Q4 2022 Helios Technologies Inc Earnings Call
Ladies and gentlemen.
And welcome to the Helios technologies fourth quarter 2022 earnings Conference call.
At this time all participant lines are in a listen only mode.
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 does not my pleasure to introduce you to Tania Almond widespread didn't of Investor Relations and corporate Communications. Please go ahead.
Thank you operator, and good day, everyone welcome to the Helios technologies fourth quarter and full year 2022 financial results Conference call. We issued a press release announcing our results yesterday afternoon, and if you do not have that release it is available on our website.
At H L I O dot com.
Also find slides there that will accompany our conversation today.
On the line with me are Joseph matter stomach, our president and Chief Executive Officer, and Tricia Fulton, Our executive Vice President and Chief Financial Officer. They will spend the next several minutes reviewing our fourth quarter results discussing our progress with our augmented strategy, providing our outlook for 2023.
And then we will open the call to your questions if.
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 will be provided in our upcoming 10-K to be 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 slides.
Please reference slide three now.
That it's my pleasure to turn the call over to Joseph.
Got you. Thank you and good day, everyone last quarter I stated our top priority is protecting the business.
Margins and cash flow even in this challenging environment the Helios team delivered again.
I would like to briefly recap our strategy.
As an organization, we are tirelessly dedicated to our customers and critically focused on innovation leadership.
We utilized our Chilean business system to guide our strategies and tactics.
Enables us to capitalize on our unique position as a pure play hydraulics and electronics provider.
Made great strides this year on our transformation from a holding company to an integrated operating company with a long runway ahead of us.
I am very grateful well, how hard our global teams work this year navigating nonstop challenges.
Is a true testament to the amazing people, we have in the helix family into core values, we share.
This has been an important year for helix as we integrated and close on flywheel acquisitions.
<unk> technologies and announced the plans for new centers of excellence to best service, our customers through leveraging our world class manufacturing and operating approach.
Our team executed on our augmented strategy and protected our business. We saw an active globally, while diversifying our markets and revenue base. Most importantly, we continue to build and develop the talent that makes up our global workforce.
We delivered top tier margin with solid earnings for the full year of 'twenty to 'twenty, two while navigating supply chain challenges.
<unk> impact and the ongoing softness in our health and wellness business in the fourth quarter.
We continue to build on our financial strength with our Q4 free cash flow up 20% versus prior year.
Our balance sheet remains very flexible so we can be opportunistic and additional flywheel acquisition.
In 'twenty to 'twenty three we expect to build upon the progress. We have made this year, we will stay focused on what we can control and keep innovating maintaining our top tier lead times and execute our manufacturing and operating strategy.
So that and we announced we are creating two operational centers of excellence in North America for his robotics.
We also just announced the opening of our automated warehouse in Italy it faster.
With this move we expect to drive greater operational efficiencies.
Polity control and enabled technology enhancements.
Eight advanced hydraulic solutions for our customers.
We recently closed another great flywheel acquisition, Shultis precision manufacturing that brings additional customers and capabilities.
Combined with our organic growth.
Entertainment acquisition, we expect to reach our 1 billion revenue milestone with top tier margins on a run rate basis, ending 2023 not including any additional acquisitions this year.
Through our organic and acquired innovations, we are creating a pure play hydraulics and electronics business it will be incredibly tough while competition to follow.
Now turning to slide four.
As I mentioned, the shortest acquisitions further diversifies our end markets in the hydraulics.
Aerospace communication foodservice medical device and dental industries shelf.
Sean This is a highly trusted specialist in CNC machining prototyping and engineering Assembly.
It matches, well with our flywheel acquisition strategy and brings our newly expanded 110000 square foot facility.
The company's in Buffalo Grove, Illinois in close proximity to Damian products, our future hydraulic manifold solutions center of excellence.
Justice has a long history and strong reputation for producing high quality precision machining components for demanding customers there.
