Hudson Technologies, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Hudson Technologies fourth quarter 2020 earnings call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, John Nesbitt. Please go ahead.

Thank you. Good afternoon, and welcome to our conference call to discuss Hudson Technologies financial results for the fourth quarter and full year 2020. On the call today are Brian Coleman, President and Chief Executive Officer, and Nat Krishnadi, Chief Financial Officer. I'll take a moment to read a 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 business 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. Okay, with that, I'll now turn the call over to Brian Coleman. Go ahead, Brian.

Good evening, and thank you for joining us. We closed 2020 with our fourth quarter performance continuing to reflect the challenges that have characterized most of the year related to the public health and economic uncertainties caused by COVID-19 pandemic. On a positive note, we were seeing signs of price stability and certain price increases as we exit the year. During the fourth quarter, we saw continued decline in overall demand as many schools, businesses, and other public venues remain either entirely closed or open for only limited usage due to the pandemic. As we've discussed before, closures and facilities that have limited or no daily use have reduced needs for comfort cooling, so end market demand for refrigerants continue to be weak through the close of the year, resulting in lower volumes compared to last year. The reduced volume was partially offset, particularly in the fourth quarter, by the higher selling prices of certain refrigerants. The fourth quarter, which falls outside of our nine-month selling season, is typically our lowest demand quarter, and that remained consistent this year. However, as we've done throughout 2020, we've managed the business through SG&A cost reductions, delivering the balance sheet, and reduced interest expense, all while improving our leverage ratio, as Nat will describe later. 2020 was a challenging year overall, and as it progressed, we focused on mitigating the downside of the pandemic and the residual shutdown of the U.S. economy, which impacted our entire selling season and beyond. That being said, refrigeration and comfort cooling are widely regarded as essential, and as widespread vaccination programs continue to roll out, we are optimistic that more businesses, universities, and facilities will return to normal operations and will require our products and services as they get back to business as usual. While we don't know the exact timing of the full return to normalcy for our customer base, we used the fourth quarter to plan for 2021 selling season and we believe we are well positioned to meet potential demand as the economy comes back online and more cooling systems are turned back on. Hudson is a leading source for all refrigerants from legacy products like CFCs and HCFCs to the current HFCs and beyond to the next generation HFOs. We're positioned at two key points in the supply chain with a solid and long standing customer base. With our capabilities and relationships, we remain optimistic about the future opportunities despite the challenges of 2020. As a provider of refrigerants, we are also sharply focused on our role in the industry as sustainability legislation promotes initiatives to phase out certain HFC refrigerants. As such, one of the cornerstones of Hudson's operations is the reclamation of refrigerant and the complementary services we offer to support reclamation and system optimization. For many years, we, along with many others in our industry, have worked to assist the federal government's development of a program for the eventual orderly phase-down of burgeon HSC production while requiring the EPA to promote the growth and reclamation. Concrete progress was made in December 2020 when Congress passed the AMAC as part of the omnibus COVID-19 relief package. Under the AMAC, virgin HSC production will decrease by 85% over the next 15 years, with a 30% reduction in the baseline scheduled to take place in 2024. The regulated phase-down of HSC virgin production through the establishment of an allocation system is similar to the previous ODS phase-out, which included R22. With the expected allocation system, we will begin to see a tightening in the supply of virgin HFC refrigerants, likely resulting in HFC price increases. An important difference between the proposed HFC phase-down and the ODS phase-out is that the reclamation industry was in its infancy when the CFC and HCFC phase-out began. Today, the reclamation industry is well established, with Hudson representing approximately 35% of all refrigerant reclamation activity in the US. Reclamation is a key component of the orderly phase-out of refrigerants, and the new law requires the EPA to promote the growth of reclamation during the anticipated HFC phase-out. This represents a tremendous long-term growth opportunity, and we expect HFC sales will continue to grow as a percentage of our revenues as refrigerant systems are upgraded and new construction continues. We are also acting innovatively to drive further sustainability through our partnership with BlueSource, the nation's leading carbon offset developer retailer, to reduce greenhouse gas emissions associated with HFCs. Through this partnership, Hudson and BlueSource will work together initiating carbon projects to develop and market high-quality voluntary carbon offsets resulting from the reclamation of HFC refrigerants across the country using the American Carbon Registry's certified reclaimed HSC refrigerants protocol, or the ACR protocol. HSCs can be very harmful when vented into the environment, but alternatively, recovery and reclamation provide a significant environmental benefit, and that's why we're excited by the growth in the voluntary markets and HSC reclamation. The ACR protocol is extremely important and has been executed in advance of any regulatory requirements. and another recent development along these lines, Hudson has taken a significant step towards making our California production sites carbon neutral by offsetting their energy consumption with carbon credits. Our goal is to reduce energy consumption and achieve carbon neutrality at our production facilities, consistent with our mission of providing reclaimed refrigerants and equipment optimization services to help our customers lower their energy bills and reduce their carbon footprints. These efforts tie particularly well to the California's path to HFC reductions, which is currently independent of the federal efforts. For 2021, we are optimistic about the reopening of businesses, schools, and public facilities that make up our customers and markets, and we believe we are well positioned to leverage opportunities as cooling systems are reengaged. Moreover, the phase-down of HFC virgin production will be a catalyst for growth and development of the US Reclamation Market and our leadership in this space. Now we'll turn the call over to Nat to review the financials.