HLIO Earnings Recap
Beat 6 of last 7 quarters
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Helios is positioning to enter the data center thermal management market with its Faster quick couplings, a high-growth area tied to AI infrastructure cooling. Management called it the company's largest opportunity and is investing in capacity and inventory, though revenue is not yet in guidance. This could signal incremental demand for fluid conveyance components as data center buildout accelerates.
Helios delivered another strong quarter with sales of $232 million, up 9% YoY (16% pro forma), and adjusted EPS of $0.88, up 49%. Gross margin expanded 280 bps to 34.6%, and adjusted EBITDA margin reached 21.2%, the fourth consecutive quarter above 20%. Both segments grew, with Hydraulics up 14% pro forma and Electronics up 19%, driven by broad-based strength across regions and end markets. The company generated record Q2 operating cash flow of $42 million, reduced net leverage to 1.4x, and continued returning capital via dividends and buybacks. Management also completed the Faster Canada facility closure and consolidated North American operations.
Management raised full-year 2026 sales guidance to $880–900 million (from $840–870 million), implying 12% growth at the midpoint and the highest annual sales in company history. Adjusted EBITDA margin guidance was raised to 20.2%–21.0%, and adjusted EPS guidance was raised to $3.05–$3.25, up 23% at the midpoint. For Q3, they expect sales of $215–222 million, adjusted EBITDA margin of 19.8%–20.6%, and adjusted EPS of $0.70–$0.77. The outlook reflects strong order momentum, ramping commercial wins, and continued margin expansion, tempered by tougher second-half comps and macro headwinds including tariffs, energy prices, and geopolitical tensions. Management emphasized that the stabilization phase is complete and the company is now in a growth phase, with data center thermal management as a new market opportunity, though no revenue is included in 2026 guidance.
“We have 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.”
on Company trajectory
“This represents our single largest opportunity across Helios today. And so we're treating it that way and are very excited about the opportunity it presents to help support our CORE Strategy growth.”
on Data center thermal management
“We're growing through new business wins, bringing innovative products to market, improving our operations, and generating strong cash flow to keep investing in our future while returning capital to shareholders.”
on Growth drivers
Can you elaborate on the footprint/restructuring actions at Faster and how you're thinking about capacity and CapEx investments?
Sean explained the consolidation of Faster North American operations, including closing a Canadian facility and moving production to Italy, while building out a new facility in Toledo, Ohio. He noted record order week at Daman and highlighted investments in automation and capacity for data center thermal management. Jeremy added that CapEx guidance of 4%–4.5% reflects investments in thermal management capacity, low-cost centers in Tijuana and India, and automation upgrades.
Why does the guide step down in the second half despite momentum, and what's the line of sight on data center wins and the industrial end market?
Sean explained that the second half has tougher comps and seasonality, but July was the best month ever for revenue and orders. He noted that data center revenue is not in guidance yet, but samples are out with a dozen prospective customers and an order could be imminent. Jeremy added that industrial is stable ex-CFP, with strength in mobile, aerospace, and health and wellness, while marine remains soft.
How should we think about the sustainability of gross margin expansion, and what's tracking best under The CORE Strategy?
Jeremy attributed margin expansion to volume leverage, productivity, and low-cost center utilization, with the IEEPA tariff refund providing a $1 million benefit. He noted cost pressures from PCBs, memory chips, and aluminum. Sean said organic growth is tracking well ahead of the 5% target, and margin expansion is pacing ahead of plan, with M&A becoming a bigger focus as leverage has dropped below 1.5x.