HUDSON TECHNOLOGIES INC /NY Q3 FY2024 earnings call

• Industry developments included EPA's Refrigerant Management rule and 2023 reclamation data showing a 7% increase in total reclaimed refrigerants and 20% growth in HFC reclaim. - Partnered with the Rocky Mountain Institute (RMI) to publish a report highlighting GHG emissions reduction with reclaimed refrigerant. - Integration of USA Refrigerants acquisition is progressing well, with new customers and additional sources of reclaimed refrigerant. - Confident in long-term growth as HFC phasedown progresses, expecting HFC pricing to increase eventually.

Hudson Technologies recorded $61.9 million in revenue for the third quarter of 2024, a 19% decrease from the third quarter of 2023. The decline was primarily due to lower prices for certain refrigerants and slightly lower revenue from the DLA contract. HFC prices, particularly HFC-410A (which represents about 70% of the total aftermarket demand for HFCs), had declined an additional 20% from Q2 2024 levels to approximately $6 per pound by the close of Q3 2024.

• Full year revenue expected at the low end of prior guidance range. - Full year gross margin is approximately 28%. - Fourth quarter gross margin typically lower due to seasonality.

• Concern that inventory levels and consumption allowances from 2025 to 2028 may not decline sufficiently relative to demand unless a petition is filed with the EPA to lower consumption allowances. - Uncertainty in HFC pricing dynamics, which could lead to continued lower prices in the near term.

Q: Concerns about inventory levels and potential need for a petition to the EPA to accelerate phasedown.

A: Brian Coleman noted concern that consumption allowances for 2025-2028 could be too high due to OEM demand shift to lower GWP refrigerants, and explained the petition process involves challenging the EPA with evidence to lower annual consumption allowances.

Q: Integration of USA Refrigerants and impact on recovery of refrigerant.

A: Brian Bertaux stated integration is going well, bringing new customers and additional sources of reclaimed refrigerant. Brian Coleman added USA team is helping execute into Hudson's customer base, including those from the Airgas acquisition.

Q: Revenue from DLA contract and expectations.

A: Brian Coleman said DLA revenues for the quarter were approximately $9 million, with annual revenue running at mid-$30 million or low-$30 million compared to over $50 million in 2023.