Hawkins, Inc.: Mastering Sustainable Expansion in Water Treatment Amid Rising Leverage – A Long-Term Buy

Hawkins, Inc. (NASDAQ: HWKN) is positioning itself as a dominant force in the water treatment sector, leveraging strategic acquisitions and robust cash flow to fuel growth while navigating elevated leverage. Despite rising debt from recent deals, the company’s disciplined approach to M&A and its ESG-aligned technological advancements make it a compelling long-term investment. Here’s why investors should act now.

Record Sales and Segment Dominance: A Water Treatment Powerhouse

Hawkins’ fiscal 2025 results underscore its transition into a water-centric powerhouse. Full-year revenue hit $974.4 million, a 6% increase, with the Water Treatment segment surging 23% to $446.5 million—now the company’s largest division. In the fourth quarter alone, Water Treatment sales jumped 21%, driving overall revenue growth to 10%. This segment’s dominance is no accident: Hawkins has executed nine acquisitions since 2023, nearly all focused on expanding its water treatment footprint.

The crown jewel of these deals is the April 2025 acquisition of WaterSurplus, a leader in sustainable water solutions. This move brought patented technologies like NanoStack™ (a low-energy filtration system) and ImpactRO™ (for high-salinity water treatment), directly aligning with global ESG trends. WaterSurplus’s $10 million adjusted EBITDA in FY2024 adds tangible value, and its integration into Hawkins’ operations positions the company to surpass $500 million in Water Treatment revenue by 2026, propelling total revenue over $1 billion for the first time.

Acquisition-Driven Growth: A Disciplined Playbook

Hawkins’ M&A strategy is geographically and technologically targeted. Since 2023, it has expanded into key markets like Mississippi, North Carolina, and the East Coast, while acquiring firms with complementary strengths:
- WaterGuard (2024) and Amerochem (2025) solidified its presence in North Carolina, a high-growth region.
- Wofford Water Service (2024) filled a gap in the South, while Intercoastal Trading (2024) and WaterSurplus (2025) enhanced East Coast and midwestern reach.
- Each deal adds local expertise, proprietary tech, or operational synergies, ensuring minimal overlap and maximum scalability.

The company’s $400 million revolving credit facility (up from $250 million) provides ample liquidity for future tuck-in acquisitions, even as it aims to reduce leverage below **1.0x adjusted EBITDA by .

Managing Debt: A Calculated Risk with Strong Cash Flow

Hawkins’ leverage ratio rose to 1.0x+ post-WaterSurplus, but its cash-generating engine mitigates risk. Fiscal 2025 operating cash flow hit $111.1 million, up 12% year-over-year, while dividends and share repurchases totaled $36 million—a testament to financial health. Management has explicitly prioritized debt reduction:
- Interest coverage ratio: 8.5x (comfortably covers interest expenses).
- Free cash flow: Expected to fund both debt repayment and growth initiatives without diluting shareholders.

Critics may worry about slower EPS growth (projected to slow due to amortization and higher interest costs), but this is a short-term trade-off for long-term gains. Hawkins’ focus on high-margin water treatment (which now accounts for 46% of revenue) should offset these pressures over time.

Why Buy Now? Infrastructure and ESG Tailwinds

Hawkins’ narrative aligns perfectly with two megatrends:
1. Infrastructure Spending: Governments worldwide are prioritizing water infrastructure upgrades, particularly in regions grappling with aging systems or contamination (e.g., PFAS “forever chemicals”). Hawkins’ patented technologies address these challenges directly.
2. ESG Demand: Investors are increasingly favoring companies with sustainable solutions. WaterSurplus’ low-energy systems and PFAS removal tech fit squarely into ESG portfolios, attracting capital from ESG-focused funds.

Risks? Yes—but Manageable

• Debt Levels: While manageable, any economic downturn could strain liquidity.
• Segment Dependency: Overreliance on Water Treatment (now 46% of revenue) leaves it exposed to regulatory or demand shifts.
• Integration Challenges: Successful assimilation of WaterSurplus’s complex technologies is critical.

Conclusion: A Rare Opportunity in Sustainable Infrastructure

Hawkins, Inc. is not just another industrial player—it’s a water infrastructure disruptor with a clear path to $1 billion revenue and a fortress-like balance sheet. While leverage is elevated, its cash flow, disciplined M&A, and ESG-aligned tech stack position it to capitalize on a $1 trillion global water market.

For investors seeking exposure to infrastructure and ESG trends, Hawkins offers a rare combination of growth, defensive cash flow, and a management team with a proven track record. The time to act is now—before the water treatment boom fully hits.

Recommendation: Buy Hawkins, Inc. for a 3–5 year horizon, targeting a 20–30% upside as its water segment matures and leverage normalizes.