Greetings, and welcome to the Helios Technologies Q3 2023 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 of Investor Relations and Corporate Communications. Thank you. You may begin. Thank you, operator, and good day, everyone. Welcome to the Helios Technologies third quarter financial results conference call. We issued a press release announcing our results yesterday afternoon. If you do not have that release, it is available on our website at hlio.com. You will also find slides there that will accompany our conversation today. On the line with me are Josef Matosevic, our President and Chief Executive Officer, and Sean Bagan, our Chief Financial Officer. They will review our Q3 results, along with our updated outlook for the remainder of 2023. We will then 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 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 have been provided in our latest 10-K filing, as well as our upcoming 10-Q, 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 slides three through six now. With that, it's my pleasure to turn the call over to Josef. Tania, thank you, and welcome to today's call. I want to take a moment to send our heartfelt sympathy to everyone being impacted by this new conflict in the Middle East. We are all living through very tenuous times. Shifting to the business, let me start by welcoming Sean to his first quarterly call with Helios. Sean joins us most recently from Polaris, where he spent 23 years advancing through their global ranks. He has a proven track record of building, growing, and transforming global businesses into highly productive and profitable operations. Sean has hit the ground running and is a great fit within our team and our company values. He joins us at a very important time as we face a dramatic shift in the market dynamics this quarter. I would like to thank the Helios team for their tenacity in navigating these challenging conditions while maintaining focus on our long-term goals. We saw positive trends starting this year. Last quarter, signs of stalling started to show. As we advanced through August and September, they took a turn. As I noted on our last call, our near-term visibility is, in fact, less clear than our long-term outlook. EMEA shows signs of weakening before it improves. The U.S. economy has pockets of softness. The APAC recovery is taking longer than even that region, especially China, had expected. Our customers in the Americas, currently representing 55% of total revenue, are beginning to hesitate. Those customers are facing a less favorable environment for consumer spending and financial liquidity. This equates to what the Fed has been pushing for, a slowed economy to tamp down inflation. Given current conditions, we have been taking proactive actions to protect our margins by optimizing our cost structure while balancing our resources to deliver the top-notch service our customers have come to expect. Even with global macroeconomic and geopolitical uncertainty, I am confident our strategy is intact. While we manage through the short term, we must continue to lead and execute for the long term. For the last several years, we have been methodically investing for growth. We are well positioned to be able to drive significant leverage across the top and bottom line when the markets start to recover. We are encouraged with the progress we are making across several customer projects we described last quarter. All these deals are still in play. The timelines for decisions on some have been pushed out based on the macro. Those customers are facing near-term challenges, but remain opportunistic and committed. Most of these projects are currently expected to begin in 2024 and start to show contribution in the latter half of the year. We continue to demonstrate that our innovation and engineering excellence are paramount. For example, we recently announced two advanced new products from our Electronics segment, both with initial customer examples. The first being the PowerView P70, and most recently, Climate Zone II. We are also building on the value our acquisitions bring to create revolutionary technology. We recently introduced remote support software by integrating i3 capabilities with its Cygnus support platform into our OpenPV software. Together, this creates a solution that will increase end user satisfaction and loyalty, improve customer support, and enable a recurring revenue stream to capture this added value. In fact, our i3 team has created a software platform for a commercial food service customer who has added the software to thousands of their units. This same customer intends to also leverage the Cygnus platform as it will connect directly with this new software. We are seeing traction with our new products and services. It is just being masked now by the macroeconomic impacts I described. I will now turn the call over to Sean to review our financial results and updated outlook, and then he will hand it back to me for some closing remarks. Sean, please. Thank you, Josef, and hello, everyone. I'm thrilled to be here. As most of you know, I joined Helios as CFO on August ninth. In my first 87 days, I had the opportunity to visit all our major operations while meeting a great number of our global team. I am impressed with the strength of our