Hudson Technologies(HDSN) - 2024 Q3 - Quarterly Results

Executive Summary & Highlights Hudson Technologies reported Q3 2024 results impacted by refrigerant pricing pressure, maintaining a strong, debt-free balance sheet and initiating a stock repurchase program Q3 2024 Key Metrics | Metric | Value | | :--- | :--- | | Revenue | $61.9 million | | Net Income | $7.8 million | | Diluted EPS | $0.17 | | Cash Position | $56.5 million | | Debt | None | | Stock Repurchased | $2.6 million | - The company's Q3 results were affected by continued pricing pressure on certain refrigerants, a trend that persisted through the 2024 cooling season[2] - Management remains confident in its long-term growth strategy, focused on capitalizing on the phasedown of HFC refrigerants and anticipated growth in demand for reclaimed refrigerants[2] Financial Performance Quarterly and nine-month revenues and profits declined year-over-year due to lower refrigerant prices and reduced DLA contract revenue, significantly compressing gross margins Third Quarter 2024 Results (Three Months Ended Sep 30, 2024) Q3 2024 revenues decreased 19% to $61.9 million with gross margin at 26%, and net income fell to $7.8 million, partially offset by a litigation settlement Q3 2024 vs. Q3 2023 Performance (in millions) | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Revenues | $61.9 | $76.5 | -19% | | Gross Margin | 26% | 40% | -14 p.p. | | Operating Income | $7.0 | $23.1 | -69.7% | | Net Income | $7.8 | $13.6 | -42.7% | | Diluted EPS | $0.17 | $0.29 | -41.4% | - The revenue decrease was primarily driven by lower prices for certain refrigerants and slightly lower revenue from the Company's DLA contract[5] - Net income for Q3 2024 included approximately $2.3 million of non-recurring income, partly from a litigation settlement[5] Year-to-Date 2024 Results (Nine Months Ended Sep 30, 2024) For the nine months ended September 30, 2024, revenues decreased 17% to $202.5 million, gross margin fell to 30%, and net income significantly decreased to $27.0 million Nine Months 2024 vs. Nine Months 2023 Performance (in millions) | Metric | 9M 2024 | 9M 2023 | Change | | :--- | :--- | :--- | :--- | | Revenues | $202.5 | $244.2 | -17% | | Gross Margin | 30% | 40% | -10 p.p. | | Operating Income | $32.5 | $73.4 | -55.7% | | Net Income | $27.0 | $48.3 | -44.1% | | Diluted EPS | $0.57 | $1.02 | -44.1% | - Selling, general and administrative expenses for the nine-month period included approximately $0.7 million of non-recurring costs related to the USA acquisition and IT expenses[6] Business Outlook & Regulatory Update The company adjusted its full-year 2024 revenue forecast to the low end of guidance and anticipates a 28% gross margin, while viewing the EPA's new reclaim mandates as a positive long-term catalyst - Full-year 2024 revenue is now expected to be at the low end of the previously provided guidance range[2] - Full-year 2024 gross margin is anticipated to be approximately 28%[2] - The EPA's finalization of the Refrigerant Management rule, including reclaim mandates starting in 2029, is viewed as a positive step for the broader use of reclaimed refrigerants[3] Capital Allocation & Shareholder Returns Hudson initiated a stock repurchase program in Q3 2024, buying back $2.6 million of common stock, and subsequently increased the total authorization to $20 million for 2024 and 2025 - The company repurchased $2.6 million of its common stock during the third quarter of 2024[1][4][7] - The board of directors increased the share repurchase program authorization to $20 million, to be executed with up to $10 million in each of 2024 and 2025[7] Financial Statements This section presents the consolidated financial statements, detailing the company's financial position, income, and cash flows for the periods ended September 30, 2024 Consolidated Balance Sheets As of September 30, 2024, Hudson's balance sheet strengthened with total assets of $309.4 million, cash increasing to $56.5 million, inventories decreasing, and the company becoming debt-free Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $56,487 | $12,446 | | Inventories | $103,523 | $154,450 | | Total current assets | $203,510 | $204,995 | | Total Assets | $309,428 | $296,672 | | Total current liabilities | $46,563 | $58,551 | | Total Liabilities | $55,533 | $67,899 | | Total Stockholders' Equity | $253,895 | $228,773 | - The company ended the quarter with a strengthened, unlevered balance sheet, holding $56.5 million in cash and no debt[4] Consolidated Statements of Income The income statement reflects a 19% Q3 and 17% nine-month revenue decline due to pricing pressure, with net income significantly lower at $7.8 million for Q3 and $27.0 million for the nine months Income Statement Summary (in thousands) | Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $61,943 | $76,496 | $202,475 | $244,169 | | Gross Profit | $15,942 | $30,580 | $59,934 | $97,537 | | Operating Income | $6,973 | $23,122 | $32,547 | $73,432 | | Net Income | $7,806 | $13,582 | $26,953 | $48,302 | Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, operating cash flow significantly increased to $71.1 million due to inventory reduction, resulting in a net cash increase of $44.0 million Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Category | 2024 | 2023 | | :--- | :--- | :--- | | Cash from Operating Activities | $71,103 | $43,518 | | Cash used in Investing Activities | ($24,422) | ($2,215) | | Cash used in Financing Activities | ($2,640) | ($42,815) | | Net Increase (Decrease) in Cash | $44,041 | ($1,512) | - The strong operating cash flow was primarily driven by a $52.2 million positive change from inventories, compared to an $8.3 million positive change in the prior year period[15] - Investing activities included a $20.7 million payment for an acquisition[15] Company Information This section provides background on Hudson Technologies as a leading refrigerant provider, details for the earnings conference call, and the standard safe harbor statement regarding forward-looking statements and associated risks About Hudson Technologies Hudson Technologies is a leading U.S. provider of sustainable refrigerant products and services to the HVACR industry, specializing in reclamation and offering various on-site services - Hudson Technologies is a leading provider of innovative and sustainable refrigerant products and services, and one of the largest refrigerant reclaimers in the United States[10] - The company's primary products and services include refrigerant sales, refrigerant management and reclamation, and on-site services like system decontamination and real-time monitoring[10] Conference Call Information A conference call and webcast to discuss Q3 2024 results is scheduled for November 4, 2024, at 5:00 P.M. ET, with a telephonic replay available for one month - A conference call to discuss results is scheduled for November 4, 2024, at 5:00 P.M. Eastern Time[8] - A replay of the call will be available until December 4, 2024, with access details provided[9] Safe Harbor Statement This statement cautions that forward-looking statements are subject to numerous risks and uncertainties, including regulatory changes, refrigerant demand and pricing, competition, and seasonality, which could cause actual results to differ materially - The report contains forward-looking statements that are not guarantees of future performance and are subject to risks and uncertainties[11] - Key risk factors include changes in laws and regulations, demand and price for refrigerants, the company's ability to source refrigerants, competition, and seasonality[11]