Q3 2021 Helios Technologies Inc Earnings Call
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Greetings welcome to Helios technologies third quarter 2021 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.
Once you require operator assistance during the conference. Please press Star Zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Tania Almond Vice President of Investor Relations. Thank you you may begin.
Thank you operator, and good day, everyone welcome to the Helios technologies third quarter 2021 financial results Conference call. We issued a press release. This morning. If you do not have that release. It is available on our website at H L. I O Dot Com you will also find slides there.
There that will accompany our conversation today.
On the line with me are Joseph metastatic, our President and Chief Executive Officer, and Tricia Fulton, Our Chief Financial Officer. They will spend the next several minutes reviewing our third quarter results discussing our progress with our accelerated growth goals updating our outlook for the rest.
2021 and then we will open the call to your questions.
If you turn to 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 will be provided in our 10-Q to be filed with the securities and Exchange Commission.
You can find these documents on our website or at S. P C Dot Gov I'll.
I 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 slides.
And with that it's now my pleasure to turn the call over to Joseph.
Thank you and good day everyone.
Please turn to slide three and I will summarize the highlights for the quarter.
Our Helios team deliver outsized growth again this quarter across each line of our business by expanding our market share with our current customers winning.
Winning new customers and diversifying the markets we serve.
We believe this is a direct result of strong execution on our augmented strategy for growth that is made possible by the passionate culture instilled in our team we ship values of integrity.
Solution leadership accountability and innovation.
Every day, we leverage our core values as we address the challenges from supply chain constraints and material costs head on with flexibility agility and creativity.
We are not immune to the logistical constraints, everyone is facing with interpretation challenges.
We are prioritizing constantly to meet our customers' needs by partnering with our suppliers and identifying new sources to complete or this timely and maintain our top tier lead times.
We have stayed focused on optimizing our manufacturing efficiencies and implemented multiple pricing strategies across all of our businesses to cover the inflationary pressures didn't realize.
It is important to note that through all of this demand remains robust across all of our markets and we believe we continue to take market share due to our responsiveness to our customers' needs.
Back, we had 30% organic growth in the quarter, reflecting strong demand in our operational flexibilities to deliver.
This was bolstered by winning new customers and diversified markets as well as the new products. We have introduced that are being well received.
Additionally, we recently won an important new customer in the electric vehicle design and manufacturing space.
We'll provide edge to edge electric control displace over a multiyear period.
This is a perfect example of a new customer win and diversified markets.
As you know this quarter, we have been integrating our name acquisition that I spoke about on our last call.
We are very excited about how nicely, we see their product feeling of our good better and best portfolio approach in our electro hydraulic product offerings.
Do you expect to start bringing this combined offerings to the market relatively quickly through the end of this year into early next year.
Just after the third quarter, we closed our acquisition of the assets of Joy and way both NIM enjoying are excellent examples of the effectiveness of our flywheel acquisition strategy.
Joanne is an ideal addition for our electronics segment.
To complement our controls platform from multiple boy acquisition further expands our reach into Asia increase our manufacturing capacity as well as help with better served in the region for the region and strength in our supply chain.
They are another example of a strong stand alone business that fits within the Helios business system like a glove and we will be able to create a multiplier effect.
Because of our strong cash generation this quarter, we have once again rapidly delever the balance sheet quickly getting back to our targeted two times leverage metric, providing dry powder to continue advancing our acquisition strategy.
And I should add that the pipeline continues to remain very robust.
Due to the strong quarter performance the strength of demand in our markets and our teams excellent work in achieving manufacturing efficiencies.
We are again, raising our full year 2021 revenue and non-GAAP cash EPS outlook, while holding margins steady even with the backdrop of this most unusual operating environment in the supply chain.
We are encouraged by what we are hearing from our customers and believe this sets us up for a solid 2022 as well.
Let me review some of the financial highlights on slide four and five and then pass it over to Tricia for more details.
Our second quarter net sales increased over 80% to $223 million, including $64 million in sales from acquisitions.
Our adjusted EBITDA margin remains top tier at 25, 1%. This was a 170 basis point expansion over last year.
Non-GAAP cash EPS was 107 more than double over last year, reflecting the strength of the economic recovery.
Ability to capture greater share of growth and the addition of several excellent acquisitions.
Our Helios team is the absolute key to our success and I could not be prouder of their dedication and fortitude through the most unusual operating conditions of probably all of our careers.