leadership and believe we have the right strategy to continue to grow the business and leverage our diversification across markets, geographies, and products. We have strong brands, leading market positions, and expansive manufacturing capabilities. These span across processes that range from injection molding, heat processing, wire harnessing, precision machining, through to circuit board printing. We are nimble and responsive, and Helios has a culture of excellence grounded in a strong value system. Combine this with our regional manufacturing capabilities and low-cost operations, and I believe it's clear how our strategy to innovate with integrated solutions, including remote service through software systems, makes us very tough to follow. We are starting from a very solid foundation from all the investments we have made as we further optimize our cost structure. This enables us to weather near-term challenges and be well-positioned to capture compounding effects of driving leverage across our businesses as conditions improve. Let me start with the review of Q3 results, talking to slides seven through 13. I believe the slides speak for themselves and provide quite a bit of detail, so I plan on hitting some key points and providing additional color. The surprise factor in our results for the quarter was most visible in the $26.2 million, or 12%, sequential sales decline from the Q2 of this year. Demand in the Q3 reflected a rather swift change in dynamics as certain customers across mobile, agriculture, marine, industrial, and health and wellness end markets shifted gears and began pulling back orders and pushing out decisions. Given we have quite a bit of book-and-bill business, this readily impacted the Q3. Every region was down sequentially this quarter, the exact opposite of what we saw in the first and second quarters. European markets were especially weak across both segments and were down 24% compared with the Q2, or $13.8 million, more than half the total decline. The Americas were down 7%, or $8.7 million sequentially, while APAC was off 8%, or $3.7 million. The lower volume in the quarter heavily impacted gross profit and margin year-over-year and sequentially, due to under absorption. Gross profit declined $9.6 million, and gross margin contracted 380 basis points year-over-year. While we had benefits from pricing and foreign exchange, it only partially offset the volume impact, along with inflationary costs. Given the larger decline in volume sequentially, gross profit was up $16.1 million from the trailing Q2, resulting in gross margin of 29.6%. The $6 million increase in SG&A expenses compared with Q3 2022 primarily relates to acquisitions, integration, higher wage and benefit costs, along with increased R&D investments to maintain our leadership positions. As evidenced with our actual Q3 2023 sequential reduction of SG&A expenses, we are executing plans to control overhead expenses while continuing to position the business for the opportunities we have to continue to diversify and grow. Adjusted EBITDA in the quarter of $35.6 million, or 17.7% of sales, reflects the impacts of volume and investments. Volume is significant for the business as our decremental margins run at about 40%. Our strategic plans are focused on improving our incrementals while reducing our decrementals. I see opportunity to leverage fixed costs as we gain new customers in new markets, while also continuing to gain efficiencies from our integrated manufacturing and operating strategy. Our effective tax rate in the Q3 was 30.5%, up 690 basis points from 23.6% in the prior year, based on the mix of earnings in various jurisdictions. Diluted non-GAAP cash EPS of $0.44 in the quarter reflects the impacts I've discussed, as well as a $0.09 impact from higher interest expense compared with last year. Briefly, by segment, on slide 12, you will find the third quarter review of our Hydraulics segment. Sales were up 1% over the prior year period, driven by sales to the Americas and some pricing. We estimate about $7.8 million in sales were delayed due to the supply chain shortages. This started to come down sequentially compared with last quarter. Sales declined to the mobile, industrial, and agricultural end markets. Acquisitions added $11 million, and there was $2.2 million favorable foreign exchange impact this quarter. Sequentially, Hydraulics declined $20.4 million, driven by swift changes in the mobile, agriculture, and industrial end markets. Notably, of those markets on a year-to-date basis, agriculture is still up, which only intensifies the degree of unexpected change in demand this quarter. The decline is readily seen by region, with EMEA being down $12.5 million quarter-over-quarter, more than half of the overall decline. Gross profit declined $5.4 million year-over-year, resulting in gross margin contracting 430 basis points, as pricing and efficiencies were not able to offset flattish volume. The different margin profile of acquired businesses, restructuring costs, and higher wage and benefit costs. Sequentially, gross profit was down $8.6 million, although gross margin contracted just 150 basis points. SG&A expenses increased by $5.6 million year-over-year. This increase was driven by incremental SG&A from acquisitions, as well as inflation with labor and