HLIO

Greetings, and welcome to the Helios Technologies First Quarter Fiscal Year 2026 Financial Results Conference Call. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tania Almond, Vice President of Investor Relations and Corporate Communications. Thank you. You may begin.

Thank you, operator. Good day, everyone. Welcome to the Helios Technologies First Quarter 2026 Financial Results Conference Call. We issued a press release announcing our results yesterday afternoon. If you do not have that release, it is available on our website at hlio.com. You will also find slides there that accompany today's discussion as well as our prepared remarks. Joining me today are Sean Bagan, President and Chief Executive Officer, and Jeremy Evans, Executive Vice President, Chief Financial Officer. Sean will begin with highlights from the first quarter. Jeremy will then review our financial results in more detail and provide our outlook. Sean will return with some closing remarks, and then we will open the call for questions. Before we get started, please turn to slide two, where you will find our safe harbor statement.

As you may be aware, we will make some forward-looking statements during this presentation and the Q&A session. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from those presented today. These risks and uncertainties and other factors can be found in our annual report on Form 10-K for 2025, along with our upcoming 10-Q to be filed with the Securities and Exchange Commission. You can find these documents on our website or at sec.gov.

I'll also point out that during today's call, we will discuss some non-GAAP financial measures which we believe 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. We have provided reconciliations of comparable GAAP with non-GAAP measures in the tables that accompany today's slides. Please reference slides three through five as I now turn the call over to Sean.

Thanks, Tania, welcome everyone. We appreciate you joining us today. Anyone who watched this year's Kentucky Derby saw more than just a winner. They saw focused execution under pressure at exactly the right moment. Golden Tempo stayed focused, found his stride, and delivered when it mattered most. We believe our first quarter performance tells a similar story. Helios entered 2026 having done the hard work, sharpening our go-to-market model, strengthening our balance sheet, and building a team and culture aligned around the CORE 2030 strategy we introduced at our Investor Day. Like that Saturday race, the results for Helios this quarter weren't just a one-headline moment. They were a collection of firsts and records. The highest quarterly sales ever for Enovation Controls, our largest electronic segment business. A record first quarter of cash generation for the company.

Our first ever regular dividend increase of 33%. Perhaps one of the most telling measures of how far we've come, we reduced our net leverage by more than a full turn in just one year, bringing us to 1.6x net debt to adjusted EBITDA, the lowest level since the first quarter of 2018. The balance sheet position isn't just a financial milestone, it's a strategic one, opening a meaningful level of optionality in how we deploy capital as we pursue the next leg of our growth. 2025 was our year of repositioning. 2026 is where that work finds its stride.

As we came out of the starting gates on the 2030 financial targets, a plan built on 5%+ organic sales growth annually, our first quarter performance didn't just meet that bar, it cleared it decisively, giving us early momentum against a five-year roadmap that we intend to run all the way through. The core strategy laid out a clear set of performance priorities to double our sales by 2030 and expand adjusted operating and EBITDA margins to 20%+ and 25%+, respectively. The work we have done over the last 18 months to sharpen our go-to-market model, invest in innovation, and enhance operational excellence across our global footprint is an outcome of our momentum model, the engine behind this performance.

Our first quarter results reflect the effectiveness of the Helios Business System as we are executing our organic sales growth plans and improving our margins year-over-year while we manage through a choppy geopolitical environment and invest for future growth. Let me summarize the first quarter. With a more robust demand environment than expected, total sales exceeded the high end of our outlook range, up 17% year-over-year to $228 million. On a pro forma basis, excluding the Custom Fluidpower or CFP divestiture and the impact of foreign exchange, sales grew 23%, with both segments in all regions contributing to the increase. Our profitability measures kept improving as higher sales volume drove significant year-over-year expansion in our margins. We continue to deeply engage with our existing and prospective customers, seeking out opportunities, leveraging our enhanced go-to-market model.

Our teams from both hydraulics and electronics across our relevant major brands attended the CONEXPO trade show in the first quarter and showcased our latest products with a record level of show attendees present. Based on the level of booth activity and leads we extracted, we are seeing healthy activity across most of the markets we address. On a consolidated pro forma basis, we saw year-over-year growth across all the major end markets that we serve.

