8-K: Hawkins, Inc. Reports Record Q1 Fiscal 2026 Results Driven by Water Treatment Growth and Strategic Acquisition

Hawkins, Inc. announced record first quarter fiscal 2026 financial results, with revenue up 15% and adjusted EBITDA up 13%, largely driven by strong performance in its Water Treatment segment and the strategic acquisition of WaterSurplus.

Summary

• Achieved record quarterly results for revenue, gross profit, operating income, net income, diluted earnings per share (EPS), and adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (adjusted EBITDA).
• Revenue grew 15% year-over-year to $293.3 million for the first quarter of fiscal 2026.
• The Water Treatment segment experienced significant growth of 28%, contributing $149.6 million in sales, including $29 million from acquired businesses.
• Gross profit increased 12% to $72.4 million, representing 25% of sales.
• Diluted EPS was $1.40 per share, a 1% increase from $1.38 in the prior year period; pro forma EPS, assuming the WaterSurplus acquisition occurred at the beginning of applicable periods, would have been 11% higher.
• Adjusted EBITDA reached $57.6 million, a 13% increase over the same period last year, with trailing 12-month adjusted EBITDA exceeding $170 million.
• Successfully closed the strategic acquisition of WaterSurplus, enhancing capabilities in design, engineering, and filtration systems within the Water Treatment segment.
• Crossed the $1 billion revenue mark for the trailing twelve months for the first time in company history.
• Certified as a Great Place to Work for the fifth consecutive year.
• Re-aligned reporting segments to Water Treatment, Food and Health Sciences, and Industrial Solutions, effective first quarter fiscal 2026.

Sentiment

Score: 8

Explanation: The company reported record financial results across multiple metrics, driven by strong growth in its Water Treatment segment and a significant strategic acquisition. Management expressed satisfaction with results meeting expectations and provided a positive outlook for continued profitability. While there was some margin pressure in other segments and increased leverage due to the acquisition, the overall performance and strategic positioning are strong.

Positives

• Achieved record quarterly results across multiple key financial metrics: revenue, gross profit, operating income, net income, diluted EPS, and adjusted EBITDA.
• Overall revenue increased by a strong 15% to $293.3 million.
• The Water Treatment segment demonstrated exceptional growth of 28%, with sales reaching $149.6 million, significantly boosted by acquired businesses.
• All three reporting segments contributed to year-over-year revenue growth.
• Successfully surpassed the $1 billion revenue mark for the trailing twelve months, a historic first for the company.
• Adjusted EBITDA saw a robust 13% increase, reaching $57.6 million.
• The strategic acquisition of WaterSurplus was completed, expanding the company's full-service offerings in water treatment to include design, engineering, and filtration systems.
• Maintained a strong balance sheet with a leverage ratio of 1.6x, despite significant acquisition financing.
• Recognized as a Great Place to Work for the fifth consecutive year, indicating strong employee satisfaction and corporate culture.
• Increased cash dividends declared per common share to $0.18 from $0.16.

Negatives

• Diluted EPS growth was modest at only 1% ($0.02 increase), despite strong top-line growth.
• Gross profit for the Food & Health Sciences segment decreased by 3% due to lower selling prices driven by competitive pricing pressures.
• Gross profit for the Industrial Solutions segment decreased by 2% primarily due to competitive pricing pressures and increased operating costs.
• Selling, general and administrative (SG&A) expenses increased significantly by 24% ($6.1 million), largely attributable to costs from the acquired business (including amortization of intangibles and acquisition costs) and increased compensation/medical expenses.
• The leverage ratio increased to 1.61x from 0.86x at the end of fiscal 2025, primarily due to borrowing for the WaterSurplus acquisition.

Risks

• Changes in competition and price pressures.
• Changes in demand and customer requirements or processes for products.
• Availability of product and disruptions to supplies.
• Interruptions in production resulting from hazards, transportation limitations, or other extraordinary events outside the company's control that may negatively impact business or supply chains.
• Changes in imported products and tariff levels.
• The availability of products and the prices at which they are available.
• The acceptance of new products by customers and the timing of any such acceptance.
• Changes in product supplies.