operating costs and investments in R&D. Sequentially, SG&A was unchanged. Please turn to slide 13 and we'll discuss the Electronics segment. Given its U.S. sales concentration, there was no foreign currency impact in the quarter for the segment. Year-over-year, Electronics sales declined $6.6 million, or 9%, and had about $3.4 million in sales delayed due to the supply chain. Marine, which has held fairly steady in sales every quarter for the last two years, had a drop-off this quarter, impacting both the year-over-year and sequential comparisons. Notably, another category in our recreational market, off-road vehicles, mostly offset the decline in marine. This does validate our diversification strategy is working. This quarter, we broadly had so many markets impacted at once, our diversification was not able to overcome the macro drag. Health and wellness was down over 20% year-over-year and 8% sequentially, but still up over 50% from the trough in the Q4 last year. Gross profit was off $4.2 million from lower volume, while gross margin contracted 320 basis points as pricing and efficiencies were not able to offset lower volume, higher material costs, restructuring costs, and reduced leverage to our fixed cost base. SG&A expenses increased 22% compared with last year, which included incremental SG&A from acquisitions, increased personnel costs, and investments in R&D. Sequentially, SG&A grew 2%. Please turn to slide 14 for a review of our cash flow. We generated $11.8 million in adjusted cash from operations. CapEx of $5.9 million was 3% of sales for the quarter, as investments in capacity expansion in North America and Asia are essentially complete and equipment purchased. Trailing 12-month adjusted free cash flow was $53.1 million, with a conversion rate of 103%. Turning to slide 15. Even as we face headwinds, we have an extremely healthy balance sheet and the financial flexibility to execute our strategy for growth. Helios' track record of delivering exceptional margins drives its strong cash flow engine. Our capital allocation framework prioritizes dollar one to be invested back into the business to support new product development and operational efficiency. Our long-standing dividend is an important component to overall shareholder returns. Finally, we remain opportunistic on executing both flywheel and transformational acquisitions that fit strategically into the Helios portfolio. Cash and cash equivalents were $35.2 million, providing us sufficient liquidity. Total liquidity at the end of the quarter was $219 million. We reduced debt by $4.6 million in the quarter, and our net debt to Adjusted EBITDA leverage ratio was 2.98x ending the quarter. In summary, while our near-term outlook is less than expected from the start of the year to now, I am extremely encouraged with the underlying strength of our foundation and strategy, the boundless white space of opportunity, and the prospects around creating more discipline to prioritize investments that will produce shorter payback and higher returns. Turning to slide 16, we'll talk to our updated expectations for the remainder of the year. I will start by saying we have an opportunity to further our discipline around financial forecasting processes through greater rigor of data analytics and leveraging the power of business intelligence. Our updated outlook considers the rather swift change in demand we experienced in the Q3, and the feedback we are receiving from our sales channels and customers. Having been abruptly impacted by global macroeconomic uncertainty and the resulting dynamic market conditions, we are modifying our outlook appropriately for the remainder of the year. We now expect revenue in the range of $820 million-$835 million, implying fourth quarter revenue of approximately $178 million-$193 million. With the decline in volume and the impact to margins, combined with continued disciplined investments, we are moderating our Adjusted EBITDA targets for this year to $152 million-$167 million. I believe our business can support delivering mid-20% and better Adjusted EBITDA margin over time with sufficient volume. In the near term, our focus is on executing our long-term strategy while protecting margins and controlling expenses in our operations. We have several significant projects underway that should start to materialize in more meaningful ways later in 2024 and build through 2025. Though we expect with current market conditions, 2024 will start off slower than we had earlier anticipated. Like my experience at Polaris, where I was involved in the growth of the company from $1 billion to nearly $10 billion, I believe that as Helios continues to execute on our solid strategy while improving our processes and systems, we can grow well beyond the next milestone of $1 billion in revenue. While the near term has macro headwinds, Helios is positioned well to weather these market fluctuations with its expansive end markets, innovative products, diversified geographies, leading market positions, strong brands, and extensive manufacturing capabilities. We have significant potential, and our long-term future is very bright. So let me turn it back to Josef, who will reference slides 17-18. Thank you much, Sean. Again, we are very happy to have you on the team. This is a certainly interesting time. When