Hudson Technologies, Inc.

Greetings. Welcome to the Hudson Technologies first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, John Nesbitt of IMS Investor Relations. You may begin.

Thank you. Good evening, and welcome to our conference call to discuss Hudson Technologies' financial results for the first quarter 2023. On the call 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, or predictions about the future of forward-looking statements. Although they reflect our current expectations and are based on our best view of the industry and 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 discussion of the principal risks and uncertainties that affect our business and our performance and other factors that could cause actual results to differ materially. With that, I will now turn the call over to Brian Coleman. Go ahead, Brian.

Good evening, and thank you for joining us. 2023 is off to a solid start and in line with our long-term target expectations. As you know, the 2022 selling season was exceptional due to sale prices rising at a much faster pace than inventory costs. which creates a tough quarter to quarter comparison. Our first quarter results reflects this dynamic with revenues down slightly due to a combination of lower selling prices for certain refrigerants, as well as a decrease in demand compared to the first quarter of 2022. It's not unusual for us to see pricing pressure and lighter volume in the first quarter of any year since during January through March time period, large portions of the country are still facing winter weather and not yet thinking about turning on air conditioning systems. This is why we think it's more important to view and evaluate our performance over the full nine-month selling season rather than on a quarter-to-quarter basis. Looking at the bottom line, we reported strong profitability and upper-end cash flows during the first quarter of 2023. As we expected, gross margins has begun to moderate as the gap between inventory costs and sale prices narrow, while first quarter margin of 39% came in ahead of our long-range target of 35%. From a regulatory perspective, for the 2023, the continued 10% step-down in Virgin HOC production and consumption allowances mandated by the AMAC remains in place. As we cited on previous calls, in 2024, A 40% baseline reduction in virgin HFCs begins, and we believe the aggressive phase-down schedule will benefit our business by driving higher demand for our reclaimed refrigerants as virgin HFCs become constrained. There is an estimated install base of over 125 million HFC units, and we believe that the ongoing step-down in HFC production and consumption allowances mandated by the AMAC will benefit our business. Additionally, we anticipate that heightened regulatory and reporting initiatives could drive consolidation in our industry and provide acquisition opportunities as certain of our competitors may struggle with these new requirements. Long-term, we see a tremendous opportunity for the increased use of reclaimed refrigerants for many reasons, including we're seeing industry stakeholders beginning to embrace the environmental benefits of using reclaimed refrigerant which is nearly a zero GDP gas, and federal and state legislation is expected to increase mandates in the use of recovered and reclaimed refrigerants. With this in mind, we're focused on cultivating a customer base that encompasses industry participants who share our vision of the circular economy for refrigerants. As the virgin HFC supply is limited, the commitment to recovering and reclaiming refrigerant becomes even more important So we will continue to see customers who share our vision for the adoption of sustainable and responsible refrigerant management. We continue our efforts to promote our sustainable products, services, and consultation capabilities to the marketplace. And earlier this week, we announced that Hudson has become a chemical producer partner in the EPA's Green Chill Advanced Refrigeration Partnership Program. GreenChill is a voluntary partnership that works with the food retail industry to reduce refrigerant emissions and decrease their impact on the ozone layer and climate change. We are participating in GreenChill's corporate emissions reduction program as our Emeril refrigerants line uses recovered and reclaimed product to fulfill our customers' cooling system demands, providing a sustainable solution and promoting the circular economy of refrigerants. In addition to our Emerald products, Hudson is uniquely qualified to leverage our field service capabilities to help drive the transition to more efficient cooling equipment and greener refrigerants, while also servicing the existing install base with reclaimed refrigerants as the industry continues to evolve. With comfort cooling and refrigeration systems considered essential in most areas of the world and systems having a lifespan of approximately 20 years, the availability of reclaimed HFCs to bridge the reduction in virgin supply will be critical in ensuring an orderly transition to lower GDP refrigerants and equipment. We are pleased with the start to 2023 and encouraged by our prospects as we enter another selling season. That said, we'd like to many in our industry continue to watch the current economic trends. Experience has taught us that comfort cooling and refrigeration can remain more insulated from the worst of a recessionary environment, but a recessionary environment can present challenges for everyone. With our industry-leading reclamation technology and decades of experience, we believe Hudson is ideally positioned to provide sustainable and responsible refrigerant management to support the industry transition to greener refrigerant and environmentally sound cooling equipment. We see a tremendous opportunity for a company to play a leadership role in meeting the refrigerant needs of the growing installed base of cooling and refrigeration systems, as well as providing conversions and service options as equipment requirements evolve. In fact, we've attended many conferences where attendees and officials I've looked to Hudson for our expertise as thought leaders and sought our advice and assistance. This is an exciting time for our industry, and we are well positioned to facilitate and support the next move to the next generation technology and refrigerants. Now I'll turn the call over to Nat to review the financials. Go ahead, Nat.