Hudson Technologies, Inc.

Greetings. Welcome to the Hudson Technologies fourth quarter and year-end 2025 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, Jen Beldeau of IMS Investor Relations. You may begin.

Thank you. Good evening, and welcome to our conference call to discuss Hudson Technologies' financial results for fourth quarter and year-end 2025. On the call today are Ken Gaglione, Hudson's President and Chief Executive Officer, Brian Berto, CFO, and Kate Houghton, Hudson's Senior Vice President of Sales and Marketing. 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 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 principal risks and uncertainties that affect our business and our performance and of the factors that could cause our actual results to differ materially. During the call, we will also be referring to certain non-GAAP financial measures. For a detailed reconciliation of these measures to GAAP financial measures, we refer you to the press release issued earlier this afternoon and the 8-K file this afternoon with the SEC. With that, we'll now turn the call over to Ken Gaglione. Please go ahead, Ken.

Good evening, everyone, and thank you for joining us. Since returning to Hudson as CEO in November, I've already had a chance to speak with many of you, and I'm pleased to have this opportunity tonight to address a broader audience of investors and analysts. It's been a very busy and productive three months with our internal operating teams as well as with key customers. There have been many positive changes and a lot of progress in the few years since I left Hudson, and I found the underlying foundation of the company on my return remains very solid. Hudson is comprised of a tremendous group of knowledgeable and service-oriented professionals, with a commitment to delivering innovation and sustainable refrigerant products, services, and technology that our customers need in this continuously evolving and frequently complex HVAC landscape. I'm excited to be back and to have this opportunity to lead Hudson as we write our next chapter. Before we get into the financial results, I want to take this opportunity to discuss my vision for Hudson and our strategy and priorities going forward. As you know, Hudson has been an industry leader in refrigerant distribution and an innovator in reclamation and refrigerant management service for decades. Our founder pioneered refrigerant reclamation in the U.S., and we successfully navigated two previous refrigerant phase-outs, CFCs in the late 90s and HCFCs in the mid-2000s, and now we're currently moving through another phase-down of HFCs to HFOs. Our core business of refrigerant reclamation, sales, and associated services remains the focus of our organic growth strategy. This is critical to our commitment to the refrigerant lifecycle management and sustainability, whereby we help to ensure optimum system performance using environmentally beneficial reclaimed refrigerants. There are many opportunities for our continued growth in support of this core mission. In the near term, and in alignment with our capital allocation strategy, we're focused on investing in a few concentrated areas that I'd like to speak about tonight, infrastructure, inventory, and ERP. First, investing in our infrastructure includes expanding our separation technology and automation to ensure we are well prepared and positioned to meet the evolving needs of our customers and the new, more complex HFO refrigerant blends. Additionally, We are investing in inventory that is crucial to our operations and supports our well-earned reputation for efficiently supplying our customers with the refrigerants they need when they need them. Looking back, we were somewhat light on inventory at the end of 2024, and as a result, missed delivering on some orders during the 2025 selling season, a situation that was corrected in the fourth quarter. We remain committed to investing in our inventory so that we are well positioned to deliver the service excellence that our customers have come to rely on. More recently, we went live with the new ERP system in February, 2026. This will add connectivity to our operations and provide a more efficient platform for our ability to reliably serve our customers. Like many new ERP implementations, we have had our share of startup headaches, which Brian will cover in more detail. Second, we're focused on the organic and strategic expansion of our service capabilities in the commercial market. In the short time that I've been back and working with our internal teams, we have identified several opportunities to apply our existing technology and expertise to provide additional service offerings to our customer base. The HVAC market has a multitude of servicing needs, and we believe we have an opportunity to capture more of that demand. Some examples include the separation and packaging of new refrigerant blends that require specialized balancing and handling, providing new methods to recover refrigerant from underserved segments of the market, and HVAC system optimization services, just to name a few. Third, we'll continue our disciplined approach to accretive acquisitions. In conjunction with driving organic growth, we will continue to evaluate acquisition and alliance opportunities that complement our core capabilities and or strengthen our geographical presence in the market. An example, our recent acquisition of Refrigerant Zinc is an example of that approach and has given us an enhanced presence in the western portion of the U.S. for both securing recovery refrigerant and refrigerant distribution. And lastly, fourth, returning capital to our shareholders via our opportunistic stock repurchase program. We repurchased $20 million in stock during 2025 and intend to continue our practice of opportunistic buybacks in 2026. I want to take this opportunity to acknowledge that these initiatives build upon the strong foundation passed to me from my predecessor. And for that, I and the company are truly grateful. I don't believe this is a time for a transformative change. It's not necessary for a company right now. But instead, it's a time for diversification of our revenue stream to reduce seasonality and our dependence on a few dominant refrigerants. Our entire team here is committed to capitalizing on the opportunities in front of us this year. Now I'll touch briefly on fourth quarter and four-year results before turning the call over to my colleagues. As many of you know, Q4 is historically our weakest quarter from a sales volume perspective as it falls outside of our nine-month selling season. Nonetheless, we delivered impressive revenue growth of 28% in the fourth quarter of 2025, primarily related to strong sales volume, which we believe is a promising indicator of the demand environment going into 2026, and a validation of our focus on driving volume by exceeding customer expectations. Additionally, during the fourth quarter, we completed our creative acquisition of Refrigerant Zinc, headquartered in Denver, which strengthens our presence and access to the recovered refrigerant supply chain in the Western United States. I'll give you a brief overview of our full 2025 financial performance. We grew 4% for the full year to $246.6 million in annual sales volume with a growth of 6%. Our gross margin was 25% and we posted non-GAAP adjusted net income of 19.7 million or 44 cents per diluted share. Also important here is that 2025 also marks our second consecutive year in achieving an 18% increase in reclamation volume. This is directly related to our activities at the contractor level. As we've frequently mentioned in these calls and elsewhere, refrigerant recovery is critical to the reclamation process, and Hudson has been an industry leader in building awareness among contractors around the importance of recovery, both from a sustainability standpoint and an economic perspective. we have substantially heightened our ability to secure recovered refrigerant via our acquisitions of USA Refrigerants and Refrigerants, Inc., which expanded our recovery team and our geographic reach. Expanding reclamation, that's a critical part of our supply chain, and it will be increasingly important with the EPA's further reduction in consumption allowances in 2029. I'll take a moment now and turn to our work for the Defense Logistics Agency, or the DLA, Last year, we recorded revenue of $38 million for the full year under our DLA contract. As many of you know, during the fourth quarter, we announced that we had been awarded the renewal of our DLA contract to support the U.S. military as a prime contractor. In late January 26, just last January, we were notified that a competitor had filed a bid protest regarding an administrative challenge to the DLA's evaluation of proposals and the contract award to Hudson Technologies. Our contract award has been rescinded while the DLA conducts its review of its internal processes. And while this development is disappointing, Hudson has a proven and successful 10-year working relationship with the DLA and will continue providing logistic support on our existing contract, which runs through 2026. We are determined to preserve our position as a value partner to the DLA while this protest is being resolved, and we will provide further updates as we learn more. In closing, I would say overall, I am very pleased, we are very pleased with our solid fourth quarter close to 2025, and we are energized for the opportunities we see to grow our business. Now I'll turn the call over to Kate Horton, our Senior Vice President of Sales and Marketing, to provide some additional detail around Hudson's market opportunities.