I look at what Helios has been able to accomplish together over the last 3+ years, I am incredibly proud of the team's hard work and dedication. You can see from the last couple of slides, we have a great foundation of established step-level growth that we are building from. When I think back to 2019 going into 2020, when the pandemic started and there was a market pullback, no one knew exactly what could be accomplished in the near term. You can see how much we have grown since then. We are so much better positioned today from all the investments we have been making the last several years. This is why I'm more excited today than I have ever been, thinking about our ability to jump up to the next step on the growth SG&Ale. When you think about how we have been transforming into an integrated operating company that could start to generate recurring software sales as early as next year, that is really true transformation. We have a great future in front of us. We will navigate through this, just as we have got through the pandemic. We have a proven strategy, a dedicated team, and are excited to keep driving towards our goal every day. With that, let's open up the lines for Q&A, please. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question comes from Chris Moore with CJS Securities. Please go ahead, sir. Hey, good morning, guys. Thanks for taking a few questions. Yeah, maybe you could just provide some more thoughts, you know, on 2024. It sounds like the large deals you're working on aren't lost. They've been pushed, but you know, maybe just a little bit more how you're thinking about 2024 at this stage. Good morning, Chris. Look, this is probably the key part to understand about our story right now. So we are getting in front of these large OEMs, and, you know, we have been bidding on deals that we have never had the chance to bid before. And you see the shift in our mix of OEM business. In Q2, it was up 61%. In Q3, declined 53%, which was reflected in our results. And, you know, as we saw, the broad macro impact us- ... across all of our end markets, you know, including ag, especially in the marine health and wellness industry. That's kind of what you saw here in Q3. On the other hand, you know, we grew in absolute dollars sequentially in the distributor and integrator channel. So back to your question, the size of those OEM deals that we are bidding on are bigger than we have ever could have imagined at the beginning, and they are clearly still in play and have not been canceled. And we continue to work with those customers hand in hand, in pretty much everything we have said from day number one. You know, when you get invited to the table with those OEMs, you've got to have the right products. You've got to have the technology and differentiation, and you've got to have, most importantly, the capacity and the processes and systems, so they can feel it, touch it, before you even get the final signature on the paper. Combined with our regional approach in manufacturing, you know, it makes us really a good candidate. So we're building out our center of excellence for maximum leverage, and ultimately also have a margin improvement. This has been a very methodical, step-by-step approach that we have been constructing now for over two years, and we certainly expect that this will play out exactly how we have structured. There's really no indicators that tell us that it will not, and once we are spec'd in, it becomes just a very sticky relationship, building up on the core foundation that we have developed over the last years. So, you know, look, we are, like everyone else, somewhat frustrated by the macro environment right now, but unless we think the end of the world is gonna end tomorrow, we're gonna stay laser focused on investing in our future and execute on those deals and protect our business. You know, the scope of those deals, Chris, is expanding pretty much day by day as additional customers have learned of our capability. You know, our flywheel acquisitions have contributed towards making this stickiness even stronger. You know, we had to invest in additional talent and engineering, and that explains the investment portfolio in capacity and SG&A. And we don't wanna cut into this because we are within literally finishing stages of those deals. So key message being here, you know, stay the course with us. We continue to be extremely confident that we will execute our strategy. Got it. Extremely helpful. Thanks, Josef. Maybe just one follow-up. So it's interesting how broad-based the decline was and, you know, kind of how quick that you saw that downturn. As you mentioned, OEMs were, I don't know, 61% of Q2. So as you, as you kind of become more and more focused on the OEM route, is that where you saw the, you know, that quick decline? It was the OEM's ability to make a quick decision and pull back versus, you know, on the distribution side? That is correct. And largely on the marine sector and recreational and health and wellness. And then we saw also ag pulling back, in Europe and in North America, too. Got it. So I would guess longer term, that means, you know, quarters could be a bit more lumpier because the OEM focus, but the flip side obviously is there as well in terms of, you know, the quicker decisions on the positive. So I