Hudson Technologies, Inc.

and welcome to the Hudson Technologies fourth quarter and full year 2024 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. Should you wish to join the queue to ask a question at any time, you may press star one on your telephone keypad. Should you wish to remove yourself from queue, you may press star two. It's now my pleasure to turn the floor over to Jen Belladeau, of IMS Investor Relations. Jen, the floor is yours.

Thank you. Good evening, and welcome to our conference call to discuss Hudson Technologies' financial results for the fourth quarter and year-end 2024. On the call today are Brian Coleman, President and Chief Executive Officer, and Brian Berto, Hudson's CFO. 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 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. With that out of the way, I'll turn the call over to Brian Coleman. Please go ahead, Brian.

Good evening, and thank you for joining us. Our fourth quarter unfolded largely as expected, closing out what was a challenging year. As many of you know, our fourth quarter has historically been characterized by seasonally slower sales activity compared to our nine-month selling season, and this year was no exception. Brian Berto will provide details about our financial results a little later in the call, but at a high level, full year revenue of $237 million was slightly below our revised target of $240 million. We achieved a revised full-year gross margin target of 28%. We further strengthened our unlevered balance sheet as evidenced by our cash position of $70 million and no debt at December 31, 2024. And after establishing our stock repurchase program during the third quarter, we repurchased a total of $8.1 million of common stock in 2024. As we previously discussed, our 2024 cooling season was impacted by decreased pricing for certain refrigerants, and our full year results reflect that pricing dynamic, as well as lower revenue from our DLA contract as compared to 2023. As we reported, HSC pricing in 2024 declined up to 45% throughout the sales season, and we ended the year with no price improvement. However, our actual sales price decline was not as severe as the market due to our diverse sales channels, which include direct-to-wholesalers and direct-to-end customers, such as supermarkets, chemical plants, manufacturing facilities, among others. HSC pricing at the close of 2024 was just under $6 per pound and remains at this price point as we kick off 2025. As I mentioned last quarter, when we discussed HFC pricing, we're generally focused on the price of HFC 410A, which represents about 70 percent of the total aftermarket demand for HFCs. For the moment, there is no material demand for refrigerants as we've not entered the 2025 cooling season. Certainly, when we report our first quarter results in early May, we'll have a better understanding of any possible supply-demand imbalance But as we've previously noted, we have a concern that upstream inventories may still be at a high level. For the moment, we see the 2025 gross margin ranging from the mid to upper 20s. And certainly on price alone, we will have a difficult comparison to the first quarter of 24 in 2025. Ultimately, we will know the 2024 inventory data from the EPA, but that will likely not be available until the third quarter of this year. To give some context around revenue from the DLA contract, during the full year 2024, we recognized $36 million in revenue from the contract, which was slightly ahead of where we expected normal purchasing levels to be, and we anticipate 2025 will trend to normal purchasing levels. As you may remember, during 2023, we saw a significantly increased purchasing activity of approximately $20 million in revenue through the DLA contract than in any previous year, and we anticipated 2024 to return to a more normalized DLA purchasing level. As we previously discussed, we do not control market pricing for HFC refrigerants, but we are fortunate to have a diverse customer base that allows us to perform better than market. We will always focus on what we control. namely ensuring that our customers have the right refrigerants where and when they need them, and promoting recovery and reclamation activities as our industry transitions to lower GDP equipment and refrigerants. Our established distribution network and longstanding supplier and customer relationships position us well to efficiently meet the market demand for all types of refrigerants, including next generation low GDP refrigerants. And we remain focused on expanding our customer base and market reach. Importantly, a long-term view is that the current phase down of HSC refrigerants create a significant opportunity for our reclamation business. The installed base of HSC equipment will be operable for 20 plus years to come. And as the supply of virgin HSCs become limited, reclaim HSCs will be needed to fill the anticipated supply-demand gap. Additionally, there have been regulatory changes at both federal and state levels to promote and require the use of reclaimed refrigerants. On the federal level, in September, the EPA published its final refrigerant management rule, which, among other directives, mandates the use of reclaimed refrigerants for servicing in certain sectors of the market beginning in 2029, and thereby banning the use of newly manufactured or virgin refrigerants for servicing. This is the first time our industry has seen a federal requirement for the mandatory use of reclaimed refrigerants in certain sectors, and we believe this represents a strong step forward in the drive toward broader use of reclaimed refrigerants. Recently, there's also been promising legislation active among the states. led by California, which has implemented laws to prohibit the sale and use of certain newly manufactured high GDP HFCs and has mandated the use of reclaimed refrigerants in their place. At the start of 2025, California also began implementing a mandate for the use of reclaimed refrigerants in state government facilities, thereby prohibiting the use of virgin refrigerants. New York has legislation somewhat similar to California and Washington State has legislation pending with more states expected to follow. We believe that these mandates create an additional opportunity for contractors to follow the law and not intentionally vent refrigerants. We believe that contractors will recognize that venting is no longer sustainable if they plan to serve their customer needs associated with these reclaim mandates. It should be noted that our overall reclaim activity increased by 18% in 2024. We are intent on maximizing our recovery and reclamation capabilities, and our strategic acquisition of certain assets of USA Refrigerants in June of 2024 strengthened our capabilities in this area. Refrigerant recovery is integral to the reclamation process. So our addition of USA and its recovery network, combined with our ongoing efforts to promote recovery in the field, are strengthening our ability to source recovered refrigerants. In terms of our efforts in the field, Hudson pays for recovered refrigerant, and we focused on promoting best practices for recovery of refrigerants during technician training, with an emphasis on the existing mandates for the use of reclaimed refrigerants. We believe that informing technicians about these mandates helps reinforce the message that the practice of venting refrigerants does not make sense for them either financially or commercially. We communicate this message by speaking at cooling industry events and by addressing technician training sessions hosted by our customers. During the fourth quarter, Hudson attended and or spoke at Service World Expo, Green Build, and ACCA, among others. As we move toward the heart of the cooling season for 2025, we believe we are well positioned to grow our role as a leading provider of all types of refrigerants, particularly reclaimed refrigerants, by ensuring we are positioned to capitalize on refrigerant sales, servicing opportunities, and the reclamation needs of our customer base. We remain focused on balancing our commitment to driving a smooth transition for our customers through the current refrigerant phase down, while promoting our industry's continuing evolution towards lower GDP equipment and refrigerants. Now I'll turn the call over to Brian Berto for the review of our fourth quarter financial results.