Helios Technologies (HLIO) Q3 2026 earnings review
Helios sets a sales record, but its profit outlook drops
Helios, a maker of hydraulic parts and machine controls, posted record third-quarter sales, but rising costs stopped its margins widening. Sales from the businesses it owns in both years rose 13%, helped by early orders ahead of price increases. But its fourth-quarter plan puts sales about 1% below last year, and profit per share excluding one-offs 22% lower.
| Sales from the businesses it owns in both years | +13% +4% as reported |
|---|---|
| Profit per share, excluding one-offs | $0.80 +11% from a year ago |
| Fourth-quarter sales outlook | $205–212M middle of the range: $208.5M |
| Full-year profit per share outlook, excluding one-offs | Narrowed to $3.08–3.15 middle of the range down 3.5 cents |
⚖️ Verdict: 🔴 Bearish
The story got worse, because rising costs for chips, metals, freight and labor now absorb what extra volume adds. Helios trimmed its full-year profit range despite beating its third-quarter plan, so a year of margin gains has paused. The good news: hydraulics keeps winning customers, and a first data-center order arrived.
The question now is whether price increases catch up with costs next year, or whether margins keep stalling. Finance chief Jeremy Evans expects pricing to help more fully next year; tight memory-chip supply and a shrinking electronics business point the other way. The fourth-quarter results, with next year's first plan, will settle it.
🐂 Bull Case
Hydraulics Wins Customers From Rivals
Hydraulics, Helios's larger division, makes valves and quick-release couplings that move fluid in tractors, diggers and factory machines. Chief executive Sean Bagan says the division grows mainly by taking business from competitors. "I would characterize it as majority of share gains," he told analysts on the call.
The third quarter supports him. Excluding an Australian unit Helios sold last year, hydraulics sales rose 15%. The US trade association for hydraulics makers counted only 5% more industry shipments in the first nine months. Bagan's team has also lifted its full-year forecast for the division three times this year.
Part of that growth came early, though. Distributors restocked ahead of announced price increases, a "replenishment of channel inventory" that finance chief Jeremy Evans tracks apart from end demand. He estimated that customers pulled $4 million to $5 million of orders out of the fourth quarter. Partly for that reason, the division's fourth-quarter plan shows growth of only about 4%.
What to watch: hydraulics sales growth in the first quarter of 2027, after the early orders have passed through. If it still outpaces the trade association's shipment count, the share gains do not depend on restocking.
Faster Wins Its First Data-Center Order
Faster, the Helios unit that makes quick-release couplings, won its first order for data-center cooling parts after the quarter. The couplings join the pipes that carry coolant to computer chips.
Chief executive Sean Bagan said the order matters as a step into "a large unpenetrated market", "not the order's near-term financial contribution". More than 30 potential buyers are testing the parts, and finance chief Jeremy Evans put the market at about $1 billion.
Large volumes need approval from the biggest cloud operators, and Helios is still working toward it. Evans estimated that such buyers replace couplings with their servers every two to three years, which would bring repeat sales.
What to watch: a second order or a named approval in the fourth-quarter results. Without one, data centers stay a small trial business for Helios through 2027.
Helios Spends More on Buybacks and a Deal
Helios has paid down much of its acquisition debt, so it now has cash for shareholders and deals. Third-quarter buybacks reached $19 million for about 256,000 shares, the largest amount in any quarter so far.
Chief executive Sean Bagan also announced what he called "our first acquisition since 2023". Helios paid $1.7 million for the assets of Radio Sound, a maker of vehicle audio systems, and began a multi-year relationship with Indian Motorcycle.
The standing doubt is that this team has no record of buying companies. Radio Sound is too small to settle that, though finance chief Jeremy Evans expects it to add $1 million to $2 million of sales.
What to watch: the next deal. Evans said Helios will now consider larger targets, and the first sizeable one will show what price this team pays.
🐻 Bear Case
Fourth-Quarter Sales Set to Fall Below Last Year
Helios has grown fast for five quarters, and the standing worry is that tougher comparisons will end that run. Chief executive Sean Bagan dismissed the worry on the call: "So again, we're not feeling any sort of slowdown or seeing anything."
The fourth-quarter plan shows sales below last year's level all the same. Finance chief Jeremy Evans gave two reasons. Last year's fourth quarter had an extra shipping week, worth close to $10 million of sales, and customers moved some orders into the third quarter to beat price increases.
Without those effects, Evans said, fourth-quarter sales would grow in the low-to-mid single digits. That is a fair adjustment, but it marks a clear step down from the double-digit pace of the first three quarters. Bagan himself told investors not to treat this year's growth as "indicative of our expected annual growth profile going forward".
What to watch: the 2027 plan, due with the fourth-quarter results. Bagan pointed to growth of at least 5% a year, and a plan near that minimum would show that this year's pace leaned on restocking and easy comparisons.
Rising Costs Stop Helios Margins From Widening
Helios's second promise was that fuller factories would lift margins. Gross margin, the share of sales left after the cost of making the products, widened by 2 percentage points or more from a year ago in each of the four quarters before this one.
In the third quarter that gain shrank to 0.1 points. Finance chief Jeremy Evans said dearer metals, memory chips, circuit boards, freight and European utilities took more than 1 percentage point off gross margin. Helios's quarterly filing also blamed overtime and staff benefit costs.
Overhead spending climbed as well. Selling, engineering and administrative costs reached 17.7% of sales, 0.3 points above a year ago, because Helios spent more on research and bonuses. So operating margin excluding one-offs stayed at 16.6%. Evans expects price increases to catch up, with benefits "to show more fully in 2027".
