8-K: Hawkins Achieves Record Q2 Revenue & EBITDA Amidst Growth

Hawkins, Inc. reported record second quarter fiscal 2026 results with significant revenue and adjusted EBITDA growth, driven by strong performance in Water Treatment and Industrial Solutions segments.

Summary

• Hawkins, Inc. announced record second quarter fiscal 2026 results for revenue, gross profit, operating income, and adjusted EBITDA.
• Revenue grew 14% to $280.4 million for the second quarter of fiscal 2026, up from $247.0 million in the prior year.
• Water Treatment segment revenue increased 21% to $150.9 million, including $23 million from acquired businesses.
• Industrial Solutions segment revenue increased 11% to $56.6 million.
• Food and Health Sciences segment revenue increased 2% to $72.9 million.
• Gross profit increased 12% to $67.6 million, maintaining 24% of sales.
• Adjusted EBITDA rose 9% to $50.4 million, with trailing 12-month adjusted EBITDA exceeding $178 million.
• Diluted EPS decreased by $0.08, or 7%, to $1.08 per share, primarily due to a $5 million increase in amortization and interest expense related to acquisitions.
• Pro forma EPS for the quarter would have been 5% higher than the pro forma prior year period, assuming the WaterSurplus acquisition occurred at the beginning of the prior fiscal year.
• Selling, general and administrative (SG&A) expenses increased 27% to $33.7 million, largely due to $5.6 million in added costs from acquired businesses, including $2.5 million in amortization of intangibles and $0.5 million in fair value accretion on earnout liabilities.
• The company reduced its debt level by $20 million during the quarter, with total debt outstanding at $279.0 million and a leverage ratio of 1.53x trailing 12-month proforma adjusted EBITDA.

Sentiment

Score: 8

Explanation: The company reported record revenue and adjusted EBITDA, demonstrating strong operational growth across key segments. While diluted EPS saw a slight dip, it was attributed to strategic acquisition-related expenses, with a positive pro forma outlook. Debt reduction further strengthens the financial position, indicating a very positive underlying performance and strategic direction.

Positives

• Achieved record second quarter results for revenue ($280.4 million), gross profit ($67.6 million), operating income ($33.9 million), and adjusted EBITDA ($50.4 million).
• Overall revenue growth of 14% year-over-year.
• Water Treatment segment demonstrated strong growth of 21%, contributing significantly to overall revenue increase.
• Industrial Solutions segment also showed robust growth of 11%.
• All three segments grew for the second consecutive quarter.
• Adjusted EBITDA increased 9% year-over-year, indicating strong operational performance.
• Generated strong cash flow, allowing for a $20 million reduction in debt during the quarter.
• WaterSurplus acquisition integration is progressing well, with more high-margin sales opportunities identified than initially expected.
• Pro forma EPS, accounting for the WaterSurplus acquisition from the prior fiscal year, would have been 5% higher.

Negatives

• Diluted EPS decreased by $0.08, or 7%, to $1.08 per share, primarily due to a $5 million increase in amortization and interest expense related to acquisitions.
• Food & Health Sciences segment gross profit decreased 4% due to lower selling prices and competitive pricing pressures.
• Selling, general and administrative (SG&A) expenses increased 27%, largely due to acquisition-related costs.
• Leverage ratio increased to 1.53x trailing 12-month proforma adjusted EBITDA, compared to 0.86x at the end of fiscal 2025, primarily due to acquisitions.
• Expected drag on operating income and earnings per share from the WaterSurplus acquisition in fiscal 2026, with $17 million of annualized expense anticipated.

Risks

• Changes in competition and price pressures could negatively impact financial results.
• Changes in demand and customer requirements or processes for products may affect sales.
• Availability of product and disruptions to supplies could hinder operations.
• Interruptions in production resulting from hazards, transportation limitations, or other extraordinary events outside of control may negatively impact business or supply chains.
• Changes in imported products and tariff levels could affect costs and pricing.
• The availability of products and the prices at which they are available are subject to market fluctuations.
• Acceptance of new products by customers and the timing of such acceptance are uncertain.
• Changes in product supplies could impact production and sales.

