Greetings. Welcome to Helios Technologies Q3 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Tania Almond, Vice President of Investor Relations. Thank you. You may begin.
Thank you, operator, and good day, everyone. Welcome to the Helios Technologies Q3 2021 Financial Results conference call. We issued a press release this morning. If you do not have that release, it is available on our website at 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 Tricia Fulton, our Chief Financial Officer. They will spend the next several minutes reviewing our Q3 results, discussing our progress with our accelerated growth goals, updating our outlook for the rest of 2021, and then we will open the call to your questions. If you turn to slide two, you will find our safe harbor statement. As you may be aware, we will make some forward-looking statements during this presentation and also during the Q&A session.
These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from where we are today. These risks and uncertainties and other factors will be provided in our 10-Q to be filed with the Securities and Exchange Commission. You can find these documents on our website or at 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. With that, it's now my pleasure to turn the call over to Josef.
Tania, thank you, and good day, everyone. Please turn to slide three, and I will summarize our highlights for the quarter. Our Helios team delivered outsized growth again this quarter across each line of our business by expanding our market share with our current customers, winning new customers, and diversifying the markets we serve. We believe this is a direct result of the strong execution on our augmented strategy for growth that is made possible by the passionate culture instilled in our team with shared values of integrity, inclusion, leadership, accountability, and innovation. Every day, we leverage our core values as we address the challenges of supply chain constraints and material costs head on with flexibility, agility, and creativity. We are not immune to the logistical constraints everyone is facing with transportation challenges.
We are prioritizing constantly to meet our customers' needs by partnering with our suppliers and identifying new sources to complete orders timely and maintain our top lead times. We have stayed focused on optimizing our manufacturing efficiencies and implemented multiple pricing strategies across all of our businesses to cover the inflationary pressures being realized. It is important to note that through all of this, demand remains robust across all of our markets, and we believe we continue to take market share due to our responsiveness to our customers' needs. We had 30% organic growth in the quarter, reflecting strong demand and our operational flexibility to deliver. This was bolstered by winning new customers in diversified markets, as well as the new products we have introduced that are being well-received. Additionally, we recently won an important new customer in the electric vehicle design and manufacturing space.
We will provide edge-to-edge electric control displays over a multi-year period. This is a perfect example of a new customer win in diversified markets. As you know, this quarter we have been integrating our NEM acquisition that I spoke about on our last call. We are very excited about how nicely we see their products filling out our good, better, and best portfolio approach in our electro-hydraulic product offerings. We expect to start bringing these combined offerings to the market relatively quickly through the end of this year into early next year. Just after the Q3, we closed our acquisition of the assets of Joyonway. Both NEM and Joyonway are excellent examples of the effectiveness of our flywheel acquisition strategy. Joyonway is an ideal addition for our electronic segment.
They complement our controls platform from our Balboa acquisition, further expand our reach into Asia, increase our manufacturing capacity, as well as help us better serve in the region, for the region, and strengthen our supply chain. They are another example of a strong standalone business that fits within the Helios business system like a glove, and we will be able to create a multiplier effect. Because of our strong cash generation this quarter, we have once again rapidly delevered our balance sheet, quickly getting back to our targeted 2 times leverage metric, providing dry powder to continue advancing our acquisition strategy. I should add that the pipeline continues to remain very robust.
Due to the strong quarter performance, the strength of demand in our markets, and our team's excellent work in achieving manufacturing efficiencies, we are again raising our full year 2021 revenue and non-GAAP cash EPS outlook while holding margins steady, even with the backdrop of this most unusual operating environment in the supply chain. We are encouraged by what we are hearing from our customers and believe this sets us up for a solid 2022 as well. Let me review some of the financial highlights on slides four and five, and then pass it over to Tricia for more details. Our Q2 net sales increased over 80% to $223 million, including $64 million in sales from acquisitions. Our adjusted EBITDA margin remains top tier at 25.1%. This was a 170 basis point expansion over last year.
Non-GAAP cash EPS was 1.07, more than double over last year, reflecting the strength of the economic recovery, our ability to capture a greater share of growth, and the addition of several excellent acquisitions. Our Helios team is the absolute key to our success, and I could not be prouder of their dedication and fortitude through the most unusual operating conditions of probably all of our careers. I will now turn the call over to Tricia to review the financial results and outlook in a little bit more detail. Tricia?
