Good evening, and welcome to our conference call to discuss Hudson Technologies, Inc.'s financial results for the fourth quarter and year-end 2024. On the call today are Brian Coleman, President and Chief Executive Officer, and Brian Bertaux, 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 our 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. 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 Bertaux 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 our 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, HFC 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 chemical plants, manufacturing facilities, among others. HFC 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% of the total aftermarket demand for HFCs. For the moment, there's no material demand for refrigerants as we've…

Thank you, Brian, and good evening, everybody. I will now review our fourth quarter and full-year 2024 financial results with a comparison to our 2023 results. Hudson Technologies, Inc. reported $34.6 million in revenue in the 2024 fourth quarter, a 23% decrease compared to the 2023 quarter. The decrease was primarily related to lower refrigerant market prices and lower revenue from the company's DLA contract. Fourth-quarter gross margin was 17% compared to 31% in the 2023 quarter due to lower refrigerant market prices. The 2024 fourth-quarter sequential change in gross margin is consistent with prior years reflecting lower seasonal sales volume. Our fourth-quarter SG&A of $8 million came in lower than the $8.5 million recognized in the 2023 quarter. We recorded an operating loss of $3.2 million in the 2024 quarter compared to operating income of $4.7 million in the 2023 quarter. The company reported a net loss of $2.6 million or a loss of $0.06 per basic and diluted share in the 2024 quarter compared to net income of $3.9 million or $0.09 per basic and $0.08 per diluted share in the 2023 quarter. Now turning to the full year. Hudson Technologies, Inc. recorded $237.1 million in revenue in 2024, a decrease of 18% compared to 2023. The decrease was primarily related to lower refrigerant market prices and lower revenue from the company's DLA contract. Our refrigerant sales volume increased slightly over 2023. However, this was more than offset by a steady decline throughout the year in market prices for HFC refrigerants. DLA revenue in 2023 was higher than normal due to certain surge purchases of approximately $20 million. The elevated DLA activity in 2023 made for a tough comp in 2024. The 2024 gross margin was 28% compared to 39% in 2023, reflecting lower refrigerant market prices throughout…

Thank you, Brian. As we begin 2025, we remain committed to our long-term outlook that refrigeration and cooling represent a tremendous growth opportunity for Hudson Technologies, Inc. Our progress might move intermittently at times due to factors we do not control. But our management team is very good at execution in areas that we do control, with particular emphasis on purchasing more recovered refrigerants, which yield higher gross profits and margins when sold as compared to the distribution of newly manufactured refrigerants. Operator, we'll now open the call to questions.

Thank you. The floor is now open for questions. Please press star one on your telephone keypad. We do ask if listening on speakerphone today, that you pick up your handset while asking your question to provide optimal sound quality. Once again, please press star one on your keypad now if you wish to join the queue to ask a question. Please hold a moment while we poll for questions. And the first question today is coming from Gerry Sweeney from Roth Capital. Gerry, your line is live. Please go ahead.

Brian one and Brian two. Thanks for taking my call. Which is one and which is two? I'll let you decide.

Alright. Thank you. I was gonna bring that up. But yes. We'll go on order of age. So just curious as to how much visibility you have into the channel and will you be able to see maybe some of the destocking upstream as it develops or if you had some ability to talk to some of the clients and understand where they are in that process.

Well, you know, back to what we suspect, we do expect that the inventory totals when reported for 2024 will be lower than 2023. And we think a good bit lower because of the 30% reduction in the allowances in the 2024 year compared to the 2023 year. Believing that the overall demand would have been very similar in 2024 to 2023. Obviously, when the data comes out, we'll confirm that. So we think there's been some decline in the upstream inventory balances, but it's still, we think, fairly significant. And so we're being cautious about 2025 right now. And sort of setting the stage that, obviously, it's still well before the cooling season. But prices haven't changed. They may. But we probably won't see that until we start to get into April and certainly by early May when we report the first quarter results.

Got it. You know, with that in mind and looking at your inventory at inventories at the close of the year, I think they were $96 million. You did mention something about inventories at the end. I didn't catch all that. But so this is redundant. I apologize. But looking at your inventories around $96 million, are you in good shape for that, or will you continue to go out and maybe purchase or be more aggressive with gas or just play normal? Eventually, the channel's gonna clear, and this could be a good opportunity to gain inventory, especially with your balance sheet. Just wanted to see how you think of that.