With our balance sheet in excellent shape, our board of directors approved the aforementioned increase to the quarterly dividend in March, and we continue to return capital to shareholders under our existing $100 million share repurchase authorization. These actions reflect our confidence in the long-term outlook and alignment with the value creation framework we shared as part of the core strategy. With that, I'll turn the call over to Jeremy to review the financial results in more detail. Jeremy?

Thank you, Sean, and good day, everyone. As I review our first quarter results, please refer to slides six through through. First quarter sales were $228 million, up 17% compared with $195 million in the prior year period and above the expectations we laid out on our fourth quarter call. Changes in foreign exchange had nearly a $6 million favorable impact on a year-over-year basis and contributed approximately $2 million to the over-achievement of our Q1 outlook. As a reminder, we divested CFP at the end of September, so the first quarter comparison is more meaningful on a pro forma basis. Excluding the CFP sales in last year's first quarter and the foreign exchange impact, sales for the quarter were up 23% year-over-year.

Higher sales and improved absorption drove gross profit up 25% in the quarter to $75 million, and gross margin expanded 220 basis points year-over-year to 32.8%. In addition to higher volumes, margin expansion was driven by favorable segment mix, operational initiatives, and benefits from the CFP divestiture, partially offset by net tariff impacts and higher overhead expenses driven by equipment maintenance and energy costs. First quarter operating income rose 76% year-over-year to $30 million, and operating margin expanded 440 basis points to 13.1%, demonstrating the operating leverage inherent in the business. On a non-GAAP basis, adjusted operating margin in the quarter was 16.7%, up 330 basis points year-over-year.

Adjusted EBITDA margin was 20.4% in the first quarter, up 310 basis points over the prior year and the third consecutive quarter above 20%. Diluted EPS in the quarter was $0.59, up 168% compared with the prior year period. Diluted non-GAAP EPS of $0.80 rose 82%, exceeding the high end of our guidance range and a great start toward our expectation to deliver double-digit EPS growth for the second consecutive year. The upside reflects the realized sales growth, margin expansion, and solid operating performance. Turning to the segments, please refer to slide nine. Growth remained broad-based, driven by both segments in all regions. Hydraulics sales were up 10% and Electronics up 29%. On a pro forma basis and normalizing for the impact of foreign exchange, Hydraulics grew 19%.

Regionally, we saw growth across the Americas and EMEA, while APAC declined year-over-year as a result of the divestiture. On a pro forma basis, APAC grew over last year as well. Our business mix has shifted year-over-year to a greater weighting of electronics from not only the CFP divestiture, but also because our electronics segment has been growing faster on a relative basis. By end market, hydraulics saw strength in mobile, especially in the construction category, along with continued signs of recovery in agriculture, while we've seen channel inventories normalize. Our lead times have improved with operational challenges behind us, and we are capitalizing on this to win more business. We have a clear path identified to drive incremental sales across a number of adjacent markets we've not historically participated in. All of this gives us confidence in driving sustainable growth across our hydraulics segment.

Hydraulics gross profit in the quarter grew 18% year-over-year, and gross margin expanded 220 basis points to 31.8%, driven by better fixed cost leverage on higher volume, lower material costs, and the impact of the CFP divestiture. Segment SG&A expenses in the quarter increased approximately $1 million or 4%, primarily reflecting investments in wages and benefits, as well as research and development, but improved as a percentage of sales. Segment operating income increased 34% to $23.4 million, and operating margin expanded by 300 basis points. In electronics, demand remained robust across recreational markets, including persistent strength with a large OEM customer that has been a key contributor to recent volume outperformance.

While there are still pockets of softness in certain consumer-exposed end markets, most notably marine, we are realizing growth with health and wellness, mobile, and industrial. Overall, the electronics segment is performing extremely well on driving profitable sales growth. Electronics gross profit in the quarter was up 36%, and gross margin expanded 170 basis points, primarily driven by higher volumes and lower direct labor costs as a percentage of sales. SG&A expenses increased $2 million, reflecting ongoing investment in engineering and research and development, but improved as a percentage of sales. Segment operating income increased 78% to $14.2 million, and operating margin expanded by 430 basis points. On slide 10, we generated $24 million of cash from operations and $17 million of free cash flow, both records for a first quarter.

It's well worth noting that we've been able to effectively manage our working capital as we've returned to growth, achieving a 25-day year-over-year improvement in our cash conversion cycle. Flipping to slide 11, you'll see we use this cash to further strengthen the balance sheet as we continue to pay down debt, bringing our net debt to adjusted EBITDA leverage ratio down to 1.6x at quarter end, compared with 2.7x in the prior year period. The lower debt level, along with a lower spread on our credit facility borrowings due to reduced leverage, resulted in $2 million interest expense savings in the first quarter compared to the prior year.