I will now turn the call over to Tricia to review the financial results and outlook in a little bit more detail Tricia.
Thank you Joseph and good day, everyone on slide six and seven I will review, our third quarter consolidated results.
As Joe noted, we outperformed and delivered outstanding growth in the third quarter supported by our focus on delivery lead times and managing our operations efficiently. We continue to expand our sales channels, while our existing end markets remain robust.
We are focused on executing our flywheel acquisition strategy and our most recent transformative acquisition of that Paula exceeded our expectations again.
Net sales grew 82% over the prior year period, as we executed our growth plans and continues to take market share.
As Josef mentioned, we delivered very strong 30% organic growth during the quarter.
Third quarter gross profit of $89 million increased $34 million or 72% over the prior year period from higher volume.
Gross margin was a very healthy 36, 2% and was impacted year over year by the difference from Balboa margin profile.
Throughout the quarter, we captured manufacturing efficiency and improved leverage of our fixed cost base on higher sales, which were offset by increases in logistics and raw material costs.
We have done and continue to implement multiple pricing strategies, while also carefully managing the business to overcome the higher input costs.
And the factory is performing well given the constant re prioritization and we need to do to get product out the door, maintaining extreme flexibility and agility in our operation has been a competitive advantage and is helping us take market share.
Adjusted EBITDA margin grew to 25, 1% up 170 basis points from the same period, a year ago, reflecting higher volumes and our disciplined cost management effort.
Non-GAAP cash EPS improved 54 to $1 seven for the third quarter over the prior year period, reflecting strong demand across all industries and better than expected performance of the Balboa acquisition.
Our effective tax rate in the third quarter was 25, 5% compared with 27% in the prior year period due to a reduction in available tax incentives and increased earnings in higher tax jurisdictions, such as Italy, Germany and Australia.
Please turn to slide eight for a review of our Hydraulics segment third quarter operating results.
Third quarter hydraulics sales of $133 million were up 36% over the prior year period and benefited from broad based improved demand in most of our end markets showing very strong annual growth in the Americas and EMEA.
Annual organic growth in this segment was 31%.
Those included a positive 1 million impact from foreign currency exchange rates.
Q3, hydraulics gross profit benefited from higher volumes, while margin increased 150 basis points to 37, 6%, primarily driven by fixed cost leverage on higher sales manufacturing efficiencies and sales mix.
The 460 basis point operating margin expansion to 23, 8% compared with the prior year period reflects operating leverage on higher volume as well as our disciplined execution on our manufacturing strategy.
Please turn to slide nine for a review of our electronics segment third quarter operating results.
Electronic sales were $89 8 million up from the $24 4 million in the year ago period, reflecting an increase of 268%.
Annual organic growth in this segment was 26%.
We are seeing strong demand from the health and wellness and recreational markets supply chain constraints limited sales in both end markets in the quarter.
Acquisitions contributed $59 million in revenue to our electronics segment for the third quarter.
Next quarter, we will observe one year since acquiring Sao Paulo, and it will be classified into our organic growth category. We continue to be very excited by the potential. This acquisition has brought to our business.
Electronics segment gross profit of $31 3 million in Q3 increased with the acquisition and higher volume.
Electronics gross margin was 34, 9% and reflects the impact of mix primarily related to the different margin profile of the Balboa acquisition as well as increased cost, resulting from supply chain challenges to meet strong customer demand.
Operating income for the electronics segment of $18 4 million was up from $4 7 million in the prior year period, and operating margin improved 130 basis points.
The 2021 third quarter margin reflects operating leverage gained with all bolus favorable operating profile and higher volume in the organic business.
Please turn to slide 10 for a review of our cash flow.
Cash from operations was $32 5 million in the third quarter compared with $36 7 million in the prior year period, we are carefully balancing our working capital requirements with our efforts to provide timely delivery to our customers and significant demand and material shortages.
For the quarter Capex was $6 7 million up from $1 9 million in the third quarter of 2020.
Capex for the full year 2021 is expected to range between $25 million to $27 million.
This is down from a range of $30 million to $32 million due to the timing of when certain investments will be available.
On a year over year basis, this will be an increase of 78% from our capital expenditures in 2020.
Free cash flow was a strong $25 7 million at the end of the third quarter equating to a trailing 12 month free cash flow conversion rate of 103%. We are confident we have significant financial flexibility to further pursue our flywheel acquisition strategy.