They have an exceptional value added manufacturing process with approximately $30 million in full year revenue in 2022, and a healthy margin profile.
The acquisition is immediately accretive.
Now turning to slide five.
This past year, we as a global company. We are recognized by several third party organizations. We were named one of America's Best Midsized companies by Forbes in 'twenty to 'twenty two.
First of all once the systems and components Trophy engineers choice for its innovative faster APC electronic hydraulic hose coupling some.
<unk> was named a 2022, Florida manufacturing employer of choice.
Ovation controls for the third year in a row was named one of the best workplaces in manufacturing and production in 2022 ranking number two on the list. This time.
We are extremely proud of this notable recognition and there are just a few highlights of the many great things our people and companies are accomplishing every single day.
Having a highly engaged and productive workforce is critical to driving success for any organization.
We believe our strength here will enable us to compete for top talent minimize risk and ultimately keep winning in the marketplace.
Now, let me turn the call over to Tricia to review the financial results and discuss our outlook. She will then hand it back to me for a few final comments Richard please.
Thank you Joseph and Hello, everyone on slide six through 10, I will review, our fourth quarter 2022 consolidated results.
As Josef noted our team executed well on our augmented strategy and protected our business.
We believe we had success navigating the fourth quarter and this past year, despite the difficult macro environment.
Throughout 2022, we experienced significant uncertainty rapid inflation rapidly rising interest rates are challenged and constrained supply chain.
Striction in China, and lower consumer demand, mostly in our health and wellness market.
End market sales this past quarter saw very strong double digit percentage growth in recreational markets, including off road vehicles and marine.
Industrial markets grew in machinery power generation oil and gas and mining.
Mobile markets, including construction material handling specialty vehicles and forestry equipment also strengthened.
Our health and wellness markets remained contracted.
Geographically, our 2022 sales in the Americas, and EMEA regions increase comparably to 2020 one.
Both benefiting from pricing and acquisition related sales, while sales to the APAC region declined from demand and FX impact.
Revenues declined in all regions in the fourth quarter compared to last year, reflecting lower demand primarily in the health and wellness market.
Overall, we had an unfavorable FX impact on revenue of $7 1 million in the quarter and 28 million for the full year.
We estimate that supply chain constraints to late $12 3 million in sales this quarter.
As you would expect the softness in sales and related economic conditions in the quarter impacted our gross profit and margin.
Profitability declined on lower volumes FX rates and continued challenges with supply chain and logistics.
But benefited from prior pricing initiatives and realized benefits from our manufacturing and operating strategy.
<unk> expenses were constant versus the prior year, reflecting cost management initiatives, while we integrate acquisitions implement our manufacturing and operating strategy and adapt to the macro environment.
Adjusted EBITDA in the quarter was $39 2 million and adjusted EBITDA margin was 20%.
For the full year adjusted EBITDA margin was 23, 2%.
We continue to demonstrate we can provide top tier margins, even through a very challenging environment.
Our effective tax rate in the fourth quarter was negative two 3%.
And positive 19, 2% for the year.
Our full year rate is down one 1% versus the prior year's effective tax rate of 23%.
Primarily driven by a decrease in the foreign tax income taxed at different rates.
And state and local tax benefits.
Additionally, as a result of recent acquisitions, our full year U S state effective tax rate decrease.
Diluted non-GAAP cash EPS of <unk> 78 starts in the quarter includes a tucson impact for FX.
Slides nine and 10 provide visual trends demonstrating overall growth in our hydraulics revenue for the past several quarters.
Most of the FX impact affects the hydraulics segment.
Supply chain constraints delayed an estimated $7 1 million in sales for hydraulics this quarter almost half of which was due to a coil shortage.
The decline in electronics over the past few quarters were heavily impacted by the softness we experienced in the health and wellness market.
This is one of the areas that we have taken a conservative approach to within our 2023 guidance.