Total liquidity continues to exceed total debt, giving us ample flexibility to fund organic growth investments and return capital to shareholders while preserving dry powder for strategic M&A consistent with the core strategy we shared during our Investor Day. As mentioned, we extended our history of paying cash dividends to 117 consecutive quarters, highlighted by a 33% increase to $0.12 per share. We also deployed nearly $5 million on share repurchases during the quarter, leaving approximately $82 million remaining on our share repurchase authorization. Slide 12 reflects the 2026 financial priorities that we established. We started the year with solid execution against each priority, as confirmed by our first quarter results. We remain focused on disciplined operational execution and investing in high return opportunities, positioning Helios for earnings growth and long-term value creation. Turning to slides 13 and 14.

Based on our strong first quarter performance and improved visibility into the second quarter, we are raising the full-year sales and earnings per share outlook. We now expect sales to be in the range of $840 million-$870 million for the year, compared with $839 million as reported in 2025 and $792 million on a pro forma basis. This implies 8% growth over 2025 on a pro forma basis at the midpoint, driven primarily by volume growth in our core platforms and the ramping of recent commercial wins. At the segment level for the full-year, we expect hydraulics sales in the range of $520 million-$535 million, up approximately 7% at the midpoint on a pro forma basis.

For electronics, we expect sales in the range of $320 million-$335 million, up 10% at the midpoint. We continue to expect 2026 adjusted EBITDA margin to be in the range of 19.5%-21%, reflecting gross margin expansion, operating expense discipline, and the full-year benefit of our portfolio and footprint actions. We now expect diluted non-GAAP EPS in the range of $2.70-$2.95, or 11% growth at the midpoint. For the second quarter of 2026, we expect sales to be in the range of $227 million-$232 million, up 16% over last year's second quarter at the midpoint when taking the divestiture of CFP into consideration.

At the segment level for the second quarter, we expect hydraulics sales in the range of $141 million-$144 million, up approximately 13% at the midpoint on a pro forma basis. For electronics, we expect sales in the range of $86 million-$88 million, up 21% at the midpoint. We expect consolidated adjusted EBITDA margin to be in the range of 20%-21%, up 190 basis points at the midpoint, and diluted non-GAAP EPS of $0.78-$0.83 per share, up 36% at the midpoint. As we originally guided, 2026, we expect first half growth rates to be stronger year-over-year compared to the second half, driven by the timing of end market recoveries and the ramp of certain commercial wins in the second half of 2025.

We are also mindful of several second half considerations to our full-year outlook, including the uncertain tariff landscape, the inflationary pressures on fuel costs, the impact of rising energy prices, ship cost dynamics, ongoing geopolitical tensions, and broader recovery of cyclical markets. We remain focused on executing the core strategy, positioning Helios for earnings growth and long-term value creation. With that, please turn to slide 15, and I'll turn the call back to Sean for his closing remarks.

Thanks, Jeremy. As you've heard today, Helios is off to a strong start in 2026. We are delivering double-digit sales growth, expanding margins, and realizing strong cash generation. We are making progress on the initiatives that underpin the core strategy and have a balance sheet that enables us to make strategic organic investments and explore incremental acquisition opportunities. Thank you to the global Helios team for such a strong start out of the gate for the year. Our go-to-market engine is performing. We're converting a healthy funnel of opportunities into wins across both segments and across the regions where we compete.

Our Enovation roadmap is on track with a robust pipeline of new products, including the all-new state-of-the-art QMEH cartridge valve with proprietary position sensor technology launched by Sun Hydraulics at CONEXPO, Faster's launch of a collection of new products designed to support thermal management systems within data centers, and our next generation of electronics platforms like the OpenView S70 display to provide advanced control and monitoring systems within data centers and other end markets. Our operational excellence efforts, from footprint optimization in North America and Europe to productivity improvements across our facilities, are all designed to support margin expansion toward the long-term targets we laid out at Investor Day. Most importantly, we have a high-performing global team that is executing with discipline and a customer-centric culture that believes in the path we've laid out.