Thank you, Josef, and good day, everyone. On slides six and seven, I will review our Q3 consolidated results. As Josef noted, we outperformed and delivered outstanding growth in the Q3, supported by our focus on delivery lead times and managing our operations efficiently. We continue to expand our sales channels while our existing end markets remain robust. We are focused on executing our flywheel acquisition strategy, and our most recent transformative acquisition of Balboa exceeded our expectations again. Net sales grew 82% over the prior year period as we executed our growth plans and continued to take market share. As Josef mentioned, we delivered very strong 30% organic growth during the quarter. Q3 gross profit of $80.9 million increased $34 million or 72% over the prior year period from higher volumes.
Gross margin was a very healthy 36.2% and was impacted year-over-year by the difference from Balboa's margin profile. Throughout the quarter, we captured manufacturing efficiencies and improved leverage of our fixed cost base on higher sales, which were offset by increases in logistics and raw material costs. We have done and continue to implement multiple pricing strategies while also carefully managing the business to overcome the higher input costs. Manufacturing is performing well given the constant reprioritization we need to do to get product out the door. Maintaining extreme flexibility and agility in our operations has been a competitive advantage and is helping us take market share. Adjusted EBITDA margin grew to 25.1%, up 170 basis points from the same period a year ago, reflecting higher volumes and our disciplined cost management efforts.
Non-GAAP cash EPS improved $0.54 to $1.07 for the Q3 over the prior year period, reflecting strong demand across all industries and better than expected performance of the Balboa acquisition. Our effective tax rate in the Q3 was 25.5% compared to a 20.7% in the prior year period due to a reduction in available tax incentives and increased earnings in higher tax jurisdictions such as Italy, Germany, and Australia. Please turn to slide eight for a review of our Hydraulics segment Q3 operating results. Q3 Hydraulics sales of $133 million were up 36% over the prior year period and benefited from broad-based improved demand in most of our end markets, showing very strong annual growth in the Americas and EMEA. Annual organic growth in this segment was 31%.
Sales included a positive $1 million impact from foreign currency exchange rates. Q3 Hydraulics gross profit benefited from higher volumes while margin increased 150 basis points to 37.6%, primarily driven by fixed cost leverage on higher sales, manufacturing efficiencies, and sales mix. The 460 basis point operating margin expansion to 23.8% compared with the prior year period reflects operating leverage on higher volumes as well as our disciplined execution on our manufacturing strategy. Please turn to slide nine for a review of our Electronics segment Q3 operating results. Electronics sales were $89.8 million, up from the $24.4 million in the year ago period, reflecting an increase of 268%. Annual organic growth in this segment was 26%. We are seeing strong demand from the health and wellness and recreational markets.
Supply chain constraints limited sales in both end markets in the quarter. Acquisitions contributed $59 million in revenue to our Electronics segment for the Q3. Next quarter, we will observe one year since acquiring Balboa, and it will be classified into our organic growth category. We continue to be very excited by the potential this acquisition has brought to our business. Electronics segment gross profit of $31.3 million in Q3 increased with the acquisition and higher volumes. Electronics gross margin was 34.9% and reflects the impact of mix primarily related to the different margin profile of the Balboa acquisition, as well as increased costs resulting from supply chain challenges to meet strong customer demands.
Operating income for the Electronics segment of $18.4 million was up from $4.7 million in the prior year period, and operating margin improved 130 basis points. The 2021 Q3 margin reflects operating leverage gained with Balboa's favorable operating margin profile and higher volume in the organic business. Please turn to slide 10 for a view of our cash flow. Cash from operations was $32.5 million in the Q3 compared with $36.7 million in the prior year period. We are carefully balancing our working capital requirements with our efforts to provide timely deliveries to our customers amidst significant demand and material shortages. For the quarter, CapEx was $6.7 million, up from $1.9 million in the Q3 of 2020.
CapEx for the full year 2021 is expected to range between $25 million-$27 million. This is down from a range of $30 million-$32 million due to the timing of when certain investments will be available. On a year-over-year basis, this will be an increase of 78% from our capital expenditures in 2020. Free cash flow was a strong $25.7 million at the end of the Q3, equating to a trailing 12-month free cash flow conversion rate of 103%. We are confident we have significant financial flexibility to further pursue our flywheel acquisition strategy. Regarding our capital structure on Slide 11, we continue to rapidly de-lever our balance sheet. This quarter, we hit our target range of pro forma net debt to adjusted EBITDA leverage of 2 times.
