequentially
➢ Sales were in line with prior-year period
➢ Exceeded expectations
Gross Margin Drivers
➢ 20 basis point expansion due to favorable mix and cost containment efforts
Operating Margin
➢ 80 basis point decline due primarily to foreign currency
translation
Q4 2020 Sales by Region
Gross Profit
($ in millions)
Sales $48.6
$17.0
Operating Income
$9.0
Q4 - Electronics Segment
Fourth Quarter Highlights
Sales Drivers
➢ $24.2 million, or 99% sequential growth
➢ Balboa revenue was $26 million
➢ Certain end markets including marine and health and wellness doing very well as a result of pandemic buying shifts
Gross Margin Drivers
➢ Continued investment in product development for contracted product pipeline and Balboa's product gross margin profile
➢
Margin decline also from reduced fixed cost leverage in
Enovation's business
Operating Margin Drivers
➢ Leverage offset from lower sales volumes by cost
containment efforts and favorable operating margin
profile at Balboa
($ in millions)
Three Months Ended | YTD | YTD | ||
1/2/21 | 12/28/19 | 1/2/21 | 12/28/19 | |
Net cash provided by operating activities | 31.6 | 39.6 | 108.5 | 90.5 |
CapEx | (7.4) | (5.4) | (14.5) | (25.0) |
Free cash flow (FCF) | $24.2 | $34.2 | $94.0 | $65.5 |
Note: Components may not add to totals due to rounding
Outstanding cash generation in Q4 2020
• Focus on working capital management drove free cash flow
• 2020 CapEx intentionally lower than historical rates at ~3% of sales; expect 2021 CapEx closer to growth investment level of ~5% of sales
• Sustainable changes in operational efficiency expected to continue to drive cash generation
2017
Cash Flow
Free Cash Flow(a)
2018
2019
2020
SIGNIFICANT FREE CASH FLOW GENERATION PROVIDES FINANCIAL FLEXIBILITY
(a) Free cash flow is defined as cash provided by operating activities minus capital expenditures (b) 2019 Free cash flow adjusted for $10.7m contingent liability that impacted operating cash flow instead of financing (c) free cash flow conversion is defined as free cash flow divided by net income; in 2020 adjusted for a goodwill impairment of $31.9m in Q1 2020
($ in millions)
Capitalization | ||
1/2/21 | 12/28/19 | |
Cash and cash equivalents | $25.2 | $22.1 |
Total debt | 462.4 | 300.4 |
Total net debt | 437.2 | 278.3 |
Shareholders' equity | 607.8 | 577.6 |
Total capitalization | $1,070.2 | $878.0 |
Debt/total capitalization | 43.2% | 34.2% |
Net debt/net total capitalization | 41.8% | 32.5% |
Note: Components may not add to totals due to rounding
Financial flexibility
Q4 Capital Structure
• Generated $32 million of cash in the quarter, and $109 million for fiscal 2020
• Total debt increase of $202 million and net debt by $209 million in Q4 2020 as a result of the Balboa Acquisition
• Net debt/pro forma Adjusted EBITDA: 3.0x(1) - better than expected
• Generating cash to reduce debt and keep the flywheel spinning
• Total liquidity of $169 million at quarter end
• Consistent dividend payer over the last twenty-four years
STRONG CAPITAL STRUCTURE SUPPORTS CURRENT STRATEGY
(1) Pro Forma for the Balboa acquisition. See supplemental slide for net debt-to-Pro Forma Adjusted EBITDA reconciliation and other important information regarding Helios's use of net debt-to-Pro Forma Adjusted EBITDA.
2021 Outlook
2020 Actual | 2021 Outlook | |
Consolidated revenue | $523 million | $675 - $705 million |
Adjusted EBITDA margin | 23.2% | 23% - 24% |
Interest expense | $13 million | $16 - $18 million |
Effective tax rate* | 17.6% | 24% - 26% |
Depreciation | $18 million | $22 - $24 million |
Amortization | $22 million | $30 - $31 million |
Capital expenditures | ~3% of sales | ~5% of sales |
Non-GAAP Cash EPS | $2.24 | $2.75 - $3.10 |
* Excludes goodwill impairment charge in 2020 Actual |
DRIVING PROFITABLE GROWTH WHILE INVESTING FOR THE FUTURE
Note: This assumes constant currency rates and that markets served continue to recover from the global pandemic.