Regarding our capital structure on slide 11, we continue to rapidly delever our balance sheet. This.
This quarter, we hit our target range of pro forma net debt to adjusted EBITDA leverage of two times. This improved from the three times at the end of 2020.
Total debt was 471 million at quarter end, we also had $121 million available on our revolving lines of credit with total liquidity of $169 million.
As a reminder, our financial strategy is to increase leverage for disciplined acquisitions, and then generate the cash to quickly pay that down or.
Our capital priorities remain debt reduction organic growth through new products and technologies acquisitive growth and distributions to shareholders.
In fact with our next dividend payment, we planned to join an elite group of public companies that have paid dividends for 25 years straight.
Now, let's turn to slide 12, and I will discuss our outlook for the rest of 2021.
Our guidance for 2021 assumes constant currency using quarter end rates as well as the assumption that our markets are not further impacted by the global pandemic.
As a result of our outperformance this quarter, we are raising our revenue outlook for 2021 to the range of 842 $860 million, which implies an annual growth rate of approximately 63% at the midpoint of the range.
We are holding adjusted EBITDA margin outlook steady at 23, and a half 24, 5%, we continue to leverage our manufacturing efficiencies to offset stronger headwinds in the fourth quarter due to rising material costs.
This implies we are raising our expectation for adjusted EBITDA dollars to the range of $197 million to $211 million or 68% annual growth rate at the midpoint of the range.
Additionally, we continue to invest through non capex related items into our manufacturing strategy to reap the rewards of margin improvement over the long term.
Relative to our margin guidance, we are reflecting inflated material and freight costs continuing through the remainder of the year the challenges of obtaining parts and supplies, even as we build inventory as well as the difficulties in staffing and balancing production lines.
We are tightening our interest expense outlook to $16 million to $17 million at current borrowing levels and rates.
The expected effective tax rates for 2021 remains in the range of 22% to 24%.
Depreciation is now expected to be between 21% to $22 million well I'll look at amortization is unchanged at approximately $32 million to $33 million.
We are raising our non-GAAP cash EPS outlook to between $3 75 to $4 10 per share or 75% increase over the prior year at the midpoint of the range.
The increase in our guidance for 2021 is driven by strong end market demand. We have so far this year and expect to continue throughout the remainder of 2021.
We expect that we can leverage our fixed cost base and maintain our strong margins, even given the headwinds on the supply chain material cost and logistics.
The spread in our ranges this far into the year is an indication of the highly unusual operating environment, we all find ourselves with them.
With that I will turn the call back to Joseph for some final comments.
Thank you Tricia.
Certainly fascinating times, we have exceptional demand for our products, while also having to be very agile to meet their demand.
Our team has proven we are up to the challenge and we remain Super excited about how we are shaping in driving our future forward.
With that let's open the lines up for Q&A. Please.
Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue and for participants using speaker equipment. It made me necessary to pick up your handset.
We're pressing the star team.
Our first question is from Nathan Jones with Stifel. Please proceed.
Hey, Good morning, this is Adam Farley on for Nathan.
Good morning, Adam.
Hey, you guys called out your really strong lead times, a couple of times on the call.
This leading Q and you called out share gain opportunities as well.
So could you provide a little bit more color on what the share gain opportunities have been so far.
Okay.
Yeah, I think we've had.
I had a lot of opportunities that we've seen.
On an individual basis coming through from you.
Our market share gain perspective, where we have had customers reach out to us and say hey, I can't get this from one of your competitors and we've been able to satisfy the need.
For that customer in some cases, it's a one off but in many cases, we believe it's a long term share gain for us.
And we've seen a lot of those in the hydraulic space over the last few months, maybe a little bit less on the electronic side, but.
Part of that is supply chain related cause that's hitting the electronic side, a little bit harder than hydraulics, and we've been able to really maintain our strong lead times on the hydraulic side and take market share.
And then probably the other data point would be did we hit our distribution Council meeting here.
Just about a week ago, hitting so disorder and.
That kind of confirms with Tricia just said with the feedback we've gotten from the distributors and the order patterns that.
You know the.
Previous customers, who did not purchase from us that we are.
Now supplying.
So those are the two key drivers.
Okay.
And do you think there's any double ordering going on in the system with any customers trying to secure inventory.
We don't have an indication that there is any I mean, right now everyone's just trying to get what they need understanding the logistics and supply chain issues and get what they need as quickly, but we don't see any indication of double ordering.