The combination of a clear strategy, a stronger operating model, and a solid financial foundation has Helios positioned well to navigate a dynamic environment and to deliver sustainable growth, enhanced profitability, and compelling long-term value for our shareholders. We will stay focused on running our own race, settling into our accelerated pace, and keeping our sights set on the long-term targets we have established for ourselves. Thank you for your engagement and support. With that, operator, let's open the lines for Q&A, please.

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Chris Moore with CJS Securities. Please proceed with your question.

Hey, good morning, guys. Congrats on a great quarter. Thanks for taking a couple. Despite the, you know, continued success, it still doesn't look like you're necessarily operating in an environment where, you know, you're seeing exceptional broad strength across a lot of your markets. Maybe can you drill down a little further on how you would characterize demand, you know, kind of overall at this point?

Good morning, Chris. Thanks for the call or the question. Yes, in terms of the demand environment and the market environment, certainly we've continued to see our order trends pace favorably. A couple just talking points there in terms of year-over-year order demand. We've seen 12 consecutive months, including April, of double-digit order intake over the prior year. Secondly, when you look at our order backlog, that obviously continues to grow and continues to be up about double digits year-over-year as well. Our order trends are strong. When we look at the market performance, though, we'd characterize it as choppy.

We've got our four big large businesses, and if you go around the horn on those with Sun Hydraulics really benefiting from the construction and infrastructure investments that are being made and a lot of the OEM equipment that our products goes into through our distribution channels. We're seeing that very strong. In addition, we really look at the channel inventory levels of our distribution partners, and they're at very healthy levels down again in levels where we would envision more reordering patterns. On the ag side at Faster, where they're predominantly indexed to, it's really a story of geographic impacts where Europe and Asia are stronger and the U.S. continues to be a challenge market here in the Americas.

We've done a nice job to diversify that business into more construction and also recently announced our entry into the thermal management for data centers. We see some nice green shoot opportunities there as well. On the electronic side, the Balboa business for that health and wellness market continues to be a low single-digit growth market, that has effectively recovered from the gyrations from what COVID happened with the uptick during COVID and then the downturn, where we're back consistently growing that business. We've seen a shift there as well, where Asia particularly is growing faster than a little bit lighter here in the Americas. That's just due to where the OEMs are choosing to make the end equipment. As us as the lead supplier, we're a bit agnostic to where the spas get built because we're gonna fulfill that demand and chase that in whichever geography it is.

Then finally with Enovation Controls, very diversified, but as we highlighted in our prepared remarks, it was a record quarter for Enovation. We're really thrilled about the trajectory there. The marketplace is mixed. The biggest part of the Enovation business has historically been the recreational, which is also off-road products and marine. Marine still remains very challenged. Recreational is stabilized as the dealer channel inventories have been stable as well there for a period of time and starting to see some growth. Then the off-highway continues to be an increase there. Our business is really indexed to the U.S. there and generally feeling really good about the large growth we're getting out of that business.

That is really helpful. I appreciate that. Maybe just a follow-up. Coming into the quarter, you know, consensus adjusted EPS roughly was really the same level for Q3 and Q4. Based on the strong Q1 and the Q2 guide, overall 2026 guide, you know, obviously 2H is gonna have to come down some. I just wonder how are you thinking about, you know, kind of Q3 versus Q4 at this point in time?

Chris, this is Jeremy. As you noted, we said when we did the initial guide for the year that we expect the second half growth to be a little bit less than what we see in the first half. Part of that is due to the timing of some of those customer wins that we had last year, as well as some of the markets that we saw starting to return. We got really good visibility into, you know, the next 12 weeks or so in the order book, especially on the distribution side as you start getting.

Further than that, right, it's a little bit less clear. Definitely based on the good Q1, how we're guiding Q2, which we'd expect to be similar to Q1. You know, we did raise the outlook. We're expecting to have a little bit stronger year than we did originally. And when we look at the EPS specifically in the second half, yeah, we have it coming down as well. Obviously, if we look at the midpoint of our guide at $2.88, and we would see it a little bit, I think higher in the third quarter and relatively similar in the fourth quarter as well.

Chris, can I just add on to that a little bit as well?

Yeah.

I think it's important to point out from just not necessarily seasonality perspective, but the pace of our business. Jeremy's made this point on prior calls that if you consider this year and then you go and you do a five-year period, four of those five years, our first half has been bigger than the back half. Kinda either 53%-54% in the first half to 46%-47% in the back half. Last year in 2025, Jeremy's point being the back half was really strong. That's the only year out of those five where the back half was larger.

