Hudson Technologies(HDSN) - 2022 Q1 - Quarterly Report

Part I. Financial Information This section presents the company's unaudited financial statements, management's analysis, market risk disclosures, and internal controls for the reporting period Financial Statements (unaudited) This section presents Hudson Technologies' unaudited consolidated financial statements for Q1 2022, encompassing balance sheets, income statements, equity, and cash flows, along with detailed notes Consolidated Balance Sheets The company's total assets increased to $246.8 million as of March 31, 2022, from $215.7 million at year-end 2021, driven by higher trade accounts receivable and inventories, while equity grew significantly due to strong net income Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $152,326 | $119,949 | | Total Assets | $246,842 | $215,715 | | Total Current Liabilities | $46,859 | $64,439 | | Total Liabilities | $145,946 | $144,776 | | Total Stockholders' Equity | $100,896 | $70,939 | Consolidated Statements of Operations For Q1 2022, the company reported a significant turnaround with revenues surging to $84.3 million and net income of $29.6 million, a substantial improvement from the prior-year period's net loss Q1 2022 vs Q1 2021 Performance (in thousands, except per share amounts) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenues | $84,338 | $33,780 | | Gross Profit | $45,820 | $9,138 | | Operating Income | $38,298 | $1,692 | | Net Income (Loss) | $29,555 | $(1,076) | | Net Income (Loss) per Share – Diluted | $0.63 | $(0.02) | Consolidated Statements of Stockholders' Equity Total stockholders' equity increased from $70.9 million to $100.9 million in Q1 2022, primarily driven by the quarter's strong net income of $29.6 million - The accumulated deficit decreased from $(45.8) million at the start of the year to $(16.3) million as of March 31, 2022, due to the strong net income of $29.6 million[13] Consolidated Statements of Cash Flows The company generated $5.1 million in cash from operating activities in Q1 2022, a significant improvement from the prior year, leading to a $1.7 million increase in cash and cash equivalents Cash Flow Summary (in thousands) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Cash provided by (used in) operating activities | $5,066 | $(4,969) | | Cash used in investing activities | $(27) | $(290) | | Cash (used in) provided by financing activities | $(3,379) | $6,686 | | Increase in cash and cash equivalents | $1,660 | $1,427 | Notes to the Consolidated Financial Statements The notes detail the company's refrigerant services business, accounting policies, the impact of the AIM Act, debt refinancing activities, and the status of net operating loss carryforwards - The company is a refrigerant services company providing solutions like reclamation, reuse, and sale of refrigerant gases. It operates as a single reportable segment[18][19] - Under the AIM Act, the EPA is phasing down HFCs. Hudson received a 2022 allocation allowance of approximately 3 million Metric Tons Exchange Value Equivalents, representing 1% of total HFC consumption[24][26] - In March 2022, the company refinanced its debt, entering into a new $85 million Term Loan Facility and an amended revolving credit facility (Amended Wells Fargo Facility) for up to $90 million, resulting in a $4.7 million interest expense charge from debt extinguishment[110][121][130] - Due to recent profitability, the company utilized $20.7 million of net operating losses (NOLs) and reduced its valuation allowance by $6.0 million, leaving a remaining allowance of $9.1 million, with potential for further release if profitability continues[52] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q1 2022 performance to a 149% revenue increase driven by higher selling prices and volume, significantly improving gross margin and working capital, alongside successful debt refinancing Q1 2022 vs Q1 2021 Results of Operations (in millions) | Metric | Q1 2022 | Q1 2021 | Change | | :--- | :--- | :--- | :--- | | Revenues | $84.3 | $33.8 | +149% | | Cost of Sales | $38.5 | $24.6 | +56% | | Gross Profit | $45.8 | $9.1 | +403% | | Net Income (Loss) | $29.6 | $(1.1) | +$30.7M | - The revenue increase was primarily due to higher selling prices for certain refrigerants, fueled by increased demand and limited industry supply, as well as increased sales volume[158] - In March 2022, the company executed a major debt refinancing, including an Amended and Restated Credit Agreement with Wells Fargo for up to $90 million and a new $85 million Term Loan Facility with TCW Asset Management, maturing in 2027[170][181] - The termination of the prior term loan facility resulted in a one-time charge of $4.7 million recorded as interest expense in Q1 2022[190] Quantitative and Qualitative Disclosures About Market Risk The company identifies primary market risks as interest rate fluctuations on variable-rate debt, with a 1% change affecting annual interest expense by $0.9 million, and volatility in the refrigerant market - The company is exposed to interest rate risk on its Amended Wells Fargo Facility and Term Loan Facility. A 1% change in the interest rate would result in an approximate $0.9 million annual effect on interest expense[206][207] - The company faces market risk from fluctuations in the demand, price, and availability of refrigerants, which could materially affect revenue and inventory values[208] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[209] - No material changes to the company's internal control over financial reporting were identified during the first quarter of 2022[210][211] Part II. Other Information This section provides updates on risk factors and lists exhibits filed with the Form 10-Q Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its Form 10-K for the fiscal year ended December 31, 2021 - There have been no material changes to the risk factors detailed in the Company's Form 10-K for the year ended December 31, 2021[213] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications under Sarbanes-Oxley and Interactive Data Files for financial reporting List of Filed Exhibits | Exhibit Number | Description | | :--- | :--- | | 31.1 | CEO Certification (Sarbanes-Oxley Section 302) | | 31.2 | CFO Certification (Sarbanes-Oxley Section 302) | | 32.1 | CEO Certification (Sarbanes-Oxley Section 906) | | 32.2 | CFO Certification (Sarbanes-Oxley Section 906) | | 101 | Interactive Data Files (XBRL) | Signatures This section contains the authorized signatures for the Form 10-Q report Signatures The Form 10-Q report was duly authorized and signed on May 10, 2022, by Brian F. Coleman, Chairman of the Board, President, and Chief Executive Officer, and Nat Krishnamurti, Chief Financial Officer - The report was signed on May 10, 2022, by Brian F. Coleman (CEO) and Nat Krishnamurti (CFO)[218]