Hudson Technologies, Inc. Q2 FY2025 earnings call

Key Points - Brian Coleman noted a slow start to the cooling season but solid second quarter results with revenues of $72.8 million and 31% gross margin. - Reclamation business was strong due to enhanced recovery capabilities. - DLA orders were in line with expectations, and the company is entering its 10th year serving DLA and DoD needs. - Refrigerant pricing improved in Q2, with HFC 410A reaching $8 per pound. - Unlevered balance sheet had $84.3 million in cash and no debt; repurchased $2.7 million of stock in Q2. - Kate Houghton discussed market opportunity, reclamation as a long-term growth opportunity, LEED recognition for reclaim refrigerants, and technician training. - Brian Bertaux reviewed financial results: revenue $72.8M (3% decrease from Q2 2024), gross margin 31% (up from 30% in Q2 2024), net income $10.2M ($0.23 per diluted share), and $84.3M cash at quarter end.

Hudson Technologies reported second quarter revenues of $72.8 million with a gross margin of 31%. The reclamation business showed continued strength. HFC 410A, which represents about 70% of the total aftermarket demand for HFCs, saw pricing improvements during the quarter, reaching $8 per pound at one point.

Guidance - Maintain full year 2025 gross margin target of mid-20% or potentially slightly higher depending on strength of Q3. - Q4 is seasonally slow, so full year target remains in place. - Expect strong Q3 due to ongoing heat and market trends.

Risks - Tariffs affecting refrigerant pricing volatility. - Regulatory changes, including EPA evaluation of AIM Act and other regulations. - Competition for DLA contract, as it's no longer a small business set aside.

Q: Did Hudson benefit from repair mix being up in the quarter via HFC and aftermarket business, and participate in A2L aftermarket sell?

A: Kathleen Houghton said they saw repair vs replace as an element of Q2 activity, already participate in A2L aftermarket sales.

Q: What's current HFC price?

A: Brian Coleman said HFC price peaked around $8, slightly retracted but steady in range.

Q: Quantify reclamation volume?

A: Kathleen Houghton said reclamation activity reported at year end, but encouraged by Q3 activity; USA acquisition integrated, making separation difficult.

Q: Thoughts on channel inventory and HFC prices?

A: Brian Bertaux said EPA to release 2024 inventory data in Sept/Oct, hard to tell on inventory impact, but prices pulling back slightly.

Q: Comments on EPA and AIM Act?

A: Brian Coleman said EPA evaluating regulations, Hudson diligent with EPA and Congress on AIM Act importance.

Q: Reclaim education with contractors?

A: Kathleen Houghton said they do a lot of speaking, reclaim starting to take hold, but only talked to half of ~500k contractors.

Q: Expectations for Q3 and margin?

A: Brian Coleman said expect strong Q3, and Q3 margin strong with prices pulling back slightly but Q3 solid.

Q: Tariffs impact on pricing and reclaim?

A: Brian Coleman said tariffs affect imported refrigerants, reclaim is US sourced, so no tariff impact, and price increases benefit reclaim profitability.

Q: DLA contract renegotiation and volume?

A: Brian Coleman said don't know new contract details, volumes uncertain but won't necessarily anticipate higher volumes once awarded.