Strategic Direction
Our Purpose
✓
▪ Our trusted global brands deliver technology solutions that ensure safety, reliability, connectivity and control
Our Mission
✓
▪ Protect the Business
▪ Think & Act Globally
▪ Diversify Markets and Revenue
▪ Develop Talent
Continued confidence in successful execution of strategy with augmented value streams
✓
DRIVING GROWTH AND MARKET EXPANSION
Supplemental Information
($ in millions, except per share data)
Sales
$523.0
$554.7
$111.9 | $116.0 |
$442.8 | |
$407.0 |
2019
Hydraulics
2020
Electronics
2020 Consolidated Results
Gross Profit / Gross Margin
25000.0%
$212.3
$196.2
20000.0%
15000.0%
10000.0%
5000.0%
0.0%
38.3% | 37.5% |
2019
2020
Adjusted EBITDA Margin(1)
Non-GAAP Cash EPS(2)
2019
2020
2019
2020
SOLID PROFITABILITY DUE TO PRODUCTIVITY IMPROVEMENTS AND DISCIPLINED COST MANAGEMENT
(1) See supplemental slide for Adjusted EBITDA reconciliation and other important information regarding Helios's use of Adjusted EBITDA
(2) See supplemental slide for Non-GAAP Cash Net Income reconciliation and other important information regarding Helios's use of Non-GAAP Cash Net Income and EPS
2020 Segment Results
Hydraulics
($ in millions)
Sales
Gross ProfitOperating Income
($ in millions)
Sales
Electronics
Gross ProfitOperating Income
$86.0
$82.0
19.4% | 20.1% |
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
➢ Sales volume adversely impacted by temporary factory closures and softer end market demand as a result of the COVID-19 pandemic
➢ Gross margin expansion of 50 bps and operating margin expansion of 70 bps
• Consolidation related production efficiencies
• Rapid cost alignment with changed environment
• Some restructuring and other expenses last year
➢ Drivers of sales volume:
• Impact of COVID-19
• Incremental revenue from Balboa
• Intentional shift in customer base
➢ Gross and operating margin reduction resulting from lower sales volume, partially offset by cost management initiatives
Segment Data
Three Months Ended For the Year Ended ($ in thousands) January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019 |
Sales: |
Hydraulics $ 103,079 $ 102,550 $ 407,192 $ 442,812 |
Electronics 48,539 23,377 115,848 111,853 |
Consolidated $ 151,618 $ 125,927 $ 523,040 $ 554,665 |
Gross profit and margin: |
Hydraulics $ 37,617 $ 37,248 $ 150,312 $ 161,401 |
36.5% 36.3% 36.9% 36.4% |
Electronics 16,973 10,179 47,790 50,881 |
35.0% 43.5% 41.3% 45.5% |
Corporate and other (1,874) - (1,874) - |
Consolidated $ 52,716 $ 47,427 $ 196,228 $ 212,282 |
34.8% 37.7% 37.5% 38.3% |
Operating income and margin: |
Hydraulics $ 19,584 $ 20,275 $ 81,996 $ 86,027 |
19.0% 19.8% 20.1% 19.4% |
Electronics 8,963 3,016 19,363 21,994 |
18.5% 12.9% 16.7% 19.7% |
Corporate and other (18,147) (4,519) (65,947) (17,906) |
Consolidated $ 10,400 $ 18,772 $ 35,412 $ 90,115 |
6.9% 14.9% 6.8% 16.2% |
(Unaudited)
Sales by Geographic Region & Segment
2020 Sales by Geographic Region and Segment ($ in millions)
Q1
2019 Sales by Geographic Region and Segment ($ in millions)
% Change y/yQ2
% Change y/yQ3
% Change y/yQ4
% Change y/yYTD 2020
% Change y/yQ1