Hi, guys. Thanks for taking my questions.
Thanks, Thank you.
Our next question is from Mig <unk> with Baird. Please proceed.
Thank you.
And Oh well done.
Operating environment.
I guess, where I'm looking for maybe a little more context Joseph is.
The tenure of demand in your two businesses I'm sort of curious as to how.
Orders are running relative relative to revenue.
So you're you're seeing.
Higher or lower order intake in the quarter relative to what you reported in revenues.
And I'm also curious given the amount of disruption that is out there.
Have you seen any impact negative impact on customer demand.
What are you hearing from your OEM customers as far as how theyre planning their own production.
For the fourth quarter, but really into into 2022.
Yeah.
Good morning, Megan Thanks for the comment so in terms of you are.
Your first question now or the Pentagon.
You know it has been very consistent throughout all of our businesses, it really hasnt fluctuated up and down.
Both segments hydraulic and electronics.
You know you always go through a period of time, where you see a spike up in 10 is balance back down and then you get you know.
A few calls and can be actually ship earlier and.
So you get that type of stuff, but in terms of ore or the pattern there hasn't been really no fluctuation or cyclicality.
On your second.
Question there is.
You know we look at this very closely every single day and when we changed our guidance we factored that in.
There is a strong level of optimism in certain areas.
And now obviously with the infrastructure Bill passed and will be signed is that optimism is obviously P.
Pete.
We are just super careful.
How are we going to meet the demand. There is would be hearing is very consistently is.
The main should stay robust.
We are working very close with our distribution partners and OEM partners to really label out of schedule.
We can fulfill that schedule on a timely basis.
The demand is stable.
We are seeing upticks in certain areas.
And we are building this very carefully with with some of the supply chain challenges.
Towards the scene.
To say, but.
I think that's kind of.
That's kind of where the army.
Okay.
Maybe you could put a finer point looking at your hydraulics business.
The thing that surprised me looking at both EMEA and Asia Pacific.
Revenues here are fairly consistent sequentially.
The third quarter relative to the second.
And.
You know, we've heard that China has slowed down in it.
No.
Equipment volumes are certainly lower there.
In EMEA.
You have that.
Basically the faster business, where there's been disruption for OEM.
OEM customers I think one of them has talked about having alkali plant shutdowns for their European operations. So what are you seeing in these two geographies.
China specifically.
And then.
The progression of demand for your for your AG customers and implicitly your EMEA.
Hydraulics business.
Yeah on the.
The China piece, and Tricia can chime in as well on.
On the China piece, I think what really helps us Mig we really stayed true to our strategy or have been a niche market.
In the region for the region in Asia with one of our strategic pillars, just a year ago was to have a more of a system solution approach, where we have our Queen Schon factory.
Just.
Matter of fact, sure and ship hydraulic components, but all the electronics components as well.
So we were able to have an impact.
In Asia, you know.
From a more system sale approach than just a component approach in that.
And that helped us in the region with local supply chain and local capabilities of manufacturing.
And in EMEA.
It's you know, Italy, Germany, UK, Spain, you name it we have seen.
You know very strong in and promising demand.
No interruptions.
We are seeing cost.
<unk> in terms of inflationary periods, but we knew there would have been and we are.
You know what.
Offsetting did with price increases and as you guys know we were.
You know successful all of US are working with the Oems on price increases so that those went through.
But then we have you know a lot of flexibility in our European manufacturing.
To.
To flex labor up and down in <unk>.
Pre bought quite a bit of material.
Really protects us as much as we can so yeah just to add.
A bit more specifics on a couple of the markets.
In APAC, we are seeing the Korean construction market be very strong and it's picking up speed, which has historically led to that China ramping back up at least from what we've seen historically.
And then China egg is extremely strong in our <unk> business as well they are growing very quickly in taking market share there.
The other part of APAC that it's starting to come back a little or in the third quarter was the mining in Australia, so quite a bit of our business there and we have seen a decline because of Covid, where we are.
Literally couldn't get into the mind, but now we're able to go back to those customers and that seems to be ramping back up as well.
That's helpful. My last question.
You mentioned pricing.
I'm curious, if we can get a little more detail or context.
On that I look at your <unk>.
Your incremental margins on EBITDA.
And they've been remarkably consistent 28, 29 27 throughout 2021, despite incremental costs, you called out transportation materials and a number of other factors.
