Hudson (HDSN) 5 May 222022 Q1 Earnings call transcript

Good afternoon, ladies and gentlemen and welcome to the Hudson Technologies’ First Quarter 2022 Earnings Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Jen Belodeau. Ma’am, the floor is yours.

Thank you. to for call first welcome Technologies’ discuss and results financial quarter evening our to conference Hudson Good XXXX.

now Krishnamurti, On Coleman, the statement. I Nat Safe President Brian moment will CFO. and Chief read call Executive Officer Harbor today the take a are to and

statements. predictions course the about are statements. forward-looking the conference that address will make call, future During statements we expectations, this certain of All opinions or forward-looking

that in other that Go and review and most our our you these are current business not involve view expectations Brian. cause number and consider cases and we our call not on results With can materially. see and principal and over elements assumptions. differ based recent urge XX-K turn the affect we the best of of industry performance. our guarantees risks control, risks statements Please are our interpret reflect since are of them understand Brian our these them And will certain out Form the other they filings discussion to of a light. and within performance of to Coleman. We a could to that uncertainties and SEC Hudson’s subsequent that you future in that ask way, change they our the actual as I businesses that factors Although now ahead, and would today, for of

year delivered growth, margins XXXX first off start on saw demonstrated improved building substantially Thank as of coming we you. thank strong revenue XXXX. profitability. very and significant record Good to the a joining We evening enhanced results for calendar is and quarter by you momentum us. out

XXXX. trends off our year characterized and X-month half that the The pricing pricing upward we saw first of season in calendar activities a back continuation of the quarter selling kicks traditional

progressed. then the up You XXXX a momentum slow may and to year season our off start picked remember that as got

In margin cost in to the of mainly for our the put, faster record refrigerant XXXX, gross without significant addition first of average certain basis cost increase material quarter. Simply and the refrigerants. the price XX%, quarter increased to refrigerants to increased prices selling than in selling revenue of for due appreciation

Additionally, sales continue working of and refrigerant their today, developing value relationships volume we who increased quarter our we is meet benefited focus we to not but from on value we customers sales, likely portfolio. our to the as exit also year with which ability continue pattern strategic sustainability recognize certain just who of this while a last conclude year. achieved third the during growth non-core This was to started needs

in solid producer customers established quarter sustainable adding margin years, was the a not a who as remain and the a economy the long-term. we That proposition strong our refrigerants of base unusually supplier over circular we Over through reclamation. and focused understand longstanding customers and have value Hudson’s said, on of first

reclaimed R-XX AIM of to refrigerants the XXXX which down. the the production a saw ‘XX to and It’s We a scheduled full mandate positioned for inventory we gap HFCs in take is the as uniquely with down the will a steps AIM as reduction start allowances beginning currently cost refrigerants industry’s consumption aggressive use XXXX. faster the baseline demand and previously through and more what year meet the our XXXX promotes performance phase-out increase as moderate are a in to are HSC regulations, reclaimer, out. and commonly that with of for most important mandates step phased leading to much place compliance production fill phased Virgin virgin supply the XXXX Act Act XX% in the anticipated XX% than HFCs note to of XXXX. last marks similar for we production to levels expect margin as The will the of out and the used with year

As role cooling distribution to place, the in reclamation next us a transition tremendous believe expand this a market and presents reclaimer, opportunity capabilities technology network our with cleaner, efficient in we leading and with established to more refrigerants. the leadership industry’s equipment generation

have of revenue and and communicated previously targets We million million longer income term respectively. operating annualized $XXX $XX

faster this estimated. their based those XXXX, a and be we regulations, tremendous the longer remain trend continues reach year were rate through phased originally believe a Europe, visibility of that implementing path XXXX today, to For targets in we Hudson. with confident of will AIM a the opportunity term HSE impact they We with pricing initial assuming as we year’s our at out, than Act for on on are pricing XXXX

addition Act, positioned Air the by California the initiatives we In to or benefit with to industry CARB. compliance are AIM forth put from the Board Resources

a As a reclaimed requirement charged we the assist equipment. factory been minimum mentioned in of CARB requirement. proposed refrigerants opportunities XX% this have actively use meeting pursuing we before, in that OEMs And to has OEMs

our brand enabling cooling OEMs practices. upon our industry as in commitment intent among to supplying AprilAire seek they recognition founded was sustainable on a growing to reclaimed from promoting reclaimed source Hudson to other initial refrigerant are refrigerants. a partnership We and expanding for our