We're really looking at this on a two-year growth basis. If you do the math on our implied guidance, we actually, particularly at the high end of our guide, see the back half accelerating on a two-year basis from a growth rate perspective. I just wanna highlight that particularly because we have a quarter of our business that's in the EMEA region roughly, and that July-August time period is generally seasonality just a little bit lower. That's one of the things at play.

We've been mindful. I would say we wanna be cautious to see further growth develop in the back half, we couldn't be more thrilled out of the gate here, getting ahead of our plan and the ability to raise our Q2 expectation. Q2 will be, it's typically a large quarter for orders. As we pace throughout the quarter, we'll get better visibility into that back half because we are fairly short cycle in terms of our order trends, but we feel really good about the momentum. And as I highlighted, 12 consecutive quarters of double-digit order intake, including the month of April. If that continues, we will continue to chase our numbers up.

No, that makes perfect sense. Thanks, guys. I really appreciate it. I'll jump back in line.

Thanks, Chris.

Our next question comes from the line of Jeffrey Hammond with KeyBanc Capital Markets. Please proceed with your question.

Hey, good morning, everyone. This is David Tarantino on for Jeff.

Hey, David.

I just wanna follow up on that last point, Sean, acknowledging the choppy backdrop you were describing and that back half comps are tougher. Could you give us some perspective on what the implied second half outlook embeds relative to the underlying demand trends you're seeing today and what the customers are telling you? Is the second half moderation more around being conservative given that it's still relatively limited visibility, or should we be thinking about something from an end market perspective?

I would say, first again, I just want to anchor back to the prior year. When we look at the prior year, and I'm going to take CFP out of those numbers because I think it's important to strip that out knowing that was a roughly a $60 million run rate business, had about $45 million of revenue in the 2025 period. When you look at that last year in the back half, excluding that, we reported a +21% in the back half. As we carry that forward into this year, we think at the low end, there could be some contraction over that. However, at the high end, for sure, we could see growth as well.

Again, that's just taking the Q1 actuals with our Q2 implied guide and the back half. When you look at it on the two-year trend, again, it actually would accelerate on the back half. It would be a +15% the first half, +20% on the back half at the high end of the $870 million full-year guide. I think some of the variability and the factors we're looking at is ag is a big part of that. What does that recovery look like? We are encouraged by the most recent releases from some of the ag OEMs, the large three, AGCO, CNH, Deere. Obviously, Deere's not reporting for another nine days.

Given what's expected of their sales, the AGCO growth was nice to see in the quarter, knowing that we're a supplier and we're gonna feel that a little bit earlier, and that's what we've seen in our order book. We look at our Faster order trends, our orders are consistently outpacing our sales. That could be a mover. The other one is our announced entry into this thermal management business with Faster. We're pretty confident that will start ramping in the back half of the year. We have not had any revenue yet.

So when we look at whether it's Faster or the rest of our products that have been launched, like the QMEH valve, like some of the displays that we talked about for Enovation, these are incremental. These aren't cannibalizing existing sales. It really starts with that closeness to the customer, understanding their needs, and building our product pipeline around that. Those are some of the things that we see. Our own execution internally is at a high level right now, and we need to continue that with our product launches, which will be robust here in the back half of the year, and we expect to have some successful launches.

Yeah, I would just add to the new product piece. We did talk about the new wins that we had in 2025. Some of those started in 2025. We projected that around $60 million in new business win to be phased in over time. A lot of maybe second half potential is in some of those new products and timing of getting orders for those, some of those Sean mentioned. You know, we continue to put out press releases on new products, and we're pretty excited about the product roadmap that we have.

Okay, great. That's helpful. Maybe turning to margins, you highlighted a number of cost headwinds in the prepared remarks, which don't seem apparent in the margins yet. Can you walk us through the puts and takes on the margin guide, particularly around price costs, and if there's any incremental tariff impacts and what you're doing to offset these headwinds you laid out?

Absolutely. This is Jeremy. As we said at our Investor Day and as you can see in our results, one of the biggest movers on our margin is just the volumes. As we get the leverage going through our footprint, you can see that ramp as we saw here in Q1 with the year-over-year improvement. In the guide at the midpoint for the second half, sales would be a bit lower. However, we're still committed to improving our margins. You know, our intent is to improve margins roughly 100 basis points per year as we go forward towards our long-term 2030 targets that we communicated.