Future Outlook

Management expects Water Treatment and Industrial Solutions segments to continue growing in the second half of the fiscal year. The Food and Health Sciences segment is anticipated to be flat to down due to tougher comparisons and competitive pressures. The WaterSurplus acquisition is expected to be accretive in fiscal 2027, with an anticipated $17 million in annualized expenses related to it in fiscal 2026. The full-year effective tax rate is expected to be approximately 26-27%.

Management Comments

• "Our second quarter results were highlighted by all three segments growing for the second consecutive quarter. This was a great achievement that was delivered by our entire team working together."
• "Our growth was again led by Water Treatment, with revenue growth of over 21%, followed by Industrial Solutions growing 11% and Food and Health Sciences growing 2."
• "Our record second quarter revenue of $280 million and record second quarter adjusted EBITDA of $50.4 million are both a result of our ongoing strategy of investing in high-margin business that drives topline growth and enhances our margins."
• "We continue to generate strong cash flow, which allowed us to reduce our debt level by $20 million during the quarter."
• "We are pleased with our growth even as we experienced the expected drag on operating income and earnings per share from our first quarter acquisition of WaterSurplus."
• "This acquisition is expected to be accretive in fiscal 2027 as we continue to ramp the business, but in fiscal 2026 we expect to incur $17 million of annualized expense related to the acquisition associated with amortization, earn-out accretion and interest expense."
• "The integration is going well and currently we see even more high-margin sales opportunities than we expected when we closed the deal."
• "Looking to the second half of the year, we expect Water Treatment and Industrial Solutions to grow, while we expect Food and Health Sciences to be flat to down, driven by tougher comparisons over the prior year and competitive pressures within the food space."
• "We will continue to deliver on our strategy of investing in our higher margin businesses, acquiring companies that are accretive to Hawkins, all while servicing the needs of our customers to the highest level possible."

Industry Context

The strong performance in the Water Treatment segment, with 21% growth, aligns with broader industry trends of increasing demand for water purification and treatment solutions, driven by environmental regulations and industrial needs. The company's strategy of investing in high-margin businesses and strategic acquisitions, such as WaterSurplus, positions it to capitalize on these trends. The competitive pressures in the Food and Health Sciences segment reflect a dynamic market where pricing and innovation are key differentiators.

Corporate Governance

Stakeholder Impact

• Shareholders: Positive impact from record revenue and EBITDA, debt reduction, and strategic acquisitions, though diluted EPS saw a temporary dip due to acquisition costs. Cash dividends declared per common share increased to $0.19 from $0.18.
• Employees: Positive impact from overall company growth and potential increases in variable pay and other personnel costs.
• Customers: Continued focus on superb customer service and support, quality products, and personalized applications.
• Creditors: Positive impact from debt reduction and strong cash flow generation, improving creditworthiness despite an increased leverage ratio due to acquisitions.

Next Steps

• Continue integration of the WaterSurplus acquisition, with expectations for it to be accretive in fiscal 2027.
• Continue investing in higher-margin businesses.
• Pursue acquisitions that are accretive to Hawkins.
• Service customer needs to the highest level possible.
• Monitor and address competitive pressures within the Food and Health Sciences segment.

Key Dates

Recommendation

Hawkins, Inc. delivered strong operational results with record revenue and adjusted EBITDA, indicating robust underlying business health. The strategic acquisition of WaterSurplus, while temporarily impacting EPS due to associated expenses, is expected to be accretive in fiscal 2027 and has already revealed more high-margin opportunities. The company's ability to reduce debt while investing in growth, coupled with positive outlooks for its core Water Treatment and Industrial Solutions segments, suggests a solid growth trajectory. Despite competitive pressures in Food & Health Sciences, the overall strategic direction and financial performance warrant a 'buy' recommendation for investors seeking growth in specialty chemicals and water treatment.

Keywords

Hawkins Inc., HWKN, Water Treatment, Industrial Solutions, Food and Health Sciences, Q2 2026 Earnings, Financial Results, Adjusted EBITDA, Revenue Growth, Acquisition Integration, Specialty Ingredients, Chemical Distribution, SEC Filing