PEARL RIVER, NY – May 9, 2018 – Hudson Technologies, Inc. (NASDAQ: HDSN) announced results for the first quarter ended March 31, 2018.
For the quarter ended March 31, 2018 Hudson reported revenues of $42.4 million, a 9% increase compared to $38.8 million in the comparable 2017 period. Gross margin was 19% for the first quarter of 2018 compared to 32% for the first quarter of 2017. Net loss for the first quarter of 2018 was $3.1 million, or ($0.07) per basic and diluted share, compared to net income of $5.7 million or $0.14 per basic and $0.13 per diluted share in the first quarter of 2017. Non-GAAP adjusted net loss for the quarter ended March 31, 2018 was $1.0 million, or ($0.02) per diluted share, compared to non-GAAP adjusted net income of $6.1 million, or $0.14 per diluted share during the first quarter of 2017. Adjusted EBITDA was $2.9 million for the first quarter of 2018, as compared to adjusted EBITDA of $10.5 million for the first quarter of 2017.
Reconciliations of net income (loss) to non-GAAP adjusted net income (loss), diluted net income (loss) per share to non-GAAP adjusted diluted net income (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.
Kevin J. Zugibe, Chairman and Chief Executive Officer of Hudson Technologies commented, “As we previously indicated, the 2018 selling season has had a very slow start. Our first quarter results were negatively impacted by declines in both price and volume for most of the refrigerants we sell, with many customers resorting to a just-in-time buying pattern for all refrigerants, as opposed to the typical pre-season inventory stocking in anticipation of the impending cooling season. This just-in-time buying approach, combined with cooler than normal weather and price declines contributed to our weaker performance for both revenues and gross margins in the first quarter.
“The refrigerant season is a nine-month season and we’ve only recently begun to see more seasonable weather, and improved demand. However, we are concerned with the overall pricing dynamics for all refrigerants, particularly in the near term. With our visibility today, we do not expect to achieve the revenue, gross margin or GAAP earnings per share targets set forth in our fourth quarter earnings release. Assuming that refrigerant pricing remains at current levels, GAAP gross margins should remain in the upper teens in the near term. Overall, we do believe that demand will return to more normal levels. Consequently, primarily based on lower sales price expectations, we are expecting revenues for the year to be approximately $230 million.”
Mr. Zugibe concluded, “Despite the current market softness we remain optimistic about the long term market opportunity. It should be noted that 2018 full year non-cash expenses, net of anticipated capital expenditures and taxes, should provide approximately $8 million of additional cash flow. Moreover, we expect to generate approximately $10 million in additional cash flow from the anticipated reduction in inventory levels and approximately $9 million in additional cash flow from the realization of a one-time cash tax benefit resulting from the change in the tax law.
“We have experienced unsettled refrigerant seasons in the past, but we anticipate that, as in these prior seasons, refrigerant pricing will stabilize and, as such, we should begin to see gross and operating margins returning to historical levels. Our acquisition of ASPEN Refrigerants, Inc. (“ARI”) provides a more diverse customer base that will give us added flexibility to navigate the current refrigerant market and will help to grow our supply of reclaimed refrigerants. Our Company is a market leader in the refrigerant and reclamation industry with a portfolio of products and service offerings that leave us well positioned to capitalize on the opportunities associated with the final virgin production phase out of R-22 in 2019.”
Conference Call Information
The Company will host a conference call and webcast to discuss the first quarter results today, May 9, 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 June 9, 2018 and may be accessed by dialing (877) 481-4010. International callers may dial (919) 882-2331. Callers should use conference ID: 27890.
Use of Non-GAAP Measures
The Company has presented the following non-GAAP financial measures in this press release: EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share (Adjusted EPS). The Company defines EBITDA as the net income (loss) as reported under GAAP, plus income tax expense (benefit), interest expense and depreciation and amortization expense. The Company defines Adjusted EBITDA as EBITDA plus the amortization of the inventory step-up in basis arising from inventory purchased in the ARI acquisition, non-cash stock compensation expense, and non-recurring transaction fees and integration costs related to the ARI acquisition. The Company defines Adjusted Net Income (Loss) as the net income (loss) as reported under GAAP plus income tax expense (benefit), the amortization of the inventory step-up in basis arising from inventory purchased in the ARI acquisition, amortization expense, non-cash stock compensation expense, and non-recurring transaction fees and integration costs related to the ARI acquisition and adjusted for effective tax rates. The Company defines Adjusted EPS as Adjusted Net Income (Loss) per share.
We present these non-GAAP measures because we believe these measures are useful indicators of our operating performance, particularly in light of the impact of the recent ARI acquisition. Our management believes that detail as to the impact of the specified acquisition-related matters and other matters is useful in understanding the overall change in the consolidated results of operations for Hudson Technologies from one reporting period to another. Our management uses these non-GAAP measures principally as a measure of our operating performance and believes that these measures are useful to investors because they are frequently used by analysts, investors and other interested parties to evaluate the operating performance of companies in our industry. We also believe that these measures will be useful to our management and investors during 2018 as the impact of the ARI acquisition continues to be reflected in the Company’s financial results.
