Hawkins, Inc. Reports Fourth Quarter and Fiscal Year 2025 Results

ROSEVILLE, Minn., May 14, 2025 (GLOBE NEWSWIRE) -- Hawkins, Inc. (Nasdaq: HWKN) today announced fourth quarter and full-year results for its fiscal year ended March 30, 2025.

Fourth Quarter Fiscal Year 2025 Highlights:

• Record fourth quarter sales of $245.3 million, a 10% increase over the same quarter of the prior year, led by Water Treatment segment sales growth of 21% over the same quarter in the prior year.
• Record fourth quarter gross profit of $52.2 million, a 15% increase over the same quarter of the prior year, contributing to record fourth quarter operating income of $24.6 million, a 22% increase over the prior year.
• Record fourth quarter diluted earnings per share (EPS) of $0.78, which was 18% higher than the same period of the prior year.
• Record fourth quarter Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (adjusted EBITDA), a non-GAAP measure, of $36.7 million, an 18% increase over the same period of the prior year.

Full-Year Fiscal Year 2025 Highlights:

• Record annual sales of $974.4 million, an increase of 6% over the prior fiscal year, with Water Treatment segment sales up 23% over the prior year.
• Record gross profit of $225.5 million, a 16% increase over the prior year, contributing to record operating income of $119.2 million, a 15% year-over-year increase.
• Record diluted EPS of $4.03, which was $0.44, or 12%, higher than fiscal 2024.
• Record adjusted EBITDA, a non-GAAP measure, of $167.5 million, an increase of 17% over fiscal 2024.
• Operating cash flow of $111.1 million.
• Completed four acquisitions during the fiscal year, all of which supported growth in our Water Treatment segment.
• Ended the year with net debt of $143.9 million and a leverage ratio of 0.86x adjusted EBITDA.
• Paid cash dividends of $0.70 per share for the year, an increase of 11% over the prior year. This marks the 40^th consecutive year of paying a dividend.

Executive Commentary - Patrick H. Hawkins, Chief Executive Officer and President:

"Fiscal 2025 was another exciting year of growth for our company. This resulted in records in sales, gross margin, operating income, EPS, and adjusted EBITDA. We are extremely proud of our accomplishments over the past year that allowed us to achieve these record levels. Our focus has been to deliver sustained growth over time, and we accomplished our seventh straight year of EPS growth, helping to deliver return on equity of approximately 20%."

Mr. Hawkins continued, "Our disciplined M&A strategy again contributed to the growth of our Water Treatment segment, which is now our largest segment. We completed four acquisitions during the year, and have completed 13 acquisitions over the last five years. Subsequent to the end of our fiscal year, and as previously disclosed, we acquired WaterSurplus to continue our growth. WaterSurplus is an excellent addition to our portfolio, and we are excited to have the team on board."

Mr. Hawkins continued, "Our Water Treatment segment achieved sales growth of 23% for the year, through sales from our acquired companies as well as organic growth. Sales in our Industrial and Health and Nutrition segments were down for the year but were up in the fourth quarter, and both of these segments had double-digit operating income growth for the year. Overall, operating income was 15% higher than fiscal 2024.”

Mr. Hawkins concluded, "Looking ahead to fiscal 2026, we expect all of our business segments to grow and our revenue to surpass $1 billion for the first time in our 86-year history. We expect EPS to grow as well, although at a slower rate than in recent years due to higher interest expense associated with the new debt financing and increased amortization expense related to our recent acquisitions. We expect our cash flow and balance sheet to remain strong, and with the diversity of our businesses and the overall strength of our company, we believe we will continue to generate strong operating cash flow. This will allow us to fund future growth investments and pay down a portion of our debt during fiscal year 2026 as we expect to achieve a leverage ratio below 1x adjusted EBITDA by the end of fiscal year 2027.”

