Q1 2022 Helios Technologies Inc Earnings Call
Greetings and welcome to the Helios technologies first quarter 2022 financial results Conference call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Tania Almond, Vice President Investor Relations corporate communications and risk management for Helios technologies.
You you may begin.
Thank you operator, and good day, everyone and welcome to the Helios technologies first quarter 2022 financial results Conference call. We issued a press release yesterday afternoon. 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.
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 first quarter results discussing our progress with our accelerated growth goals affirming our outlook for 2022, and then we will open up.
A 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 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 were provided in our 10-K filed 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 slide.
And with that it's now my pleasure to turn the call over to Joseph.
Thank you Tanya and good day everyone.
Our team had another exceptional quarter as we are sticking to our game plan, but executing on our strategy to drive accelerated growth.
We are achieving this through innovation and the deployment of the helium business system to keep both center and focus on what we can control.
Even while we continue to live with the backdrop of some of the most unusual times in recent history.
If you would please turn to slide three I will review the quarterly highlights.
We started the 'twenty to 'twenty two of strong in fact on a run rate basis, we are well on our way of meeting our goal to reach at least $1 billion in revenue by 2023.
<unk> been successful executing element of fracturing in our operation strategy to deliver outperformance, which led to our highest and anticipated $241 million in revenue in the first quarter.
Innovative higher value solutions are proving to be sticky with our customers and building loyalty.
This is how our brand is growing and how <unk> is winning in our markets. Additionally.
Additionally, our responsiveness to our customers and our ability to deliver top tier industry lead times helps us beat the competition and we continue to take market share.
What is very apparent in our results is the strong operating leverage inherent in our business model along with the benefits. We are starting to achieve as we shift to a more integrated operating company.
As we successfully grow our top line, we are expanding our bottom line at a greater rate I am convinced it is the commitment of our world class team executing against those businesses then that is driving our earnings power.
We are focused on continuous improvement and operational excellence, while proactively managing our supply chain and inventory to ensure we keep delivering for our customers.
Believe it is important for our investors to understand not only how well positioned we are to capitalize on strong economic conditions, but also our ability to weather macroeconomic challenges. This.
These attributes include.
The strength of our balance sheet.
Our ability to quickly delever diversity of our revenue sources.
And geographies.
<unk> innovative culture that is part of our DNA.
Our leading market positions across our portfolios.
Our pure play focus within the hydraulics and electronics industries.
Our world class people without them nothing else matters.
We believe all of this quality is great not only the buffers that protects us when times get tough, but also creates the opportunities to help us further accelerate our operating model.
Importantly, we have delivered on our promises for eight sequential quarters.
And are on track to achieve the milestones that we have accelerated by two years of reaching at least $1 billion in revenue by 2023.
I want to thank all of our global colleagues for their dedication and hard work in achieving this amazing results.
Now I would like to provide some highlights on our most recent acquisition announcements please turn to slide four.
Jamie is an ideal demonstration of our bolt ons flywheel acquisition strategy.
<unk> bring differentiated technology that expands our hydraulics segment offering.
In fact, because the products are so complementary to ours. There has been partnering with our fast the business to sell their products. Since October of 2020. So we already had an established working relationship with the team.
And it makes sense to bring them into the Helios family to further accelerate our combined efforts.
The amount of effects rotating products did enable connections within the hydraulic system to eliminate leakage. The combination of our cartridge valves quicker release couplings and swivels create industry, leading solutions that are not only very high value and cost effective for our customers, but also.
Have safety and environmental benefits as well.
We believe the potential of these bolt ons is significant and it further strengthens helios in the hydraulics market as the leading pure play provider of highly engineered solutions to both Oems and our distribution partners.
As we continue to target system sales across our segments over time. This type of technology enhancements only further extend our differentiation to be the most trusted strategic partner for our customers.
Let me now turn the call over to Tricia to review the financial results and discuss our current outlook in more detail before I come back for some closing remarks.
<unk>.
Thank you Joseph and Hello, everyone on slides five through nine I will review our first quarter 2022 consolidated result, as Joseph noted we started the year off strong out of the gate managing through the continued challenges of the global supply chain and broader macro environment.
Net sales grew 17% over the prior year period, as we executed our growth plans and continue to take market share we delivered strong organic growth of 14% during the quarter, even with a $4 7 million foreign currency headwind.
First quarter gross profit of $83 6 million increased $8 2 million or 11% over the prior year period from higher volume.