will leave it there. I appreciate it. Thank you, Chris. Thanks, Chris. Our next question comes from Jon Braatz with Kansas City Capital Associates. Please proceed with your question. Josef, when you look at the projects that are upcoming in 2024 or late 2024, maybe in 2025, are they more in the consumer markets versus the industrial markets? How can you... Can you parse that out for us? Yeah. Good morning, Jon. So, all of them are really in the industrial commercial markets. That's where we are focused, largely OEM, system sales. So you know, the story that we have been excited to tell over the last two years, you know, it starts with a proprietary technology on the manifold side, and then, you know, it goes through the cavity, and then you build up that manifold system into something much bigger and larger, and then you add electrification to that. And as you know, you can't really put any other products on our products once you spec them. So we continue that notion, what has been developed many years ago, in the industrial commercial applications. Very niche, just much more content.... over time. Oh, okay. Jon, I'll just add, I'd add—I wanted to add, there's quite a variety of different end markets. So when we look across, whether it's food service or construction or, you know, so when we look across all of these deals, we're really starting to see that diversification that we've been trying to foster, continuing to blossom there as well. Okay, thank you. And one last question, Josef. In your commentary, obviously, your results have been affected, as you said, by the macroeconomic conditions, and also, you said, geopolitical issues. And two things: number one, Is there anything, it's probably difficult to parse out, but is there anything specific to the geopolitical things that we're seeing that have directly affected your revenues? And then also the conflict in the Middle East, it was more of a late third quarter item. Have you seen any impact from what we're seeing in the Middle East here in the Q4? That comment was more relating to Jon. You know, we still have shipments suspended, obviously, you know, into the Russian markets that we- Yep Previously had. And then, you know, there is quite a bit of still standstill on some orders that should have come. You know, folks are just being a little bit more cautious and waiting on the sidelines, placing some of the orders that we anticipated to come in Q3, and waiting out what's going to happen here, if anything at all, but nothing directly specific to the Middle East. Okay. All right. Thank you. Thanks, Jon. Thanks, Jon. Our next question comes from Jeff Hammond with KeyBanc Capital Markets. Please proceed with your question. Hey, good morning, everyone. Sean, welcome aboard. Good morning, Jeff. Thank you. So I'm just trying to get a better read on what's, you know, destocking and what's real weakening demand. And, you know, I think you made a comment, you know, around the Q4 that you still, you know, assume that inventories are high. Like, what are your customers telling you about, you know, the level of destock and where inventories are, and when you think you get through some of the destock? Yeah. Morning, Jeff. So we just had a pretty large meeting with our distribution channel just over the last two weeks ago and touched the, you know, the top 25. And clearly, Sean can probably add a little bit more commentary, too, because he was with me. Clearly, we are seeing the inventory coming down. Is it coming down to the levels that they're getting ready to place large orders? Not quite yet, but when you look at the trend, what's transpired, Sean, I believe you went from, you know, 13% reduction to 6% to 3% to 2%, so it's clearly going in the right direction. It gives us a level of insurance, I guess, that inventories are pulling back. Orders are continuing to flow, but way not at the level, Jeff, we saw, you know, a year ago. Yeah, the only thing I'd add, Jeff, too, is just sequentially, we continue to see an increase here in the third quarter in that distributor channel. And so directionally, with where the inventory levels are at and the experience that we saw of our sales in the third quarter, gives us some confidence that there could be some opportunities to start replenishing that channel. Okay. Can you just talk about the linearity through the quarter? I think you said July was okay, and then it tailed off. And then maybe just comment on October. We've heard from some companies where they saw, you know, August, September softness and then maybe lifted its head in October. Not sure if you're seeing that. Yeah. So, you know, we communicated in Q2, Jeff, that, you know, actually was not a stellar quarter, but it was, you know, still pretty, pretty decent for us. And then we got into, you know, August and started seeing the marine segment kind of pulling back. And then there was a sharper decline, you know, at the beginning of September, and then pretty much fell off the cliff up to, what, Sean? 40 percentile, 37, 40 percentile. So between the marine, recreational, and health and wellness still not recovering, there was the compounding effect that we saw and a direct result of, you know, the margin impact that we experienced here. But other than that, and following that was some ag decline in Europe. That