Hudson Technologies, Inc. (NASDAQ: HDSN) announced results for the
third quarter ended September 30, 2023.
For the quarter ended September 30, 2023, Hudson
reported revenues of $76.5 million, a decrease of 15% compared to
revenues of $89.5 million in the third quarter of 2022. The
decrease is primarily related to decreased selling prices for
certain refrigerants, partially offset by increased refrigerant
sales volume and revenues from the Company’s Defense Logistics
Agency (“DLA”) program during the period as compared to the third
quarter of 2022. Gross margin in the third quarter of 2023 was 40%,
compared to 49% in the third quarter of 2022. Hudson reported
operating income of $23.1 million in the third quarter of 2023,
compared to operating income of $36.3 million in the prior year
period.
The Company achieved net income of $13.6 million
or $0.30 per basic and $0.29 per diluted share, compared to net
income of $29.4 million or $0.65 per basic and $0.62 per diluted
share in the third quarter of 2022. During the third quarter of
2023, the Company recorded $3.4 million of non-recurring costs,
primarily related to the write-off of deferred financing costs with
respect to the full and final payoff of the Company’s term loan,
which are included as Interest Expense in the Company’s Statements
of Income. Excluding these non-recurring costs, Hudson achieved
non-GAAP adjusted net income of $16.1 million or $0.35 per basic
and $0.34 per diluted share in the third quarter of 2023. (See
reconciliation of net income and earnings per share to non-GAAP
adjusted net income and non-GAAP adjusted earnings per share in the
supplemental table included at the end of this release).
The Company’s effective tax rate for 2023 and
future periods will reflect a statutory tax rate of approximately
26.1%, excluding certain temporary and permanent tax adjustments,
while the nine months ended September 30, 2022 period reflected an
effective tax rate of 11.9% due to the release of the Company’s
valuation allowance at that time.
For the nine months ended September 30, 2023,
Hudson reported revenues of $244.2 million, a decrease of 12%
compared to revenues of $277.8 million in the first nine months of
2022. Revenue in the first nine months of 2023 declined primarily
related to a decrease in selling prices for certain refrigerants
during the period as well as slightly lower sales volume, partially
offset by higher revenues from our DLA and carbon credit programs.
Gross margin in the first nine months of 2023 was 40%, compared to
53% in the first nine months of 2022. Hudson reported operating
income of $73.4 million in the first nine months of 2023, compared
to operating income of $124.4 million in the prior year period.
During the nine months ended September 30, 2023,
the Company recorded net income of $48.3 million or $1.07 per basic
and $1.02 per diluted share, compared to net income of $98.7
million or $2.20 per basic and $2.10 per diluted share in the first
nine months of 2022. Excluding the $3.4 million of non-recurring
costs in the third quarter of 2023, as described above, Hudson
recorded non-GAAP adjusted net income of $50.8 million, or $1.12
per basic and $1.07 per diluted share in the first nine months of
2023. (See reconciliation of net income and earnings per share to
non-GAAP adjusted net income and non-GAAP adjusted earnings per
share in the supplemental table included at the end of this
release).
As previously announced, Hudson fully paid off
its remaining $32.5 million of term loan debt during the third
quarter of 2023. Stockholders’ equity improved to $224.6 million at
September 30, 2023 compared to $174.9 million at December 31,
2022.
Brian F. Coleman, President and Chief Executive
Officer of Hudson Technologies commented,
“The close of the third quarter marks the end of
the traditional nine-month cooling season, and as expected, our
results continued to see a difficult comparison to the
significantly strong revenue and margin performance achieved in
2022. As we have previously noted, we saw substantial sales price
increases without a corresponding increase in inventory price,
throughout most of 2022. Conversely, the 2023 cooling season was
characterized by both a challenging pricing environment, and by the
late arrival of warmer weather to many parts of the U.S. which
impacted demand for certain refrigerants. Nonetheless, we delivered
solid third quarter results and our ability to drive profitability
and strong cash flow enabled us to aggressively pay down our debt
during the last 15 months, saving over $10 million of annualized
interest expense, and culminating with the full repayment of our
term loan during the quarter.