Our manufacturing strategy is driving results, even though the benefits are being partially masked by the current macro environment.
Our teams have spent a lot of time formulating plans for each business segment to maximize our in the region for the region and make versus buy strategies as we integrate the acquisitions. We have made over the last 18 months.
Gross margin was 34, 8% in the quarter down 200 basis points from the year ago period.
While volumes and pricing were up increases in logistics, and raw materials and labor costs compressed margin.
Adjusted EBITDA was $59 million up 15% with associated margin of 24, 5% compared with 25, 1% from the same period a year ago.
Higher volume was offset by the cost increases I just described.
Our effective tax rate in the first quarter was 22, 4% compared with 23, 2% in the prior year period, reflecting levels of income in various tax jurisdictions.
Diluted EPS improved to 94, SaaS up 34%, while diluted non-GAAP cash EPS improved to $1 18 up 19% for the first quarter over the prior year period, reflecting higher sales operational efficiencies and strong operating leverage.
Please turn to slide 10 for a review of our Hydraulics segment results.
First quarter hydraulics sales of $137 1 million were up 15% over the prior year period and benefited from improved demand and market share gains in the Americas and EMEA. Despite the $4 5 million headwind from foreign currency exchange rates.
Organic growth in this segment was 10% over the prior year period, while acquisitions added $6 4 million.
This is strong growth despite an estimated $6 6 million of sales delays due to supply chain shortages in this segment.
Q1, hydraulics gross profit increased 12% and benefited from higher volume gross margin of 37, 1% versus 38, 1% last year benefited from price increases and fixed cost leverage on higher volume offset by increases in material legit.
Fixed labor costs and unfavorable FX.
Operating income increased 13% due to strong leverage and cost discipline, while margin modestly declined 50 basis points to 23, 1% from the prior year period.
Please turn to slide 11 for a review of our electronics segment results.
Electronic sales were $103 4 million in the quarter, an increase of 21% over the year ago period organic growth. In this segment was up 20% in the first quarter. We are seeing strong demand from the health and wellness and recreational markets and.
The growth was seen across all regions.
For the quarter, we estimate that approximately $11 million of sales were delayed due to supply chain shortages.
Electronics segment gross profit of $32 8 million in Q1 increased 9% from the prior year period on higher volume.
Electronics gross margin of 31, 7% was down from 35% in the year ago period, reflecting price increases and fixed cost leverage on higher sales that were more than offset by increases in raw material freight logistics and labor costs.
Operating income for the electronics segment of $25 million was up 12% from the prior year period, although operating margin contracted 160 basis points.
The operating margin reflects the flow through of gross margin, partially offset by fixed cost leverage on higher sales and disciplined cost management.
Please turn to slide 12 for a review of our cash flow.
Cash from operations was $14 7 million in the first quarter compared with $15 1 million in the prior year period.
We are carefully balancing our working capital requirements with our efforts to provide timely deliveries to our customers significant demand and material shortages.
We have increased inventory to address our backlog and maintain our top tier lead times, which is helping us take market share.
For the quarter Capex was $5 6 million or two 3% of sales compared with $5 million or two 4% of sales in the year ago period.
We are currently expecting capex in 2020 to be between 3% to 5% of sales.
Free cash flow was $9 1 million in the first quarter, our free cash flow conversion rate was 76%.
For the trailing 12 months ending first quarter of 2022. This is lower than our more typical rate, which was consistently over 100% from 2018 to 2020.
We have made a conscious decision to invest in and grow inventory or demand dictates and this strategy is reflected in our working capital needs.
Regarding our capital structure on slide 13, we consistently demonstrate our ability to rapidly delever our balance sheet. Our strategy is to flex up leverage for strategic disciplined acquisitions, and then quickly delever using cash generated from operations.
Our pro forma net debt to adjusted EBITDA leverage of 179 times remains below our long term goal of two times, we will continue to use cash to pay down debt as we reload for future acquisitions.
Cash and equivalents were $33 million at the end of the first quarter compared with $28 5 million at the end of 2021.
Total debt at quarter end was $438 1 million compared with $445 million at the end of 2021, reflecting repayments net of borrowings on our credit facilities of $4 3 million in the quarter.
Liquidity at the end of the quarter was $192 million.
As a reminder, our capital priorities remain debt reduction organic growth through new products and technology.
Positive growth and distributions to shareholders.
Now, let's turn to slide 14.
Even in the face of much greater macro uncertainty just two months. After we first established this full year outlook, we are maintaining our guidance for 2022, which assumes constant currency using quarter end rates.
