Hudson Technologies, Inc. (NASDAQ:HDSN) announced that it has closed a five-year contract valued at $400 million with an agency of the U.S. Department of Defense (DoD). The management of HDSN is no doubt excitement about the deal as CEO Kevin Zugibe called it a transformative win. Zugibe also revealed that they had been pursuing the contract for nearly two years.
While the management is already celebrating the win, investors should take a careful look at the contract to see its terms and potential impact it could have on their value in the company.
As per the official announcement by Hudson Technologies, Inc. (HDSN), the contract specifically relates to an agency within the DoD known as the United States Defense Logistics Agency (DLA). The contract calls for Hudson to supply and manage refrigerants, cylinders, compressed gas and related items.
The contract has a base life of five years and the maximum value of the contract for those years has been pegged at $400 million. But there is an option to renew the contract for another five years, though it is not clear at this juncture what the financial terms will be for the renewed deal.
What does the contract mean for shareholders?
As a shareholder or prospective investor in Hudson Technologies, Inc. (HDSN), the most important part is how the contract would impact shareholder value. It is important to note that Hudson didn’t provide a breakdown of how it hopes the DoD deal would impact its financial performance and balance sheet position. But the CEO Zugibe said that the contract would help Hudson solidify its position in industry gas and refrigerant sectors. The closest he came to talk about the impact of the transaction on Hudson’s performance was a statement in a press release that said the award would bring considerable earnings and revenue growth. Note that no figures were provided with regards to expected impact on the top and bottom lines and how soon that would happen.
Hudson Technologies, Inc. (NASDAQ:HDSN) is building value quietly
But the deal looks great for shareholders even in the absence of estimated impact on financial performance. The fact that Hudson Technologies, Inc. (HDSN) has been silently pursuing a deal with the DoD reveals how the management is quietly working to generate growth and create value for investors. It is no wonder that shares of Hudson gapped up immediately the deal was made public.