% Change y/yQ2
% Change y/yQ3
% Change y/yQ4
% Change y/yYTD 2019
% Change y/y
Americas: Hydraulics Electronics Consol. Americas $ 37.3 21.6
(17%) 34.2 13.4
(50%) 27.7 21.4
(11%) 58.9(13%) 47.6(30%) 49.1(27%) 31.3 37.5 68.8 (14%) $ 130.5 (20%) 92% 24%
| Americas: Hydraulics $ 41.6 58% $ 41.2 4% $ 43.3 13% $ 36.2 (18%) $ 162.3 9% |
Electronics Consol. Americas 26.1 67.7 (13%) 20% 26.6 67.8 (5%) 0% 24.0 67.3 (12%) 2% 19.5 55.7 (17%)
| |
% of total 45% 40% 40% 45% 43% | % of total 46% 47% 49% 44% 47% |
EMEA:
EMEA:
Hydraulics Electronics Consol. EMEA % of total
33.5 2.5 36.028%
(20%) 0% (19%)
31.2 1.9 33.128%
(15%) 6% (14%)
32.1 1.5 33.627%
1% (29%)
34.4 4.9 39.3 26%
11% 145% 19%
131.2 10.8 142.0
(7%) Hydraulics
29% Electronics
(1%)
27%
(5%) Consol. EMEA % of total
41.8 2.5 44.330%
113% (7%) 99%
36.8 1.8 38.627%
(11%)
(9%) (33%)
31.9 2.1 34.025%
(8%) (22%)
(9%)
31.1 (11%) 141.6 9% 2.0 0% 8.4 (17%) 33.1 (10%) 150.0 7% 26% 27%
APAC: Hydraulics Electronics Consol. APAC $ 33.0 1.6 34.6
(11%) (1%) 36.7 1.9 38.6
38.4 1.5 39.9
(17%) 9% 37.4 6.1 43.5 6% $ 145.5 5% 221% 17%
| APAC: Hydraulics Electronics Consol. APAC 33.1 1.8 34.9 99% (5%) 89% 35.7 1.7 37.4 53% (15%) 47% 34.9 1.8 36.7 12% 13% 12% 35.2 1.9 37.1 9% 12% 9%
|
% of total 27% 32% 33% 29% 30% | % of total 24% 26% 26% 29% 26% |
$ 554.7
Total
$ 129.5(12%)
$ 119.3(17%)
$ 122.6(11%)
$ 151.6
20%
$ 523.0
(6%)
Total
$ 146.9
51%
$ 143.8
6%
$ 138.0
2%
$ 125.9
(9%)
9%
Adjusted Operating Income Reconciliation
(Unaudited)
($ in thousands)
Three Months EndedJanuary 2, 2021
September 26, 2020
June 27, 2020
March 28, 2020
December 28, 2019
GAAP operating income
$
(10,033) $ 18,772
Acquisition-related amortization of intangible assets Acquisition and financing-related expenses Restructuring charges
CEO and officer transition costs Loss on disposal of intangible asset Goodwill impairment
Other
Inventory Step-up amortization M&A Integration Costs
10,400 $ 8,791 7,088 - 161 - - - 1,874 257
18,343 $ 4,558 101 64 622 - - - - -
16,702 $ 4,417
4,348 4,521
- 298 1,644 - - - - -74 165 622 - 31,871 - - -
- - - - - - - -
Non-GAAP adjusted operating income
$
$
$
$
27,047
$
23,293
GAAP operating margin
Non-GAAP Adjusted operating margin
20.4% 18.5%
28,571 6.9% 18.8%
23,688 14.9% 19.3%
23,061 14.0% 19.3%
-7.7% 14.9%
Non-GAAP Financial Measure:
Adjusted operating margin is adjusted operating income divided by sales. Adjusted operating income and adjusted operating margin are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, Helios believes that providing non-GAAP information such as adjusted operating income and adjusted operating margin are important for investors and other readers of Helios's financial statements, as they are used as analytical indicators by Helios's management to better understand operating performance. Because adjusted operating income and adjusted operating margin are non-GAAP measures and are thus susceptible to varying calculations, adjusted operating income and adjusted operating income margin, as presented, may not be directly comparable to other similarly titled measures used by other companies.