integration our refrigerants economic reduces refrigerants. platform environment. verifiable the powerful and and for a on gas way creating positive continue on providing our emissions, waste to refrigerants reclamation, value to EMERALD refrigerant in and us creates branded maximum customers to measurable recovering, for their practices lead reclaiming for reusing wishing focus document sustainability reclaimed the services R-Side sales impact Our of The use and greenhouse of

proven the transitions positioned distribution equipment. by ideally as With on market and of next season, for we we network, capitalize marketplace XXXX technology base, As to generation the opportunities refrigerants diversified product from conditions in begin seeing services. customer the we the the selling heart offerings believe and to are we the and changing are industry existing products enter longstanding are our and to we energized our

call ahead, to financials. Nat will the Go to review I turn over Nat. Now, the

Thank you, Brian.

certain to the XXXX, million $XX.X March recorded Hudson quarter XXXX For the The XXX% increased first comparable for XX% million, Gross as the was of of the was for quarter to in margin of by first ended prices $XX.X growth increased XXXX XX% compared compared refrigerants an XX, driven as quarter quarter revenues of volume. period. selling first the in during well increase XXXX.

appreciation out in of cost earlier, Brian increase margin due pointed certain the a mainly basis refrigerants and to significant sold. As the price increase is gross selling material without the

of for of expect of million XXXX moderate margin XXXX. gross of or As we revenue first was we to gross move XX, $XX.X compared as a to and basic Xx margin basic levels through XXXX the performance performance. for share the the quarter net similar million X% months XX for quarter ended XXXX of first diluted X.XXx for $X.X X.XXx to to or to $XX.X The in first of in recorded XXXX of XX% fiscal net ratio full per months year trailing million was the the SG&A operating of the to XXXX. year recorded first XXXX, per in the a performance result company income the to in $X.X compared improved same The of share period to March We per quarter million quarter operating loss a and XXXX. ratio of mainly leverage the compared of $X.XX $X.XX leverage declining or ended XXXX. of million revenue Xx income XX $X.X of March significantly of in quarter from loss first XXXX million income in company’s or $X.X $X.XX diluted a of trailing XX,

Wells the company to announced, with $XX its overall million credit the of into million quarter million, term During which Management providing entered new credit revolving Fargo to revolving to of increase million is $XX facility $XX Wells and amended one TCW previously comprised facility borrowing facility two, the and in continues TCW loan to manage Asset facility. this as agreement $XX at the overall up a another participating Fargo LLC capacity. existing

cash. the of revolver respective ongoing a in to debt, new full during be ABL structure The $XX.X was the additional new participation first the cash consisting an Brian million $XX of better current company at the XXXX million for of facilities, on March loan conjunction availability accelerated amended of loans. no expense its costs balance total term new facility $X.X enable $X.X in The opportunities selling the term resulting debt was sheet $XX.X XXXX. deferred financing amortized company or a revolving will and and in mentioned, XX, million Future million the to million of over terminated. under procure interest incremental that the potential term X-year with term $XXX The with repaid of the ABL term pricing XX, credit March discloses the the the In and flow into of such company’s inventory ABL extinguishment an the non-recurring opportunities, pay-down loan as entry the loan Any season. of consisting loan and million would term one-time for million to quarter rate. at the Our ABL. $XX the loan loan relating facility of gives constituted increased draw-downs aforementioned the refinancing existing company’s XXXX term

will and us our credit loan We provide have partners liquidity and financial forward. solid revolving call I flexibility and we to over turn now the back Brian. platform loan term look as and strong facilities a with Brian?

you, Thank Nat.

refrigerant will XXXX enter questions. we in our excited the open focus we opportunities are on about now and leadership we the selling the of As heart industry. call reclamation Operator, growing to the and season, the position ahead

Certainly. first Craig-Hallum. Ryan question Sigdahl from [Operator is from Instructions] Your coming

live. is line Your

on Good the afternoon, Brian and Congrats results. strong Nat.