“As we move through the close of the year, our
industry is preparing for the mandated 40% reduction in baseline
HFC production, which becomes effective at the start of 2024. With
the current installed base of HFC equipment, the aggressive
reduction in virgin HFC production is expected to meaningfully
impact the supply landscape, creating enhanced demand for reclaimed
refrigerant to fill what is anticipated to become a substantial gap
between HFC supply and demand. We are uniquely positioned with our
proprietary reclamation technology to meet the ongoing refrigerant
needs of our customer base as the industry transitions to more
environmentally friendly cooling alternatives. Likewise, our
service and system conversion offerings enable us to play a
leadership role in the shift to cleaner refrigeration and cooling
technologies. Hudson is a longstanding proponent of the circular
economy of refrigerants, and we look forward to continuing to
provide our expertise and capabilities as we expand our customer
base to assist the evolution to the next generation of cooling
applications and refrigerants,” Mr. Coleman concluded.
Use of Non-GAAP Financial
Measures
This news release contains Adjusted Net Income
and Adjusted Net Income Per Share, which are non-generally accepted
accounting principles (non-GAAP) financial measures (as defined by
U.S. Securities and Exchange Commission (SEC) Regulation G). While
management believes that these non-GAAP financial measures may be
useful in evaluating the financial performance of the Company by
factoring out the impact of a one-time non-cash charge related to
the prepayment of the Company’s term loan, this information should
be considered supplemental to, and not a substitute for, financial
information prepared in accordance with GAAP. In addition, the
Company’s definitions for non-GAAP financial measures may differ
from similarly titled measures used by other companies or
analysts.
Conference Call Information
The Company will host a conference call and
webcast to discuss the third quarter results today, November 1,
2023 at 5:00 P.M. Eastern Time.
To access the live webcast, log onto the Hudson
Technologies website at www.hudsontech.com, and click on “Investor
Relations”.
To participate in the call by phone, dial (888)
506-0062 approximately five minutes prior to the scheduled start
time. International callers please dial (973) 528-0011. Callers
should use entry code: 980505
A replay of the teleconference will be available
until December 1, 2023 and may be accessed by dialing (877)
481-4010. International callers may dial (919) 882-2331. Callers
should use conference ID: 49295.
About Hudson Technologies
Hudson Technologies, Inc. is a leading provider
of innovative and sustainable refrigerant products and services to
the Heating Ventilation Air Conditioning and Refrigeration
industry. For nearly three decades, we have demonstrated our
commitment to our customers and the environment by becoming one of
the first in the United States and largest refrigerant reclaimers
through multimillion dollar investments in the plants and advanced
separation technology required to recover a wide variety of
refrigerants and restoring them to Air-Conditioning, Heating, and
Refrigeration Institute standard for reuse as certified EMERALD
Refrigerants™. The Company’s products and services are primarily
used in commercial air conditioning, industrial processing and
refrigeration systems, and include refrigerant and industrial gas
sales, refrigerant management services consisting primarily of
reclamation of refrigerants and RefrigerantSide® Services performed
at a customer’s site, consisting of system decontamination to
remove moisture, oils and other contaminants. The Company’s
SmartEnergy OPS® service is a web-based real time continuous
monitoring service applicable to a facility’s refrigeration systems
and other energy systems. The Company’s Chiller Chemistry® and
Chill Smart® services are also predictive and diagnostic service
offerings. As a component of the Company’s products and services,
the Company also generates carbon offset projects.
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995
Statements contained herein which are not
historical facts constitute forward-looking statements. Such
forward-looking statements involve a number of known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. Such factors include, but are not limited to, changes
in the laws and regulations affecting the industry, changes in the
demand and price for refrigerants (including unfavorable market
conditions adversely affecting the demand for, and the price of,
refrigerants), the Company’s ability to source refrigerants,
regulatory and economic factors, seasonality, competition,
litigation, the nature of supplier or customer arrangements that
become available to the Company in the future, adverse weather
conditions, possible technological obsolescence of existing
products and services, possible reduction in the carrying value of
long-lived assets, estimates of the useful life of its assets,
potential environmental liability, customer concentration, the
ability to obtain financing, the ability to meet financial
covenants under existing credit facilities, any delays or
interruptions in bringing products and services to market, the
timely availability of any requisite permits and authorizations
from governmental entities and third parties as well as factors
relating to doing business outside the United States, including
changes in the laws, regulations, policies, and political,
financial and economic conditions, including inflation, interest
and currency exchange rates, of countries in which the Company may
seek to conduct business, the Company’s ability to successfully
integrate any assets it acquires from third parties into its
operations, the impact of the current COVID-19 pandemic, and other
risks detailed in the Company’s 10-K for the year ended December
31, 2022 and other subsequent filings with the Securities and
Exchange Commission. The words “believe”, “expect”,
“anticipate”, “may”, “plan”, “should” and similar expressions
identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date the statement was made.