Historically, we just manage our inventory levels with the intent of being able to sell the inventory within the next season. We generally don't carry even a full year's worth of inventory. So the dollars you see in inventory and how the inventory dollars are coming down are not necessarily volume, but price, particularly, that we're trying to reload the inventory at lower prices. Now we thought probably when we report a Q2, that our cost basis was stabilizing relative to the sale price, but, unfortunately, the sale price declined further from Q2 into Q3. So we do think going forward, there'll be some more room to lower dollars in inventory just by price alone as we go through the 2025 sales season.

Think I got that. I may have to follow-up with that later, but I think I got that. Okay. Got it. And final question. I'm not sure if you'll answer this, but I'm gonna throw it out there. You know, obviously, reclaim is part of the business. Distribution is I think, a Virgin Gas still remains a portion of your business. Just curious on access to gas on that front and you know, what percentage of revenue or of that or how important does that play into just general revenue and

Yes. I mean, HFCs still are dominated by virgin supply. And then therefore, that would be true for Hudson Technologies, Inc. Now, certainly, because we're a reclamer, and able to access reclaimed HFCs, our percentage might be different than others, but still HFCs are single digits relative demand.

Got it. Okay. Got it. I'll jump back in queue. I appreciate it.

Thank you.

Thank you. Your next question is coming from Ryan Sigdahl from Craig Hallum. Ryan, your line is live. Please go ahead.

Hey. Good afternoon, Brian Brian. Wanna start with the DLA contract. So, one, have you seen any impact from whether it be Trump and kind of the administration change, the DoD cuts that are happening? And then as you look at kind of the new contract that's up for renewal and rebid right now, anything change from a timing standpoint, still expect a decision this summer. And then as far as the bid process goes, I guess, anything significant that's changed from your expectation of what Hudson Technologies, Inc.'s margins can be with that renewal?

Yeah. So back to the contract, there's several hundred line items. And they're all really consumable line items. We don't there is no guaranteed demand relative to the contract. That's why it's difficult to estimate what an annual revenue might be, but again, we think it's gonna be in that low to mid-thirties for 2025. We don't see any, you know, administrative activities that's going to negatively or at the moment positively improve that outlook relative to what we think we'll achieve in 2025 related to the contract. As it relates to the successor contract, the bid proposals went in, but went in later than the original timeline. So we think it'd be more likely the back half and a later part of 2025 when we hear the results of that process and who will be awarded with the next contract.

And then you said if you think about tariffs, trade wars, do you think that'll have any impact, or do you see any impacts from usage of allocations for 2025 of potentially pulling those early into the year or maybe even pushing them late.

Well, as it relates to refrigerants, we already had very, very large tariffs on the Chinese-produced HFC refrigerants, and pretty much almost every class whether they be individual components or blended products. The tariffs range probably from 200% to, like, 285% already. Where I think for the moment, we're gonna see more of an impact a direct impact would be on some steel tariffs. And if you think about some of the tariffs that are being put in place on steel, that could impact the cost of cylinders. And we have a large reusable cylinder fleet so we don't need to really buy a lot of reusable cylinders just to kind of fill in as end of life comes out of that fleet. But as it relates to disposable cylinders, which go towards the smaller size refrigerants for mainly residential, light commercial, we think we're gonna see some price increases on the cylinders. And we're expecting to be able to pass those price increases through the channel as we would expect most of the other suppliers of refrigerants to that channel would likely do the same.

Great. Guys. Good luck.

Thank you.

Your next question is coming from Josh Nichols from B. Riley. Josh, your line is live. Please go ahead.

Yeah. Thanks for taking my question. Just kind of curious with like the switch over for new OEM, equipment to this hybrid refrigerant just still early days. I mean, some other peers have said that you may not see the impact until, like, two tier or whatnot, but I'm just curious your thoughts on how that may impact inventory levels or potentially, like, the pace of the stocking for 2025?

So the newer equipment and the equipment transition rule is kicking in the gear. The products that would have been stockpiled really are related to the HFC legacy systems. So products associated with either the components to 410a or 410a as an example. Right now, there is market disruption as it relates to the transitioning to the lower GWP systems. Mainly, related to current demand and supply, but likely as it relates with any transition, you run into that in the early days and then quickly the industry catches up with availability on both the equipment and on the refrigerant side. So there are some, you know, chunkiness right now as the lower GWP equipment is being launched. There is definitely sell-through of the legacy equipment so we'll likely see a lot of 410a units being sold in the 2025 year installed in the 2025 year. And all these different supply issues on the transition of the lower GWP equipment should clean themselves up over the next few months.

