Hudson Technologies, Inc. Q4 FY2025 earnings call

• Investing in infrastructure: Expanding separation technology and automation, investing in inventory to meet customer needs, and going live with a new ERP system in February 2026 (with startup headaches). - Focused on organic and strategic expansion of service capabilities in commercial market, identifying opportunities like separation/packaging of new refrigerant blends, recovery from underserved segments, and HVAC system optimization. - Disciplined approach to accretive acquisitions, e.g., acquisition of Refrigerant Zinc strengthening presence in western U.S. - Returning capital to shareholders via opportunistic stock repurchase program, repurchased $20 million in stock in 2025 and intend to continue in 2026. - Fourth quarter 2025 delivered 28% revenue growth, completed acquisition of Refrigerant Zinc. Full year 2025 had 4% revenue increase, 25% gross margin, non-GAAP adjusted net income of 19.7 million or 44 cents per diluted share. - Work with DLA: Awarded renewal of DLA contract in fourth quarter 2025, but contract award rescinded due to competitor bid protest, but will continue providing logistic support on existing contract through 2026.

Fourth quarter 2025 had impressive revenue growth of 28%, primarily related to strong sales volume. Full year 2025 revenue was $246.6 million, a 4% increase from 2024, with a 6% increase in sales volume partially offset by slightly lower pricing. Gross margin was 25% in 2025. Revenue from DLA contract was $38 million in 2025. The company's unlevered balance sheet remained strong at year-end with $39.5 million of cash.

• Expect Q1 2026 revenue to increase by a low to mid-single-digit percentage compared to Q1 2025, and ERP-related inefficiencies not expected to persist in second quarter and forward. - Intend to continue opportunistic stock repurchases in 2026 with $20 million authorization.

• DLA contract: Competitor filed bid protest regarding DLA's evaluation of proposals and contract award to Hudson Technologies, contract award rescinded while DLA conducts review of internal processes. - ERP implementation: Like many new ERP implementations, experienced startup inefficiencies in Q1 2026.

Q: Talked about key focuses going forward in organic and creative, specifically around service, HVAC optimization, and removing seasonality.

A: Ken mentioned looking at proactive services like monitoring and measuring chiller performance, working on H2O and HFO refrigerants, and developing targets for revenue outside direct refrigerant distribution.

Q: Update on HFC pricing, trends, inventory, channel, and 2026 pricing expectation.

A: Market balanced in supply and demand, slight price appreciation, seeing signs of upwards price appreciation, not expecting significant HFO demand from service side in second half of 2026.

Q: How much cylinder inventory expected to meet 2026 demand and important factor to improve gross margin.

A: Don't speak to cylinders but feel ready to meet demand, factors include pricing, fixed asset investments to automate and reduce costs, new ERP system for efficiencies.

Q: Inventory build, price levels in 4Q, gross margin direction for 2026, and DLA bid process timeline.

A: Entered 2024 light on inventory, went back to historical standards of around six-month inventory days on hand, if no real change in pricing gross margin for 2026 comparable to 2025, fair assumption DLA contract run rate $38 million in 2026, but timing of bid process unclear but optimistic to prevail