This improved from the 3 times at the end of 2020. Total debt was $471 million at quarter end. We also had $121 million available on our revolving lines of credit, with total liquidity of $169 million. As a reminder, our financial strategy is to increase leverage for disciplined acquisitions and then generate the cash to quickly pay that down. Our capital priorities remain debt reduction, organic growth through new products and technologies, acquisitive growth, and distributions to shareholders. In fact, with our next dividend payment, we plan to join an elite group of public companies that have paid dividends for 25 years straight. Now let's turn to slide 12 and I will discuss our outlook for the rest of 2021.
Our guidance for 2021 assumes constant currency using quarter end rates, as well as the assumption that our markets are not further impacted by the global pandemic. As a result of our outperformance this quarter, we are raising our revenue outlook for 2021 to the range of $840 million-$860 million, which implies an annual growth rate of approximately 63% at the midpoint of the range. We are holding adjusted EBITDA margin outlook steady at 23.5%-24.5%. We continue to leverage our manufacturing efficiencies to offset stronger headwinds in the Q4 due to rising material costs.
This implies we are raising our expectation for adjusted EBITDA dollars to the range of $197 million-$211 million or a 68% annual growth rate at the midpoint of the range. Additionally, we continue to invest through non-CapEx related items into our manufacturing strategy to reap the rewards of margin improvement over the long term. Relative to our margin guidance, we are reflecting inflated material and freight costs continuing through the remainder of the year, the challenges of obtaining parts and supplies, even as we build inventories, as well as the difficulties in staffing and balancing production lines. We are tightening our interest expense outlook to $16 million-$17 million at current borrowing levels and rates. The expected effective tax rate for 2021 remains in the range of 22%-24%.
Depreciation is now expected to be between $21 million-$22 million, while outlook on amortization is unchanged at approximately $32 million-$33 million. We are raising our non-GAAP cash EPS outlook to between $3.75-$4.10 per share, or a 75% increase over the prior year at the midpoint of the range. The increase in our guidance for 2021 is driven by the strong end market demand we had so far this year to continue throughout the remainder of 2021. We expect that we can leverage our fixed cost base and maintain our strong margins, even given the headwinds on the supply chain, material costs, and logistics. The spread in our ranges this far into the year is an indication of the highly unusual operating environment we all find ourselves within.
With that, I will turn the call back to Josef for some final comments.
Thank you, Tricia. These are certainly fascinating times. We have exceptional demand for our products while also having to be very agile to meet the demand. Our team has proven we are up to the challenge, and we remain super excited about how we are shaping and driving our future forward. With that, let's open the lines up for Q&A, please.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Nathan Jones with Stifel. Please proceed.
Yeah, good morning. This is Adam Farley on for Nathan.
Morning, Adam.
Adam.
Hey, you guys called out your really strong lead times a couple of times on the call. You called out share gain opportunities as well. Could you provide a little bit more color on what the share gain opportunities have been so far?
Yeah, I think we've, you know, had a lot of opportunities that we've seen on an individual basis coming through from, you know, a market share gain perspective where we have had customers reach out to us and say, "Hey, I can't get this from one of your competitors," and we've been able to satisfy the need for that customer. In some cases, it's a one-off, but in many cases, we believe it's a long-term share gain for us. And, you know, we've seen a lot of those in the Hydraulics space over the last few months. Maybe a little bit less on the Electronics side, but, you know, part of that is supply chain related because that's hitting the Electronics side a little bit harder than Hydraulics.
We've been able to really maintain our strong lead times on the Hydraulics side and take market share.
Adam, probably the other data point would be that we had our distribution council meeting here, just about a week ago here in Sarasota, and that kind of confirms what Tricia just said with the feedback we have gotten from the distributors and the order pattern that, you know, there were previous customers who did not purchase from us that we are now supplying. Those are the two key drivers.
Okay. Do you think there's any double ordering going on in the system with any customers trying to secure inventory?
We don't have an indication that there is any. I mean, right now everyone's just trying to get what they need, understanding the logistics and supply chain issues, and get what they need as quickly. We don't see any indication of double ordering.
