Hudson Technologies, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Hudson Technologies' fourth quarter year-end 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, Investor Relations for Hudson Technologies. Sir, the floor is yours.

Thank you. Good evening, and welcome to our conference call to discuss Hudson Technologies' financial results for the fourth quarter year-end 2021 earnings. On the call today are Brian Coleman, President and Chief Executive Officer, and Matt 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, and 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 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 principle of risks and uncertainties that affect our business and our performance and for the factors that could cause actual results to differ materially. Okay, with that, I will now turn the call over to Brian Coleman.

Go ahead, Brian. Good evening, and thank you for joining us. We're pleased to have closed 2021 with record fourth quarter and full year results. Our strong fourth quarter performance reflected significant revenue growth, enhanced margins, and improved profitability. It is important to note that our fourth quarter has historically been our weakest quarter, given that it falls outside our traditional nine-month selling season which takes place from January through September. However, after the close of the selling season this year, the industry saw continued strength in the average selling price of certain refrigerants, which drove our unusually strong fourth quarter performance. Looking forward, we are energized to carry the momentum we built throughout 2021 into 2022. To provide some pricing perspective, the average selling price of many refrigerants increased sequentially from the third quarter to the fourth quarter. We had not expected fourth quarter pricing to increase but rather remain stable as it has traditionally done. Instead, pricing for certain refrigerants steadily trended upward throughout 2021. As we enter the 2022 season, we believe this pricing behavior will continue particularly as the AMAC phase down of HFCs begins. Assuming this pricing trend continues for the 2022 selling season, we could see revenues exceeding $270 million in 2022. If we look to Europe as guidance for pricing relative to the initial steps taken under the HFC phase down there, we could expect to see a doubling in price for HFC refrigerants from the 2021 levels in the next few years. While we can't be certain pricing will reach those levels or the timing of any such increase, but over time, if we reach those levels, we could see our revenues reach $350 million with an operating income of over $70 million. Moreover, such a pricing dynamic should be a stimulus for growth and reclamation, which has not been factored in into this basic analysis. As we move through 2022 and beyond, we expect to see gross margin performance at the low 30% level, as we expect to acquire HSC refrigerant inventory at higher price points than reflected in the 2021 full year. As reclaim volumes increase, we could begin to see gross margin improvement greater than the expected low 30% levels because we acquire gas for reclamation at lower costs as compared to virgin purchases. That said, we wouldn't expect to see a reclamation benefit to gross margin until the 2023 season. In a favorable development, last week we announced that we have completed the refinancing of our debt. Nat will go into more details on this, but in short, we've entered into a new $85 million term loan and increased our ABL facility to a total of $90 million. This new debt structure will meaningfully improve our cost of capital and interest expense with an approximate 3% reduction in the overall effective interest rate. Refinancing our debt and securing ample availability for the future is a key development for Hudson, reflecting our strong operating model and improving performance. With our visibility today, we believe 2022 will be a year of tremendous opportunity for Hudson related to our strong market positioning, particularly as the industry begins to comply with the AMAC, as well as other legislative initiatives. To recap, the AMAC has introduced a mandate 10% step down in the production and consumption allowances for virgin HFCs in 2022 from the original baseline. The AMAC requires further phase downs of virgin HFC production over the next 15 years with a cumulative 40% reduction in the baseline scheduled to take place in less than two years. Reclamation will be critical to maintaining necessary HFC supply levels to ensure an orderly phase down. As a leading reclaimer, we believe this will enable Hudson to act as an HFC supplier while also supporting the transition away from the production of virgin HFCs. We have the ability to process and reclaim all refrigerant gases including CFCs, HCFCs, HFCs, and HFOs. So our reclamation capabilities provide a long-term market opportunity. In the near term, the installed base of HFC equipment continues to expand, and as virgin supply tightens, we expect the demand for HFCs will drive accelerated reclamation activity to fill the anticipated supply gap. With our industry-leading reclamation capabilities, long-standing customer relationships, and efficient distribution network, we are well positioned to enable the efficient transition to greener refrigerants. We've also previously mentioned CARB or California Air Resources Board initiatives. Currently, CARB has proposed a requirement that OEMs use a minimum 10% reclaimed refrigerant in the factory-charged equipment, and we've been actively pursuing opportunities to assist OEMs in meeting this requirement. To that end, in January, we were excited to announce that Hudson will supply reclaimed refrigerant to Aprilaire for use in their healthy air solutions for homes. We are thrilled to work with Aprilaire as they take an early adopter approach to incorporating reclaimed refrigerant into their products. Hudson was founded on a commitment to sustainability, and in conjunction with Aprilaire, Our focus on recovering, reclaiming, and reusing refrigerants can reduce waste and greenhouse gas emissions and create maximum economic value for used refrigerants. Hudson represents approximately 35% of refrigerant reclamation activity in the U.S., which positions us to not only support the phase down of HSC refrigerants, but also as a key source in the circular economy of refrigerants. We are energized by the opportunities we're seeing to grow our business and to provide our services to better benefit the environment. Now I'll turn the call over to Nat to review the financials. Go ahead, Nat. Thank you, Brian.