Helios Technologies, Inc. (HLIO) | The Buildout — AI Infrastructure
The Verdict
Helios Technologies makes engineered hydraulic and electronic control components — cartridge valves, manifolds, quick-release couplings, displays, and control systems — that go into machines and equipment built by other companies. Its connection to the AI buildout runs through data-center thermal management: the Faster couplings business has launched a portfolio of quick disconnects for liquid-cooling loops, sold to the integrators who build cooling racks and requiring validation by hyperscalers before sale. It is a component-supply role, not compute, networking, power, or software, and management does not describe the company as an AI company.
| Market Cap | — |
| Revenue (TTM) | $891M |
| Revenue Growth | +14.0% |
| EBITDA Margin (TTM) | 16.9% |
| Net Cash | $53M |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- 2026 sales are guided to $880M–$900M, which management says would be the highest annual sales in company history at the midpoint — after divesting roughly $60M of annualized CFP revenue.
- Order intake grew double digits year over year for a fourth consecutive quarter, and July was the best July ever for both revenue and order intake.
- Gross margin expanded year over year for a fourth straight quarter, to 34.6% in Q2 2026, and adjusted EBITDA margin stayed above 20% for a fourth straight quarter.
- Net leverage fell to 1.4x from 2.6x a year earlier, below the company's 1.5x–2.5x target range, and the CFO said net debt was the lowest since Q3 2020.
- The CORE Strategy targets doubling sales by 2030, 20%+ adjusted operating margin, 25%+ adjusted EBITDA margin, and 5%+ organic growth annually; management says it is two quarters into a 20-quarter plan and ahead of plan.
What We’re Watching
- Q3 2026 is guided down sequentially to $215M–$222M with adjusted EBITDA margin down 30 bps year over year at the midpoint; management flags tougher second-half comparisons.
- No data-center thermal revenue is in 2026 guidance, and first sales are now expected in 2027 — the timeline slipped from 'ramping in the back half of the year' on the prior call.
- The biggest Electronics growth driver is 'a large OEM customer' that is unnamed, unquantified, and repeatedly cited as a key contributor to segment outperformance.
- Input-cost pressures — printed circuit boards, memory chips, aluminum, freight fuel surcharges, and European energy — are rising, and Q2 gross profit included about $1M of net IEEPA tariff refunds that management excluded from guidance.
The thesis looks to be strengthening on the core business: two straight quarters of beats and raises, four quarters of double-digit pro forma sales and adjusted earnings growth, expanding margins, and leverage below target. The data-center option is the swing factor and has already slipped once — from a second-half-2026 ramp to first sales in 2027 — so the thesis is really two stories: a core business management says has moved 'from turnaround to takeoff,' and a pre-revenue adjacency management calls its largest opportunity but keeps out of the numbers. The open question is whether the 'imminent' data-center order lands and whether core growth holds through the harder second-half comparisons.
Earnings Beat
Helios reported Q2 2026 net sales of $232 million, up 9% reported and 16% pro forma for the CFP divestiture and FX, at the high end of guidance. Gross margin was 34.6%, up 280 basis points year over year, and adjusted EBITDA margin reached 21.2%, above the guided range. The standout was cash: a Q2 record $42 million of operating cash flow and $31 million of free cash flow.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $232M | $228M | $212M | +9.1% |
| Gross margin | 34.6% | 29.5% | 31.8% | +280bps |
| EBITDA | $48M | $45M | $38M | +26.2% |
| EPS | $0.66 | $0.59 | $0.34 | +92.7% |
| Net leverage (net debt / adjusted EBITDA) | 1.4x | 1.6x | 2.6x | down 1.2x |
We've moved from turnaround to takeoff, and we're entering the second half with increasing altitude, momentum and confidence while navigating through a turbulent macro environment.— Sean Bagan, Chief Executive Officer, 2026-08-11
Management tone: Management's tone shifted between the two calls of record. In Q1 2026 the framing was measured: '2025 was our year of repositioning, 2026 is where that work finds its stride.' By Q2 2026 the CEO declared the two-year stabilization plan complete and said the company had 'moved from turnaround to takeoff.' The company also volunteered the short order book of about one quarter of visibility, disclosed the roughly $1M IEEPA refund benefit and said incremental margins would be lower excluding it, and did not dispute an analyst's observation that Electronics end markets are not growing near double digits.
