Hudson (HDSN) 6 Aug 242024 Q2 Earnings call transcript

Welcome to the Hudson Technologies Second Quarter 2024 Earnings Call. [Operator Instructions] I will now turn the conference over to your host, Jen Belodeau.

Good evening, and welcome to our conference call to discuss Hudson Technologies financial results for second quarter 2024.

On the call today are Brian Coleman, President and Chief Executive Officer; and Brian Bertaux, Hudson's news Chief Financial Officer. I'll now take a moment to read safe harbor statement.

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

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

joining evening, thank Good and us. for you

short-term the the XXXX of acquisition expected significant long-term this as sales of So cash we management use Unfortunately, a rule, seen buyback, basis, refrigerant a of season. final have federal share positive such for flow reclaimed first-ever events, has far, USA mandates number refrigerants the downward generation, anticipated pricing the the and the on pressure creating refrigerant.

with for the year. volume the challenging. refrigerants through in very season, been strong over In XX% increase we landscape quarter, XXXX the selling a last move demand has were second As

margin to revenue pressure the negatively impacted continue which and refrigerants, for we certain and pricing gains. volume outweighing our experience performance However,

decline the discussed $X.XX level approximately pricing decreased quarter last quarter, per pound when an HFC to spoke as on refrigerants industry from XXXX, at compared second with the XX% we May of X% today. the has about by the approximate about second our of X, in price and certain saw During pricing we levels

environment, our the below was pricing target. challenging Given our performance margin long-term

profitability. would the if current the we to year visibility However, pricing anticipate revenue we season, remainder XX%. our full levels of approximately through full $XXX XXXX of approximately selling $XXX year in delivered solid margins continue with range million gross million of today, With

repeated anticipated comparison As strong that would year's progressed. of million, not last for pricing difficult as might activity be $XX order we DLA year. rebound we quarter, a the we this levels outlined approximately noted creating that program-specific And season not likely last

disappointing, is time, While pricing the and the of is this Hudson's current situation industry a temporary we've pricing believe we impact our dynamic long-term long view not been growth opportunity. does in and very

control, that can including and As recovery our refrigerant the commitment remain meeting we elements ensuring needs through and of on we business we phaseouts. we as that always, our future and underway bridge current the our are promoting customers help transition reclamation refrigerant to the focused of

generated our sales expected relationship and will strong phasedowns of of The During and allow brings, existing the This to the the recovered current per refrigerants to leverage future to team base capabilities refrigerants reclamation. million us virgin and refrigerant. resulting the imbalance. and and Hudson's USA organization customer announced a for ability around USA year. with Historically, refrigerants, leading are of enhance skill in scale their combined of quarter, recovery known average profitably approximately purchaser significantly we acquisition set supply-demand expertise our revenues recovery $XX USA our significantly sourcing

gross month focused of as dedicated on as see grow we as result balance buy of CFCs of latest the to of Hudson products, refrigerant And of to of strategic benefits achieve acquiring all on-boarded plan when that the the the acquisition the we reminder, potential manufactured our the refrigerants. to about team, with and and excited sell set this business integrated very recognize as should types the and team so a we're June, we of well in motion generation welcome has the the team. ours a reclaimed to and double Hudson and the we expected sold, July as opportunity typically group. then we and the this we and In in growth a refrigerant With USA volumes from addition newly when contribution new have we refrigerants than USA of the group year, margins created acquisition, HFCs this the

source recovery of we've more we our inventory when the more self-reliant side needs. on become refrigerants, Additionally, supply

completion towards we anticipated current supply-demand our imbalance. will the move visibility the related gain out season, the and selling in better the we where stands As of phase HFC X-month terms industry to of

of important aspects expect certain also AIM the We which component proposed an management to of see rule month, implementation EPA's is refrigerant finalized Act. the of this the

is in time a EPA As rule history we have that for the for final, use industry's equipment. the in reclaim certain of the our proposed the of as If use this refrigerants certain adopted requirement rule and be will mandates applications sectors. proposed reminder, a reclaimed mandatory the refrigerants federal first