When we look at some of the inflationary pressures, you mentioned tariffs, we've done a fairly good job of mitigating those tariffs. We talked about moving some of the production following our in the region for the region strategy. We've looked at sourcing products from alternate suppliers, been fairly successful with that. We've also had some, you know, pricing actions in place too. From a I'd say a dollar perspective, we're recovering really well. It does have an impact on the margin percentage because we're essentially passing through tariff costs, not trying to make incremental profit on those. I think we've navigated that fairly well. You know, we communicated last year tariff impacts in the second half were roughly $8 million, on a full run rate basis, it'd be a little higher.

In the current tariff situation, it definitely is still fluid, subject to change, right? With the ruling on the IEEPA tariffs, it actually would be less than that if things maintained as they are now. Again, who knows with that situation? Outside of tariffs, the two costs that we do see inflationary pressure on, one is just freight costs with fuel. The fuel surcharges with the freight carriers continue to go up. We're starting to see surcharges impact to 2022 levels, as well as some of the rising energy costs, more specifically there in Europe.

We look to offset those. Obviously, pricing is a component. Our pricing strategy, over the last, you know, 12 months or so has been to recover our costs. That is absolutely a lever in things that we're looking at. Definitely some marginal pressure, but believe we're managing that really well, and we're still looking to expand our margins as we grow and as we get the top line growth, targeting that 100 basis points roughly expansion per year.

I think 2025 demonstrated that we can contend with a very volatile situation and still control our margins. As is implied in our guidance, we've held our full-year adjusted EBITDA range from 19.5%-21%. Yes, we've taken up our top line by $10 million on the high end. Effectively staying our margin profile's intact and anchoring back to our commitments to drive over 100 basis points of improvement year on and year out over through cycle to 2030. We feel really good about that. Obviously, we've got way ahead here in the first quarter from a year-over-year perspective. Again, from a guidance setting perspective, since Jeremy and I have been partnering on this, we try and protect on the bottom end for some unforeseen things.

We're obviously striving to hit the top end of our guidance. If we can do that, year-over-year, we're gonna drive 180 basis points of adjusted EBITDA margin expansion, which would be a great result. Really the takeaway here is not a lot has changed since we entered the year. We just had a strong start to the year and I think a little bit of the second quarter is fairly well in line with what we saw coming into the year. We think the second quarter is gonna look a lot like the first quarter. I think from a street perspective and consensus, the construct of the year looked a little bit different, but for us, it's progressing slightly better than what we thought. If this pace continues, we'll feel really good going into the back half of the year.

Great. Thanks.

Our next question comes from the line of Mircea Dobre with Baird. Please proceed with your question.

Hey, good morning, guys. It's Joe Grabowski on for Mig this morning.

Morning, Joe.

Hey, good morning. just kind of building on the last two sets of questions. You know, your sales in the first quarter, $228 million, expected to be up a little bit sequentially. Those would be the two strongest quarters in several years. that's even, you know, taking into account the divestiture, which, you know, reduced sales by about $15 or so million a quarter. When you think about this kind of current level of sales, how do you kind of parse it out between recovery in end markets and, you know, what you guys are doing internally as far as, you know, new product launches, new customers, new end markets, so forth?

Thanks for the question, Joe. Yes, I'm glad you picked up on the relevant comparable there. Once you take out CFP, that the first quarter was one of our highest quarters ever of sales. Again, our Q2 guide would indicate it's gonna look very similar in the second quarter. To answer the question in terms of where we see that growth coming from, you and I, Jeremy, Tania, enjoyed some time at CONEXPO together. You saw it. You saw the activity in the booth. You saw all the new products we had on display. We think that is clearly the backdrop for our current environment in terms of our growth. Again, my point earlier of we need to cleanly continue to execute on our product launches to support that.

Our refined go-to-market that we really changed significantly over the last 18 months is certainly driving a lot of that as well on how we're interfacing with our customers, how we're driving business discussions, how we're targeting new customers in adjacent spaces. The end markets, none of them are, what I call it, on fire or providing a significant year-over-year improvement. In pockets, there are some really strong markets as we highlight. Like construction here in the U.S. is doing well. In Asia, it's doing really well. In Europe, it's been pretty steady and good. From an ag perspective, we all know where that is, and we already talked about that one. Our Balboa health and wellness, very slow growth, and we don't expect that one to grow any faster than historical low single-digit levels.