No.
Okay. Thanks for taking my questions.
Thanks, Adam.
Thank you.
Our next question is from Mig Dobre with Baird. Please proceed.
Thank you. Good morning, and well done in a difficult operating environment. I guess where I'm looking for maybe a little more context, Josef, is the tenor of demand in your two businesses. I'm sort of curious as to how orders are running relative to revenue. So you're seeing, you know, higher or lower order intake in a quarter relative to what you reported in revenues. I'm also curious, given the amount of disruption that is out there, have you seen any impact, negative impact, on customer demand? What are you hearing from your OEM customers as far as how they're planning their own production, not just for the Q4, but really into 2022?
Yeah. Good morning, Mig, and thanks for the comment. In terms of your first question, our order pattern, you know, has been very consistent throughout all of our businesses. You know, it really hasn't fluctuated up and down, both segments, Hydraulics and Electronics. You know, you always go through a period of time where you see a spike up and then it balance back down, and then you get, you know, quite a few calls and can we actually ship earlier. You get that type of stuff. But in terms of order pattern, there hasn't been really no fluctuation or cyclicality. On your second question, there is, you know, we look at this very closely every single day. When we, you know, changed our guidance, we factored it and, you know, there is a strong level of optimism in certain areas.
Now obviously with the infrastructure bill to pass and will be signed, that optimism has obviously peaked. You know, we are just super careful how we're going to meet the demand. What we're hearing very consistently is that demand should stay robust. We're working very closely with our distribution partners and OEM partners to really level out a schedule that we can fulfill that schedule on a timely basis. The demand is stable. We are seeing upticks in certain areas, and we have balanced this very carefully with some of the supply chain challenges, you know, the world is seeing, so to speak. I think that's kinda where we are, Mig.
Okay. Maybe to put a finer point, looking at your Hydraulics business, the thing that surprised me, looking at both EMEA and Asia Pacific, you know, revenues here are fairly consistent sequentially in the Q3 relative to the second. You know, we've heard that China has slowed down and you know, equipment volumes are certainly lower there. In EMEA, I know you have, that's basically the faster business where there's been disruption for ag OEM customers. I think one of them has talked about having outright planned shutdowns for their European operations. What are you seeing in these two geographies, China specifically, and then the progression of demand for your ag customers and implicitly your EMEA Hydraulics business?
Yeah. On the China piece, Tricia can chime in as well. On the China piece, I think what really helps us, Mig, you know, we really stay true to our strategy of being a niche market, you know, in the region, for the region in Asia. One of our strategic pillars just a year ago was to have more of a system solution approach where we have our Kunshan factory, not just manufacture and ship hydraulic components, but also electronics components as well. We were able to have an impact in Asia, you know, from a more system solution approach than just a component approach. That helped us, you know, in the region with local supply chain and local capabilities of manufacturing.
In EMEA, if it's, you know, Italy, Germany, U.K., Spain, you name it, we have seen, you know, very strong and promising demand, no interruptions. You know, we are seeing cost headwinds in terms of inflationary period, but we knew that would happen, and we are, you know, offsetting that with price increases. As you guys know, we were, you know, successful also working with the OEMs on price increases so that those went through. We have, you know, a lot of flexibility in our European manufacturing to flex labor up and down and we pre-bought quite a bit of material to really protect us as much as we can.
Just to add a little bit more specific on a couple of the markets. In APAC, we are seeing the Korean construction market be very strong, and it's picking up speed, which has historically led to then China ramping back up, at least from what we've seen historically. China ag is extremely strong in our QRC business as well. They're growing very quickly and taking market share. The other part of APAC that is starting to come back a little in the Q3 was the mining in Australia. Quite a bit of our business there. We had seen a decline because of COVID, where we literally couldn't get into the mines. Now we're able to go back to those customers and that seems to be ramping back up as well.
That's helpful. My last question, you mentioned pricing. I am curious if we can get a little more detail or context on this. I look at your incremental margins on EBITDA, and they've been remarkably consistent, 28%, 29%, 27% throughout 2021, despite incremental costs, right? You called out transportation, materials, and a number of other factors. I'm curious as to how you've been able to deliver these steady incremental margins. How is pricing looking, and what might be the carryover contribution into 2022? Thank you.