Adjusted Operating Income Reconciliation
(Unaudited)
($ in thousands)
Three Months Ended
For the Year EndedJanuary 2, 2021
December 28, 2019
January 2, 2021
December 28, 2019
GAAP operating income
$
35,412 $ 90,115
Acquisition-related amortization of intangible assets Acquisition and financing-related expenses Restructuring charges
CEO and officer transition costs Loss on disposal of intangible asset Goodwill impairment
Other
Inventory step-up amortization M&A integration costs
10,400 $ 8,791 7,088 - 161 - - - 1,874 257
18,772 $ 4,521
22,114 17,924
- - - - - - - -
7,264
361
2,592 -
31,871 -
1,874
257
11 1,724 - 2,713 - 127 - -
Non-GAAP adjusted operating income
$
$
$
101,745
$
112,614
GAAP operating margin
Non-GAAP adjusted operating margin
19.5% 20.3%
28,571 6.9% 18.8%
23,293 14.9% 18.5%
6.8% 16.2%
Non-GAAP Financial Measure:
Adjusted operating margin is adjusted operating income divided by sales. Adjusted operating income and adjusted operating margin are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, Helios believes that providing non-GAAP information such as adjusted operating income and adjusted operating margin are important for investors and other readers of Helios's financial statements, as they are used as analytical indicators by Helios's management to better understand operating performance. Because adjusted operating income and adjusted operating margin are non-GAAP measures and are thus susceptible to varying calculations, adjusted operating income and adjusted operating income margin, as presented, may not be directly comparable to other similarly titled measures used by other companies.
Non-GAAP Cash Net Income Reconciliation
(Unaudited)
($ in thousands)
Three Months Ended
For the Year EndedJanuary 2, 2021
December 28, 2019
January 2, 2021
December 28, 2019
Net income
$
$
14,218 $ 60,268
Amortization of intangible assets Acquisition and financing-related expenses Restructuring charges
CEO and officer transition costs Goodwill impairment
Change in fair value of contingent consideration
(47) 652
5,551 $ 8,791 7,088 - 161 - -13,809 4,521 - - - - (51)
22,114 18,065
7,264 361 2,592 31,871
11 1,724 - -
Loss on disposal of intangible asset - - - 2,713
Other - - - 127
Inventory step-up amortization M&A integration costs
Tax effect of above
1,874 257 (4,543)
- - (1,118)
1,874 257 (8,604)
- - (5,823)
Non-GAAP cash net income
Non-GAAP cash net income per diluted share
$ $
19,179 0.60
$ $
17,161 0.54
$ $
71,900 2.24
$ $
77,737 2.43
Non-GAAP Financial Measure:
Adjusted net income per diluted share is adjusted net income divided by diluted weighted average common shares outstanding. Cash net income per share is cash net income divided by diluted weighted average common shares outstanding. Adjusted net income, adjusted net income per diluted share, cash net income and cash net income per diluted share are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, Helios believes that providing non-GAAP information such as adjusted net income, adjusted net income per diluted share, cash net income and cash net income per diluted share is important for investors and other readers of Helios's financial statements, as they are used as analytical indicators by Helios's management to better understand operating performance. Because adjusted net income, adjuste d net income per diluted share, cash net income and cash net income per diluted share are non-GAAP measures and are thus susceptible to varying calculations, adjusted net income, adjusted net income per diluted share, cash net income, and cash net income per diluted share, as presented, may not be directly comparable to other similarly titled measures used by other companies.