We are considering the war in Ukraine, which has no clear timeline.
Robert extended Lockdowns in major regions in China.
The pace of inflation.
<unk> and size of a potential recession and the actions yet to be taken around the world by Central Bank.
He will not include came in our expectations until the acquisition closes in the next few months, although it is not material in size.
Our outlook currently assumes our markets are not further impacted by inflation, the global pandemic or the geopolitical environment.
We are responsibly taking into consideration all of these current events as we look forward.
We continue to expect revenue in 2022 to be in the range of $930 million to $950 million, which implies an annual organic growth rate of approximately 8% at the midpoint of the range.
In terms of quarterly revenue flow, our first quarter exceeded our expectations, there's less visibility as we look at the second half of the year, while we have the benefit of pricing strategies coming into play we want to remain cautious until we get further into the year and our visibility comes more into focus.
Our adjusted EBITDA margin outlook remains 23, 5% to 25%, which at the midpoint approximates our adjusted EBITDA margin for the full year of 2021.
We will continue running our manufacturing strategy playbook as Joseph described to find ways to offset the macro impact.
This implies that our expectations for adjusted EBITDA dollars remained in the range of $219 million to $238 million or roughly a 7% annual increase at the midpoint of the range.
We expect interest expense to be between $14 million to $15 million at current borrowing levels and rates.
The effective tax rate for 2022 is expected to be in the range of 21% to 23%.
Depreciation should be between $24, five and $26 5 million well I'll look on amortization is approximately $28 million to $29 million.
Our expectations for diluted non-GAAP cash EPS remained between $4 35 to $4 67 per share in 2022.
This represents a 5% increase over our 2021 results at the midpoint of the range.
We are driving forward with our augmented strategy and delivering accelerated and profitable results, while maintaining top quartile industry margins.
As we address the highly unusual operating environment. We are in we are encouraged by the progress we are making and the success, we're having with that I will turn the call back to Joseph for some final comments.
Thank you much Trisha.
These are unique times, yet I believe we are extremely well positioned to execute at high levels. It is very important to us to continue to do what we said we're going to do we believe taken a cautious stance on the second half of the year right now as part of us being good stewards of the business.
As I said last quarter I am very optimistic that our potential is in the organization will be further unleashed as we move beyond this inflationary and macroeconomic challenges.
Over the last two years, we developed and have been executing on our augmented strategy that it is taking us from a holding company to an integrated operating company.
It has been perfect timing to make this transition considering the changes in the world around us.
It is providing tremendous leverage and we'll continue to do so over time as we get further into executing and implementing our operating and manufacturing plants.
Our business is significantly more diversified today as we continue to grow and cover more white spaces.
Our R&D and sales teams are collaborating more than ever across all of the businesses.
Innovative product solutions that we are creating are stickier with our customers.
Addition, our investments in manufacturing operations have contributed to top tier industry lead times, which we have been maintaining throughout this volatile environment.
We are also very focused on our corpus sustainability efforts as part of these strategies.
We are working to better articulate our ESG metrics and activity and recently rolled out a new website with our usages section to highlight those details.
We are super excited about our future and hope you shouldn't there's excitement with that let's open up the lines for Q&A. Please.
Thank you we will now be conducting a question and answer session.
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All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Thank you. Our first question comes from the line of Jeff Hammond with Keybanc. Please proceed with your question.
Hey, good morning, everyone.
Good morning, Jeff Good morning, Jeff.
So I was hoping to get one if you could give us price in the quarter and two just just update us on how youre thinking about.
Price cost progression through the year as you kind of pushed some of these price increases through.
So on the price cost we did get pricing in Q1, I think we talked about that on the last call. It wasn't fully active throughout Q1, we do expect that it will be fully in in our numbers that the by the end of Q2 from a price cost person.
<unk> I mean, we're trying to remain neutral by the end of Q2.
On that and we are seeing some pricing pressures in areas that we maybe didn't anticipate but we're also seeing as we pointed out really strong demand. So we're very encouraged by that.
Okay, and then I just wanted to understand within the context of kind of holding the guide and I understand kind of the high level macro headwinds, but you mentioned kind of tougher visibility. So maybe just speak to that and talk about kind of what your backlog did.
And order trends through the quarter, because it sounds like demand kind of remains strong and I would expect.
What's kind of the shorter lead times continue to outgrow.