However, we do believe we will continue to take share and outpace that with a lot of win-back strategies and our new product pipeline. Finally, Enovation has continued to significantly outpace growth of any of our other businesses for multiple quarters, including a record quarter here in the past quarter. That is 100% aligned to their go-to-market initiatives because those markets they operate in have been challenged. As those come back, gives us a lot of excitement. We know that those are very cyclical markets and some of those consumer discretionary. Even ag, a long-term cyclical market that has to be bottoming here at a point in time. There are signs in small compact tractors and other geographic regions where it is starting to recover. We're pretty confident that if we get some market help, we can certainly be in that mid to upper points of our new guidance ranges.

Great. That all sounds terrific. Maybe my just follow-up question. I know you guys just touched upon the tariff landscape, but maybe kinda drill down a little bit. Maybe what has changed as far as your tariff outlook versus maybe at the end of the or when you announced Q4. I don't know, maybe any strategy you can give as far as the way you're thinking about tariff rebates or just anything around that topic.

This is Jeremy. I'll take that one. Obviously, the topic of the IEEPA refunds is at the forefront of our minds, probably like most other companies. We will pursue refunds, although it's not extremely clear yet how that process will play out and when or if any of that will actually get collected. That is not included in our guide or our numbers at this point. From a how do we manage the tariff standpoint, it will look a lot like it has done in the past. You know, we continue to look at our product portfolio and, you know, specific to our Tijuana facility, making sure that those products are USMCA compliant.

Looking at the in the region, for the region production as a way to avoid tariffs, then constantly working with our suppliers as well. To the extent, you know, tariffs change and we need to, we're working with our customers, and as a last resort, we'll take pricing actions. And that's been historical. We'll continue to manage as we have up to this point. Specific to refunds, we will absolutely monitor the situation. We will pursue refunds. We're not gonna, you know, factor that in until it becomes a little bit more certain and we have a better feel for what would be paid and when.

Okay, uh-

To put it into perspective, maybe one thing to add.

Yep. Sorry.

Just to quantify that a little bit, again, if you anchor back on our $8 million second half impact of last year, you know, little more than half of that is related to the, you know, the IEEPA refunds. That would be if everything were paid. Obviously there is some uncertainty around that. It's not a huge number for us either. Just wanna highlight that point.

Okay, great. Thank you. Good luck.

Thanks.

Our next question comes from the line of Tomohiko Sano with JP Morgan. Please proceed with your question.

Hi, good morning, everyone.

Morning, Tomo.

Thank you for taking my questions. You highlighted strong recreational demand in electronics supported by a large OEM. For 2Q and fiscal year, is the base case holds, normalizes, or decelerates, and what's driving that view, please?

Sorry, tell me what's driving the view for?

For the recreational demand.

Second half, yeah.

Yes, for a strong recreational demand in electronics. You talk about the supported by a large OEM. Could you talk about your view into second quarter and the rest of the year, please?

Yeah. As Sean mentioned, within that Enovation business, they've really been focused on their go-to-market strategy as well as new product and we're rolling out our next generation displays. We have an OpenView platform that's built on the CODESYS programming language, which actually empowers our customers to do some of their own engineering design on those displays and applications. Yes, we have seen some wins with the large OEM customer that you referenced. There are others. We have a very diversified customer base there as well. We've got a funnel of opportunities, and, you know, there is absolutely an opportunity to win more business.

Our outlook for the rest of the year includes the impact from expected new wins as well as changes to both our order trends and our OEM forecast. With all the OEM customers, we engage with them on a regular basis. You know, we get updates from them, and I would say at least as of now, those forecasts haven't changed that materially from when we set off the annual guide. The other thing I would just highlight about that Enovation business is if they continue to diversify as well into the industrial space, mobile space, they actually have a product as well that has been sold into the data center environment. It's not just the recreation where we see opportunities there with Enovation.

Thank you, Jeremy, and if you could talk, just follow up on a company-wide levels. Outside of the demand environment, what incremental drivers do you expect from your go-to-market initiatives into second quarter and back half, new wins, program ramps, and cross-sell channel expansions? Anything you wanna highlight here for the rest of the year? Appreciate it. Thank you.

Hey, Tomo, it's Sean. I would first point to the product side, a lot of the product has been announced last year in terms of our launch of new products and our new NPI processes that we put in place to similarly drive accountability and timing and investment, to prioritize products and really put a effort around incremental products that are not cannibalizing existing. We believe our product offering is extremely competitive. We have leading positions in the markets we choose to participate in.