was not substantial, though. The largest piece was in the marine, recreational, and health and wellness. ... Okay. And then just, you know, Sean, I think you talked about, you know, controlling decrementals, and I'm just wondering kind of how you're thinking about balancing cost control and managing the decrementals on the downside versus, you know, some of these investments and capacity adds that, you know, you need to move forward with or you want to move forward with. Yeah. Thanks for the question, Jeff. I think for me, as I look at the capacity, it was important that we get that capacity in place as we're continuing to try and secure some of these larger OEM system sales, and we need to demonstrate that we have that. When we look at the cost control side of things, we did a nice job in the Q3, reacting swiftly when we saw some of the volume coming down. We're not going to get the full effect. You won't see that in the third quarter, but as we get into the Q4, you'll see the full effect of those kind of very targeted savings. Now, I will tell you, we did not cut into R&D because that's the lifeblood of this company. But when you look at our run rate of our operating expenses, despite some acquisitions that we've done this year, we'll be relatively flat relative to the fourth quarter last year, which was the highest quarter of OpEx last year. Okay, appreciate it. Thanks, Jeff. Our next question comes from Mig Dobre with Baird. Please proceed with your question. Yes, thank you. I want to put a finer point on the discussion here and maybe focus it on things at segment level. So you know, if we're looking at your Hydraulics segment, obviously, we don't have the health and wellness and marine and all of that exposure there. The ag softness, I don't know that that's terribly surprising given what the OEMs are going through right now. So that, at least to me, that part makes sense. I'm just sort of curious on mobile and industrial, because you talked about emerging softness there as well. Related to this, I'm curious as to how you think about your Americas portion of the hydraulics business specifically, because organically, this business has declined now for two quarters in a row, and I'm kind of curious as to what's embedded in the guidance for the Q4 specifically. Yeah, good morning, Mig, in particular to the North American piece, and to answer your question specifically, you know, above and beyond some of the market softness, we also had an internal path here, too, and it relates to standing up the center of excellence in North America. Again, it supports and will support the new incoming business. And, as we transferred product from Sarasota into Indiana, in terms of demand from $25 million-$30 million to just shy of a $100 million business. We had a couple little fumbles here. You know, as you can imagine, you know, when you move so much product and then you rely on a lot of outside contractors, we put a brand new building up. So we probably were missed around $7 million-$10 million in revenue, which is now in our backlog. Playing this forward, where we're sitting now, that fumble has been recovered. We are at run rate now, actually a little bit better than the Sun run rate used to be, and we should be truing up the backlog here between now and the next couple, three months. But there was another contributor that you saw specific to Helios here on our demand. But in terms of your comment for mobile and for industrial and market softening- Mm-hmm. I'm trying to understand your perspective there, because at least from what I've heard thus far, this earnings season, on a construction side, there doesn't seem to be any production cuts, unless I'm mistaken, please correct me. And maybe the same thing with industrial as well. Ag, that I can see, but it's the other part that I find surprising. So can you comment at all on that? Yeah, look, Mig, I mean, I'm looking at the chart now and all the numbers, too, and at least in the markets we are participating in... I mean, you know well enough that we are a pure play, hydraulic and electronics. We don't commingle in anything else. So what you communicated is exactly what is going on. I mean, there's a temporary pullback here. Have the orders been canceled? No, but the market has slightly pulled back. Sean, you want to add this with- Yeah. Hey, Mig. Sean, I would just highlight specific to the hydraulic segment when we look at it. I mean, certainly it's that construction piece of the mobile, so the lighter construction-type vehicles, and then the, in the industrial side, more of the industrial machinery that we saw the most severe year-over-year declines. So that's where the pressure points are at. But there were pockets that were up as well. I mean, oil and gas, renewable energy, kind of what you hear more of the macro theme. So it was certainly mixed, but there was more to the downside throughout the third quarter. ... Okay. In electronics, I guess, you know, you talked about the health and wellness and the marine portion of the business seeing some pressure. When I'm kind of looking at your implied guidance for the fourth quarter, you know, it's got revenues maybe stepping down sequentially down to call it, like, $55 million. Is this the sort of run rate that you think carries into 2024? Because that would