Yeah, Jeff Good morning, So you summarized it well we are seeing continuous strong demand pretty much across our entire portfolio.
Still.
Still paying very close attention to Asia, obviously in Europe .
These are for an example in on the electronics side is.
It's slightly up on the hydraulic side and slightly down we did anticipate our conscience factory a 10 day shutdown, we have fully open now again.
Close eye on Europe , as I mentioned and then.
You know overall, just the entire supply chain, we continue to see soft spots in it.
Some areas.
So we've just been really cautious.
And careful.
No.
Business model, how we run to how we like to run the company is we want to really do what they said, they're going to do and.
We don't have 100% confidence on the second half yet so that kind of would drive so little cautionary step in our tone, but in terms of orders and demand in our backlog it remains to be very strong.
And are you seeing any like is this Asia the Asia decline in hydraulics was that more around the.
The lockdown or some some underlying slowing in demand.
No.
Purely around the lockdown.
We do not see well.
We saw a little bit.
Slow down.
But you.
Immaterial in that area.
It was largely tied into the last downturn.
Okay I'll get back in queue. Thanks.
Thank you.
Our next question comes from the line of Chris Howe with Barrington Research. Please proceed with your question.
Good morning, Thanks for taking my questions.
Morning, Chris.
Hey, good morning.
Just wanted to follow up on some of the segment level commentary.
<unk> had.
Electronics.
It was highlighted that the health and wellness markets did well.
Well as some other markets.
Perhaps you could breakdown your performance in.
In the quarter for health and wellness.
And how you anticipate health and wellness.
Progressing through the year versus your expectations in.
In addition to some of the other end markets that are performing well and electronics.
Yeah, Chris so.
She can add a little bit more detail efficiencies fit but.
Our strategy has been from day number one to really create the leverage within the electronics.
I meant it.
If it's with innovation well bore products or Joanne when China. So we're just starting to see is really the growth system sale and penetrating a broader.
Market by just leveraging our products.
We have.
Very heavily invested in new products and new innovation.
Some cases simplifies our products in other cases just.
Added feature to be really.
Two diversify so in terms of.
Your question on the electronics segment.
Pretty confident to be going to continue to move the needle as we.
Get farther into rolling out our new products.
And that goes not just with north American market, but because of the global market.
A higher level of confidence in that area.
Yes, I think also we pointed to the recreational markets, which remain very strong on the electronics side.
Especially in the U S markets, we're seeing really strong demand and a lot of that.
Discussions coming out of our customer meetings that are really encouraging for the.
Future and going forward for that end market as well.
Okay. Okay. That's helpful.
And my next question.
And I'll hop back in the queue.
As we think about these environmental constraints.
Sure.
You mentioned your facility in China is back operational after a 10 day shutdown.
The last the direct or indirect impacts.
From this region are ongoing.
As we think about that and also challenges around raw material freight logistics and labor cost how should we think about the sequential second quarter versus the first quarter.
As it relates to these challenges.
Yes, so Chris.
Look.
Sure.
You know we have.
Obviously paid very close attention.
What's going on in the global markets.
And.
You know incorporated all of the data points, we need to.
But quite honestly, we are not dwelling too much on wood to market conditions are versus doubling down on our customers and our manufacturing strategy and our new product introduction.
I think it would be fair to say that.
We feel.
Comfortable where we are in our journey.
And.
Despite the supply chain challenges, which in.
In many cases still.
Because we kind of go hand to mouth and then we make it at the last couple.
A couple of weeks.
In other cases to supply chain has been flowing extremely well.
Although our lead times.
Are you know exactly where we wanted to be anywhere between six and seven weeks far far greater than any.
Any competitor in the market. So we continue to take greater market share balancing that with supply chain balancing that with the macro.
Economic theory of what's going on is.
Is what you're hearing in our tone being a little bit more cautious, but you know.
I really don't see a reason why we would not maintain the labor cost.
Performance, we currently.
I was talking about.
I also think one of the things that are offsetting some of the issues that we're seeing in supply chain is what we're doing on the manufacturing and office strategy.
Continually opening up capacity and improving our processes.
Well, it's moving around some of our production to the most efficient place for us to make product. So that's really going to help continue and the long term to drive margin as well.
Perfect. Thanks for taking my questions and good to be on the call.
Thank you Lucas.
Our next question comes from the line of Mig <unk> with Baird. Please proceed with your question.
Ah, yes, thank you and good morning, guys.
I got to admit I'm, a little bit confused as to all the moving pieces here and there.