Yeah. Go ahead, Tricia. Go ahead.
We've been able to get pricing throughout all of the businesses, in some cases multiple times throughout the year. In addition to that, the manufacturing strategy is really taking off and helping us with manufacturing efficiencies that are driving some of that incremental gain that we're seeing as well.
Right. Carry over into 2022, can you comment on that?
You know, some of the price increases went through as permanent. Some of them went through as surcharges related specifically to material increases. There will be some carryover into 2022, and there will likely be, you know, additional pricing actions in 2022, you know, just related to general price increases.
Okay. Thank you.
Thank you, Mig.
Our next question is from Jeff Hammond with KeyBanc Capital Markets. Please proceed.
Hey, good morning.
Morning, Jeff.
Good morning.
Just back on to follow on Mig's question. I think he had asked about, you know, either book to bill or if you're still building backlog here or if just your ability to ship is allowing you to kind of to work that down at all.
We saw a very strong backlog, and that really is coming from the end market demand. I expect that the backlog will be strong headed into 2022. You know, like everybody else, we do have some past due, but, you know, we are doing a very good job at managing our past due dollars right now and getting them out the door as quickly as we can. A large majority of those, I would say, are on the electronic side, where we have some of the part shortages, where we're literally missing one part before we can ship something. As soon as those are coming in, we're able to turn it around. I think the backlog is a testament really to the end market demand.
Okay. Just to be clear, I think you said you lost some revenue or you had some deferred revenue in Electronics, but that was not the case in Hydraulics. Maybe just if you can quantify kind of how much you think slipped to the right?
Yeah. Actually, we had it in both segments where we saw a deferred revenue as a result of parts shortages or not having the parts on a timely basis. You know, it takes us some time once they get in the building to be able to build it and turn around and ship it. We saw some of these parts really freeing up the last couple weeks of the quarter, but we weren't able to necessarily get everything out the door. Then, you know, it falls into October. I would say of what we had, about two-third of it is Electronics and one-third of it is Hydraulics.
Okay. Then, just last one. As we look into Q4, you know, should we think of the step down in revenue and margins as seasonal, or is there something more there? Maybe particularly on the margins, is there something getting particularly worse there? Because, again, as you know, my model kind of shows the same thing, like incrementals being pretty consistent through the year. Thanks.
I mean, given everything that we're seeing on the supply chain side, we've been cautious with Q4, recognizing that it's going to require a very strong flow of products or components coming in the door to ship. Along with that, clearly in Q4, there's always some seasonality that's related to less shipping days due to holidays, specifically in North America and EMEA. You know, it's probably a little bit of both, I would say. You know, I don't think there's anything that you need to read into that other than those two items, supply chain and normal seasonality for holidays.
Okay. Thanks so much.
Thank you.
Thank you.
Our next question is from Josh Pokrzywinski with Morgan Stanley. Please proceed.
Hey, good morning, guys.
Morning, Josh.
Good morning, Josh.
Just, Tricia, you mentioned, you know, kind of the share gain and, you know, folks who can't get supply from, you know, their kind of traditional supply base, you know, seeking you guys out, and you're able to fill in on that. I'm sort of wondering, like, how do you see that evolving going forward? I mean, I would imagine that, you know, all those customers, including your own core customers, are trying to validate, you know, kind of backup suppliers just in case. Like, do you think that there's some sort of, like, normalized middle ground where, you know, they spread it more evenly between, you know, yourselves and maybe their, you know, their historical supply base?
Do you think, you know, you're winning more where it, you know, may be kind of a spec-ed in application where, you know, they would just sort of go with you from now on as this all blows over, of course?
Yeah. A couple of things, Josh. You know, as we said before, you know, we invested in our own destiny here knowing that the supply chain constraints will and should happen. You know, we had a lot of folks within our key competencies, suppliers actually worked with them hand in hand. We also developed our internal capabilities with our make versus buy strategy here, meaning, you know, as we acquired, you know, new businesses, we didn't only acquire capacity, but also capability. Once we fully fleshed this out, it clearly made sense. There's certain core competencies that we can manufacture internally, not just much quicker, but also much more cost effective, and it can flow through our process accordingly.