Future Outlook

Management expects all three segments to continue to grow profitability for fiscal 2026. The company plans to continue its strategy of investing in higher margin businesses and servicing customer needs to the highest level possible. The effective tax rate for the full year is currently expected to be approximately 26-27%.

Management Comments

• "Our first quarter results came in as expected, with Water Treatment having another strong quarter with revenue growth of 28%, despite a cooler and wet start to the summer." Patrick H. Hawkins, Chief Executive Officer and President.
• "Our record revenue of $293 million was the result of all three reporting segments growing year over year and for the first time in our history, Hawkins crossed the $1 billion revenue mark for the trailing twelve months." Patrick H. Hawkins, Chief Executive Officer and President.
• "Our continuing strategy of investing in higher margin business helped drive the growth and record results we have experienced this quarter as well as over the last several years." Patrick H. Hawkins, Chief Executive Officer and President.
• "Our double-digit growth in revenue and adjusted EBITDA, along with our strong cash flow, has allowed us to focus on growth while maintaining a strong balance sheet." Patrick H. Hawkins, Chief Executive Officer and President.
• "We closed on the acquisition of WaterSurplus in the quarter, one of our largest acquisitions in company history. We are excited about the growth opportunities this acquisition presents us." Patrick H. Hawkins, Chief Executive Officer and President.
• "By combining Hawkins chemistry, service, and technical expertise with WaterSurplus design, engineering, and filtration systems, Hawkins now has a full-service equipment and chemical offering for water treatment customers throughout the United States." Patrick H. Hawkins, Chief Executive Officer and President.
• "Our balance sheet continues to be strong, and our leverage ratio at the end of the first quarter was 1.6x." Patrick H. Hawkins, Chief Executive Officer and President.
• "Looking to the future, we expect all three segments to continue to grow profitability for fiscal 2026. We will continue to deliver on our strategy of investing in our higher margin businesses, while servicing the needs of our customers to the highest level possible." Patrick H. Hawkins, Chief Executive Officer and President.

Industry Context

The company's strong performance, particularly in Water Treatment, aligns with increasing global demand for clean water solutions and specialized chemical applications. The acquisition of WaterSurplus strategically enhances the company's offerings, allowing it to provide a more comprehensive suite of services from chemistry to engineering and filtration systems, positioning it well within a consolidating and technologically evolving water treatment market. The competitive pricing pressures noted in the Food & Health Sciences and Industrial Solutions segments suggest these are more mature markets where operational efficiency and product differentiation are critical for maintaining profitability.

Corporate Governance

Stakeholder Impact

• Shareholders: Positive impact due to record financial results, increased diluted EPS, increased cash dividends, and strategic acquisition for future growth.
• Employees: Positive impact due to company being certified as a Great Place to Work for the fifth consecutive year, indicating a positive work environment.
• Customers: Enhanced offerings in water treatment due to WaterSurplus acquisition, providing a full-service equipment and chemical offering throughout the United States.

Next Steps

• Continue to grow profitability across all three segments for fiscal 2026.
• Continue investing in higher margin businesses.
• Continue servicing customer needs to the highest level possible.

Key Dates

Recommendation

The company delivered record financial performance in Q1 FY26, exceeding $1 billion in trailing twelve-month revenue for the first time. The strategic acquisition of WaterSurplus significantly enhances its Water Treatment segment, a high-growth area, and positions the company for continued expansion and higher margins. Despite an increase in leverage due to the acquisition, the balance sheet remains strong, and management expects continued profitability across all segments. The consistent growth, strategic investments, and positive outlook make this an attractive investment.

Keywords

Water Treatment, Specialty Ingredients, Chemicals, Food & Health Sciences, Industrial Solutions, Acquisition, Financial Results, Earnings, EBITDA, Corporate Governance, HWKN, Nasdaq