be—I mean, this run rate would basically be consistent with the prior year when you were experiencing pretty significant destocking in your health and wellness business. Mig, can you clarify, did you say $55 million sequential reduction? No, not sequential reduction. That, the implied revenue for the Q4 in electronics is $55. And, I'm curious if you think of that as being a run rate into 2024, or do you think that... I mean, is there something that's temporary in terms of destock impacting the Q4 specifically? Or is this sort of where the new sort of demand run rates on a go-forward basis? Yeah, no, I would not say it's a new run rate. I think you got two dynamics there. When you think of the Electronics segment, speaking to Enovation Controls, there's been more near-term headwinds, particularly the marine space. I think when you look at that business as we head into 2024, it will be a tough start to the year, but we would expect that to recover as the year goes on. From a Balboa perspective, as you know, last fourth quarter kind of was the trough, had a nice H1, and then the third quarter kind of declined a bit, but we clearly see that business on the up. We're seeing order rates continue to increase. I would not say that's the new norm, but you're correct in terms of kind of the Q4 implied guidance in that kind of $55 million-$60 million range, relative to the Q3, where it was a little bit higher than that. Okay. My last question is really on how you're planning on addressing all of this from a cost perspective, because obviously the environment- Yeah - has changed for you. Incremental margins- Yeah - were high in the Q3. The implied incremental margins in the Q4 are once again, by my math, north of 100%. So I'm sort of curious as to where exactly are you tweaking, and what the carryover from savings would be into 2024. Thank you. Yeah, Mig, look, we are very focused on bringing those deals across the finish line and, you know, holding on to our engineering and R&D. So, you know, on the people side, you know, we're going to need those folks that we invested in and trained to ramp that production as we onboard those new customers. We have taken conscious discipline here in terms of cost control and controllable expenses, you know, travel and looking at many other areas and trade shows and what have you. But we believe, as it stands today, again, if the world doesn't end tomorrow, that those deals will pay back, and we shouldn't have this conversation much longer. So, Sean, I don't know, maybe you can add your perspective. Yeah, I, I think Josef hit that right on. If you think about the cost structure of the company, certainly up in our cost of goods sold section, some of the measures are, in the near term, is where we have the excess capacity. We're taking the opportunity over the holidays to shut down a couple extra days, save a little bit on overhead expenses. But really, as I kind of tried to highlight, on the operation or operating expenses, sequentially, we'll be down $2 million from where our run rate's been in the first three quarters. So you're really going to see the benefit of the actions we took here in the Q3 as we saw the slowdown coming. Now, when I look at the cost structure and you look at the fixed versus variable costs, really looking at a third element to highlight what's flexible. So those are the opportunities to defer some things, because, again, we want to be mindful and not cut too deep into our muscle, where when this volume comes back, as you highlight the decrementals, the incrementals are going to flow really nicely, and then we can lever back up the OpEx to support the growth. Okay. Thank you. Thanks, Mig. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Nathan Jones with Stifel. Please proceed with your question. Good morning, everyone. Good morning, Nathan. Morning, Nathan. I got a few follow-ups to some of Mig's questions here. Starting off with the, you know, these large contracts and the capacity additions. You guys are pretty confident those were going to get signed in the Q3, and that volume was gonna, I guess, start in the H1 of 2024. Sounds like that's pushed out to the H2 of 2024. The capacity additions have been added, so there's increased fixed cost there that's going unabsorbed at the moment. Maybe some more color around why those contracts didn't get signed in the third quarter as planned. What kind of guarantees or commitments you had from those customers in order to go and put that capacity in? Or whether that was, you know, a calculated risk, to demonstrate your ability to deliver on volume without commitments in hand from those customers. Just any timing expectations for, you know, when we might see these things actually get signed. Yeah. So Nathan, once again, the customers that we have been communicating to our investors, including all of you, those deals are well, well in the play, and, you know, we expect to sign those deals based on what we have communicated. There haven't been no change. We have some ownership in this as well as we have assumed the capacity in many areas to be completed sooner, but due to supply chain challenges, due to equipment challenges, due to many other issues as you stand up new processes, those are not the same processes that we have. Those are in addition to, so