Hudson Technologies, Inc.

Good afternoon, ladies and gentlemen, and welcome to today's Hudson Technologies third quarter 2022 earnings call. At this time, all participants have been placed on a listen-only mode, but 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 of IMS Investor Relations. John, the floor is yours.

Thank you, Tom. Good evening and welcome to our conference call to discuss Hudson Technologies' financial results for the third quarter 2022. On the call 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 expectations 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 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 will turn the call over to Brian Coleman. Go ahead, Brian.

Good evening, and thank you for joining us. Our third quarter delivered a strong close to our 2022 selling season, reflected in record revenues, improved margins, and enhanced profitability. During the third quarter, we continued to benefit from sustained strength in the pricing of certain refrigerants. In addition to delivering our third quarter of record revenue performance, we achieved gross margins of 49% in the quarter and a significant improvement when compared to gross margin in the third quarter of 2021. However, as expected, gross margin moderated sequentially as compared to the first and second quarters of this year, as we began to see less of a gap between the inventory cost and the sale price. As we enter the fourth quarter, which is seasonally our weakest quarter, we are focused on maintaining our existing strategic relationships and adding new customers who share our vision of the circular economy for refrigerants. Hudson is a long-time industry leader in the facilitation and adoption of sustainable refrigerant management, and we are deliberate on our efforts to attract partners who are similarly committed. In addition to our traditional sales activities, we are also heightening the market recognition of sustainable products, services, and consultation capabilities through our participation at industry events. In mid-September, we exhibited at the Food Industry Association's Energy and Store Development Conference, which focused on retail food energy use and management, HVAC and refrigeration, and sustainability. In October, Hudson presented a continuing education webinar around the AMAC phase-downs, and the importance of reclamation, which was sponsored by the industry news magazine, ACHR News. With almost 500 live attendees, and we anticipate another 700 views from registered participants. This week, we're exhibiting at the Green Build International Conference and Expo, introducing our products to attendees focused on creating greener buildings and communities throughout the use of sustainable solutions, And next week, we'll be at the Institute of Heating and Air Conditioning Industry Trade Show. IHACI is a California HVAC industry organization focused on contractor training. And with California's role as an early adopter for certain reclamation activities, we look forward to showcasing our capabilities there. As an industry veteran, we're aggressively pursuing opportunities to share our more than 30 years of experience and expertise and to provide alternatives and thought leadership as our industry continues to transition to next generation refrigerants. As you know, that transition has begun in earnest with the start of the industry's compliance with the AMAC this year. To recap, the AMAC mandates a 10% step down in the production and consumption allowances for virgin HFCs in both 2022 and 2023. and a 40 percent baseline reduction in 2024. The Act mandates a much faster and more aggressive phase-down than what was undertaken with the R22 phase-out a few years ago. It promotes the use of reclaimed refrigerants to meet demand as virgin production steps down. While the move to reclaimed refrigerant use won't happen overnight, the estimated install base of HFC units was more than 100 million in 2020. So as the leading reclaimer with the fastest state-of-the-art technology and decades of proprietary knowledge, Hudson is uniquely positioned to fill the anticipated HFC supply gap with reclaimed refrigerants as virgin production is phased out. Moreover, the EPA just issued a proposed allocation rule covering the 2024 to 28 phase down period with a mandated 40% reduction from the original baseline. Parallel opportunities related to the AMAC, we're working to establish partnerships in response to compliance initiatives being proposed by certain states as well as the federal government. For example, we've spoken a great deal about CARB regulations in California, which require OEMs to use a minimum of 10% reclaimed refrigerant in the factory-charged equipment. In the past year, we've announced partnerships with Aprilaire and Lenox, whereby Hudson will supply the reclaimed refrigerant needs for their new equipment. Likewise, there are many other states evaluating moving forward on regulations requiring the use of reclaimed HFCs, and we believe there's a tremendous opportunity for us to grow our business as we help customers navigate the current and future regulatory environment. As the leader and claimer in the United States with an estimated 35% market share, we are well positioned to supply reclaimed refrigerant at the installed base of equipment as virgin HSC production is phased out and also as a supplier for new equipment at the OEM level. We have decades of experience and several prior refrigerant phase downs under our belts. And we're looking forward to playing a leadership role as this most recent refrigerant evolution continues. Up for cooling, and refrigeration systems are essential to day-to-day life, and these systems have a long life expectancy. Therefore, the orderly transition to lower GDP refrigerants and equipment will rely for some time on the availability of reclaimed HFCs to bridge the reduction in virgin supply. We remain committed to providing the products and services to enable an industry-wide transition to next-generation refrigerants and more efficient equipment. As the leading reclaimer, Hudson has the capability to reduce refrigerant waste and the harmful venting of refrigerants into the atmosphere by driving forward the technology and incentives that enable our industry partners to recover, reclaim, and reuse refrigerants. We're pleased to have delivered exceptionally strong performance in the third quarter and for the nine-month selling season. As we move through the close of 2022 and on to 2023, we, along with the rest of our industry, are keeping a close watch on the economy because while comfort cooling and refrigeration can likely remain more insulated from the worst of a recessionary environment, an economic downturn isn't a positive element for anyone. Hudson is uniquely positioned with proprietary reclamation technology, longstanding customer relationships, and a proven distribution model to continue driving our leadership role in the circular economy of refrigerants. We remain focused on leveraging our strengths to grow our business while also facilitating the transition to next-gen cooling alternatives. Now I'll turn the call over to Nat to review the financials.