HUDSON TECHNOLOGIES INC /NY Q1 FY2025 earnings call

• Started 2025 with slightly improved sales volume but saw revenue decline to $55.3 million due to lower refrigerant market pricing.
• Continued momentum in refrigerant recovery activities, with increased reclaim volume in the first quarter, boosted by the USA refrigerants acquisition.
• Orders related to DLA contract were consistent with last year's first quarter.
• Tariff costs affecting supply side costs for virgin refrigerants and cylinders, with industry passing higher costs through distribution chain.
• Anticipate 2025 gross margin to be mid-20s, improving from first-quarter margin.
• Supply-side disruption for next-generation refrigerants due to AMAX Technology Transition Rule, with market demand exceeding production volumes but expecting balance by late cooling season.
• Strengthened unlevered balance sheet with $81 million in cash and no debt at quarter end, and repurchased $4.5 million of common stock in 2025.

Revenue for the first quarter of 2025 was $55.3 million. The gross margin was 22% due to lower refrigerant market pricing compared to the first quarter of the previous year. The reclamation business saw increased reclaim volume during the first quarter, with the USA refrigerants acquisition contributing to volume gains. Refrigerant pricing in the first quarter was approximately 40% lower than the first quarter of 2024, but since the quarter closed, prices for certain HFCs have increased to over $6 per pound. The refrigerant segment's revenue contribution is significant, with HFC 410A representing about 70% of the aftermarket demand for HFCs.

• Expect 2025 gross margin to be closer to mid-20s, improving from first-quarter margin.
• Tariff uncertainty creates uncertainty for costs and prices to customers.
• Market demand for new lower-GWP refrigerants is exceeding production volumes but expects additional capacity to balance with demand by late cooling season.
• Tariff costs for new refrigerants are being passed through distribution chain.

• Tariff uncertainties affecting both costs and prices to customers.
• Supply-side disruption for next-generation refrigerants associated with AMAX Technology Transition Rule.
• Shortages impacting conversions to lower-GWP refrigerants and new system installations.
• Uncertainty regarding potential impact of EPA changes due to administration change.

Q: Ryan Sigdahl asks about pricing drivers, whether tariff-driven and temporary or indicative of stability.

A: Brian Coleman says supply chain disruptions and tariffs are factors, with inventory visibility improving as weather warms.

Q: Ryan Sigdahl asks about cylinder challenges and Hudson's competitive positioning.

A: Brian Coleman mentions challenges with valve lead times for A2L refrigerants and supply disruptions for smaller cylinders.

Q: Ryan Sigdahl asks about reclamation benefit from tariffs and behavior change.

A: Brian Coleman says reclaim volumes are up, with educational efforts helping contractors transition to recovery.

Q: Austin Moeller asks about imports through Mexico and tariffs.

A: Brian Coleman talks about consumption allowances and tariffs on Chinese goods.

Q: Austin Moeller asks about cooler weather in Northeast.

A: Brian Coleman says cooler weather in Northeast doesn't significantly affect until late May.

Q: Unidentified Analyst asks about DLA contract cadence, buyback plans, and inventory trends.

A: Brian Coleman says DLA expected to hit mid-35s in 2025, continue opportunistic buybacks, and approaching normalized inventory levels.