Change in Reporting Segments

Subsequent to the close of fiscal 2025, we realigned our reporting segments to reflect organizational changes made and to reflect the way we manage our operations and allocate resources. In the first quarter of fiscal 2026, we will report on the following reporting segments: Water Treatment, Health and Food Sciences (which will represent our food, pharmaceutical, agriculture, and nutrition end markets), and Industrial Solutions. We believe this realignment better reflects the value our company provides to our customers and our evolution from a bulk commodity distributor into a specialty ingredients company.

Fourth Quarter and Fiscal Year Financial Highlights:

NET INCOME

For the fourth quarter of fiscal 2025, the company reported net income of $16.3 million, or $0.78 per diluted share, compared to net income for the fourth quarter of fiscal 2024 of $13.8 million, or $0.66 per diluted share.

For the full year, the Company reported record net income of $84.3 million, or $4.03 per diluted share, compared to net income for fiscal 2024 of $75.4 million, or $3.59 per diluted share.

REVENUE

For the fourth quarter of fiscal 2025, sales were $245.3 million, an increase of $22.3 million, or 10%, from sales of $223.0 million a year ago. Each of our segments contributed to the year-over-year growth, with our Water Treatment segment leading the way with 21% growth. Water Treatment segment sales increased $18.3 million, or 21%, to $105.0 million for the fourth quarter, as compared to $86.7 million for the same period a year ago. Sales increased primarily as a result of $13.0 million of added sales from acquired businesses as well as increased sales volumes in our legacy business. Industrial segment sales increased $0.3 million, or less than 1%, to $97.4 million for the fourth quarter, as compared to $97.1 million for the same period a year ago. Sales increased primarily due to a favorable product mix shift. Health and Nutrition segment sales increased $3.7 million, or 9%, to $42.9 million for the fourth quarter, as compared to $39.3 million for the same period a year ago. Sales increased primarily due to increased sales of our manufactured products.

For fiscal 2025, Water Treatment segment sales were $446.5 million for the year, an increase of 23% over last year's sales of $363.3 million; of the $83.2 million increase, $72 million was from our acquired businesses in fiscal 2025. Industrial segment sales were $382.5 million, a decrease of 7% from fiscal 2024 sales of $409.5 million. Sales for our Health and Nutrition segment were $145.5 million in fiscal 2025, a decrease of 1%, from fiscal 2024 sales of $146.4 million.

GROSS PROFIT

Company-wide gross profit for fiscal 2025 increased $31.9 million, or 16%, to $225.5 million, or 23% of sales, from $193.6 million, or 21% of sales, for fiscal 2024. During fiscal 2025, the LIFO reserve decreased, and gross profits increased, by $1.6 million, primarily due to lower prices year-over-year on certain products. During fiscal 2024, the LIFO reserve decreased, and gross profits increased, by $15.4 million. Included as a reduction to gross profit in fiscal 2024 was a $7.7 million charge to operating expense for an environmental liability related to perchlorinated biphenyls (PCBs) discovered in the soil at our Rosemount, MN facility, with such expense reflected in our Industrial segment. The source of the PCBs is unknown and pre-dates our ownership of the property; however, we are responsible for the clean-up despite having never brought PCBs onto the property or used PCBs on the site.

Gross profit for the Water Treatment segment increased $23.1 million, or 23%, to $121.6 million, or 27% of sales, for fiscal 2025, from $98.5 million, or 27% of sales, for fiscal 2024. During fiscal 2025, the LIFO reserve decreased, and gross profits increased, by $0.5 million. During fiscal 2024, the LIFO reserve decreased, and gross profit increased, by $3.3 million. Gross profit increased as a result of the increased sales.

Gross profit for the Industrial segment increased $5.1 million, or 8%, to $72.6 million, or 19% of sales, for fiscal 2025, from $67.5 million, or 16% of sales, for fiscal 2024. During fiscal 2025, the LIFO reserve decreased, and gross profits increased, by $1.1 million. In fiscal 2024, the LIFO reserve decreased, and gross profits increased, by $12.1 million. Included as a reduction to gross profit in the prior year was the aforementioned environmental liability related to PCBs at our Rosemount, MN facility. Gross profit increased as a result of the environmental charge in the prior year not repeating in the current year, partially offset by the negative year-over-year impact of the change in the LIFO reserve, as well as improved margins on certain products.