We believe the health and wellness market will bottom out and start to recover in 2023.
The exact timing of when that recovery will begin is not yet certain so many market participants believe it could start in the spring.
We will wait to build in that recovery in a stronger way once we start to see signs of it materializing.
Fly chain constraints also delayed an estimated $5 2 million in sales for electronics this quarter.
According to the federal Reserve's industrial production index production of semiconductors, and other electronic components in the U S declined during the fourth quarter of 2022.
This is the lowest level since the second quarter of 2021, well output peaked in the fourth quarter of 2021.
We believe that as the general economic uncertainty lifts overtime.
We see end market demand return to more normalized levels, our gross margin operating margin and net income will commensurately improve.
We are proud of the team for protecting the business well and managing costs this past year.
On Slide 11, you will find highlights for our fourth quarter Hydraulics segment results.
Sales grew 12% on a constant currency basis, and the unfavorable impact to sales related to FX was $6 8 million.
Acquisitions added $8 2 million inorganic revenue grew a healthy 6% on a constant currency basis.
Hydraulics segment gross profit was impacted by unfavorable FX of $1 7 million along with inflation.
Cost discipline resulted in a decline in <unk> expenses in dollars and as a percentage of revenue over the prior year. Despite the growth in the topline.
Please turn to slide 12 for a review of our electronics segment results.
Our electronics segment is more concentrated in the U S. So foreign currency has less of an impact on revenue.
FX had a minor impact on revenue of $300000.
Electronics segment gross profit of $14 6 million and gross margin of 26, 2%.
This is a direct reflection of the slowdown in the health and wellness market.
SCA expenses were managed as we adjusted the business to the current market environment, though they did increase by $1 8 million driven by a competitive labor market wages, I T and marketing expenses.
Please turn to slide 13 for a review of our cash flow.
We had strong cash flow generation.
In Q4, we generated $35 7 million in cash from operations.
15% over the prior year period.
Our cash and equivalents were up 53% over the year ago level.
Capex came in at 5% of sales for the quarter and 4% for the full year in line with our expectations.
And we recently paid our 104th sequential quarterly cash dividend returning cash to shareholders.
Free cash flow was $25 7 million in the quarter with a conversion rate of 147% up sequentially from 105% we'd.
We generated $78 million in free cash during 2022.
Our manufacturing and operating strategy is driving productivity margin enhancements and efficiencies.
It also leverages in the region for the region operations to help protect earnings and cash flow.
You can see on slide 14 that we have a strong balance sheet and significant financial flexibility to execute our strategy for growth.
Total liquidity at the end of the quarter was $183 million.
Our net debt to adjusted EBITDA leverage ratio was one nine times.
Well, we have been executing on our flywheel acquisition strategy, we have been able to stay at or below our target leverage ratio for the last several quarters.
Turning to our 2023 outlook. Please go to slide 15.
We originally set the long term target at our last Investor Day in June 2021 to reach $1 billion in revenue by year end 2023.
Couple of years earlier than originally anticipated.
Of course at that time, many major world events had not yet unfolded.
The pandemic has stretched on for years, China has remained largely locked down.
And the Russia, Ukraine War has persisted for over a year now.
Global supply chains have been more complex than anytime in recent world history and over the last year, we've had rapid inflation and are dealing with a global recessionary environment.
When we look at our performance since 2020 through such a chaotic time in the world. We are very proud of the growth we have been able to achieve.
Even with the contraction in our health and wellness market that we've seen since the boom cycle through 2021, combined with our other businesses and recent flywheel acquisition.
We believe we can grow revenues to $910 million to $940 million this year.
That would imply 3% to 6% annual growth over 2022 and over 20% growth compounded over the last three years that's 2020.
We would expect to exit 2023 on a run rate basis of approximately 1 billion in annualized revenue.
These targets do not include any additional flywheel acquisitions, we might complete during the balance of the year, which would be incremental upside.
