Hudson Technologies, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Hudson Technologies Second Quarter 2021 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. Sir, the floor is yours.

Thank you. Good afternoon, and welcome to our conference call to discuss Hudson Technologies financial results for the second quarter of 2022. On the call today are Brian Coleman, President and Chief Executive Officer, and Nat Krishnamurti, Chief Financial 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 these 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 discussion of the principal risks and uncertainties that affect our business and our performance and other factors that could cause our actual results to differ materially. With that, I will now turn the call over to Brian Coleman. Go ahead, Brian. Thank you.

Good evening and thank you for joining us. We are pleased to have delivered very strong second quarter results characterized by substantial revenue growth, significantly improved margins and improved profitability. During the quarter, we benefited from very strong demand coupled with favorable pricing trends across our portfolio of refrigerants. As we anticipated, we saw increased sales activity related to the continued reopening of our economy. Additionally, the return to business as usual coincided with the warm summer weather in the north and northeast, which has historically driven heightened demand in the marketplace as cooling systems come back online. From our vantage point today, we're seeing more normal levels for demand than we had seen last year. From a pricing standpoint, during the second quarter, we saw improved pricing across most refrigerants we sell, and we believe prices will remain stable for the near term with the expectation of increases in 2022 season as the implementation of the AMAC phase-down begins. With that reference in mind, I'd like to take a minute to discuss our gross margin performance. The significantly improved gross margin in the second quarter is primarily attributable to the higher selling prices of certain refrigerants. As you know, we take a FIFO approach to inventory management. And during the second quarter, we were largely selling through inventory we had acquired at lower costs. Therefore, we saw a more favorable impact on our gross margin performance. Moving forward, through the balance of the cooling season, we expect to see a return to more historical gross margin performance of the upper 20s to the lower 30% levels with particularly HFC refrigerant inventory at price points more in line with the current selling prices. Hudson is well positioned in the refrigerant supply chain at two key points, serving as a leading provider of all types of refrigerants. To give some context, we sell HFCs, which are currently the most commonly used refrigerant and represents the largest installed base of equipment, as well as legacy refrigerants like CFCs and HCFCs. and eventually we will serve as a supply source for next generation HFOs. We are secure in our leadership position and with our capabilities and relationships, we remain optimistic about our prospects for the future. As we discussed before, our industry is on the cusp of exciting new regulatory changes and we remain focused on the opportunities before us as environmental and sustainability legislation is adopted. The AIM Act, which was passed in December of 2020, requires the phase-down of HFC production over the next 15 years with a cumulative 40% reduction in the baseline scheduled to take place in just two and a half years. With the large and growing installed base of HFC systems, reclamation will be critical to maintaining necessary HFC supply levels to ensure an orderly phase-down. As a leading reclaimer, we believe this represents a significant long-term opportunity for Hudson to act as an HFC supplier while also supporting the transition away from the production of virgin HFCs. In September, the EPA will finalize the HFC allocations likely for the years 2022 and 23. Hudson believes it will receive allocations under this rulemaking. With the allocation rule, we'll have more visibility around how the industry will be positioned to meet demand as HSC production becomes more limited. Moreover, the EPA will have to administer other aspects of the AIM Act over the next several months, which should help fine tune the overall financial opportunity for our company. Along with the establishment of an allocation framework, the AIM Act mandates the EPA to support the growth and development of the reclamation market. Hudson represents approximately 35% of all refrigerant reclamation activity in the U.S., and our capabilities as a reclaimer uniquely position us to support the phase-down of HSC refrigerants and as an effective resource in the circular economy of the refrigerant industry. We are energized by the opportunities we are seeing not only to grow our business, but also to provide our services to benefit the environment. We're pleased with our progress to date in the 2021 selling season and look forward to continuing to meet the demands of our customers as the end markets they serve return to normal operations. We're encouraged by the opportunities we're seeing in the marketplace, and we look forward to leveraging our capabilities to enhance our leadership role as a refrigerant provider and reclaimer as the HFC phase-down begins. Now I'll turn the call over to Nat to review the financials.