All this combined got us to a point where we can have, you know, where we're in a position to hold our lead times very steady and meet our demand with our customers. At the same time, we had our diversified market strategy where we worked and targeted three customers within each of our business units in the Electronics and in Hydraulics. That process, you know, has become very strongly and now we're in a position where we, you know, won a couple of them and also announced another one today that's going to carry out over the next five, six years.
Look, all in, we do believe we will have an advantage as a company in terms of our lead times, but also from a cost structure standpoint, we will not be as dependent as we were once before a couple, three years back. We're taking the proper steps as we have announced it in our investor meeting. Tricia, on your part?
Nope. I think you covered it.
Got it.
Okay.
That's helpful. Sorry, Josef.
No, no, go ahead. I just wanna make sure.
Okay.
We answered your question.
Yep. Absolutely did. I guess, you know, maybe taking a step back on, you know, kind of how you've seen, you know, book-to-bill lay out and, you know, through the year, and how you feel about backlog seasonally, with, you know, kind of pull-ins versus, you know, push-outs on customers taking delivery. Again, you know, organic growth's been really strong, you know, kind of all year here. Just wondering, you know, if the sequencing or, you know, backlog position has changed at all as you guys have passed through the year.
Yeah. I mean, look, demand remains very robust pretty much in both of our segments. That hasn't been an issue. You know, in terms of pull ahead, I think we are focused on shipping exactly what the customer needs right now, so we really don't experience or have any mortgaging of other quarters, so to say. We don't have that going on. In terms of orders going forward, you know, look, we are really super excited how 2022 could shape out. You know, we are by nature a very humble and conservative company, so our visibility in the Hydraulics segment, you know, it's only a couple, three weeks. Our visibility in the Electronics segment is a little broader.
As long as we can mitigate our supply chain constraints that the world is facing, you know, we should have a pretty decent 2022. The backlogs are strong in both segments. Nothing has been mortgaged, and we're trying to fill in the demand, but also stay very, very methodical and disciplined, not by over-committing and under-delivering. Our shareholder value here is pretty lucrative going to 2022, I would say.
Great. Appreciate the color. Best of luck.
Thanks, Josh.
As a reminder, just star one on your telephone keypad if you would like to ask a question. Our next question is from Jon Braatz with Kansas City Capital Associates. Please proceed.
Good morning, Josef, and Tania.
Good morning.
Hi.
Two questions. Number one, obviously this morning there's a lot of buzz surrounding the infrastructure bill.
Mm-hmm.
I guess when you speak to your customers, can you help sort of separate reality from the hope and expectation on this bill? Could it prove incremental to the demand that you're seeing in 2022? Or is it just going to be more of a longer term issue?
Well, I think in our area of the niche market, Jon, there's clearly an opportunity for incremental volume. What we have been discussing with our OEM customers, you know, what is the supply constraint look like from an overall product offering? You know, we may be on time, and we may be delivering the products, and so may others as well, but what is the total impact that they're experiencing currently? That's what we're trying to learn, Jon. But in terms of your question, we do see this as incremental opportunity for us.
In 2022?
Yes.
Okay, all right. Secondly, last couple of quarters, Balboa's revenues have been sort of sequentially flat. Are you seeing the impact, the favorable impact from the pandemic on their revenues beginning to abate? Are you seeing any change in it as it relates to the pandemic?
Yeah. I think what that relates to, Jon, is more the electronic components shortages. You know, once again, our order pattern has been, you know, very robust and-
Mm-hmm.
Trust me when I tell you, we could have shipped a lot more product if we would've had-
Okay.
Like Tricia said earlier, you know, we have a week that we kinda go hand to mouth, and then in the last couple weeks of the quarter, the product starts flowing nicely, but you run out of daylight. No, we have not seen a stoppage or a slowdown yet. We certainly hope with our augmented strategy on diversifying that market, and the acquisition of Joyonway, we will be able to penetrate that product line into many more other markets. That's certainly our strategy. If supply chain maintains where it is right now, we should be pretty good.
Yep. Yep. Okay. All right, Josef. Thank you very much.
Thanks much.
We have reached the end of our question and answer session. I would like to turn the conference back over to Josef for closing remarks.
Thank you, operator. Thank you all for joining us today. As always, we certainly appreciate your interest in Helios and look forward to updating all of you on our Q4 next year. We remain super confident in our ability to continue to grow and deliver value for all of our stakeholders. Have a great day and stay healthy.
Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.