you Well, Good much. evening. thank very

price well, our think and is what Curious of exactly caught I I the don’t R-XX R-XXXA currently? up

seen much that R-XX and is pricing. R-XX will going and R-XX. further much a with on more the normal I target phased $XX low-XXs. have out would that to get be R-XX supply to with movement economics many certain always XXs. acting not provided the fairly long-term range to as were We in relative ought am pound price of a are the back we you CFCs demand in that stable see therefore Sure. have to

we change expect So, be materially over probably it level to in time. continue not and that to

should gather and Hudson to a continue model R-XX continue. relative sale used basis that to cost price that lower expect at price to We significant

further relates have again call. last As seen earnings HFCs it to since even price increases, our we

And starting to now than that communicated for let’s $XX are GWP the prices higher in HFC or have on past. average higher to are are now higher HFCs XXX-A. $XX we clearly value not may certainly see that we this are break pricing a for starting for We say above But HFCs. a see we than average in much

twice GWP have XXX-A XXX-A So to articulate today, because GWP if you not we is waiting see could of sell it’s here that to might of have are do the waiting. just true price of for refrigerant an the we situations that the happen our where trying particular HFC twice while

So do result this in in to initial this in to is financial our something has more performance of that this lot we AIM thought first XXXX, we possibly so but already in the quarter. accelerated might see we Act we of a see are signs and beginning implementation a QX see what expect as

And what RXXX-A you is other between and approximately on remind can gases? Brian, HFCs breakout your us those

very are in Well, R-XX HFOs that aftermarket. in the volume and to the aftermarket percentages beginning total even to marketplace. within the likely other in XX% refrigerant HFCs are products, of now some increase, right dominant now XX% the are extent small to They

in So really aftermarket. the overall demand the dominate HFCs

volume down with maybe higher dealt had breaking those GWP HFC within layer referring HFCs versus a you is vast what to one XX% which R-XXXA, But are majority that percent the that of historically to? more that XX%,

would that Yes, be correct.

other. but So R-XX. is of a plus the rest HSC pretty the After then marketplace the XX of HFCs there to some R-XXXA products then replacement HFC, like largest there is you XXXA. It’s similar volume application. is in for And refrigerant size. the XXXA, the comfort cooling out are pack mainly getting material single the each are R-XXXA probably into

Helpful.

about How inventory, there your within heading to price is inventory then increased versus the on levels it season? on pretty how do much increases pounds adding inventory, secondly, into of base increases? so significantly. feel Moving that summer you And cost selling as

Yes.

really with in in we versus seeing QX So, inventories inventories, are price. discipline and dollars coming back from really higher December, and to our dollars inventory our

And the the low-XX%. this think is that’s would don’t say year. the to at for Our which cost by now, QX, basis lower QX, certainly And in to very selling. we we than where get the gross increasing QX are closer long-term to that gross margins high we is we remainder to be now. margin of be refrigerants will our we continue going time are why expect our forecast for are

It’s dollars we done So, our increases, got inventory. in volume. we of more past to of you And in we we likely the always that’s feel of because good in inventory where relative down, more how the – price light be it’s particularly are see went we went have we should because whenever have And to when we progress. have year had in the not inventory going demands, more affected price inventory, job because like very a customer some our managing we needed carried pounds the of prices than it volatility, might we to. had certainly as experiences negatively

increase right place. balance sheet I price went dollar of you increases the inventory were the think price will because I have see the further the And So, we any on in volume the or inventory up. think

margin something it the statement year. of where to square was Based be Maybe year on that closer better exit the of that you just in, expect into came year-over-year implies where XXXX worked its to XX%. low QX for just reconcile of kind on or so kind throughout dig you similar at kind QX, to said the Helpful. what you you Can year the mean I the full gross if than it’s recently year, then And cadence? lower way and XX%, statement, that XX%. and

XX, that to based starting that going margin number. on a overall are XX an basis, something think But the we see you year QX, have Look, that think year. QX, retraction going XXXX Clearly, on achieve been to particularly lower similar be thought we to QX, the XX, on expecting are think QX, last able we the retraction might in a just kind of margins we percentage. to of QX, gross margins on we throughout towards

Great. turn I others. Thanks, it to over the will Brian.

you. Thank

conference [Operator gentlemen. and concludes This for Instructions] Thank call. ladies you, Thank session presentation. today’s you and Q&A our attending

now You may disconnect.

Sorry. conference would us everybody. excuse speaking our and want continued employees their we I in participating of without these long-term our me, Thank for those with you dedication – be support. like hard and not business to the thank I everyone call recently we you. our a you shareholders able employees support results. our for and like to results. to to second the to thank achieve would I work look after that thank their joined for again this Have forward evening’s quarter night And good