We anticipate Q1 'twenty three revenues to grow sequentially over Q4, 'twenty two by mid single digits and ramp through the year exiting the fourth quarter north of $250 million on the top line.
We expect the revenue split first half to second half to roughly approximate 45% to 55% respectively.
We have been able to protect the business through this challenging time by holding our adjusted EBIDTA margins at top tier levels.
For 2023, we think we will end the year in the range of 23, 5% to 24%, which would be up 55 basis points over the trailing three year period as well as over 2022 actuals.
We believe exiting 2023, we will approach approximately 25% adjusted EBITDA margins on a run rate basis.
Importantly, we still see a path to deliver our original targets at our last Investor day to achieve a three year CAGR of approximately 22% growth in non-GAAP cash EPS at the midpoint of our expected range for 2023 of $3 95 to $4 10 per share.
Sure.
Please now referenced slide 16, and 17 I would like to hand, it back over to Joseph for some closing comments before we take your questions.
Thank you much Trisha.
All the pieces of the puzzle of fitting together nicely as we build <unk> into over a billion integrated pure play hydraulics and electronics company.
As Tricia described much has changed in the world over the last couple of years when I look at slide 16, and think about our augmented strategy and how it has helped us.
Pro forma against our vision 2025 expectations I'm, so proud of our global teams for executing so well.
We have accomplished much through a period that is taking many businesses way off track, we have been able to acquire high quality portfolio of flywheel acquisitions.
Vance I would technologies through tireless innovation of industry, leading products and solutions.
Significant progress implementing our manufacturing and operating strategy is to be there.
Diversified revenues and markets, while protecting our business and margins all of which has accelerated our growth.
So as we enter 2023, our vision and goals remain unchanged. We believe we can protect the business.
Cash flow and earnings and did the helium business system will continue to provide the structure and discipline to execute our long term plans.
With that let's open up the lines for Q&A. Please.
Thank you.
Ladies and gentlemen at this time, we will be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
Oh confirmation school and 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.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock east.
Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Our first question comes from the line of Mick Dupre from R. W. Baird. Please go ahead.
Hey, good morning, guys, who control Graboski on for Mig This morning.
Yeah.
Thanks for all the color on the guidance very helpful. I was just wondering if maybe I could get a little more a little bit more color and see if you had anything to say on sales expectations by segment for the year.
Yeah.
Yeah, Hi, Joe This is tushar, thanks for joining today.
You know I think that we are looking at 2023 as you know.
From an organic growth perspective, probably if we exclude dumbo right. This minute from that discussion as a growth year from an organic perspective for the hydraulics segment and the parts of the electronics segment outside of Balboa that is one of the area.
Is that he said we've built a lot of conservatism into the forecast for but we're looking at mid single digit growth on the organic side, which we believe is at least two times, what the market's growing them in the areas, where we are so I think that were.
Pleased with where we are and where our businesses are able to grow relative to the market and continue that growth to outpace the market.
No. That's helpful that makes a lot of sense and maybe just drilling into the health and wellness then I know last quarter you know it was.
Kind of stabilizing at a $150 million to $160 million at that time.
You know probably four four plus months ago.
Or close to four months ago.
What are kind of the assumptions.
Is there a range you can give a similar to that for the assumptions for barbell where in 2023.
I think Joe wherever you are in this cycle now.
No. We are we feel that the business has stabilized.
We see a path and some some visibility into a recovery with improved or the pattern is that the hockey stick no.
But the order pattern is clearly going in the right direction.
In terms of geographic locations into recovery, we see that starting in North America.
And have gone really.
Including me personally spend a lot of time with the customers and really understanding the inventory levels.
You know when will it pick back up and what areas. So we feel.
We feel that we will start to see a recovery in North America, and that's kind of supported by the improved order pattern.
Following by recovery in Europe , and then the rest of the world.
In terms of your question specifically.
