Helios Technologies (NYSE:HLIO) reported a stronger-than-expected first quarter for fiscal 2026, with management pointing to broad-based sales growth, margin expansion and record first-quarter cash generation as evidence that the company’s repositioning efforts are gaining traction.
President and Chief Executive Officer Sean Bagan said Helios entered 2026 after “sharpening our go-to-market model, strengthening our balance sheet, and building a team and culture aligned around the CORE 2030 strategy” introduced at the company’s Investor Day. He said the quarter included several milestones, including the highest quarterly sales ever for Enovation Controls, a record first quarter for cash generation and the company’s first regular dividend increase, a 33% raise.
Sales Top Outlook as Both Segments Grow
First-quarter sales were $228 million, up 17% from $195 million in the prior-year period and above the company’s expectations, Chief Financial Officer Jeremy Evans said. Foreign exchange contributed nearly $6 million of favorable year-over-year impact and about $2 million of the upside to Helios’ first-quarter outlook.
Because Helios divested Custom Fluidpower, or CFP, at the end of September, Evans said comparisons are more meaningful on a pro forma basis. Excluding CFP sales from the prior-year quarter and foreign exchange effects, sales rose 23% year over year.
Gross profit increased 25% to $75 million, and gross margin expanded 220 basis points to 32.8%. Evans attributed the improvement to higher volumes, favorable segment mix, operational initiatives and benefits from the CFP divestiture, partially offset by tariff impacts and higher overhead costs tied to equipment maintenance and energy.
Operating income rose 76% to $30 million, while operating margin expanded 440 basis points to 13.1%. Adjusted operating margin increased 330 basis points to 16.7%, and adjusted EBITDA margin rose 310 basis points to 20.4%, marking the third consecutive quarter above 20%. Diluted earnings per share were $0.59, up 168% from the year-earlier period, while diluted non-GAAP EPS increased 82% to $0.80.
Hydraulics and Electronics Both Contribute
Hydraulics sales increased 10% in the quarter, while Electronics sales rose 29%. On a pro forma basis and excluding foreign exchange, Hydraulics grew 19%, Evans said. Regionally, Helios reported growth across the Americas and EMEA. APAC declined year over year because of the CFP divestiture, but grew on a pro forma basis.
In Hydraulics, Evans said the company saw strength in mobile markets, especially construction, along with “continued signs of recovery in agriculture” as channel inventories normalized. Hydraulics gross profit increased 18%, and gross margin expanded 220 basis points to 31.8%. Segment operating income rose 34% to $23.4 million, with operating margin up 300 basis points.
In Electronics, demand remained robust across recreational markets, supported in part by strength with a large OEM customer. Evans also noted growth in health and wellness, mobile and industrial markets, though marine remained a soft spot. Electronics gross profit rose 36%, and segment operating income increased 78% to $14.2 million.
Cash Flow and Balance Sheet Improve
Helios generated $24 million of cash from operations and $17 million of free cash flow, both records for a first quarter. Evans said the company also improved its cash conversion cycle by 25 days year over year while returning to growth.
The company reduced its net debt to adjusted EBITDA leverage ratio to 1.6 times at quarter-end, down from 2.7 times in the prior-year period and the lowest level since the first quarter of 2018, according to management. Lower debt and a reduced spread on borrowings under the company’s credit facility produced $2 million of interest expense savings in the quarter.
Evans said total liquidity continues to exceed total debt, giving Helios flexibility to fund organic investments, return capital to shareholders and preserve capacity for strategic acquisitions. Helios raised its quarterly dividend to $0.12 per share and has now paid cash dividends for 117 consecutive quarters. The company also repurchased nearly $5 million of stock during the quarter, leaving about $82 million on its existing authorization.
Guidance Raised for 2026
Helios raised its full-year sales and EPS outlook based on first-quarter results and improved second-quarter visibility. The company now expects 2026 sales of $840 million to $870 million, compared with $839 million reported in 2025 and $792 million on a pro forma basis. At the midpoint, the outlook implies 8% pro forma growth over 2025.
For the full year, Hydraulics sales are expected to range from $520 million to $535 million, up about 7% at the midpoint on a pro forma basis. Electronics sales are expected between $320 million and $335 million, up 10% at the midpoint. Helios maintained its adjusted EBITDA margin outlook of 19.5% to 21% and raised diluted non-GAAP EPS guidance to $2.70 to $2.95.
For the second quarter, Helios expects sales of $227 million to $232 million and diluted non-GAAP EPS of $0.78 to $0.83. The company expects adjusted EBITDA margin of 20% to 21% for the quarter.
Management Cites Choppy Demand, Tariff Uncertainty
During the question-and-answer session, Bagan characterized the demand environment as “choppy,” even as order trends remained strong. He said Helios has seen 12 consecutive months, including April, of double-digit order intake growth from the prior year, and backlog is also up by about double digits year over year.
Bagan said Sun Hydraulics is benefiting from construction and infrastructure investment, while Faster’s agriculture exposure varies by geography, with Europe and Asia stronger and the U.S. market still challenging. He said Balboa’s health and wellness market is growing at a low-single-digit pace, while Enovation Controls produced a record quarter despite mixed end markets.
Management said the second half of 2026 carries several considerations, including tariffs, fuel costs, rising energy prices, shipping cost dynamics, geopolitical tensions and the pace of recovery in cyclical markets. Evans said Helios has used regional production, alternate sourcing and pricing actions to mitigate tariffs. He added that the company would pursue potential refunds tied to IEEPA tariffs, but has not included any recovery in its guidance.
On acquisitions, Evans said Helios remains early in developing its M&A pipeline under the CORE 2030 strategy. He reiterated that acquisitions will likely be needed to support the company’s long-term goal of doubling sales, but said there is “nothing imminent” at this point.
About Helios Technologies (NYSE:HLIO)
Helios Technologies, Inc develops and manufactures engineered motion control and electronic control products for a wide range of industrial and mobile equipment applications. The company's Hydraulics segment designs and produces hydraulic cartridge valves, manifold systems, pumps and motors, filtration solutions and off-highway joysticks. Its Electronic Controls segment offers programmable electronic control units, wireless telematics, human-machine interfaces and software to optimize performance, efficiency and safety for equipment OEMs and end users.
Through its global network of manufacturing facilities, service centers and technology centers, Helios Technologies serves markets in agriculture, construction, material handling, mining, municipal and recreational vehicles, as well as industrial automation and infrastructure equipment.
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