Management Guidance
Management raised full-year 2026 guidance on the Q2 2026 call: sales to $880M–$900M (implying 12% growth over 2025 at the midpoint), adjusted EBITDA margin to 20.2%–21.0% (bottom raised), and adjusted diluted EPS to $3.05–$3.25. Segment guidance was raised to $555M–$565M for Hydraulics and $325M–$335M for Electronics, with CapEx guided to 4.0%–4.5% of sales. For Q3 2026, management guided sales to $215M–$222M, adjusted EBITDA margin to 19.8%–20.6%, and adjusted diluted EPS to $0.70–$0.77. The company excluded both data-center revenue and IEEPA refunds from guidance.
Trajectory
On the audited quarterly series, revenue has moved between roughly $211 million and $232 million over the last four quarters, and the code-computed read labels the trajectory decelerating even as pro forma year-over-year growth has stayed in double digits for four quarters. Q2 2026 revenue was $232 million, up 9% reported and 16% pro forma, with gross margin at 34.6%; the code flags gross margin as compressing on its series while operating and EBITDA margins expand. Adjusted EBITDA margin reached 21.2%, above the guided range. Management attributes the growth to volume and roughly $60 million of 2025 business wins phasing in, and says footprint and productivity benefits build in the second half of 2026 and into 2027.
The Model
The model projects FY+1 revenue of $900 million and EBITDA of $185 million (20.6% margin), then FY+2 revenue of $980 million and EBITDA of $214 million (21.8% margin). The near-term anchor is the company's raised FY2026 guidance of $880M–$900M in sales and a 20.2%–21.0% adjusted EBITDA margin, plus roughly $60 million of 2025 new-business wins phasing in. FY+2 assumes the footprint and productivity actions land and that the data-center coupling business begins to contribute after first sales are expected in 2027.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $839M | $900M | $980M |
| YoY Growth | — | +7.3% | +8.9% |
| EBITDA | $129M | $185M | $214M |
| EBITDA Margin | 15.3% | 20.6% | 21.8% |
Projections are the median of 4 independent model runs. The model’s revenue sits 12.4% above analyst consensus.
Management raised full-year 2026 guidance on the Q2 2026 call: sales to $880M–$900M (implying 12% growth over 2025 at the midpoint), adjusted EBITDA margin to 20.2%–21.0% (bottom raised), and adjusted diluted EPS to $3.05–$3.25. Segment guidance was raised to $555M–$565M for Hydraulics and $325M–$335M for Electronics, with CapEx guided to 4.0%–4.5% of sales. For Q3 2026, management guided sales to $215M–$222M, adjusted EBITDA margin to 19.8%–20.6%, and adjusted diluted EPS to $0.70–$0.77. The company excluded both data-center revenue and IEEPA refunds from guidance.
What Could Go Right — and Wrong
- The 'imminent' data-center coupling order lands in the second half of 2026 and hyperscaler validation follows, starting a 2027 revenue ramp.
- Order intake extends its double-digit streak and the roughly $60M of 2025 new-business wins phase in as planned, plus the new product launches (QMEH valve, OpenView S70, Balboa range).
- Footprint and productivity actions — the Faster Canada closure, Maumee consolidation, and Tijuana/India/China low-cost centers — deliver the cost benefits management expects in the second half of 2026 and into 2027.
- An agriculture recovery across the named ag OEMs adds a second growth driver to Hydraulics on top of mobile and construction.
- Leverage below target and deprioritized debt paydown free capital for an accretive acquisition, against the roughly $500M acquisition-revenue benchmark management references.
- The data-center order slips again or a hyperscaler disqualifies Helios, leaving the option unvalidated and the clean-room and inventory capital stranded.
- Second-half comparisons prove harder than guided; Q3 already steps down sequentially with adjusted EBITDA margin down 30 bps year over year at the midpoint.
- Input-cost inflation in printed circuit boards, memory, aluminum, freight, and European energy outpaces volume leverage, and IEEPA refunds do not recur.
- The unnamed large OEM customer behind much of Electronics' outgrowth softens, undercutting the segment's growth-without-market-growth story.
- Electronics growth keeps depending on wins against end markets that are not growing near double digits, making the outgrowth hard to sustain into 2027.