|
|
Investor Relations Contact:John Nesbett/Jennifer
BelodeauIMS Investor Relations (203)
972-9200jnesbett@institutionalms.com |
Company
Contact:Brian F. Coleman, President & CEOHudson
Technologies, Inc.(845) 735-6000bcoleman@hudsontech.com |
Hudson Technologies, Inc. and
Subsidiaries |
Consolidated Balance Sheets |
(Amounts in thousands, except for share and par value amounts) |
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2023 |
|
2022 |
|
|
(unaudited) |
|
|
|
Assets |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,783 |
|
$ |
5,295 |
Trade accounts receivable – net |
|
|
44,935 |
|
|
20,872 |
Inventories |
|
|
139,231 |
|
|
145,377 |
Prepaid expenses and other current assets |
|
|
5,769 |
|
|
5,289 |
Total current
assets |
|
|
193,718 |
|
|
176,833 |
|
|
|
|
|
|
|
Property, plant and equipment,
less accumulated depreciation |
|
|
20,570 |
|
|
20,568 |
Goodwill |
|
|
47,803 |
|
|
47,803 |
Intangible assets, less
accumulated amortization |
|
|
15,469 |
|
|
17,564 |
Right of use asset |
|
|
7,041 |
|
|
7,339 |
Other assets |
|
|
2,419 |
|
|
2,386 |
Total
Assets |
|
$ |
287,020 |
|
$ |
272,493 |
|
|
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Trade accounts payable |
|
$ |
16,828 |
|
$ |
14,165 |
Accrued expenses and other current liabilities |
|
|
25,887 |
|
|
27,908 |
Accrued payroll |
|
|
5,030 |
|
|
6,303 |
Current maturities of long-term debt |
|
|
— |
|
|
4,250 |
Short-term debt |
|
|
5,000 |
|
|
— |
Total current
liabilities |
|
|
52,745 |
|
|
52,626 |
Deferred tax liability |
|
|
4,524 |
|
|
244 |
Long-term lease liabilities |
|
|
5,167 |
|
|
5,763 |
Long-term debt, less current maturities, net of deferred financing
costs |
|
|
— |
|
|
38,985 |
Total
Liabilities |
|
|
62,436 |
|
|
97,618 |
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
|
Preferred stock, shares authorized 5,000,000: Series A Convertible
preferred stock, $0.01 par value ($100 liquidation preference
value); shares authorized 150,000; none issued or outstanding |
|
|
— |
|
|
— |
Common stock, $0.01 par value; shares authorized 100,000,000;
issued and outstanding 45,484,325 and 45,287,619, respectively |
|
|
455 |
|
|
453 |
Additional paid-in capital |
|
|
117,847 |
|
|
116,442 |
Accumulated retained earnings |
|
|
106,282 |
|
|
57,980 |
Total Stockholders’
Equity |
|
|
224,584 |
|
|
174,875 |
|
|
|
|
|
|
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
287,020 |
|
$ |
272,493 |
|
Hudson Technologies, Inc. and
Subsidiaries |
Consolidated Statements of Income |
(unaudited) |
(Amounts in thousands, except for share and per share amounts) |
|
|
|
Three months |
|
Nine months |
|
|
ended September 30, |
|
ended September 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Revenues |
|
$ |
76,496 |
|
$ |
89,502 |
|
$ |
244,169 |
|
$ |
277,781 |
Cost of
sales |
|
|
45,916 |
|
|
45,263 |
|
|
146,632 |
|
|
130,225 |
Gross
profit |
|
|
30,580 |
|
|
44,239 |
|
|
97,537 |
|
|
147,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
6,760 |
|
|
7,219 |
|
|
22,010 |
|
|
21,057 |
Amortization |
|
|
698 |
|
|
698 |
|
|
2,095 |
|
|
2,095 |
Total operating