And what's happening I guess, where are where I'd like to start is.
You commented that you.
You expected price cost to reach neutrality exiting Q2, that's what I heard so if that's the case then I guess that implies that price cost was negative in Q1.
You will get better in Q2.
No.
You know going back to the.
Prior question that was asked here.
How should we think about Q2 relative to Q1 are things getting better or are things getting worse.
And then if you can.
Catch up on price cost what does that mean for margin in the back half of the year relative to 2021, right. Because I mean 2021 had its own set of challenges, especially late in the year.
Fourth quarter, so maybe we can start with some clarification there.
Yeah. So.
Yeah, we are going to have price cuts by the end of Q2 demand is very strong so as long as we're getting supply in and in for the orders that we need we believe that we can drive a very strong Q2 as well, but there are some constraints there as you know volume is really.
What is helping to drive margins as well and we had a much higher Q1 than we anticipated on the volume side, which helps us get the tremendous leverage that we can to the margin level and I think that we can continue to do that I think what you're hearing is that theres, just some unknowns there and.
I don't think are unknown or any different than anyone else's.
But yeah, we've been.
Fighting these challenges for quite a while and I think our results over the last eight quarters, where we've outperformed have shown that we do a very good job in mitigating what those pressures are honest and we will continue to do that not only in Q2, but throughout the rest of the year. We're in the back half, we just have a little bit less visibility than we have.
Now.
Well, let me look you're essentially saying that your margins are going to be flattish for the full year right. You started the year in our home 60 basis points.
Down in Q1.
Obviously, it has to get better from here in order to.
That guidance, presumably the fourth quarter is where you have the biggest tailwind right because that's the easiest comparison, but is it fair for investors to expect.
Flat or better.
Year over year margin, starting with Q2 or is this purely a second half.
22, okay.
Based on your operating plan and what do you know right now.
I think Mig what would be fear is exactly what we said is.
As we see it right now.
You know, we are taking a little bit more of a cautious stance as we learn more and we will certainly learn more over the next few weeks.
Stay tuned obviously could.
What was the change in a much more positive.
So we are not seeing that the demand is dropping off we're not saying that the margins are dropping off would be seeing is clearly we don't have enough visibility in the second half.
And once we get comfortable with all the data we will <unk>.
Communicate accordingly, so the transparency of our tone.
Our structure here is very important to understand.
I see.
Then maybe a question for you Joseph.
You highlighted the fact that demand is good.
You're trying to be conservative with reiterating the guidance I understand that but when you were talking about evaluating risk for the back half of the year.
Can you give us a sense of what sort of risk you were you were talking about because as far as demand goes everything you've told US is that things are quite good. So what are some of the risks in your view that you were trying to balance here within the outlook.
Yes, certainly.
So number one is obviously been China opening back up to its fullest.
We are continuing to see strong demand.
And just to give you a slight example, we had.
You know our Crimson factory shutdown for 10 days and folks were not even allowed to leave the building.
The good news was that we were able to operate and build belts and the bad news is we couldn't ship it.
And there has been slight indication that that could happen again, no effect was fully open now and.
And we are shipping products, we're shipping product at a lower rate as the ports are sold backed up.
So the whole China notion needs to get back.
That contract to the extent that we can have a stronger data points and a lot more confidence in.
And.
Our ability to ship product so thats number one.
To.
Is Europe .
Yes.
Those are very strong.
Where we get really.
Cautious on is we have seen continuous increase in terms of pricing pressure on raw material.
Supply chain has been relatively decent but now we've seen increase in energy cost.
And until that works itself out of the system. This would be another another data point.
And the North American market has been very strong for us.
You know our lead time really drive for continuous market share gain but every once in a while we see a blip in our supply chain. So we just make to somewhere else you don't want to get ahead of our skis and overcommit and under deliver and Thats, what you're hearing.
Understood.
Then if I may one last one and I know, Jeff asked about pricing I'm going to try this question again.
If I look at your guidance.
Even at the high end of revenue you would imply that.
Growth for the rest of the year is somewhere around call it 67%.
And.
Given what we're seeing in pricing pretty much across the end markets that you're serving in some of your peers and so on.
To me at least it would imply that.
There was very little volume growth that you're baking into the guidance.
Sequent quarters here.
The lift that we're seeing is mostly price.
Am I correct on that and if I am then.
Why are we not seeing a little more volume.
Through is it still supply chain or is it some other factor of conservatism baked in.
My kids.