Thank you. And then, Brian, I know that primary, of course, focused on reclamation, but you do also sell some, like, historically, like, virgin HFCs, lower margin, granted. And, like, the reclamation side of the business. I think it's, like, 20% for urgent. That something that you guys I guess, would still be doing much of or would you be able to do that for the new refrigerants as well? Because the pricing for the newer refrigerants going into OEM equipment is presumed to be higher than HFCs given the transition that's going on or would you not really be impacted by that?

Well, we definitely, technically, can reclaim replacement refrigerants. It probably though will be a while before you start to see any material amounts of that because they have to be installed and then problems have to occur and so forth. Where the concern could be about what reclaim activity we could do or volumes is around some of these replacement low GWP refrigerants are under patent. And because they are multi-component products, we want to make sure that, you know, we're not upsetting any relation patent rights and the things like that. So those are things that will get worked out over the next number of years as these replacement systems get installed and eventually start to run into problems. But for the near term, we're pretty much gonna see large volumes of HFCs coming back. We know, discussed this evening strategies to grow our overall volume of recovered HFCs, we expect to continue to do that in 2025 and beyond.

Thanks. And then last question for me. I mean, we talked a lot about HFCs, but just some of the older stuff like R-22, as that continues to age out. Have you seen any major shifts in terms of demand or price on that front, or does that continue to hold pretty steady and much higher price with relatively steady volumes.

Well, the volumes will decline slowly over time and have been declining. And you could see that really as reported through the EPA reclaim data. So you'll see that R-22 reclaim volumes on an annual basis continued that downward slope. And that downward slope is likely gonna tie into how demand is declining as well. So for the most part, R-22 using R-22 as the reclaim proxy R-22 is stable. And has been pretty stable relative to supply and demand. And really not influenced in the way the HFCs have been because HFCs are the class of refrigerants where there's an upstream stockpile.

Understood. Thanks, Brian.

Thank you. Your next question is coming from Austin Moeller from Canaccord. Austin, your line is live. Please go ahead.

Hi. Good afternoon. So just my first question, do you have any updates on potential overseas licensing opportunities of portable distillation equipment?

I'm sorry. Are you asking the question about Hudson Technologies, Inc. licensing equipment?

Yes. Or rather of customers overseas being able to use your licensed equipment.

So we have over the years a handful of relationships where we've worked with organizations that already have an HVAC business and infrastructure. And have licensed our equipment and our proprietary distillation know-how. We're definitely looking to do more of that. We're spending a lot more time at the meeting of the parties for the Montreal Protocol. Listening to developing nations, trying to understand how we might help there. Almost always, we're gonna look for a partner that already has an established business that could make sense for us to try and license our technology. But nothing current, in the recent months.

Okay. And just a second question, do you think it's possible there could be changes to the production cap for HFCs allowed under the new congress, or do you think that the chemical manufacturers are more focused on transitioning to HFC and Congress likely won't change anything.

Well, we focus mainly, not so much the production, but the consumption cap. And it's really that first fill of that first sale inside the United States borders relative to the allowance system. But if there was to be a change to the allowances, that would have to be legislated. Congress would have to construct a bill and then it would have to pass the house and senate and then obviously executed by the president. There's no, to my knowledge, there's no industry members or anyone advocating for any changes to the existing AM Act. There was a congressional review process on the refrigerant management rule that was issued by the EPA September of this year, which in part included the mandates for the use of Reclaim. It doesn't look like that congressional review of that particular rule making is a priority for the current congress. When we looked at the list from the house majority leader relative to the congressional review projects or process, anything associated with the AMAC didn't appear to be a priority for them.

Great. That's very helpful. Thanks for the insight.

Thank you. This does conclude today's question and answer session. I would now like to turn the floor back to management for closing remarks.

Thank you, operator. I'd like to thank our employees for their continued support and dedication to our business. And both our long-time shareholders and those that recently joined us for their support. Look forward to speaking with you after the first quarter results. Have a good night, everybody.

Thank you. This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.