Looking Ahead
Over the next 12 months the tests are whether the core momentum carries through the harder second-half comparisons and whether the data-center option starts to convert. Management guides Q3 2026 sales to $215M–$222M and full-year sales to $880M–$900M, and says the September 2026 grand opening of the Faster facility in Maumee, Ohio, is a natural point to 'put some good color' around the data-center plan. The M&A framework is being rebuilt through this year's long-range planning process, with management describing nothing as imminent.
- September 2026Maumee facility opening — Faster site opens; management may give data-center color.
- Q3 2026Q3 2026 earnings — Guided to $215M–$222M sales; tests momentum into harder comps.
- H2 2026First thermal order — Management expects a data-center coupling order 'imminent.'
- Next 6–9 monthsNew Balboa range — Shipments of the new Balboa product range expected within the window.
- 2027Data-center first sales — First thermal revenue expected, with a gradual ramp outward.
- Through 2026Long-range planning — M&A framework develops; an announced transaction is the signpost.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $806M | $839M | $891M | +4.1% |
| Gross Margin | 31.2% | 32.3% | 32.7% | +102bps |
| EBITDA | $146M | $129M | $150M | -11.7% |
| EBITDA Margin | 18.1% | 15.3% | 16.9% | 274bps |
| Net Income | $39M | $48M | $71M | +24.4% |
| Free Cash Flow | $92M | $104M | $107M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)32.7%
- EBITDA Margin (TTM)16.9%
- Net Margin (TTM)8.0%
- ROIC7.9%
- FCF Conversion71.0%
- SBC / Revenue0.7%
The Company
Helios Technologies describes itself in its 10-K as 'a global leader in highly engineered motion control and electronic controls technology for diverse end markets,' operating in two segments: Hydraulics and Electronics. Hydraulics makes cartridge valves, manifolds, and quick-release couplings, plus complete hydraulic system solutions; the named businesses are Sun Hydraulics, Faster, and Daman. Electronics makes customized electronic controls, displays, wire harnesses, and software, under brands including Enovation Controls, Balboa, and Joyonway. It is a components manufacturer that sells to the OEMs and distributors building finished machines, and to the integrators building the cooling racks that matter for the AI story.
Helios manufactures in owned and leased plants and leans on lower-cost centers. The 10-K's Americas-only plants table shows Hydraulics at 1,953,000 sq ft owned and 63,000 sq ft leased, and Electronics at 529,000 sq ft owned and 377,000 sq ft leased, though EMEA and APAC square footage is not in the source. Sales split Americas 57%, EMEA 25%, and APAC 18% in Q1 2026, with the U.S. about 42% of net sales and China 12%. The company is consolidating Faster's North American operations to Maumee, Ohio, closed its Faster Canada plant in Q2 2026 with production moved to Italy, and restarted low-cost centers in Tijuana, India, and China. Management says the existing footprint can support roughly 50% more sales without significant expansion.
Business Segments
Competitive Landscape
The 10-K lays out a layered competitive field. Full-line producers — Parker Hannifin, Danfoss/Eaton, and Bosch Rexroth/HydraForce — can supply complete hydraulic systems including components functionally like Helios's. Component-only producers of cartridge valves or couplings include Delta Power Company, Stucchi, and CEJN. Low-cost producers such as Winner and Valvole Italia, the filing says, 'will typically attempt to copy our products.' In electronics the filing describes competition as 'very broad,' from large multinationals like Continental, Garmin, and Bosch to small niche specialists. In the new data-center coupling arena the source material does not name Helios's competitors, but management says it is 'entering later and having to displace either existing strong competitors.'
- Parker HannifinNamed in the 10-K as a full-line hydraulics producer that can provide complete hydraulic systems, including components functionally like those in Helios's Hydraulics segment.
- Danfoss/EatonNamed in the 10-K as a full-line hydraulics producer that can supply complete systems.
- Bosch Rexroth/HydraForceNamed in the 10-K as a full-line hydraulics producer that can supply complete systems.
- StucchiNamed in the 10-K as a component-only producer offering MCT or FCT products.
- ContinentalNamed in the 10-K as one of the large multinational electronics competitors, alongside Garmin and Bosch.
Supply Chain
Helios sits upstream of the OEMs and integrators that build finished machines and cooling racks, and downstream of the suppliers that provide its parts and raw materials. No neighbor transcript in the source material names Helios or its brands.
More on HLIO: Earnings recap