a XXXX rule, the systems legislation. would over and already all types EPA's will adopted finalized of base under as promotes introduction installed the the Additionally, the facilities Hudson certain provide consideration can HFC of XXXX. of and systems and refrigerants example, transition beginning any lower reclaim all types refrigerant for any systems. many for estimated use mandate refrigerants current use million was in for proposals first-mover and XXXX, service and the California, legacy as XXX states implement technology of mandate starting states government the in GDP state years. next which XX the Furthermore, have October have of of of and conversion reclaimed construction new well in that

it the industry the our next-generation customers. new compliance move and to legislative about support refrigerants to relates and environment to optimistic equipped and assist We're well existing ability are we technology. So as to the

more Additionally, we efforts friendly are refrigerant leader transition and the effective to management in support environmentally equipment. an industry our cooling to

are, huge a importance venting, you that of for proponent is gas, have impact refrigerant refrigerant the source a beyond without We it environmental recovered no negative the producing refrigerant. will fact Because course, also of recovery. reclaimed for of

acquisitions noted to refrigerant. quarter, of and up repurchases. environmental capital second of Wells X at the previously Based capital the program amendment, various working the calls Service we and from importance conferences share our at We We've world, Fargo service business the repurchase the coupled are presented using XXXX discuss a Nation the been During of attended of refrigerant the and strategy to share pillars data with recent and of recovering allocation on approval center needs, benefits reclaimed industry as our the $XX with initiate be an company's the widely and actively the regulatory Board Directors, Tex, Vision expect the administrator environment. Lennox customers the XxXX plan as The Summits, regarded industry legal International share we're assist leader new the by of transition we in Exchange which guidance. comply a based District to Energy. to be Hudson repurchase will working plan million weeks. and thought on to timing is and pleased coming

cash We stockholder the in strength for value sheet drive reflects deploying to The flows, capital combined our a to our to opportunity stockholders. of long-term growth We Board's are of our value balance dedication attractive strategically their our for presents and creation. prospects with buying long-term authorization share that believe confidence compelling committed an repurchase stock. profitability, Hudson's long-term and

and over through the potentially balance prioritize improved significantly we our now of through past sheet capital the while our acquisitions opportunistic repurchase are also to able Given growth few for returning organically to years, stock. stockholders investing

most responsibility take individual shareholders, As CEO the one seriously. as of largest I my

a have and shareholders, and hopefully, value. shareholder profitable success of dedication things: X our been growth to that company those ensuring longtime and For way sustainable see and you'll enhancing employees' the our my in

All are introduce said, our I'd dedication. you experience his know, company XX CFO. name to and done your that intent, has commitment homes. you proud as Exchange recognize of a who, years at if nearly and Trex, high-quality as decking With Hudson with employees' through traded of like you Bertaux, am Brian have might our that York New joined I Brian Stock of public composite recently actions especially most with

forward pleased We Brian contributions. his welcome very are look and to to

Let me turn over it to him.

Technologies, Good accomplished company's have to evening, everybody. I'm impressed as learned Hudson what I'm success. long-term and with to thrilled and this the thus I've contribute on and seen at to CFO day join leadership team am X I the far. opportunity

of I mentioned, the and leading world's Brian XX railing. manufacturer wood alternative Trex Company, previously As at years decking spent

Interim President by in commercial to During culminating at $XX Trex nine-fold $XXX of Products, reached Trex. Commercial senior Trex as roles, subsidiary $XXX market cap grew purchased billion. from railing million my million management product served revenue a number tenure I a of and

included at as with While instrumental which the broad company's in the to to driving exciting buybacks. I M&A to coming the collaborating dynamic strategic tactics, introduce look get my was time and forward joining Trex to and days. and know excellence leadership This as very leadership to operational, this to and opportunity forward allocation experience the bring myself team operational excited well opportunistic I'm Hudson to a I in financial over look of capital growth. strategic and you many be company share strategy is industry. and