expenses |
|
|
7,458 |
|
|
7,917 |
|
|
24,105 |
|
|
23,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income |
|
|
23,122 |
|
|
36,322 |
|
|
73,432 |
|
|
124,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Net interest expense |
|
|
4,358 |
|
|
2,365 |
|
|
8,106 |
|
|
12,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
|
18,764 |
|
|
33,957 |
|
|
65,326 |
|
|
112,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense |
|
|
5,182 |
|
|
4,601 |
|
|
17,024 |
|
|
13,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
13,582 |
|
$ |
29,356 |
|
$ |
48,302 |
|
$ |
98,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share –
Basic |
|
$ |
0.30 |
|
$ |
0.65 |
|
$ |
1.07 |
|
$ |
2.20 |
Net income per common share –
Diluted |
|
$ |
0.29 |
|
$ |
0.62 |
|
$ |
1.02 |
|
$ |
2.10 |
Weighted average number of
shares outstanding – Basic |
|
|
45,404,963 |
|
|
45,063,810 |
|
|
45,348,072 |
|
|
44,935,739 |
Weighted average number of
shares outstanding – Diluted |
|
|
47,345,380 |
|
|
47,181,424 |
|
|
47,319,464 |
|
|
47,053,010 |
|
Hudson Technologies, Inc. and Subsidiaries |
Supplemental Table to Reconcile Net Income and Earnings Per
Share to |
Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Earnings
Per Share |
(unaudited) |
(Amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months |
|
Nine months |
|
|
ended September 30, |
|
ended September 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net income per common share –
Basic, as reported |
|
$ |
0.30 |
|
$ |
0.65 |
|
$ |
1.07 |
|
$ |
2.20 |
Net income per common share –
Diluted, as reported |
|
$ |
0.29 |
|
$ |
0.62 |
|
$ |
1.02 |
|
$ |
2.10 |
Weighted average number of
shares outstanding – Basic |
|
|
45,404,963 |
|
|
45,063,810 |
|
|
45,348,072 |
|
|
44,935,739 |
Weighted average number of
shares outstanding – Diluted |
|
|
47,345,380 |
|
|
47,181,424 |
|
|
47,319,464 |
|
|
47,053,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as
reported |
|
$ |
13,582 |
|
$ |
29,356 |
|
$ |
48,302 |
|
$ |
98,721 |
Add: Income tax expense |
|
|
5,182 |
|
|
4,601 |
|
|
17,024 |
|
|
13,390 |
Income before income
taxes |
|
|
18,764 |
|
|
33,957 |
|
|
65,326 |
|
|
112,111 |
Add: Interest expense-
writeoff of deferred financing and other costs related to payoff of
term loan debt |
|
|
3,427 |
|
|
— |
|
|
3,427 |
|
|
— |
Adjusted Income before income
taxes |
|
|
22,191 |
|
|
33,957 |
|
|
68,753 |
|
|
112,111 |
Subtract: Adjusted Income
Taxes |
|
|
6,128 |
|
|
4,601 |
|
|
17,917 |
|
|
13,390 |
Adjusted Net income
(1) |
|
$ |
16,063 |
|
$ |
29,356 |
|
$ |
50,836 |
|
$ |
98,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net income
per common share – Basic |
|
$ |
0.35 |
|
$ |
0.65 |
|
$ |
1.12 |
|
$ |
2.20 |
Adjusted Net income
per common share – Diluted |
|
$ |
0.34 |
|
$ |
0.62 |
|
$ |
1.07 |
|
$ |
2.10 |
(1) |
|
Non-GAAP Adjusted Net Income consists of Net Income plus Interest
Expense (write-off of deferred financing and other costs related to
the payoff of term loan debt) and includes the associated income
tax effects of such adjustment. |
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