Hudson Technologies, Inc.

Good day, ladies and gentlemen, and welcome to the Hudson Technologies first quarter 2020 earnings conference call. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to your host for today, Nat Krishnamuri. Please go ahead. The floor is yours.

Thank you. Good evening, and sorry for the delay. Welcome to our conference call to discuss Hudson Technologies financial results for the first quarter of 2020. My name is Nat Krishnamurti, CFO of Hudson Technologies. On the call with me today, we have Kevin Zuggaby, Chairman and CEO, and Brian Coleman, President and Chief Operating Officer. I'll now take a moment to read the Safe Harbor Statement. During the course of this conference call, we will make certain forward-looking statements. All statements that address expectations, opinions, or predictions about the future are forward-looking statements. although they reflect our current expectations and are based on our best view of the industry and of our businesses as we see them today, they are not guarantees of future performance. Please understand that these statements involve a number of risks and assumptions and since those elements can change and in certain cases are not within our control, we would ask that you consider and interpret them in that light. We urge you to review Hudson's most recent Form 10-K and other subsequent SEC filings for a discussion of the principal risks and uncertainties that affect our business and our performance and of the factors that could cause our actual results to differ materially. With that, we will now turn the call over to Brian Coleman.

Good evening and thank you for joining us. Again, we apologize for the delay. Let me start by saying that COVID-19 has had a dramatic impact on the lives of every person, business and industry throughout the United States. and of course Hudson is no exception. However, Hudson operates in a critical infrastructure industry and is an essential business as defined by the United States government as we procure, process, service and deliver refrigerants and industrial gases to the government and refrigerants and services to wholesale and retail organizations which serve hospitals, supermarkets and many other industries throughout the United States. We've kept our plants operating and have been effectively running our operations while following all state and federal guidelines to keep our employees safe and healthy. As of this date, there has been no material impact on our ability to procure or distribute our products and services. Our priorities throughout the pandemic have been to ensure the health and safety of our employees, to keep our products in supply, and to maintain the quality and safety of our products. to best serve our customers across all channels as they adapt to the crisis and to position ourselves to emerge strong when the crisis ends. Looking back at the first quarter of 2020, we see that the market has stabilized. Refrigerant prices have been constant, and we're seeing some strengthening in the pricing of R22. In addition, we saw an increase in the volume over the same period last year, building on the increased volume we saw in 2019. During the first quarter, we improved our gross margins over 2019 and believe we have an opportunity to further drive improved margins in 2020 as we replace higher-priced inventory with low-priced product. We believe that customers' inventories are low, and with the elimination of R22 production importation in 2020, we expect to see a tightening in the supply of virgin R22. We are a few weeks away from the prime selling season, so it's too early in the season to know how pricing will develop. As we proceed through 2020, we are concerned that the economic factors resulting from the various governmental restrictions that have been put in place as a result of COVID-19 outbreak could have a negative impact on the demand and or price for refrigerants. The effect on refrigerant sales due to the closing of businesses combined with negative financial impact to the economy is unknown at this point. Time will tell. This is yet another reason why we describe the sales season as a nine-month season, not necessarily a quarter-to-quarter season. The marketplace will likely adopt a phase-out of HFC refrigerants as the development and use of more environmentally friendly products continues. The American Innovation and Manufacturing Act of 2019, or the AIM Act, if enacted, would phase down HFC production over the next 15 years. The AIM Act enjoys strong bipartisan support, and both the House and the Senate are expected to take up further consideration of the AIM Act when they return from their extended COVID break. We are encouraged by the level of bipartisan support for a bill which, if enacted, would start a regulated phase down of HFCs. We believe a phase down of HFCs will lead to the establishment of an allocation system and Robert Stoody. Our diverse portfolio of refrigerants includes HFCs, R22 and CFC sales and we are preparing for future demand for HFO refrigerants which are designed ultimately to replace HFCs. HFC sales represent a growing percentage of our revenues and with the projected installed base We see HFCs as a tremendous long-term growth opportunity for our company. We continue to replace our higher-cost FIFO inventory layers with lower-priced product, which we believe will drive continued improvement in our margins in 2020. We have increased overall sales volume to our customers and have positioned the company to benefit from stabilization of industry pricing dynamics. We remain optimistic about the long-term opportunity in front of us, and we believe we have a competitive advantage in the marketplace because of our long-standing experience and because of three key strategic advantages. First, our strong distribution network, which puts us at two key points in the supply chain, our ability to sell all refrigerants from legacy gases like the CFCs to today's commonly used HCFCs and HFCs, and to Tomorrow's Next Generation HFOs and our state of the art proprietary technology that enables us to reclaim all of these refrigerants and thereby become the producer supplier of phased out refrigerants. Now I'll turn the call over to Nat to review the financials.