Now I'll turn to review. our financial

was XX% decrease certain XXXX, second XX, the quarter primarily offset prices when of in compared XXXX of to compared as Hudson the to million of million lower in revenues quarter by XXXX. of million of year-over-year recorded a selling second period. decreased a sales revenues comparable compared to contract. to in DLA company's margin $X.X were second same of the related the to The from quarter compared refrigerants XXXX result of These For and XXXX partially was as volume revenue XX% the million, period the for refrigerant previously increases XX% depressed June of mentioned the decreases $X in quarter comparable market SG&A the for $XX.X the prices. ended XXXX XXXX XX% decrease was second Gross period. $XX.X for

non-recurring diluted XX.X% of company used of XXXX. incurred USA the of $X.X $XXX,XXX compared strengthened million During income diluted same or million its recorded company of of to of the to net the acquisition recorded compared projects. second company refrigerants XXXX XXXX, quarter XXXX the the of the company's And purchase of income net second to share period. operating $XX.X of leaving the debt. million per We excluding well in of XX.X% or second quarter XXXX $XX.X one second quarter in $XX.X $X.XX million share as in income company the was the during net cash of IT XXXX related ending comparable The quarter rate million no expenses as $XX.X the of X USA $XX.X The sheet cash, quarter compared effective to the refrigerant, XXXX. $X.XX tax the for for with balance million generation. income The quarter second of first million in period free generated free months to $XX.X this in flow the year, per operating

with strategy. The company strong liquidity of Our cash I million facility $XX.X Brian. opportunistic business $XX.X support now an of needs liquidity total million, June to pursue the to of turn capital coupled positions our back $XX and to allocation the availability well revolving XXXX. million sums very over at the credit will operating the position, call XX,

our temporary drive technology transition position like of positioned to new and the reclamation and in ultimately believe of is open technologies. tightens and customer Before company. proprietary and our I'd that in remain view to we accelerate for move long-term Operator, that now the we business. reclamation the reiterate the to impact growth Hudson's We our industry leadership reclaimed as relationships dynamic we'll pricing drive virgin adopts us confident to profitability phasedown We the higher, enhanced and Q&A, necessary leave will the call refrigerant believe industry, well activity long-standing questions. current HFCs the supply equipment does not go pricing to

from comes conducting Hallum. At we [Operator will with Sigdahl Ryan The first Instructions] time, question-and-answer be Craig session. this question a

quarters the break you down, between Can volume season? that Brian, up of increase? the with guess, I and I selling want drove XX% to shift quarter. throughout in kind was start And volume there what summer that really any

QX, we But somewhat we flat strong selling in So had when season. QX. this volume the entered interest really, was

growth balance sales the certainly we talked on not be do we growth may compared 'XX. as times XX%, activities seen season, to and that the before, and do blended the expect see entire ‘XX Now of we've season X-month throughout year see the relative we're to we over last today many think to the in but the going QX based X-month

U.S. been blends determination July, from past findings Commerce basically, for Department and general They industry next China to HFC couple on that and with HFC impact they're a investigation enforce are U.S. market, the out coming doing thoughts further be of it processed the going whether Curious and/or came year. in in duties just potential the to that an dynamics Then years? has your in of pricing the on over the

not the certain would With bad with from of regards have China. petitioners companies other it refrigerant and circumvention entities certainly that appears from ITC actors to the ITC claiming do findings that in in feel appears, have certain in and States that those to the we in bad like when bring selling have the companies attempted were that was the that United we So the said, fact, case finally is that source behavior, source from product the supported countries, this it do are would ruling we line propensity. refrigerant Bottom reached. --

could a that impose a financial don't at unfairly someone circumvented We some what be. to payments have rules you the if the know that those certainly cost know in will As significant regulations. may impact a if those are significant consequence, follow We may disadvantage that and on particularly it that impact, there rules. will, prior when tariff but those have burdens of due, and behave broadcast is duties a don't clawback,

months. of think I answer. the we'll over over be interesting will couple an next the couple of it see months, may next But what happen So have to

for one much revenue acquisition? how of quick the new me within revised from A U.S. guidance, Last refrigerants is

