Helios Technologies, Inc.

Greetings, and welcome to Helios Technologies' second quarter 2020 Financial Results Conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. Please note, this conference is being recorded. I would now like to turn the call over to your host, Deborah Pilevsky, Investor Relations for Helios Technologies. Thank you. You may begin.

Thank you, and good morning, everyone. Welcome to the Helios Technologies second quarter and year-to-date 2020 financial results conference call. On the line with me are Joseph Metasevic, our president and chief executive officer, and Tricia Fulton, our chief financial officer. Joseph and Tricia will be reviewing the results that were published in the press release distributed after yesterday's market close. If you do not have that release, it is available on our website at www.heliostechnologies.com. You will also find slides there that will accompany our conversation today. If you look through the slide deck on slide two, you will find our Safe Harbor Statement. As you may be aware, we will make some forward-looking statements during this presentation and also during 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 where we are today. These risks and uncertainties and other factors are provided in the earnings release, as well as in other documents filed by the company 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 earnings release, as well as in the slides. So with that, it's now my pleasure to turn the call over to Joseph. Joseph?

Thank you, Deb, and good morning, everyone. Before I begin on slide three, let me start by saying how excited I am to have joined Helios Technologies. It is a strong company with a bright future and innovative best-in-class legacy brands. I appreciate the board of directors providing me this opportunity to lead and advance Helios to its next level as we work towards our vision 2025 strategy. In my first two months here, I have been impressed with the management team. They have demonstrated their customer focus, nimble, enterprising, and energetic as we adapt to the unusual circumstances of COVID-19. We continue to serve our customers, developing new technologies and look to expand our addressable markets, all while considering the safety and health of our employees. Throughout the organization, We reduced costs and improved efficiencies, even in the face of strong headwinds. In fact, we delivered results that exceeded our expectation, which we will talk about in more detail later in the presentation. Our objectives through this pandemic is to stay focused and disciplined, to continue to generate strong cash flow, and importantly, to navigate into a strategic position for growth as markets recover. Our efforts are supported by a very strong balance sheet. Even during these challenging times, we are continuing to invest in select strategic initiatives. We have several projects underway with OEM in the power sports, ag, and construction markets. This includes an OEM pilot production of our new ACE software tool and MCX hydraulic controllers. We are creating innovative solutions that combine our strong electronics capabilities with our hydraulics controls, and these innovations are at the heart of our potential to grow organically. We are also addressing potential opportunities to diversify our end markets. I have been impressed with our controls technology and have identified key customer prospects where we can create value through innovative solutions. While industrial markets continue to be challenged, we are seeing the beginning of a recovery in many end markets. Please turn to slide four, and I will summarize our strategic business highlights for the second quarter. As everyone is aware, the COVID-19 related headwinds were quite strong in the second quarter, given the efforts to contain the spread that stalled economies around the world. All of our factories are operational, and despite some positive COVID-19 cases, we have been able to manage our supply chain and production capacity to meet our customers' demands. To all of this, our management teams have been able to adjust quickly to the changing market and business dynamics. We rapidly implemented cost containment measures to address the economic downturn from the COVID-19 pandemic, and continued our efforts to improve productivity. Due to the agility of both segments of the businesses, we performed better than expected in the hydraulic segment, where the global ag industry has remained resilient while the electronic segment was able to achieve plan in a very challenging market conditions. Despite lower sales, the efforts of both segments enabled us to achieve a better than expected consolidated decremental adjusted operating margin of 32%. Additionally, we demonstrated our strong cash generating capabilities and realized $25 million of cash from operations and $23 million in free cash flow. We used the cash generated to further reduce debt so that our net debt position improved by nearly $17 million furthering our strong liquidity position and maintaining our 2.1 times net debt to adjusted EBDA ratio. Moving on to slide five and some financial highlights. Sales came in at $119 million in the second quarter, supported by shipments of past due orders in our hydraulic segment. Our gap earnings per share was 40 cents. The hydraulic segment exceeded plan expectation and electronics was able to meet their plan. Both sales and gap earnings per share beat our internal expectations. Also, both were lower than last year due to impact of COVID-19 and its effect on our business, customers, and end markets. Operationally, we realized a healthy adjusted EBDA margin and non-GAAP cash EPS relative to our sales volume by executing the planned cost savings and productivity initiatives we had identified. With that overview, I will now turn the call over to Tricia to review the financial results for the second quarter and first six months of 2020 in a bit more detail. Tricia?