Adjusted EBITDA Reconciliation
Three Months Ended For the Year Ended
(Unaudited)
($ in thousands)
January 2, 2021
December 28, 2019
January 2, 2021
December 28, 2019
Net income
$
5,551 $
14,218 $ 60,268
1,605
9,829 15,039
25,760
77,028
125,909
Interest expense, net Income tax provision Depreciation and amortization EBITDA
4,714
13,890
Acquisition and financing-related expenses Restructuring charges
7,088 -
CEO and officer transition costs Goodwill impairment
Loss on disposal of intangible asset Other
161 - - -
Inventory step-up amortization M&A integration costs
1,874
Change in fair value of contingent consideration Adjusted EBITDA
257 -
13,809 $ 3,164 3,052 9,209 29,234 - - - - - - - - (51)
13,286 15,387
39,695 35,215
7,264
11
361
2,592
31,871 - -
1,724 - -
2,713
1,874
257
127 - -
(47)
652
$
Adjusted EBITDA margin
35,140 23.2%
$
29,183 23.2%
$
121,200 23.2%
$
131,136 23.6%
Balboa Water Group pre-acquisition adjusted EBITDA
22,589
TTM Pro forma adjusted EBITDA
$
143,789
Non-GAAP Financial Measure:
Adjusted EBITDA margin is Adjusted EBITDA divided by sales. Adjusted EBITDA and Adjusted EBITDA margin are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, Helios believes that providing non-GAAP information such as Adjusted EBITDA and Adjusted EBITDA margin are important for investors and other readers of Helios's financial statements, as they are used as analytical indicators by Helios's management to better understand operating performance. Because Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures and are thus susceptible to varying calculations, Adjusted EBITDA and Adjusted EBITDA margin, as presented, may not be directly comparable to other similarly titled measures used by other companies.
Free Cash Flow Reconciliation
(Unaudited)
($ in thousands)
2017
2018
2019
2020
Net cash provided by operating activities
$
$
$
101,211 108,556
Contingent consideration payment in excess of acquisition date fair value Adjusted net cash provided by operating activities
$
27,177 $
49,070 $
76,186 $ 93,111
Capital expenditures and software development costs Adjusted free cash flow
49,382 - 49,382 22,205
77,450 - 77,450 28,380
90,480 $ 10,731
108,556 -
25,025 15,445
Net Income
60,268 14,218
Goodwill Impairment
31,558 -46,730 -
- 31,871
$
$
$
60,268
$ 46,089
Net income, less goodwill impairment Free cash flow conversion
31,558 86%
46,730 105%
126% 202%
Non-GAAP Financial Measure:
Adjusted net cash provided by operating activities is net cash provided by operating activities less contingent consideration payment in excess of acquisition date fair value. Free cash flow is net cash provided by operating activities less capital expenditures. Adjusted free cash flow is adjusted net cash provided by operating activities less capital expenditures. Each of these measures has not been determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, Helios believes that providing this non-GAAP information is important for investors and other readers of Helios's financial statements, as they are used as analytical indicators by Helios's management to better understand our liquidity. Because these are non-GAAP measures, they are susceptible to varying calculations, and as presented, may not be directly comparable to other similarly titled measures used by other companies.
Net Debt-to-Adjusted EBITDA Reconciliation
As of
(Unaudited)
($ in thousands)
January 2, 2021
Current portion of long-term non-revolving debt, net | $ | 16,229 |
Revolving lines of credit | 256,225 | |
Long-term non-revolving debt, net | 189,932 | |
Total debt | 462,386 | |
Less: Cash and cash equivalents | 25,216 | |
Net debt | $ | 437,170 |
TTM Pro forma adjusted EBITDA | $ | 143,789 |
Ratio of net debt to TTM pro forma adjusted EBITDA | 3.0 | |
Note: On a pro-forma basis for the Balboa acquisition. | ||
Non-GAAP Financial Measure: |
Net debt is total debt minus cash and cash equivalents. Net debt-to-Adjusted EBITDA is net debt divided by Adjusted EBITDA. Net debt and net debt-to-Adjusted EBITDA are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, Helios believes that providing non-GAAP information such as net debt and net debt-to-Adjusted EBITDA are important for investors and other readers of Helios's financial statements, as they are used as analytical indicators by Helios's management to better understand operating performance. Because net debt and net debt-to-Adjusted EBITDA are non-GAAP measures and are thus susceptible to varying calculations, net debt and net debt-to-Adjusted EBITDA, as presented, may not be directly comparable to other similarly titled measures used by other companies.
Fourth Quarter 2020 Earnings
March 1, 2021
Josef Matosevic
President & CEO
Tricia Fulton
Chief Financial Officer
Tania Almond
VP, IR and Corp. Comm.
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Helios Technologies Inc. published this content on 01 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 March 2021 00:02:02 UTC.