It's a couple of things number one it is still a supply chain issue.
On the other hand is we're also rebalancing our capacity.
To be able to absorb more.
More volume and more products so to say, it's the market share gain in some areas has come much quicker than initially anticipated.
In copper <unk> with supply chain challenges, we decided to.
At capacity.
You know about how facility as well so we are kind of undergoing a little bit of a transformation by adding more.
More capacity and be able to.
Okay.
To ship the product.
Okay. Thank you.
Thank you.
Our next question comes from the line of Jon Braatz with Kansas City Capital. Please proceed with your question good.
Good morning, everyone.
Good morning, John .
Sort of continuing on.
That line of discussion Joseph when you look at maybe.
The volume.
For the second half of the year or for the last not last nine months.
What end markets are.
Maybe concern you the most and might begin to be sort of a precursor to a change.
And you're in.
The volume outlook as you look out towards the end of the year what end markets are you most.
I'm most concerned about.
Yeah, So two concerning market John .
Is the China construction.
And in China egg egg markets. Those are the two markets to be watching very closely just by the virtue what is going on in.
With the still increase.
Mick stages, but other than that when we look at across our.
We watch this obviously very closely but then allocate across all of our other markets.
Or pretty much point with the Green Arrow up.
So to answer your question, China construction in China egg to want to be watching very closely okay. Okay. Okay. Secondly.
Oh.
Tricia you mentioned that the acquisition.
<unk>, just announced yesterday, not not really material, but I was reading about what they do and it sort of sounds interesting.
Two questions number one.
Can it become material.
Going forward and number two.
Did they have a.
Sort of a lack of capital to really take this particular product line forward.
That may maybe behind them now.
Yes, they definitely can become material and one of the benefits that we see from this is that it enables us to get further penetration into the hydraulic systems market and certainly with the applications that we have through both faster and CVT.
We believe that that business can grow pretty significantly I don't think it was necessarily anything to do with their capital I think they just.
So the opportunity for it to be much bigger.
Bigger than it is.
By partnering up with someone like Helios a.
It's a very strong hydraulics segment player and the idea there is to make one plus one equal three or four or five.
First of all how unique is their product line.
It's very unique and it's different from other people in the industry. So it is more of a niche player in the swivel technology.
They use up all our swivel, which as you know.
Different than most of the industry.
It does not use the ball a swivel and they believe that this technology is a much better one end and more sustainable doesn't have to be replaced there actually are some very good Youtube videos about their technology. If you have some free time I would like to look at them, but it does help explain what their products do and why they are important especially.
Actually in certain industries like for history.
Okay, Alright, thank you very much.
Thanks Jack.
As a reminder, if you would like to ask a question press star one on your telephone keypad.
Our next question comes from the line of Nathan Jones with Stifel. Please proceed with your question.
Hi, Good morning, this is Adam Farley on for Nathan.
Hey, Adam.
I wanted to turn to the electronics segment.
You called out a 1% headwind from supply chain. So what are the biggest issues there I imagine, it's mainly electronic components.
Yes, it's primarily electronic components.
We have quite a few that come from the APAC region.
And we're seeing a little bit of a slowdown there, but overall I think in electronics.
Supply chain has gotten better over time, and we are starting to see things free up, but then with the China shutdowns they slowed down a little bit again, but I think we have a pretty good handle on what's coming in and what the timing is of where it's going to be coming in.
Okay, and then in terms of the backlog within electronics.
Your customers are.
Ordering in an attempt to get in line.
We are doing that.
You manage your customer orders to avoid over ordering.
I don't think there are over ordering.
Each of our businesses has a little bit definition, a different definition of backlog. So in the Billboard business, we can see a little bit more of an order book, then and and innovation, where it tends to be a little bit shorter order book timeframe, but we don't have any indication that they are over ordering if anything theyre still call.
<unk> everyday thing one can I get my product when can I get my products. So we're doing our best to get the product out the door as quickly as we can and we did have significant past due.
In that segment at the end of the quarter, but it is improving over what we saw from a pass through perspective at the end of the year because of some of the supply chain.
Freeing up over the first quarter.
Hey, guys. Thanks for taking my questions.
Thanks Shannon.
Thank you we have no further questions at this time Ms sounded I would now like to turn the floor back over to you for closing comments.
Great and thank you everyone for joining us today, we really appreciate your interest in Helios and look forward to updating you on our second quarter results in August please feel free to reach out to me with any follow up questions have a great day and please stay healthy.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.