I think we need a few more data points to be able to answer this with you know higher level of structure and discipline here Budd.
We clearly have stabilized the orders are improving.
The recovery will start in North America, followed by Europe , and then the rest of the World. We have also joined.
The two or three largest.
Health and wellness shows very recently.
One in France, one in North America.
And.
And the.
It seems to be a very good then.
Sentiment that we are clearly going to get out of this and the recovery will start in 2023.
That's kind of where you're at or Joe.
Great No. That's helpful. That's really good color and then I guess my last question and I'll kind of stick along the same line here for questions.
If I take the 45 55 sales split.
Literally I guess mathematically that would say that sales in the second half of the year or more than 20% above sales in the first half of the year.
Just kind of and I know, there's a lot of moving pieces here, but maybe just kind of walk us through the step up in sales from first half to second half.
Yeah.
So we you know.
I can start from a strategy standpoint, then tricia can add a little bit more color on the numbers.
Going into this Joe just by the virtue of our wood, we experienced in the latter half of 2022 in particular Q4 with.
Probably been the toughest eat the toughest quarter on our part on supply chain.
We have really taken a very conservative approach.
Roche and de risk the portfolio to a point that we are comfortable where we are on delivering the first half at 45.
45% oil with Tricia mentioned and then we have additional visibility.
In our.
Some business El Cubo to see business, our innovation business coupled by the heavy investments we have done over the last three years in new products and the product Rollouts.
The timing of the project Rollouts is now clearly confirmed with our customers.
We have enough inventory data in place now did we can comfortably say there's no destocking.
Did we can see in our business.
So we just wanted to be very conservative and.
And continue to deliver based on the current information we have based on the backlogs into or the pattern.
And we see improved.
Hum.
Proved pass in the second half with all the elements I just mentioned.
And then you know obviously we.
We have a little bit.
Potential upside.
Well bore just turns a little bit more on the health and wellness market turns just a little bit more that clearly would be an upside, but we feel we protected the downside scenario we have.
We have put ourselves in a position that with our capital allocation and our flexible balance sheet and our investments in new products.
If the health and wellness continues to improve as we currently see.
And if we had a couple of more acquisitions there should be a.
Pretty good second half.
Yeah got it to add onto that a little bit just to get most of the the number item [laughter].
Her looking also at improved supply chain as we roll through the year I mean, we still had a lot of supply chain issues as we noted in the prepared remarks that.
That we think are going to kind of flush out throughout the year. We have good visibility on the order book for the OEM businesses specifically.
Faster and innovation.
And can see how the orders are rolling out through the year, we have inflows from customers discussions that would indicate that they have opportunities that are kind of later in the year and can help us continue to take market share.
On the manufacturing and operating strategy most of those moves for the centre of excellence will be completed by.
Timber ish timeframe. So we believe that we're going to be able to ramp things up relative to that as well.
Okay got it that's very helpful. Thanks for taking my questions and good luck on the quarter.
Thanks, Thanks, Jeff Thank you.
Thank you.
Ladies and gentlemen, if you wish to ask a question. Please press star one.
Our next question comes from the line of Nathan Jones from Stifel. Please go ahead.
Good morning, everyone.
Morning, Nathan Nathan.
I'm going to go back to.
To try and get some.
Help bridging from the fourth quarter of 'twenty, two number to the 250 exiting <unk> 23.
You said $12 7 million of delayed revenue in the fourth quarter and you had about seven seven and a half million ish from the Shaw acquisition.
It sounds like kind of pro rate for Q 'twenty, two that would give you about $268 million you talked about mid single digit growth outside of Sao Paulo.
Which probably leads you needing about at 25 million dollar improvement.
Out of Bell Boll off from the fourth quarter of 'twenty two to the fourth quarter of 'twenty. Three is that what you guys are building in to get to the exit ready too.
