Hudson (HDSN) 4 Nov 24 2024 Q3 Earnings call transcript

Hudson Technologies, a leading player in the refrigerant industry, recently held its third quarter 2024 earnings call, shedding light on the company's performance and strategic outlook amidst the ongoing transition in the cooling and refrigerant sector. The call, led by CEO Brian Coleman and CFO Brian Bertaux, provided a comprehensive overview of Hudson's financial results, market trends, and future prospects.

A Mixed Quarter Amidst Market Challenges

The third quarter of 2024 saw a decline in Hudson's revenue, which was primarily attributed to decreased prices for certain refrigerants and a slightly lower revenue from the DLA contract compared to the previous year. Specifically, HFC prices fell by approximately 20% to around $6 per pound, impacting Hudson's gross margin performance. Despite these challenges, Hudson remains confident in its long-term growth strategy, emphasizing the eventual upward trend in HFC pricing due to the ongoing phase-out of HFCs and the expected increase in demand for reclaimed refrigerants.

Regulatory Developments and the Future of Reclaimed Refrigerants

One of the significant highlights of the call was the discussion on regulatory developments, specifically the EPA's final refrigerant management rule, which mandates the use of reclaimed refrigerants for servicing certain sectors of the market beginning in 2029. This rule is viewed as a positive step in driving the industry's broader use of reclaimed refrigerants, aligning with Hudson's commitment to reclamation and recovery practices. The EPA's decision to provide recovered pounds data by reclaimer, positioning Hudson as the second largest in recovered pounds, further underscores the company's leadership role in this area.

Navigating the Challenges Ahead

Looking ahead, Hudson faces challenges related to inventory levels and the ongoing transition to lower GWP refrigerants. The company expressed concerns over the potential for inventory imbalances in the coming years due to the combination of inventory levels and consumption allowances. To mitigate this, Hudson is advocating for lower consumption allowances in the 2025 to 2028 period. The company is also actively integrating its recent acquisition of USA Refrigerants, which is expected to enhance its ability to receive more recovered refrigerant and expand its customer base.

Staying Ahead of the Curve

In conclusion, Hudson Technologies' third quarter 2024 earnings call provided a clear picture of the company's performance and strategic outlook amidst the evolving cooling and refrigerant industry. Despite the current challenges, Hudson remains focused on its long-term growth strategy, leveraging its expertise in reclaimed refrigerants and its commitment to driving industry-wide recovery and reclamation practices. With a robust regulatory environment and a clear vision for the future, Hudson is well-positioned to navigate the challenges ahead and capitalize on the opportunities in the evolving cooling and refrigerant landscape.