Hawkins, Inc. — Second Quarter Fiscal 2027 Earnings Summary

Financial Performance:

• Reported record second quarter revenue of $313.8 million, a 12% increase from $280.4 million in the second quarter of fiscal 2026.
• Recorded record diluted earnings per share (EPS) of $1.34, up 23% from $1.08 in the prior year period.
• Net income reached $27.8 million, a 23% increase from $22.6 million in the second quarter of fiscal 2026.
• Gross profit increased 13% to $76.6 million from $67.6 million, maintaining a 24% gross margin for both the current and prior year quarters.
• Adjusted EBITDA reached a record $59.1 million, a 16% increase from $50.9 million in the second quarter of fiscal 2026.
• Trailing twelve-month net income was $85.8 million, and trailing twelve-month adjusted EBITDA was $188.0 million.
• Operating cash flow for the six months ended September 27, 2026, was $75.5 million, up 6% from the prior year period.
• Free cash flow for the six months ended September 27, 2026, increased 14% to $53.1 million from $46.7 million in the prior year period.
• Total debt outstanding was $229.0 million as of September 27, 2026, down from $244.0 million at the end of fiscal 2026.
• Leverage ratio was 1.22x trailing twelve-month adjusted EBITDA, down from 1.37x at the end of fiscal 2026 and 1.54x in the second quarter of fiscal 2026.
• Effective income tax rate was 30% for the quarter, compared to 27% in the prior year period.

Guidance and Future Outlook:

• Management expects second-half trends to be consistent with first-half performance.
• Management noted that SG&A expenses in the second half of fiscal 2027 will not benefit from a non-recurring $6.2 million SG&A reduction that occurred in the second half of fiscal 2026.
• Full-year effective tax rate is expected to be approximately 25% to 27%.

Business Segments and Product Lines:

• Water Treatment segment revenue grew 16% to $175.0 million, driven by 14% organic growth, increased volumes, and improved pricing; municipal end markets were particularly strong.
• Food & Health Sciences segment revenue grew 5% to $76.7 million, driven by increased volumes of nutrition, food ingredients, and pharmaceutical products, partially offset by decreased agricultural product sales.
• Industrial Solutions segment revenue grew 10% to $62.2 million, driven by improved pricing and favorable product mix, which offset lower volumes.
• Water Treatment gross profit increased 20% to $51.7 million (30% margin), driven by higher sales and volume growth.
• Food & Health Sciences gross profit decreased 4% to $14.9 million (19% margin), impacted by lower margins in food and pharmaceutical products and unfavorable LIFO reserve impacts.
• Industrial Solutions gross profit increased 12% to $10.0 million (16% margin), driven by higher sales and favorable product mix.
• Acquired businesses contributed approximately $3.7 million in sales during the quarter.

Market and Competitive Landscape:

• All three business segments grew by 5% or more year-over-year.
• Water Treatment segment growth was broad-based across product lines and end markets.
• Industrial Solutions segment benefited from favorable product mix and improved pricing.

Risks and Challenges:

• Gross profit was negatively impacted by a $1.9 million increase in the LIFO reserve due to higher raw material costs.
• Higher fuel costs pressured gross profit as they were not fully recovered through freight charges billed to customers.
• Food & Health Sciences gross profit was reduced by the $0.5 million year-over-year impact of the unfavorable LIFO reserve.
• SG&A expenses increased due to added costs from acquired businesses and increases in variable pay and personnel costs.

Management Commentary and Tone:

• CEO Patrick H. Hawkins described results as "record" across revenue, gross profit, EPS, and adjusted EBITDA, citing the "agility of our employees and the resilience of our business model."
• Management highlighted strong cash flow generation, noting the repurchase of $12 million of stock, payment of $15 million in debt, and acquisition of Dave Symonds & Associates during the quarter.
• Management reiterated a strategy of investing in higher-margin businesses and acquiring accretive companies.

Other Key Points:

• Closed the acquisition of Dave Symonds & Associates, Inc., a Florida-based water distributor focused on blended phosphates for corrosion control and sequestration.
• Subsequent to quarter end, acquired Eagle Labs, Inc., a water treatment distributor with in-house manufacturing capabilities in the Dallas–Fort Worth region.
• Repurchased $18.6 million of stock, paid down $15.0 million of debt, and paid $8.1 million in dividends using free cash flow generated in the first six months of fiscal 2027.
• Declared cash dividends of $0.20 per common share for the quarter, compared to $0.19 in the prior year period.
• Working capital increased by $18 million compared to the end of fiscal 2026, primarily due to increased trade receivables and inventory.
• Revised the definition of adjusted EBITDA in the third quarter of fiscal 2026 to exclude non-cash earnout related expense and income; prior-year adjusted EBITDA has been recast to conform to this definition.