HUDSON TECHNOLOGIES INC /NY Q4 FY2024 earnings call

• Fourth quarter was seasonally slower with revenue down 23% from 2023. Full-year revenue slightly below revised target of $240 million but achieved 28% gross margin target.
• Unlevered balance sheet strengthened with $70 million cash and no debt at year-end 2024. Repurchased $8.1 million of common stock in 2024.
• HFC pricing in 2024 declined up to 45%, but diverse sales channels mitigated the impact. DLA contract revenue in 2024 was $36 million, expected to trend to normal in 2025.
• Reclaim activity increased 18% in 2024. Acquired USA Refrigerants in June 2024 to enhance recovery capabilities. Attended industry events like Service World Expo to promote reclamation.
• 2025 gross margin expected to be in the mid to upper twenties. Focus on ensuring customers have the right refrigerants and promoting recovery/reclamation as the industry transitions to lower GWP equipment.

In the fourth quarter of 2024, Hudson Technologies, Inc. reported revenue of $34.6 million, a 23% decrease compared to the same quarter in 2023. The full-year 2024 revenue was $237 million, a 18% decrease from 2023. The full-year gross margin was 28%, achieving the revised target. Revenue from the DLA contract in 2024 was $36 million, slightly ahead of normalized levels, with 2025 expected to trend to normal purchasing levels. HFC pricing in 2024 declined up to 45% throughout the sales season, ending the year just under $6 per pound for HFC-410a (which represents about 70% of HFC aftermarket demand). The company's refrigerant sales volume increased slightly in 2024, but was offset by declining market prices for HFC refrigerants.

• 2025 gross margin is expected to range from the mid to upper twenties.
• Anticipates 2025 DLA contract to trend to normal purchasing levels.
• HFC pricing at close of 2024 was just under $6 per pound and remains at that level. First quarter 2025 results to provide better understanding of supply-demand imbalance.
• Recognizes the challenge of comparing to the first quarter of 2024 due to pricing.

• Market pricing for HFC refrigerants is out of the company's control.
• Upstream inventories may still be at high levels, which could impact 2025 performance.
• Tariffs on steel could impact the cost of cylinders used for refrigerants.
• Regulatory changes, while presenting opportunities, also carry uncertainties for the business.

Q: Gerry Sweeney asked about channel visibility, whether the company can see upstream destocking and inventory levels.

A: Brian Coleman stated they expect upstream inventory balances to have declined from 2023 but are still significant, and they'll have better visibility with first quarter results in May.

Q: Gerry Sweeney also asked about inventory levels and reclaim vs virgin gas.

A: Brian Coleman said they manage inventory to sell within the next season, reloading at lower prices, and reclaim is a portion of the business with HFCs still dominated by virgin supply but reclaim activity growing.

Q: Ryan Sigdahl inquired about DLA contract impact of administration changes and bid timing.

A: Brian Coleman said the DLA contract has no guaranteed demand, successor bid proposals were late, and results likely in later 2025. Also discussed tariffs on steel affecting cylinder costs.

Q: Josh Nichols asked about hybrid refrigerant impact and reclaim of new refrigerants.

A: Brian Coleman said transition to lower GWP equipment has some chunkiness but will clean up, and reclaim of new refrigerants is possible but delayed due to patents.

Q: Josh Nichols also asked about R-22 demand.

A: Brian Coleman said R-22 volumes are declining slowly as per EPA data.

Q: Austin Moeller asked about overseas licensing of distillation equipment and HFC production cap changes.

A: Brian Coleman said they look to license technology to established partners overseas, and no current changes to HFC production caps are anticipated as Congress isn't prioritizing changes to the AM Act.