So I'm I'm curious as to how you been able to deliver these hum steady incremental margin.
Is pricing looking in what might be the carryover contribution into 2022. Thank you.
Yes, great question.
I started talking at the same time, yeah. We are we have been able to get pricing throughout all of the businesses.
Some cases multiple times throughout the year and in addition to that the manufacturing strategy is really taking off and helping us with manufacturing efficiencies that are driving some of that incremental gain that we're seeing as well right.
And carryover into 'twenty, two can you comment on that.
Some of the price increases went through as a permanent some of them went through as surcharges related specifically to <unk>.
Material increases.
So there will be some carryover into 'twenty, two and there will likely be you know additional pricing actions in 'twenty two.
Just related to general price increases.
Okay. Thank you.
Thank you Mike.
Our next question is from Jeff Hammond with Keybanc capital markets. Please proceed.
Hey, good morning good.
Morning, Jeff Good morning.
So just back on the foreign mix question I think he had asked about the book to Bill or if Youre still building backlog here or just your ability to ship.
Is allowing you to kind of to work that down at all.
We saw a very strong backlog.
And that really is coming from the end market demand.
Expect that the backlog will be strong headed into 2022 and you know like everybody else. We do have some past due but yeah. We are doing a very good job at managing our past due dollars right now and getting them out the door as quickly as we can.
Majority of those or if they are on the electronic side, where we have some of the parts shortages, where we're literally nothing one part before we can ship something so as soon as those are coming in.
We're able to turn it around and I think the backlog is a testament really to the end market demand.
Uh huh.
Okay.
Okay, and then and then just to be clear I think you said you lost some revenue or you had some deferred revenue in electronics, but that was not the case in <unk>.
In hydraulics and maybe just if you can quantify kind of how much you think slipped to the right.
Yeah actually we had it in both segments were we saw our deferred revenue.
As a result of parts shortages or not having the parts on a timely basis.
You know it takes us some time once they get in the building to be able to build it and turnaround and ship it and we saw.
Some of these parts really freeing up the last couple of weeks of the quarter, but we weren't able to necessarily get everything out the door, but then.
<unk> falls into October I would say all of what we had about two thirds of it is electronics and one third of this hydraulic.
Okay, and then just last one.
As we look into fourth quarter.
Should we think of the step down in revenue and margins as a seasonal or is there something more there and maybe particularly on the margins.
Is there something getting particularly worse there because again as you know my model shows the same thing like incrementals being pretty consistent through the year. Thanks.
Yeah, I mean, given everything that we're seeing on the supply chain side, we've been cautious with Q4, recognizing that it's going to require a very strong flow of products.
Our components coming in the door to shift along with that clearly in Q4, there's always some seasonality that's related to less shipping days due to holidays, specifically in North America and EMEA.
Yeah, it's probably a little bit of both I would say, but you know I I don't think there's anything that you need to read into that other than those two items supply chain and normal seasonality for holidays.
Okay. Thanks, so much.
Thank you. Thank you.
Our next question is from Josh <unk> with Morgan Stanley. Please proceed.
Hey, good morning, guys.
Good morning, Josh.
Just to Tricia you mentioned.
You know kind of the share gain and folks who can't get supply from kind of traditional supply base.
Seeking you guys out and he's able to fill in on that I'm sort of wondering like how do you see that evolving going forward I mean, I would imagine that.
All of those customers, including your own core customers, who are trying to validate.
Kind of backup suppliers just in case.
Do you think that there's some sort of like normalized middle ground, where.
You know the spread more evenly between yourselves and maybe their you know their historical supply base or do you think you're winning more where it may be kind of up especially in application where they were just sort of go with you from from now on is as this all blows over of course.
Yeah.
So a couple of things Josh you know as as we said before.
Investing in our own.
That's an easier annoying to supply chain constraints.
Willing should happen.
And so you know we had a lot of folks within our key key competencies suppliers actually work with them hand in hand.
And then we also developed our internal capabilities with a make versus buy strategy here, meaning.
As we acquired.
You know our new businesses, we didn't only acquire capacity, but also capability and once we fully flushed is clear.
Clearly made sense, they certain core competencies as we can manufacturer.
Internally.
Not just much quicker.
It always has a much more cost effective and it can flow through our.
Our process.
Accordingly, so all of this combined.
Got us to a point, where we can have.
