PEARL RIVER, NY – March 7, 2018 – Hudson Technologies, Inc. (NASDAQ: HDSN) announced results for the fourth quarter and year ended December 31, 2017.
Consolidated Results
For the year ended December 31, 2017 Hudson achieved record revenues of $140.4 million, a 33% increase compared to $105.5 million in the comparable 2016 period. The increase is primarily related to a higher selling price of certain refrigerants, higher volumes of certain refrigerants sold and the inclusion of $14.8 million of fourth quarter revenue from ASPEN Refrigerants, Inc. (formerly Airgas Refrigerants, Inc.) (“ARI”), which was acquired on October 10, 2017. Gross margin was 27% for full year 2017 compared to 29% for 2016. Net income for 2017 was $11.2 million, or $0.27 per basic and $0.26 per diluted share, compared to $10.6 million or $0.31 per basic and $0.30 per diluted share in 2016.
Non-GAAP adjusted net income for the year ended December 31, 2017 was $20.2 million, or $0.47 per diluted share, compared to non-GAAP adjusted net income of $11.4 million, or $0.32 per diluted share for 2016. Adjusted EBITDA was $27.2 million for the year ended December 31, 2017, as compared to adjusted EBITDA of $21.3 million for full year 2016.
The Company reported revenues of $24.6 million for the fourth quarter ended December 31, 2017, an increase of 215% compared to $7.8 million in the comparable 2016 period. The fourth quarter included nearly a full quarter of consolidated revenues of $14.8 million from the Company’s acquisition of ARI. Gross margin in the fourth quarter of 2017 was 12%, compared to gross margin of 13% during the fourth quarter of 2016. Net loss for the quarter was $5.2 million, or ($0.12) per basic and diluted share, compared to a net loss of $1.9 million, or ($0.05) per basic and diluted share, in the fourth quarter of 2016.
Non-GAAP adjusted net loss for the fourth quarter of 2017 was $2.3 million, or ($0.06) per share, compared to a non-GAAP adjusted net loss of $1.8 million, or ($0.05) per share for the fourth quarter of 2016. Adjusted EBITDA in the fourth quarter of 2017 was negative $1.7 million, as compared to an Adjusted EBITDA of negative $2.2 million in the same period of 2016.
Reconciliations of net income (loss) to non-GAAP adjusted net income (loss), diluted net income (loss) per share to non-GAAP adjusted diluted earnings (loss) per share, and net income (loss) to non-GAAP adjusted EBITDA, respectively, are provided in the tables immediately following the consolidated financial statements. Additional information about the Company’s non-GAAP financial measures can be found under the caption “Use of Non-GAAP Measures” below.
Pro Forma Results
The following table provides unaudited summary pro forma total revenues and results of operations for the twelve months ended December 31, 2017 and 2016 as if ARI had been acquired on January 1, 2016. The unaudited summary pro forma information reflects certain adjustments related to the acquisition, such as the amortization of the step-up in basis in inventory, amortization expense on intangible assets arising from the acquisition, and interest on the new loans. The pro forma results do not include any anticipated cost synergies or other effects of any planned integration. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed at the beginning of 2016, nor are they indicative of the future operating results of the combined companies.
| Twelve Months Ended December 31 | ||
| (unaudited, in thousands) |
2017 |
2016 |
| Pro Forma Revenues | $255,701 | $239,626 |
| Pro Forma Net income | $23,405 | $17,109 |
| Pro Forma Net income per share | ||
| Basic | $0.56 | $0.50 |
| Diluted | $0.55 | $0.48 |
The unaudited pro forma earnings for the twelve months ended December 31, 2017 were also adjusted to exclude $6.3 million of acquisition-related expenses incurred in 2017.
Kevin J. Zugibe, Chairman and Chief Executive Officer of Hudson Technologies commented, “2017 was a transformative year for Hudson. With the acquisition of ARI, we have more than doubled the size of our business. The combined Company is the market leader in the refrigerant and reclamation industry with a larger, complementary portfolio of product offerings, increased geographic presence, an enhanced customer base and a broader and more effective sales and distribution network. Our increased size and scale will allow us to better serve our customers as our industry continues to evolve.
“Our fourth quarter is historically our weakest due to seasonal declines in demand for refrigerant. We had a solid and profitable nine-month selling season and are increasingly well positioned for the market opportunity before us. The phase out in production of virgin R-22 refrigerant continues with only 9 million pounds allocated for production in 2018, and with 2019 representing the last year for production of R-22. HFCs, the next generation gas, are also targeted for a future phase down. We look forward to leveraging our expanded capabilities, industry expertise and proprietary technology to capitalize on this market opportunity.”
Summary and Outlook
Mr. Zugibe continued, “During our third quarter 2017 call last November, we indicated that consolidated Hudson and ASPEN results for the year ending December 31, 2018 are expected to be similar to pro forma 2016 results. We also noted that we were expecting approximately $250 million in revenues for the 2018 period, which is slightly higher than the 2016 proforma results due to the inclusion of the DLA contract in the 2018 period. Moreover, we expected that GAAP gross margin would adjust down to approximately 25% from the pro forma 2016 margins due to the pricing of R-22. Consequently, based on the pro forma data and adjusted for the items noted, we believe the resulting GAAP EPS for 2018 should be in the range of $0.27 to $0.30. Adding back, and tax effecting, an estimated $7 million of non-cash amortization from the step-up in inventory basis, which is similar to the full year 2017 amortization, the Non-GAAP Adjusted EPS should be in the range of $0.38 to $0.42.
“As we look at the start of the 2018 selling season, the first quarter of 2018 buying pattern for R-22, and for nearly all HFCs, is on more of a just-in-time basis, as opposed to typical pre-season inventory stocking in anticipation of the impending cooling season. We have seen this just-in-time buying pattern before, such as in the first quarter of 2009, 2010, and 2014. As is currently the case with 2018, this just-in-time pattern typically follows a year of declines in refrigerant pricing during the cooling season and thereby large distributors and stocking locations choose to delay their purchases until the season actually begins to avoid the impact of potential price erosion. Hence, we expect first quarter 2018 consolidated revenue to be in the range of $44 million to $48 million. Additionally, we expect Non-GAAP Adjusted EPS for the first quarter of 2018 of approximately $0.01 to $0.02. Importantly, we have always viewed the cooling season as a nine month season, and we expect the delayed purchases to shift volume into the second and third quarter. Therefore, our revenue expectations for the full year remain unchanged.”
Conference Call Information
The Company will host a conference call and webcast to discuss the fourth quarter results today, March 7, 2018 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 (877) 407-9205 approximately five minutes prior to the scheduled start time. International callers please dial (201) 689-8054.
A replay of the teleconference will be available until April 7, 2018 and may be accessed by dialing (877) 481-4010. International callers may dial (919) 882-2331. Callers should use conference ID: 25326.