That seems very reasonable, but that's why we built in such a big range on the top and to be able to accommodate some of that but yeah. I think that your your numbers are in the ballpark. If you look at the $30 million range that we have.
Okay.
Okay, Yes got it.
Tricia you just said made a comment that you have visibility to the back half of the year.
With OEM orders and things like that.
Those orders out that far and how easily can tillable are they by the Oems.
We have seen historically that they're pretty firm they can make changes to them within a certain timeframe, but because we're always in constant communication, especially with the large Oems we have a pretty good confidence level in that.
At least a pretty tight range of where those orders are lower.
Within the.
A year into fixed term contracts.
That takes time contracts okay.
And then I just wanted to ask one question on Bell ball or in the fourth quarter of 'twenty. Two I mean, you guys there.
The revenue number came in right on the bottom end of where the guidance range was clearly pretty much all about borrower that ways.
The difference there.
Or is there inventory destocking in the channel lowest sell through can you just give us a bit more color on what the what the driver of the fourth quarter of 'twenty. Two result was relative to maybe the mid point of your expectations was.
Yeah, I think there was at least in belt ball, a little bit of Destocking, because we know there's inventory in the channel one of the things that we've gotten out of discussions with customers.
Is that.
The dealers are starting and distributors are starting to work through that inventory more quickly now than manufacturers seem to be so we expect that the orders are going to start to come back in Sao Paulo up from that channel first as we flow through the year.
But I think that were.
Pretty happy.
Happy with some of the verbiage that were getting but this is going to start to roll out starting in the spring.
And the other data point, it's Nathan.
You remember with our good better best strategy.
Good.
Excellent.
His work with innovation folks and our well bore folks on.
Developing new products, which we have announced and you know at the show we have received not just good feedback, but also a certain level of commitments.
Switching over instead for other clients so all combined.
I mentioned earlier, there's a confidence level did not just current products with traditional bubble of products, but also new products and diversified markets.
Leveraging.
Its product offering and the other reason I the bad cat is so.
But quinn.
First and second half and.
So we feel pretty good about it.
Great. Thanks, I'll pass it on.
Thanks Nathan.
Okay.
Thank you. Our next question comes from the line of Jon Braatz from Kansas City Capital. Please go ahead good morning, everyone.
John a couple.
Couple questions I guess.
Surrounding Europe .
Thank you Rob.
Guidance what are your thoughts.
On the contribution from acquisitions, and how you're thinking about for a foreign currency impact this year because last year. It was a $28 million drag or something like that.
What are you what are you sort of assuming.
I'm here I'm here for this year.
So from.
Acquisition.
Revenue rose.
Rolling out at pretty.
Small low single to mid single digit over what we've already announced both of those are somewhere around $30 million.
For Damon showcases the only 11 months.
Of the year, because we closed at the end of January but we will have a full year of Damon in there from an FX perspective, we made some assumptions based on where the current FX rates are we don't try to forecast FX.
So we're using kind of current rates going forward in our in our guidance and I don't anticipate that if.
We see a study in especially Europe , which has the biggest impact if we see a studying euro to U S. D number I don't think we're going to see as much impact from FX as we saw last year.
Okay. Okay, Okay, and then as you talk about the.
Mid single digit growth for the business ex Balboa.
How would that break down between price and volume how do you how do you see that.
We put through most of the pricing last year, because we're seeing such large increases in component prices provider.
So it's pretty much all driven by volume increases.
Alright, Okay. Thank you very much.
Thank you.
Yeah.
Thank you.
Ladies and gentlemen, if you wish to ask a question. Please press star one.
Okay.
Our next question comes from the line of Jeff Hammond from Keybanc. Please go ahead.
Hey, good morning, everyone.
Yes.
Okay. So the.
You're kind of looks back end loaded I think one thing I wanted to hit on was hydraulics. Just historically is typically stronger than the first half and seasonally weaker in the second half and I wanted to see kind of how the hydraulics side plays out particularly.
