Sun Hydraulics (SNHY) Tops Q4 EPS by 1c, Revenues Beat; Offers FY19 EPS Guidance Above Consensus, FY19 Revenue Mid-Point Guidance Above Consensus

Sun Hydraulics (NASDAQ: SNHY) reported Q4 EPS of $0.41, $0.01 better than the analyst estimate of $0.40. Revenue for the quarter came in at $138.7 million versus the consensus estimate of $134.19 million.

• Record-setting full year sales of $508 million, up 48%; includes organic growth of 11%
• 2018 EPS of $1.49 per share; Non-GAAP EPS of $1.74, up 9%
• 2018 adjusted operating margin of 21.4%, adjusted EBITDA margin of 24.5%
• Net debt lowered by $20 million during fourth quarter
• Ended 2018 with net debt-to-EBITDA of 2.4x
• Introducing 2019 revenue guidance of $590 million to $600 million, GAAP EPS of $2.10 to $2.20, non-GAAP cash EPS of $2.55 to $2.65, adjusted EBITDA margin of 24.5% to 25.5%

Wolfgang Dangel, Helios Technologies’ President and Chief Executive Officer, commented, “As I reflect on the past two years, I note that they represented periods of tremendous growth and diversification for Helios, as we have been successfully executing our Vision 2025 strategic plan. We finished 2018 with $508 million of revenue compared with $197 million in 2016, more than a 2.5 times increase. Similarly, we generated $124.3 million of adjusted EBITDA in 2018, or 24.5% of sales, compared with $48 million in 2016, or 24.4% of sales.

“Specifically, in the past year, revenue grew 48% and adjusted EBITDA grew 43%. Our strong fourth quarter performance, with adjusted EBITDA margin expanding 290 basis points over the prior year, contributed to the solid full year results. Additionally, we reduced our net debt by nearly $20 million in the fourth quarter, finishing the year at 2.4x net debt-to-EBITDA and marking significant progress toward our leverage goal. Highlights of 2018 include:

• During the first quarter, we completed a successful follow-on equity offering where we issued 4.4 million shares and raised approximately $240 million of capital, which was used to partially fund the subsequent Faster acquisition.
• During the second quarter, we amended our bank credit facility and closed on the acquisition of Faster. This addition strategically contributes to the diversification of our end markets, hydraulic product offerings, geographies, manufacturing footprint, and customer base.
• Also during the second quarter, we began our Sarasota Cartridge Valve Technology (CVT) manufacturing consolidation project, to increase our capacity and further improve our production efficiency in accordance with our lean enterprise initiative. The project is progressing as planned and we expect to complete it within the next month or so.
• During the third quarter, we adopted Helios Technologies as our new business name, reflecting that we now have several operating companies under our umbrella, in alignment with our Vision 2025 strategy.
• Also during the third quarter, we completed the acquisition of CFP, a relatively small, bolt-on hydraulic integrator that geographically provides us with a pivotal stepping stone from which we are further building our presence in the growing Southeast Asia region.
• Additionally during the third quarter, we began production at our new state-of-the-art facility in South Korea, in accordance with our ‘in the region, for the region’ philosophy.
• Throughout the year, we continued to make steady progress with synergy realization among Enovation Controls, Faster and CFP, together with our legacy Sun Hydraulics business.
• We also realized productivity improvement in all of our businesses, which is ongoing.
• Finally, we continued to realize the results of our organic growth initiatives, with particular focus on new products and new markets penetration.”

Looking forward to 2019, Mr. Dangel added, “We are pleased with the results from our investments to gain market share and achieve our acquisition revenue synergies. We believe we can continue to grow at a rate that exceeds growth expected in the currently changing macroeconomic climate. Also, we are aggressively investing in innovative manufacturing technologies and market-leading new products, which will keep our capital expenditures and research and development spending at strong levels. We believe that these investments are critical to the execution of our Vision 2025 strategy, which is driving shareholder value.”

GUIDANCE:

Sun Hydraulics sees FY2019 EPS of $2.55-$2.65, versus the consensus of $2.11. Sun Hydraulics sees FY2019 revenue of $590-600 million, versus the consensus of $590.16 million.

For earnings history and earnings-related data on Sun Hydraulics (SNHY) click here.

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