Really looking at where do we wanna go from a end market perspective, and then how do we become a better partner for our customers and offer incremental opportunities. On electronics, for instance, it's offering additional components and things that would naturally pair with a display or a controller. On our hydraulic side with Sun Hydraulics, it's really that engagement with our distribution channel, which in our 55-year history, we've chosen to go to market through really strong distributors that now are being measured and we're augmenting our targeted account planning with them to close more sales with our engineering capabilities and teams because it is a very technical sale at times.

Really the cross-selling and the ability for us to share customer lists and engage more deeply across all of our brands to drive more wins. Right now it starts with the product and the focus there, but we do believe that our end markets provide an opportunity to continue to recover and outpace the growth we're seeing. We do believe this year could be a record year for Helios Technologies, Particularly when you take out the $60 million of CFP revenue that has now been divested. A lot of trajectory. Jeremy, I know you've got a couple things to add there.

Yeah. Some was specific to some of the ramps throughout the year. You know, we referenced a genius product, which is a casting block, a large coupling connection out of our Faster group. We actually shared that at our CONEXPO. One display had a lot of interest in that. We're pretty excited about that. Within Enovation, we've continued to roll out that new next generation of our displays. We see opportunities there. Same thing with Sun. Some of the work we're doing there, launching our 0-Series counterbalance valve, which is a smaller valve.

We also just launched the QMEH valve with a flow sensor in it. Proprietary design. Part of this is just the adoption of those new products and getting new orders for that and what is the ramp time. We are starting to see some early wins for those that could be upside. As Sean said, again, on the market, specifically in ag, specifically in that rec marine, where it's still fairly depressed. I would say industrial still isn't a big tailwind for us. There's still some opportunities there as those markets return.

Thank you, Sean. Thank you, Jeremy. Congrats on the quarter.

Thank you.

Yeah. Thanks, Tomo.

As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from the line of Nathan Jones with Stifel. Please proceed with your question.

Morning, everyone. Thanks for taking my question. This is Andrés Loret de Mola for Nathan Jones. Maybe switching gears a little bit, during Investor Day, we talked about the $500 million, about $500 million acquisition revenue. Can you update us on the acquisition pipeline a little bit? What opportunities you're seeing in the market for MCT and FCT?

Andres Loret de Mola, this is Jeremy. First, let me anchor back to that message we said at Investor Day with a goal to double our sales. We know we're gonna need to do that through M&A. Obviously the more we grow on the organic side, the less M&A would be needed. We put out an estimate of $500 million, which is in line with what we've done historically. We just need to, in terms of volume, repeat what we've done in the past so we believe the $500 million is achievable. However, going about it in a much more disciplined role, as we explained. In terms of opportunities, we're still fairly early on in that process.

When we look at 2026 and our capital allocation priorities, we're investing in ourselves. We've invested in the data center capabilities there with Faster that we just announced. We're gonna be investing in some, you know, automation and replacement of old equipment. We've guided our CapEx expense for 2026 a bit higher. Then obviously returning capital to shareholders. Just announced the first ever increase to the company dividend. I think that is kind of our priority. However, we are developing the M&A framework and absolutely are starting to identify those white spaces and adjacent markets that we wanna target and starting to build that pipeline of opportunities.

There's nothing imminent at this point, and I expect to continue to develop that as we go throughout 2026.

Thank you. That's really helpful. Just a quick one here. Can you also provide a little bit of update on the supply chain? Are there any supply chain sourcing concerns we should consider or sourcing pressure from electronic chips?

Not at this time. There was a lot of focus on the chips and constrained demand. I think more forward-looking than the current situation. We did see the pricing on some of those chips start to increase. The teams did a really good job getting ahead of that and securing some supply. We feel that we're covered and don't see that as a material risk at this point.

Awesome. Thank you, guys. I'll hop back into the queue.

Thanks, Andrés.

Thank you. We have no further questions at this time. Ms. Almond, I'd like to turn the floor back to you for closing comments.

Great. Thank you, operator. Thank you everyone for joining us today. We will be out on the road attending some upcoming investor conferences. We look forward to seeing many of you in person. Feel free to reach out to me as well if you have any follow-up questions. We look forward to talking to you soon. Have a great day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.