Gross profit for our Health and Nutrition segment increased $3.7 million, or 13%, to $31.3 million, or 22% of sales, for fiscal 2025, from $27.6 million, or 19% of sales, for fiscal 2024. Gross profit increased as a result of a favorable product mix shift.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses increased $16.8 million, or 19% to $106.4 million, or 11% of sales, for fiscal 2025, from $89.6 million, or 10% of sales, for fiscal 2024. Expenses increased largely due to $10.4 million in added costs from the acquired business in our Water Treatment segment, including amortization of intangibles of $4.2 million, as well as increased variable costs.

ADJUSTED EBITDA

Adjusted EBITDA, a non-GAAP financial measure, is an important performance indicator and a key compliance measure under the terms of our credit agreement. An explanation of the computation of adjusted EBITDA is presented below. Adjusted EBITDA for the three months ended March 30, 2025, was $36.7 million, an increase of $5.7 million, or 18%, from adjusted EBITDA of $31.0 million for the same period in the prior year. Full-year adjusted EBITDA was $167.5 million, an increase of $24.5 million, or 17%, from adjusted EBITDA of $143.0 million for fiscal 2024. The increase was due to the impact of improved gross profits discussed above.

INCOME TAXES

Our effective tax rate was approximately 26% for both fiscal 2025 and fiscal 2024. The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes.

BALANCE SHEET

At the end of fiscal 2025, our working capital was $20 million higher than the end of fiscal 2024 due to increased customer receivables as a result of higher sales, as well as higher inventory levels. For the year, our operating cash flow of $111 million and net debt borrowing of $50 million was primarily deployed to grow the company or provide shareholder return. This included funding $87 million in acquisition spending for the acquisitions of Intercoastal Trading, Inc., Wofford Water Service, Inc., Waterguard, Inc., and Amerochem Corporation, capital spending of $41 million, dividend payments of $15 million, and stock repurchases of $21 million. Our total debt outstanding at the end of fiscal 2025 was $149 million and our leverage ratio was 0.86 times our trailing twelve-month proforma adjusted EBITDA, as compared to 0.66x at the end of fiscal 2024. Subsequent to year-end, our leverage ratio increased above 1.0x adjusted EBITDA with the WaterSurplus acquisition.

About Hawkins, Inc.

Hawkins, Inc. was founded in 1938 and is a leading water treatment and specialty ingredients company that formulates, manufactures, distributes and blends products for its Water Treatment, Food & Health Sciences and Industrial Solutions customers. Headquartered in Roseville, Minnesota, the Company has 63 facilities in 28 states and creates value for its customers through superb customer service and support, quality products and personalized applications. Hawkins, Inc. generated $974 million of revenue in fiscal 2025 and has approximately 1,100 employees. For more information, including registering to receive email alerts, please visit www.hawkinsinc.com/investors.

Reconciliation of Non-GAAP Financial Measures

We report our consolidated financial results in accordance with U.S. generally accepted accounting principles (GAAP). To assist investors in understanding our financial performance between periods, we have provided certain financial measures not computed according to GAAP, including adjusted EBITDA and return on equity. These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. The method we use to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies.

Management uses these non-GAAP financial measures internally to understand, manage and evaluate our business and to make operating decisions. Management believes that these non-GAAP financial measures reflects an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provides a more complete understanding of the factors and trends affecting our financial condition and results of operations.

We define adjusted EBITDA as GAAP net income adjusted for the impact of the following: net interest expense resulting from our net borrowing position; income tax expense; non-cash expenses including amortization of intangibles, depreciation, and charges for the employee stock purchase plan and restricted stock grants; and non-recurring items of income or expense, if applicable.

We define return on equity as net income divided by average shareholders' equity.

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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

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