you're mixing a hydraulic operation, and you got to stand it up in the right way. Having been an operator for 27 years, we've got to make sure we stand it up in the right way so we can come out of the gate swinging with the cost structure and the margin that we want. So, not to deviate from your question, but we certainly are on track to lock in those deals. This current macro pullback, it didn't help, in terms of the timing, but there is really no indication that we are too far down the road with these customers we have been working with. And one of them is literally in the 99th percentile now, so it's that is the best I can say right now, Nathan, without overcommitting and under-delivering, I guess. Yeah, and I- Go ahead. If I can add just on... Oh, I'm sorry. Go ahead. Go ahead. No, go ahead. Go ahead. I was just going to reference your capacity question, too, and the headwind you would have from the expense. I know we had it in our materials, but if you look at the major expansions in our Electronics segment, that's certainly in our Tijuana factory for the Balboa business, but also with some of the moves of the Enovation Controls manufacturing there. It opens us up to significant more opportunities to bring in more business. I'd highlight wire harnessing as a key one. That really isn't gonna affect us too much here this year because we're just bringing that on board here in the Q4. And we will expect to fully have enough volume next year for that to pay back in terms of covering the additional overhead and depreciation. When you look at the Hydraulics segment, particularly over in Europe, what Faster's doing, it. I was just over there with Josef last month, and what we're doing there from an efficiency perspective is really impressive between the automated warehousing and an additional one we'll be putting in place next year. So that will quickly pay with the volume that we're going to be able to take on. And then lastly, with the Mishawaka, Sarasota, Florida, move that Josef referenced as well. When you think about that, it was really more of a space expanding 50,000 sq ft, but it was moving equipment from both Florida and Ohio into there. And so there isn't much of a drag, and we will completely start earning that back in 2024 as that volume pushes through that. So the headwinds from the expansions aren't as significant as they may appear when you look at just the pure square footage. Okay, just following up there, Josef, it, I mean, I think you said you have some ownership of this as well, and it, it sounds like potentially here there are milestones that you need to hit before the customer will commit to, to these contracts, and then maybe hitting those milestones slipped out of the Q3, and that was more behind what the delay in signing these contracts is? There was a couple of things, Nathan. So one is finishing that capacity. And what I mean by that, it's not just putting the building up or putting the expansion up, but setting up the equipment, setting up the automation, setting up the processes, training the people. This is a complete different process. We are no longer talking about commodity. We're talking about a system, and that system, that training that comes with it, the testing that comes with it, I'd rather wait, you know, a couple, three, four weeks longer and get it right versus start launching this and fumble. That could be very costly, so we're not going to do that. So that's one ownership. The other ownership is just the fixed firm contractual obligation, how to price that product accordingly over the next three-five years, and then the following model change, 'cause when you spec in, you spec in. So we're not talking about one piece of business unit, we're talking about a full system. We don't have a straightforward application. We are a highly specified, complex product operation that, you know, that allows us to, to charge accordingly, you know. And Nathan, I would just add, you know, I think what Josef is describing is, you know, obviously each one of these deals with all of these very large OEMs are very customized, you know, applications. And, you know, all of these different facets of, you know, pulling these systems together have to be customized and very unique to the situation. So it, it's just a much more complex process, you know, as we are evolving into this new model. So it, it just takes more, more time. Do you have commitments from these customers that once all of these processes are stood up and you can demonstrate that you can produce the products and they, and they work, that the- that they will commit volume to Helios? In my opinion, we do. Okay. Thanks very much for taking my questions. Thank you, Nathan. Thank you, Nathan. There are no further questions at this time. I would now like to turn the floor back over to Tania Almond for closing comments. Thank you very much, everyone, for joining us today. We appreciate your interest and continued support of Helios and look forward to updating you on our Q4 results in February. We will be attending a number of investor conferences between now and the end of the year, so we look forward to seeing you out on the road. Please feel free to reach out to me with any follow-up questions. Have a great day. Take care. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.