Helios Technologies (NASDAQ: HLIO) reported Q1 EPS of $0.56, $0.14 better than the analyst estimate of $0.42. Revenue for the quarter came in at $129.5 million versus the consensus estimate of $121.59 million.

Tricia Fulton, the Company’s Interim President and Chief Executive Officer as well as Chief Financial Officer, commented, “Our solid first quarter performance exceeded our expectations, despite a softer demand environment compared with a year ago. Most of the quarter was business as usual for us, with the COVID-19 pandemic conditions resulting in about $5 million lower sales in the quarter. As a result of government mandates, our China operations were shut down for six weeks beginning in February through mid-March. Production at our facility in Italy was shut down for four weeks in March and April, although customer shipping activities continued. After three additional weeks of being open only for certain government approved activities, the Italian facility opened for full production today, as the government mandate was lifted. However, current economic conditions stemming from the COVID-19 pandemic resulted in the recording of a $31.9 million non-cash goodwill impairment charge relating to our Faster business unit in the quarter. All of our other significant operations were deemed essential and are running near full capacity. We implemented substantial procedures to limit the spread of COVID-19 and keep our employees safe and healthy while responding to the needs of our customers.”

She continued, “Customer demand was steady for most of the quarter, with certain industries and regions experiencing more variation than others. Despite lower sales, both of our segments reported gross margin expansion compared with the prior year, evidencing our ability to manage costs and continue productivity improvements. Additionally, we reduced our net debt by over $11 million during the quarter, expanding our already strong liquidity position and maintaining our 2.1x net debt-to-adjusted EBITDA ratio.”

GUIDANCE:

Ms. Fulton noted, “Given the significant uncertainty surrounding the eventual magnitude and duration of the impact of COVID-19 on the economy globally, we withdrew our 2020 guidance when we announced our business update on March 24th. The economic impact of the pandemic has negatively affected our sales and orders for April. We expect second quarter headwinds, but anticipate that the largest impact was in the month of April due to shutdowns of many of our global OEM customers. A portion of our backlog has been postponed from April to later in the second quarter and a smaller number of orders have been cancelled. In other cases, we do not have updated order schedules from OEMs due to their extended shutdowns. With ongoing significant uncertainty, we do not have sufficient visibility to reinstate guidance for 2020.”

She added, “To be prepared, we have undertaken scenario analyses at varying potential demand levels. The Company has already instituted certain cost containment steps in an effort to mitigate the effects of the downturn. These actions include a temporary 20% salary reduction for all officers of the Company, layoffs and temporary salary reductions at Enovation Controls, a hiring freeze, reduction in the use of contingent labor and the elimination and postponement of capital expenditures. Additionally, our Board of Directors has agreed to reduce director compensation by 20% for the remainder of the year. To further protect the health and liquidity of our business, additional actions included in our scenario planning consist of:

Postponing additional non-essential capital expenditures
Reducing our temporary labor force
Reducing overtime
Applying additional salary reductions
Reducing working hours to lower payroll expense
Executing furlough programs and/or additional layoffs
Further reducing discretionary spending

The extent of such actions will be determined by the magnitude and duration of the economic downturn. Regardless, we are confident that we will successfully manage through the challenges we face, leveraging the strengths of the Helios organization, from our well-respected brands, to our dedicated global employees, and our ample liquidity, emerging as an even stronger organization as we pursue our Vision 2025 goals.”

For earnings history and earnings-related data on Helios Technologies (HLIO) click here.