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Hudson (HDSN) 6 Aug 24 2024 Q2 Earnings call transcript

AInvestWednesday, Aug 7, 2024 7:08 pm ET
2min read

In Hudson Technologies' second quarter 2024 earnings call, executives shared a mixed bag of news, highlighting both challenges and opportunities for the refrigerant supplier. The company reported a 17% increase in volume, a significant achievement in the face of downward pricing pressure and a challenging industry landscape. However, the margin performance fell short of expectations due to the pricing pressure, which outweighed the volume gains.

Strong Volume Growth Amidst Pricing Challenges

The demand for refrigerants remained strong, with a 17% increase in volume compared to the previous year. This increase is a testament to Hudson's ability to meet customer needs amidst a challenging pricing environment. However, the company experienced a 25% decline in the price of certain refrigerants and a 6% decrease in HFC pricing compared to the previous year. These pricing pressures negatively impacted the company's revenue and margin performance, contributing to a margin performance below the long-term target.

Despite the pricing challenges, Hudson remains optimistic about its future prospects. The company anticipates full-year revenue in the range of approximately $240 million to $250 million, with full-year gross margins of approximately 30%. This forecast is based on the assumption that current pricing levels continue through the remainder of the 2024 selling season.

Acquisition of USA Refrigerants and the Future of Recovery and Reclamation

Hudson Technologies made a strategic acquisition of USA refrigerants, a leading purchaser of recovery refrigerants. This acquisition is expected to significantly scale Hudson's capabilities around recovery and reclamation, allowing the company to enhance its ability to profitably leverage current and future phasedowns of virgin refrigerants and the resulting supply-demand imbalance. The addition of the USA team has led to the creation of a dedicated refrigerant acquisition group, focused on acquiring all types of refrigerants from CFCs to HFCs and the latest generation products.

The acquisition is also expected to boost Hudson's efforts to support the transition to more effective refrigerant management and environmentally friendly cooling equipment. The company is well-positioned to support the move to next-generation refrigerants and technology, with the EPA's proposed refrigerant management rule finalized in July. This rule mandates the use of reclaimed refrigerants for certain applications and equipment, marking a significant shift in the industry.

Capital Allocation Strategy and Share Repurchase Program

Hudson Technologies announced a share repurchase program of up to $10 million, reflecting the company's commitment to strategically deploying capital to drive long-term value for its stockholders. The program is expected to be initiated in the coming weeks, subject to legal guidance. This move is a testament to the company's confidence in its long-term growth prospects and its dedication to stockholder value creation.

Looking Ahead

The second quarter of 2024 presented both challenges and opportunities for Hudson Technologies. Despite the pricing pressures, the company reported solid profitability and demonstrated its ability to navigate the current market dynamics. The acquisition of USA refrigerants and the anticipated finalization of the EPA's refrigerant management rule position Hudson for growth in the long term. The company remains focused on its commitment to meeting customer needs and promoting recovery and reclamation, bridging the transition underway through current and future refrigerant phaseouts. With a solid financial position and a clear strategic direction, Hudson Technologies is well-positioned to capitalize on the opportunities ahead.

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