So as we as we look at peer companies. It seems like you know most are kind of saying front half.
You know better growth in the second half and you know people are building and kind of some some deceleration. So you know maybe just speak to the seasonality of the of the hydraulics business.
Yeah good.
Good morning, Jeff.
Would you see here is again.
The biggest drivers why we structured it where it is you know we announced that we have now.
We are studying up two new centers of excellence.
Excellence and this is methodically structure in terms of process and inventory levels and order patterns.
So that's one main reason because it is quite heavy lifting but we're going to do it in the right way.
And that process has began obviously the other one is just by the virtue of our lead times.
That's the second piece.
But when I look at you know our current backlog you know and then tie up hydraulics segment, so to say.
There's no drop off or no really nothing standing out that would suggest any otherwise just just by the virtue of how many pieces, we have going on to continue to improve to get closer to the customer get the products launched get Damian and showed this leverage.
Stand up fast in North America with existing asset that some factories. So just a very methodical approach of executing in the right way that's it.
Okay, and then can you just clarify the lead time dynamic because I know you've been talking about you know having better lead times and that is helping drive your share, but but I don't know if like some of the backlogs more more backend weighted or.
That's clarify that comment.
Yeah, I think that the lead time, we most of our competitors because they're still out with.
Lead times relative to ours like four and five times, what our lead times are they still have backlog that youre, probably seeing flushes through in the first half more so than ours and you know we we have initiatives that we believe and through information through our distributor channels that we believe that we're going to.
To see a ramp up in the back half from an orders perspective.
Okay.
And that's tied to some of these new programs and new products.
New programs New products I also think you know right now as you saw in the release, China was pretty low for us and in Q4 on Asia in particular and yeah. That's been China's been shut down for so long we do believe that we're probably going to start to see a little bit of pickup in the back half of the year from APAC.
Okay, and then just back on electronics.
You know should we think of this for Q2 <unk> was similar between the two segments kind of mid single digits or do you see Oh.
Sharper pick up and I'm just trying to.
Yes.
The profitability drop off through Q4, he was pretty stark and I'm just wondering like does <unk> profitability for electronics look more like <unk> or more like <unk>.
We don't anticipate that it's going to look like for Q, because we do expect to have robin a little bit more revenue on the top line in Q1, which helps leverage the costs that we have there.
So it was all of the sequential growth for Q2, <unk> and electronics.
No no no we think growth in hydro I'm not at all yeah. Okay.
So and then I guess final thing on Destocking. So you saw some pretty sharp destocking in for Q.
I was just on another call when the in the pool space and they're talking about you know.
More destocking and their distributors kind of taken levels kind of to the lower end of of days on hand, So I think they're building in you know a lot more destock are you are you building in you know destocking continuing or do you or are you hearing that you your product.
Or kind of right sized in the channel.
Yeah, Jeff we did see some of that the health and wellness only we hit that very hard and matter of fact, you know I was just there two weeks ago and and.
You know I had this global council meeting with the folks and we.
We repeated the old question on numerous occasions with the feedback we have gotten is dead. We saw that you know at the second half of the year well bore but that has worked out out of the system. So the incremental improvement. We are currently seeing and have started.
To see in December and January .
Trend has nothing to do with the stacking.
Okay. So you you're hearing the Destocking has kind of done.
On our end yes.
This cancellation, yes.
Okay.
Excellent.
Thanks, a lot.
Jeff.
Thank you.
Ladies and gentlemen, since there are no further questions I would like to turn the conference available to Tania Almond for closing comments.
Great. Thank you operator, and thank you everyone for joining US today. We appreciate your interest in Helios and look forward to updating all of you on our first quarter results in May Please feel free to reach out to me with any follow up questions have a great day. Thank you.
Yeah.
Thank you.
The conference off Helios technologies has now concluded. Thank you for your participation you may now disconnect your lines.
[music].