PEARL RIVER, NY – November 8, 2017 – Hudson Technologies, Inc. (NASDAQ: HDSN) announced results for the third quarter and nine months ended September 30, 2017 as well as unaudited pro forma results for the year ended December 31, 2016 and the six months ended June 30, 2017.
Hudson reported revenues of $24.7 million for the third quarter ended September 30, 2017, a decrease of 29% compared to $34.9 million in the comparable 2016 period. The revenue decrease in the quarter is primarily related to decreases in both price and volume of certain refrigerants sold. Gross margin in the third quarter of 2017 was 21% compared to 34% in the prior year period. Net income for the quarter was $2.1 million, or $0.05 per basic and diluted share, compared to net income of $4.8 million, or $0.14 per basic and diluted share, in the third quarter of 2016.
For the nine months ended September 30, 2017, Hudson reported revenues of $115.8 million, an increase of 18% compared to $97.7 million in the comparable 2016 period. The increase is primarily related to a higher average selling price of certain refrigerants and higher volumes of certain refrigerants sold during the period. Gross margin of 30% for the first nine months of 2017 was slightly lower than gross margin of 31% in the first nine months of 2016. Net income for the first nine months of 2017 was $16.4 million, or $0.39 per basic and $0.38 per diluted share, compared to $12.6 million or $0.38 per basic and $0.37 per diluted share in 2016.
As previously disclosed, during the third quarter of this year Hudson expected declines in price and volume for all refrigerants. However, the magnitude of the decline was greater than previously anticipated. Notwithstanding these trends, the Company achieved, and slightly exceeded, its gross margin target for the entire nine-month 2017 cooling season.
Following the close of the quarter, on October 10, 2017, Hudson announced the completion of its acquisition of Airgas-Refrigerants, Inc (“ARI”). Assuming that third quarter 2017 included ARI, unaudited pro forma unaudited consolidated revenue would have been approximately $57 million for the three months ended September 30, 2017.
The Company is also providing select unaudited pro forma results including ARI for the year ended December 31, 2016 and the six months ended June 30, 2017. Additional detailed unaudited pro forma financial information is available on Form 8-K/A filed today, Wednesday November 8, 2017.
Unaudited pro forma revenues, including ARI, for the year ended December 31, 2016 were $239.6 million with gross margin of 30%. Unaudited pro forma operating income was $40.2 million, or an operating margin of 17% for 2016, and unaudited pro forma net income was $17.0 million or $0.50 per basic and $0.48 per diluted share for the twelve months ended December 31, 2016. Year-end 2016 unaudited pro forma results include a non-cash $7.4 million adjustment to cost of sales to record the amortization of the step up in inventory to its estimated fair value, which was due to the purchase price allocation relating to the acquisition, but was not included in the historical results of ARI.
For the six months ended June 30, 2017, unaudited pro forma revenues were $171.3 million with gross margin of 34%. Unaudited pro forma operating income was $43.2 million or an operating margin of 25% and unaudited pro forma net income was $23.6 million or $0.57 per basic and $0.54 per diluted share for the first six months of 2017. First six month 2017 unaudited pro forma results include a non-cash $3.7 million adjustment to cost of sales to record the amortization of the step up in inventory to its estimated fair value, which was due to the purchase price allocation relating to the acquisition, but was not included in the historical results of ARI.
It is important to note that during the six month period ended June 30, 2017, as detailed in these unaudited pro forma results, the industry was experiencing significantly higher average sales price for certain refrigerants as compared to the market price during the most recent three month period ended September 30, 2017.
Kevin J. Zugibe, Chairman and Chief Executive Officer of Hudson Technologies commented, “Our acquisition of ARI in early October marks an important milestone in the growth of our business. ARI is an established and respected company in our industry with extraordinary people, technology and customers and their strength is becoming increasingly apparent now that we have begun working together. Our industry-leading technology, longstanding customer relationships and robust distribution network have established Hudson as a leader in the refrigerant and reclamation industry. The addition of ARI significantly advances our leadership position, adding complementary products and services, enhanced distribution and sales capabilities and a more extensive geographic footprint encompassing a broader customer base. We have considerably increased the scale of our business which will enable us to meet the needs of our customers throughout the current phase out of HCFCs and as the industry shifts to HFCs, which have also been identified for future phase down. We are confident in the long term opportunities ahead for our Company related to the sale and reclamation of all refrigerants as our industry continues to evolve and adopt new technologies and gases.
“As expected and previously disclosed, during the third quarter we saw a downturn in both volume and pricing for all refrigerants. At the time of our second quarter earnings release, R-22 prices had decreased to approximately $18 per pound and the pricing pressure continued through the end of the 2017 cooling season, with R-22 prices declining further to the current level of approximately $16 to $17 per pound. Additionally, as anticipated, HFC prices also came down, further impacting our results for the third quarter. Despite these third quarter headwinds, we were pleased to deliver revenue growth, gross margin slightly exceeding our target range and improved profitability for the nine-month selling season.”
Mr. Zugibe continued, “This is a transformative time for our Company and we are energized by the opportunity to leverage our best-in-class technology, enhanced products and service capabilities and decades of industry experience to capitalize on the changes we’re seeing in our industry landscape. We are well positioned to take advantage of opportunities related to the industry’s transition to next generation refrigerants, and, as the country’s leading reclaimer, to apply our expanded reclamation capabilities to help fill demand for refrigerants as virgin production is phased down and eliminated.”
CONFERENCE CALL INFORMATION
The Company will host a conference call to discuss the second quarter results today, November 8, 2017 at 5:00 P.M. Eastern Time.
To access the live webcast, please use the following link: https://www.hudsontech.com/investor-relations/events-presentations/
To participate in the call by phone, dial (888) 437-3179 approximately five minutes prior to the scheduled start time. International callers please dial (404) 267-0369.
A replay of the teleconference will be available until December 8, 2017 and may be accessed by dialing (877) 481-4010. International callers may dial (919) 882-2331. Callers should use conference ID: 22281.