HLIO Q2 Deep Dive: Margin Pressures Ease as Portfolio Refocuses, Guidance Tops Expectations

August 12, 2025 at 23:54 PM EDT

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Motion control and electronic systems manufacturer Helios Technologies (NYSE: HLIO) reported Q2 CY2025 results topping the market’s revenue expectations, but sales fell by 3.4% year on year to $212.5 million. On top of that, next quarter’s revenue guidance ($211.5 million at the midpoint) was surprisingly good and 7.2% above what analysts were expecting. Its non-GAAP profit of $0.59 per share was 17.4% above analysts’ consensus estimates.

Is now the time to buy HLIO? Find out in our full research report (it’s free).

Helios (HLIO) Q2 CY2025 Highlights:

Revenue: $212.5 million vs analyst estimates of $201.5 million (3.4% year-on-year decline, 5.5% beat)
Adjusted EPS: $0.59 vs analyst estimates of $0.50 (17.4% beat)
Adjusted EBITDA: $39.5 million vs analyst estimates of $36.8 million (18.6% margin, 7.3% beat)
Revenue Guidance for the full year is $820 million at the midpoint, above analyst estimates of $784.6 million
Adjusted EPS guidance for the full year is $2.40 at the midpoint, beating analyst estimates by 24.2%
Operating Margin: 10.3%, down from 11.8% in the same quarter last year
Organic Revenue fell 4% year on year vs analyst estimates of 9.3% declines (525.7 basis point beat)
Market Capitalization: $1.68 billion

StockStory’s Take

Helios Technologies posted second quarter results that were received positively by the market, with revenue and non-GAAP profitability both surpassing Wall Street’s expectations despite a modest year-over-year sales decline. Management attributed the performance to stronger-than-expected demand in its Hydraulics segment and operational discipline across the business. CEO Sean Bagan highlighted progress on portfolio optimization and cost management, noting, “We continued to reduce debt which is lower by $67 million from the year ago period, improving our net debt to adjusted EBITDA leverage ratio to 2.6x.” The company also benefited from foreign exchange tailwinds and incremental growth in targeted end markets.

Looking forward, Helios’ updated guidance reflects confidence in stabilizing core markets and ongoing product innovation. Management believes recent structural changes—including divesting non-core assets and streamlining engineering resources—will improve overall margins and position the company for sequential growth. CEO Sean Bagan emphasized the focus on organic growth, stating, “New products are being launched at a faster pace, many in white spaces providing incremental sales opportunities while not cannibalizing existing sales.” The leadership team expects these actions, along with a strengthening order backlog, to drive improved performance in the second half of the year.

Key Insights from Management’s Remarks

Management cited targeted portfolio moves, market stabilization in key regions, and new product introductions as the major contributors to the quarter’s results and improved outlook.

Hydraulics segment stabilization: The Hydraulics business saw signs of recovery, particularly in agriculture, after eight quarters of declines. Management noted this was aided by healthier dealer inventories and renewed OEM confidence, especially in the EMEA region, which grew 5% year over year.
Electronics market dynamics: Electronics sales grew in the Asia-Pacific region, driven by demand in health and wellness, but the segment overall saw margin pressure due to higher freight, duties, and a less favorable product mix. The introduction of new products and platform development is expected to help offset these pressures.
Custom Fluidpower divestiture: The sale of this Australian-based business was described as a strategic decision to improve Helios’ margin profile and refocus on core brands. While the divestiture will reduce sales, management expects a positive impact on consolidated margins and future capital allocation flexibility.
Operational efficiency initiatives: Recent restructuring efforts, such as consolidating engineering functions and reallocating personnel, have enabled Helios to simplify its business and enhance accountability. These moves are expected to deliver further cost savings and improve responsiveness to customer needs.
Board and leadership changes: The appointment of Ian Walsh to the Board adds manufacturing and aerospace experience, while ongoing executive recruitment—including the search for a new CFO—aims to strengthen governance and operational oversight.

Drivers of Future Performance

Helios’ outlook is supported by a more stable demand environment, a focus on operational execution, and a streamlined portfolio targeting higher-margin growth.

Core market recoveries: Management anticipates continued stabilization and growth in agriculture, construction, health and wellness, and recreational markets, with order backlogs growing for the first time in several years. The company expects this trend to support sequential sales increases.
Margin enhancement efforts: Actions such as the Custom Fluidpower divestiture, product mix improvements, and ongoing cost discipline are projected to support a return to higher adjusted EBITDA margins, even as tariffs and segment mix remain headwinds in the near term.
Product innovation and go-to-market realignment: Accelerated new product launches in both Hydraulics and Electronics, combined with a restructured commercial organization focused on brand and product accountability, are expected to create incremental revenue streams and drive customer engagement.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be watching (1) whether market recoveries in agriculture, health and wellness, and recreational segments translate into sustained sales growth, (2) the impact of portfolio changes—including the Custom Fluidpower divestiture—on consolidated margin improvement, and (3) evidence that Helios’ accelerated new product introductions are generating incremental revenue. Execution on cost discipline and further commercial organization refinements will also be important markers of success.

Helios currently trades at $50.53, up from $36.83 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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