of getting to season focus into in and -- the to those revenue year-end. the Hudson that have the for the much is we right buying. say with balance team sorry, Right we I'm year. that again, Partly that now disclosed, buying would in we're terms numbers the in put of USA do not now ranges. And relative

we're gas. this X sales And beyond to of the see contractors season. about said before returns go Now starting think recovery months accumulate tend gas we've typically, I that the to

over this do remainder X relative most refrigerant what for are we next, that selling guidance and we particularly to have inventory extent to upside more the next to their dedicated year. go happen to activity But that season the garner So is, do sales will the of will certainly, buy provided. that the into we sales the extent months of

Maybe that. one clarification on

you'll As gross gas? improved the layered just business? on of volume be think we about to next with, will be incremental think double you year, is Or this selling it, an since Reclaimed mix current of kind Hudson margin do inventory that this call

to We months going both. will, sales We and date quarter X think if X the the of closing you it's of on quarters integration. be season lost, X first or the based the then sort

recovered and we're that selling from from feel benefit margins going as gas. definitely to reclaimed confident revenue we incremental the So as higher well get

Gerry The Capital. Roth next with question Sweeney comes from

into one the since going on determinations pricing or different then go question pricing circumvention some curious direction, to a occurred. has changed of quick rules if but Just I'm and have

significant those pricing we may evening the the tariffs We is towards and where we've are changes material have that gas subject dynamic in have don't this individuals cash fairly we not be any paid any certain clawback that application. -- today. Again, a we'll case. have believe I way pricing believe do to seen the that we'll imported directed described will and

we're all run see. cash they and and they how to business their generate that stuff, how yet So the

give and developed opportunity Can the -- acquisition, sort activity. do, Refrigerants they you what of and how -- increased do you they detail to USA and the bit going they're how on highlighted little reclaim it a sort of how more acquisition. you question, Next that drive how

supplies. has the think So they virgin years, team dedicated been for to of USA XX-plus Think the it folks. team, good had access a around really limited of and that

meet nearly to their to on process self-reliant purchase them to needs, be and had recovered ability and to they find the refrigerants. for So able XXX% customer be then

apply and done we feel integrating where we to to timely So to selling, us that sufficient relationships, Hudson They that we're very then opportunity base at and very team strong with good to and the we hunting, have contractor that bring grow that think the really relative expecting payment. haven't they're and in at reputation relationships expertise is importantly, job customer most community, Hudson's the payment good a buying very well. their a help to going as expertise

then Obviously, final to current gas cheap price. pretty buyback, have potentially on And the opportunity also dynamic a What's buy you that? some question. process at you what's point, But buyback, especially with on an at that? levels. a thought at stock but have Or the the used a the

will capital So support we flow, look needed generating seem we at first our when for needs, look more and cash then business the free that. to than we cash working certainly the to be and

X So opportunistic at that strategic our cash more generation acquisitions share will repurchases free and is with our be the for business we pillars. us, those first for for and fortunately also our But is flow growth. what's foremost, than business. But are needed looking

a gas or at the want some inventory would side? here... at used build -- market an more Pricing gas to is is there's going working going capital to and change, change. on mean I acquire believer used as you to up that some opposed point, point, to the I'm especially opportunity

make needs needs, cash and mainly we in that want capital well it's our sufficient to first working it foremost, inventory. sure expressed to for and have Brian we meet

couple relative business make as decisions it dollars dollars certainly to going inventory activities that extent or to our need we about a there With our somehow buying on we've December to the think relates we're times. 'XX. XX, XXXX, gas. limit of that We inventory be will talked particularly in not at more spent need dollars and December ending we the to dollars that to higher So inventory at than don't I believe said, and cash this XX, redirect used

Obviously, things do But allocation million far, ability is the managing business, to buy change, look to so outcome to going impact current $XX far. and if the don't capital of is and take the we're anything thus our that. that And think we with the amount we'll a refrigerants. at