<unk>.
Where are we in a position to hold our lead times very steady and and.
And meet that demand with our customers, but then at the same time, we ended our diversified market strategy, where we worked and targeted three customers within each.
Each of our business units and the electronics and hydraulics and test processes.
You know has become very strongly and now we're in a position where we.
You know one a couple of them and also announced another once a day, that's going to carry out with.
Over the next five six years.
So look all in all in we do believe we will we will have an advantage as a company in terms of our lead times, but also from a cost structure standpoint.
We will not be as dependent.
As we were once before a couple of three years back so.
We've taken the proper steps as we have announced it in the.
Investor meeting.
That's for sure.
No I think you've covered it.
Got it that's helpful.
Uh huh.
Alright, gentlemen.
No no go ahead I just wanted to make sure we answered your question.
Yes, absolutely.
And then I guess, maybe maybe taking a step back on kind of.
You've seen book to Bill lay out through.
Through the year and how you feel about backlog seasonally.
You know kind of pull ins versus you know push outs on customers taking delivery again organic growth has been really strong.
Can you kind of all year to year, just wondering if the sequencing or backlog position has changed at all as you guys did pass through the year.
Yeah, I mean look demand remains very robust are pretty much in both of our segments, that's not that hasn't been an issue.
You know in terms of pull ahead I think we are focused on shifting [laughter] exactly what the customer needs right now so we really don't experience.
Or has it any.
Mortgaging of other quarters, so to say so you don't have that going on.
In terms of.
Or this going forward.
Look we we are really Super excited how 2022 quick shape out.
We are by nature, a very a very homebuilding conservative company. So our visibility in the hydraulics segment. It's only a couple three weeks so visibility in the electronics segment is a little broader.
And as long as we can mitigate our supply chain constraints.
This facing you know we should have fee.
This in 2022 so the.
Backlogs are strong.
In both segments.
Nothing has been mortgaged and we're trying to fill into the man, but all of the state.
A very very methodical and disciplined not over committing and under delivering.
So our shareholder value here is it's pretty lucrative going into 2022 I would say.
Great appreciate the color best of luck.
Thanks, Josh.
As a reminder, this star one on your telephone keypad, if he would like to ask the question. Our next question is from John.
With Kansas City Capital. Please proceed good morning.
Joseph Tanya.
Good morning.
Two questions number one obviously this morning, there was a lot of buzz surrounding the infrastructure Bill and.
I guess when you speak to your customers can you help sort of separate out separate reality from the from the hope and expectation on this on this on this bill.
We want to actually prove could approved incremental to that.
The demand that Youre seeing in 2022 or is it just.
Going to be more of a longer term issue.
Well I think in our in our area of the niche market John It's clearly.
202 for incremental volume would we.
<unk> been discussing with our OEM customers.
You know what is the.
The supply constraint looked like from an overall product offering.
We may be on time, and we may be delivering the products and so it may all of this as well, but what is the total impact that they're experiencing currently so this will be trying to learn John.
But from in terms of your question, we do see this as incremental opportunity for us.
In 2022.
Yes, okay, Okay alright.
Secondly.
Last couple of quarters Balboa as Robin has there been sort of sequentially flat are you seeing the impact of the favorable impact from the pandemic on their revenues beginning to abate.
Debate are you seeing any any change and is it related to the to.
To the pandemic.
Yeah. So I think look as it relates to Jon is it's more of the.
Electronic components shortages once again order pattern has been.
Very robust and drug.
I'm going to tell you we could have shipped a lot more product.
Electricians said earlier, we have a week that we kind of go hand to mouth and then in the last couple of weeks of the quarter.
The product so it's growing nicely, but you run out of daylight.
No no.
We have not seen.
A stoppage or slowed down yet.
And certainly hope with our augmented strategy on diversifying to market.
And the acquisition of Julian way, we would be able to penetrate their product line into many more other markets that somehow strategy.
And if supply chain maintains where it is right now we should be pretty good yep yep, Okay, Alright, Joseph Thank you very much.
As much.
We have reached the end of our question and answer session I would like to turn the conference back over to Joseph for closing remarks.
Thank you operator, thank you all for joining us today.
As always we certainly appreciate your interest in Helios and look forward to updating all of you on our fourth quarter next year.
We remain super confident in our ability to continue to grow and deliver value for all of our stakeholders.
Have a great day and stay healthy.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
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