What to watch: gross margin in the first quarter of 2027, when the new prices have had a full quarter to work. If it barely moves from a year ago, costs are still rising faster than prices.
Electronics Sales Set to Fall in Fourth Quarter
Electronics, the division that makes displays, controls and wiring for boats, motorcycles, spas and machines, helped carry the recovery. Finance chief Jeremy Evans described a "record third quarter in Enovation Controls", its controls business. Chief executive Sean Bagan cited "the breadth of our growth".
Yet the division's growth has slowed every quarter this year, and its fourth-quarter plan has sales about 9% below a year ago. Evans tied the plan to "current order visibility" and the supply of parts such as memory chips. Excluding last year's write-off, the division's operating margin also slipped 1.2 points, to 14.3%, because research spending grew.
What to watch: Electronics sales in the first quarter of 2027, against a 29% rise a year earlier. A second quarter of decline would point to reliance on a few large recreational customers, whose share of sales Helios has never disclosed.
Risks this quarter didn't answer
Three standing risks got little new evidence in the third quarter. Each needs a specific reading before it moves the case either way, and the next two quarters should supply most of them.
- European farm machinery: the industry's business barometer fell back into recession territory in September, yet hydraulics sales in Europe, the Middle East and Africa rose 9%; orders at Faster, the coupling maker, in early 2027 will show which signal holds.
- Tariffs: Helios collected $6.1 million of refunds this year after the Supreme Court struck down some US tariffs, but owes most of it to customers; any replacement tariff would show up in costs.
- China: finance chief Jeremy Evans said distributors there built up some stock; Asia-Pacific hydraulics orders next quarter will show whether end demand keeps pace.
👓 Other Themes
Faster Completes Its Move to Ohio
Helios finished moving the North American production of Faster, its coupling maker, into one plant in Toledo, Ohio, and closed a site in Quebec. Chief executive Sean Bagan said the focus is now "improving productivity, delivery performance and execution". Electronics lines are moving from Tulsa to Tijuana, Mexico, through 2027. No savings show yet: finance chief Jeremy Evans said the move added costs to hydraulics gross margin.
💲 Other KPIs
Net debt, meaning borrowings minus cash, stood at $255 million, $109 million less than a year ago. That equals 1.4 times a year of earnings before interest, tax, depreciation and amortization, excluding one-offs, the same as last quarter. It sits below Helios's own target range of 1.5 to 2.5 times.
Inventory grew faster than sales: up 11% from a year ago and 6% from last quarter. Finance chief Jeremy Evans said Helios bought extra electronic and cooling components because suppliers stretched delivery times. Days of inventory on hand held at 119, so the stock still matches sales; a rise in days would tie up cash.
Free cash flow, the cash left after running the business and paying for equipment, rose 75% from a year ago. Operating cash flow hit a third-quarter record of $40 million. Helios kept cash tied up for 116 days, against 128 a year ago, mainly because it now takes longer to pay suppliers.
🔮 Guidance
Raised. The plan now puts full-year sales about 13% above last year, excluding the Australian unit Helios sold. This third raise is the smallest: the middle of the range moved $8.5 million, after $35 million in August. The Radio Sound purchase accounts for part of it, finance chief Jeremy Evans said. The full-year range minus the first nine months equals the fourth-quarter range exactly.
New. The plan puts fourth-quarter sales about 1% below last year and 9% below the third quarter. That would be the first decline from a year earlier since the middle of 2025. Finance chief Jeremy Evans pointed to an extra shipping week in last year's quarter and to orders customers moved forward. This range carries the whole remainder of the full-year plan.
Narrowed toward the bottom. This margin measures earnings before interest, tax, depreciation and amortization, excluding one-offs, as a share of sales. The middle of the range fell 0.3 percentage points, to 20.3%. That still beats last year by 1.1 points. Helios cited cost inflation and about $1 million of Radio Sound integration costs.
New. The middle of the range, 19.0%, sits 1.1 percentage points below last year's fourth quarter. It would be the lowest margin in six quarters, as cost inflation and Radio Sound integration costs weigh on a smaller quarter. Finance chief Jeremy Evans expects price increases and Radio Sound savings to help from early 2027.
Narrowed. The middle of the range slipped 3.5 cents, even though the third quarter beat its own plan by 6.5 cents. The new middle still implies growth of about 22%, finance chief Jeremy Evans noted. Under standard accounting, Helios cut its forecast for profit per share further, to $2.16–2.23.
New. The middle of the range, about 64 cents, sits 22% below last year's fourth quarter. Last year's figure included a one-time interest gain worth about 12 cents. Without it, the drop is about 8%, by our math. The August full-year range had left about 74 cents for this quarter, by our math, so the new plan sits 10 cents lower.
❓ Key Questions
How much does the largest recreational customer buy?
Electronics growth has leaned on one large recreational customer, and the division's fourth-quarter plan now shows a decline. That customer's share of sales and its 2027 build plans would show how exposed the division is.
Which data-center prospects have moved from testing to approval?
More than 30 potential buyers are testing Faster's couplings, but volume needs approval from the biggest cloud operators. The count of approvals, not samples, will decide whether data centers add revenue in 2027.
Do price increases cover cost inflation by mid-2027?
Evans said contract prices with equipment makers take time to reset, while memory chips and freight keep getting dearer. A price-versus-cost figure for the first half of 2027 would test the margin case.
How much did distributors stock up before the price rise?
Distributors restocked ahead of price increases, and Evans flagged a stock build in China. A measure of channel stock against end demand would show how much of this year's hydraulics growth will repeat.