The next with Riley. comes from B. question Josh Nichols

a But company's had I'm types you prices look what like A couple But you inventory level? kind couple upside the refrigerants think relative level of to is the obviously, inventory today, levels whenever for ballpark the XX% to margins that of and about the curious guys the have of where selling opportunity to a like asked. have just at things of that if HFCs, already kind next year shake you on there. be in I could the $XXX normalize in season, I'm start you that pound? of out, price based this for for for of average trying generally, prices talked what

Yes.

higher that Josh, to back public the believe But as we're XXXX we company year. talked than when times, many the cost refrigerant selling we a earnings go basis from the next we're in space. the on we're you that we'll what we about we not in product provide is talked granularity layers anticipate So season, for as only FIFO pulling QX, call

are cost a margins to in as do are and year. in going believe have lower did, a just 'XX. refrigerants if the a basis higher cost XX on the inventory they of as entering FIFO basis, of we 'XX same not the result price they But basis remain we should So

contract, of call. don't for then the it this to you just of the DLA the decline? what XQ year I'm I context contract at looking in kind And But mentioned revenue looking was year year-over-year the on curious. think specifically relative I'm DLA for last here,

about Wasn't think, actually quite lower. $X million lower. X.X, It was I

could rate, So we that assume we've at up that what said right we as still they it's in as backlog range a made before, little there procurement But now, long time, because anticipation. low about to possible a year. of a relative But a on talked there did of products be bit based to lead some last similar we're million. million and isn't $XX run our ground $XX

I bit. into the appreciate. me, a little Last question weeds digging for

was You some that there expenses. refrigerants to Was USA did onetime something $XXX,XXX say and like else. related

the know in SG&A that's So around $X the down any wasn't going of because level forma cap. to company's presumably, if backed I million in closer pro out earnings is just to back dip XQ then because it of to like report

that. expect would we Yes,

So SG&A, the in plus acquisition, the some to IT excluding USA support of organization. growth refrigerant investments the

that is comparable last expect and continue. would Aside year, from to to very X, those SG&A we

Moeller next The comes Canaccord. from question from Austin

the purchasing my some that and forward question half. Just QX signaled QX? have anything in could their the first know you here. second activity that DLA ramp Has they I up about optimism in

know volume last they year year, in that it It not fulfill mean can't. and we'll based basis. But and quite we this -- doesn't them There's very on work timely that in of way. on days. guarantee buys that dialogue. that saw they a it want orders the just within last numbers. of in therefore, so wouldn't we reoccur. predict. occurred it if buying doesn't or places QX There buy. year, It's the be But And that matter could relates able It that to necessarily the considering difficult you are and contract of isn't under DoD a to fulfill we will a NSN get clear, it we state and could really come, as fulfill to and active why It it doesn't much to ending We procure many be when. activity to be can't That's who's mean it don't to will. what orders just last it's able those them different saw

be by next created. hearing the of the cooling from a season? Do suppliers just other that burn terms your you it fully customers you the anticipate And market of down in in are follow-up. expended and that HFC file was will the existing What stock

want and when see to about data. more believe December the that get there will inventory answer to XXXX relationship 'XX. would movement this relative between much We data to our is would the reports the greater inventory there decline was XX, the question 'XX, We the EPA believe of that the We in a what we that XXXX between cooling 'XX decline and strong, indicated increases. a certainly be has year's extent 'XX. the between volume and quite as season been by And that visibility 'XX

wait to That us talk of So we're that wanting the pieces about the discuss pricing? the point. to like? back the like. are inventory really to make management What data that end the goes QX call. things future, is on should EPA's for to that X to do And kind shortly. we going the rule to the XXXX will how occur season data X those does able final us be to what available puzzle look be earnings refrigerant All of look And of comparable

over will We for the turn call question-and-answer to session, the remarks. I have of management end closing and reached now the

to Thank like I'd you. look both forward our night, good that dedication after We employees thank results. the recently us and their third for everybody. have joined speaking for business quarter our our those Have a to to support support. continued their and and you with shareholders long-time

This this time. may concludes for you disconnect lines and today's conference, participation. at you your your Thank