Hudson Technologies(US:HDSN)2025-08-01 20:00PART I – FINANCIAL INFORMATION Item 1 - Financial Statements (unaudited) Presents Hudson Technologies' unaudited consolidated financial statements, covering balance sheets, income, equity, cash flows, and accounting notes Consolidated Balance Sheets Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | June 30, 2025 (unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | Cash and cash equivalents | $84,293 | $70,134 | | Trade accounts receivable – net | $35,883 | $13,629 | | Inventories | $77,683 | $96,247 | | Total current assets | $212,587 | $195,512 | | Total Assets | $317,853 | $302,652 | | Total current liabilities | $54,804 | $47,809 | | Total Liabilities | $63,074 | $56,802 | | Total Stockholders' Equity | $254,779 | $245,850 | Consolidated Statements of Income Consolidated Statements of Income Highlights (Amounts in thousands, except per share amounts) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $72,849 | $75,282 | $128,192 | $140,532 | | Gross profit | $22,811 | $22,571 | $34,879 | $43,992 | | Operating income | $12,724 | $12,798 | $15,799 | $25,574 | | Net income | $10,168 | $9,585 | $12,926 | $19,147 | | Net income per common share – Basic | $0.23 | $0.21 | $0.29 | $0.42 | | Net income per common share – Diluted | $0.23 | $0.20 | $0.28 | $0.40 | Consolidated Statements of Stockholders' Equity Changes in Stockholders' Equity (Six Months Ended June 30, 2025 vs 2024, Amounts in thousands) | Item | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Balance at January 1 | $245,850 | $228,773 | | Repurchase of common shares | $(4,535) | — | | Share-based compensation | $538 | $751 | | Net income | $12,926 | $19,147 | | Balance at June 30 | $254,779 | $248,668 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, Amounts in thousands) | Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net income | $12,926 | $19,147 | | Cash provided by operating activities | $20,569 | $40,835 | | Cash used in investing activities | $(1,875) | $(22,755) | | Cash used in financing activities | $(4,535) | $(2) | | Increase in cash and cash equivalents | $14,159 | $18,078 | | Cash and cash equivalents at end of period | $84,293 | $30,524 | Notes to the Consolidated Financial Statements Note 1 - Summary of Significant Accounting Policies - Hudson Technologies provides refrigerant services, including sales, recovery, reclamation, and RefrigerantSide® Services, primarily for commercial air conditioning, industrial processing, and refrigeration systems1920 - The USA Refrigerants Acquisition (June 6, 2024) for $20.7 million cash (plus up to $2.0 million contingent payment) aims to broaden customer networks, increase access to recovered refrigerants, and enhance geographic footprint2425 - The AIM Act mandates a phase-down of HFC production and consumption, with a cumulative 40% reduction for 2024-2029. Refrigerant reclamation is unrestricted and crucial for maintaining HFC supply272829 - The EPA's Final Refrigerant Management Rule (Sept 20, 2024) requires better management and reuse of existing HFCs, including leak repair, automatic leak detection, and mandatory use of reclaimed HFCs for certain applications30 Revenue from United States Defense Logistics Agency (DLA) (Amounts in millions) | Period | Revenue | | :-------------------------------- | :------ | | Six months ended June 30, 2025 | $17.7 | | Six months ended June 30, 2024 | $18.8 | DLA accounted for greater than 10% of the Company's revenue and outstanding accounts receivable Note 2 - Fair Value - The company categorizes fair value measurements into a three-level hierarchy: Level 1 (active markets, identical assets), Level 2 (less active markets, similar assets), and Level 3 (unobservable inputs)7273 - Carrying values of cash, trade accounts receivable, and accounts payable approximate fair value due to their relatively short maturity32 Note 3 - Inventories Inventories (Amounts in thousands) | Item | June 30, 2025 (unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | Refrigerants and cylinders | $85,950 | $104,479 | | Less: net realizable value adjustments | $(8,267) | $(8,232) | | Total | $77,683 | $96,247 | Note 4 - Property, plant and equipment Property, Plant and Equipment (Amounts in thousands) | Item | June 30, 2025 (unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | Subtotal (Gross) | $66,120 | $63,998 | | Less: Accumulated depreciation | $(43,901) | $(42,444) | | Total (Net) | $22,219 | $21,554 | Depreciation expense for the six-month periods ended June 30, 2025 and 2024 was $1.5 million and $1.6 million, respectively Note 5 - Leases - Operating lease expense was $0.9 million for both the six-month periods ended June 30, 2025 and 202481 Operating Lease Liabilities and Terms (Amounts in thousands) | Metric | June 30, 2025 (unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | Present value of operating lease liabilities | $5,959 | $6,878 | | Weighted-average remaining term for operating leases | 2.51 years | 2.87 years | | Weighted-average discount rate for operating leases | 8.53% | 8.45% | Note 6 - Goodwill and intangible assets - Goodwill remained at $62.3 million as of June 30, 2025, and December 31, 2024, with no impairment losses recognized for the six-month period ended June 30, 2025, or the year ended December 31, 20248485 Identifiable Intangible Assets (Net, Amounts in thousands) | Item | June 30, 2025 (unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | Covenant not to compete | $48 | $54 | | Customer relationships | $10,969 | $12,434 | | Above market leases | $224 | $246 | | Trade name | $1,214 | $1,366 | | Total identifiable intangible assets | $12,455 | $14,100 | Amortization expense for the six-month periods ended June 30, 2025 and 2024 was $1.6 million and $1.5 million, respectively Note 7 - Share-based compensation - Share-based compensation expense for the six-month periods ended June 30, 2025 and 2024 was $0.5 million and $0.7 million, respectively86 - As of June 30, 2025, 6,706,835 shares of common stock were available under the Plans for future stock option grants or other stock-based awards87 Stock Option Activity (Six Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Options granted | 459,630 | 133,371 | | Options outstanding at June 30 | 2,953,350 | 45,516,146 (Note: This is total shares, not options) | | Weighted Average Exercise Price (Outstanding at June 30) | $4.16 | $3.63 (Note: This is for Dec 31, 2024) | | Intrinsic value of options outstanding (June 30) | $13.2 million | $8.6 million (Note: This is for Dec 31, 2024) | | Intrinsic value of options exercised (Six months) | $1.3 million | $0.2 million | Note 8 - Short-term and Long-term debt - On June 23, 2025, the Amended Wells Fargo Revolving Credit Facility's maximum revolving loans were reduced from $75 million to $40 million, and the letter of credit sublimit was reduced from $2 million to $1.5 million109 - As of June 30, 2025, the company had approximately $40 million in borrowing availability under the Amended Wells Fargo Facility with no outstanding balance, and was in compliance with all covenants111112 - The Amended Wells Fargo Facility matures on March 2, 2027110 Note 9 – Accrued expenses and other current liabilities Accrued Expenses and Other Current Liabilities (Amounts in thousands) | Item | June 30, 2025 (unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | Accrued expenses | $13,741 | $12,320 | | Cylinder deposits | $21,951 | $19,426 | | Lease obligations | $2,020 | $1,961 | | Other current liabilities | $228 | $106 | Note 10 – Acquisition - On June 6, 2024, the company acquired USA Refrigerants for $20.7 million in cash and a contingent payment of up to $2.0 million, recognizing $14.5 million in goodwill primarily from expected revenue growth115117 USA Refrigerants Acquisition Pro Forma Financials (Six Months Ended June 30, Amounts in thousands) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Revenues | $128,192 | $149,465 | | Net Income | $12,926 | $21,491 | Note 11 – Share repurchases - The Board of Directors authorized a share repurchase program of up to $20 million ($10 million each for 2024 and 2025), with an aggregate cap of $25 million119182 Share Repurchases (Six Months Ended June 30, 2025) | Period | Shares Repurchased | Total Cost | | :-------------------------------- | :----------------- | :--------- | | Three months ended June 30, 2025 | 495,065 | $2.7 million | | Six months ended June 30, 2025 | 803,653 | $4.5 million | Note 12 – Segment information - The company operates as a single reportable segment, with consolidated net income used by management to evaluate performance and allocate resources120121 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, liquidity, capital resources, risks, and accounting estimates, focusing on refrigerant sales and cash flow Critical Accounting Estimates - Significant judgments and estimates are involved in preparing financial statements, particularly concerning inventory reserves, goodwill, and intangible assets125 - Inventory write-downs to net realizable value are influenced by market prices for refrigerant gases, which are affected by factors like weather, seasonality, supply, government regulation, and economic conditions126 Overview - Hudson Technologies is a leading provider of sustainable refrigerant products and services to the HVACR industry, specializing in refrigerant reclamation and sales127128 - Sales of refrigerants constitute the significant majority of the company's revenues129 - The company holds a five-year contract with the United States Defense Logistics Agency (DLA) for refrigerant and compressed gas management and supply, expiring in July 2026130 Results of Operations Three Months Ended June 30, 2025 vs 2024 | Metric | 2025 (in millions) | 2024 (in millions) | Change (%) | Primary Driver | | :-------------------------------- | :----------------- | :----------------- | :--------- | :------------- | | Revenues | $72.8 | $75.3 | -3% | Lower volume, partially offset by higher average sales price | | Gross Profit | $22.8 | $22.6 | +1% | Increase in average sales price | | Gross Margin | 31% | 30% | +1 ppt | Increase in average sales price | | SG&A Expenses | $9.3 | $9.0 | +3% | Increase in staffing costs | | Net Interest Income (Expense) | $0.7 | $(0.2) | N/A | Unlevered balance sheet, higher cash | | Net Income | $10.2 | $9.6 | +6% | Increased average selling prices, partially offset by lower sales volume | Six Months Ended June 30, 2025 vs 2024 | Metric | 2025 (in millions) | 2024 (in millions) | Change (%) | Primary Driver | | :-------------------------------- | :----------------- | :----------------- | :--------- | :------------- | | Revenues | $128.2 | $140.5 | -9% | Lower selling prices and slightly lower volume | | Gross Profit | $34.9 | $44.0 | -21% | Lower average selling prices | | Gross Margin | 27% | 31% | -4 ppt | Lower average selling prices | | SG&A Expenses | $17.4 | $17.0 | +2% | Increase in staffing | | Net Interest Income (Expense) | $1.2 | $(0.4) | N/A | Unlevered balance sheet, higher cash | | Net Income | $12.9 | $19.1 | -32% | Lower selling prices, slightly lower sales volume, higher SG&A | Liquidity and Capital Resources Liquidity and Capital Resources Highlights (Amounts in millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Working Capital | $157.8 | $147.7 | | Inventories | $77.7 | $96.2 | | Trade Receivables, net | $35.9 | $13.6 | | Cash and Cash Equivalents | $84.3 | $70.1 | Cash Flow Activities (Six Months Ended June 30, Amounts in millions) | Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net cash provided by operating activities | $20.6 | $40.8 | | Net cash used in investing activities | $(1.9) | $(22.8) | | Net cash used in financing activities | $(4.5) | $(0.0) | - The Amended Wells Fargo Revolving Credit Facility's maximum revolving loans were reduced from $75 million to $40 million on June 23, 2025. As of June 30, 2025, the company had approximately $40 million in borrowing availability with no outstanding balance and was in compliance with all covenants109160161163 Reliance on Suppliers and Customers - The company's operating results are sensitive to changes in regulations, its ability to source refrigerants, and fluctuations in demand and price for refrigerants166 - The United States Defense Logistics Agency (DLA) accounted for over 10% of the company's revenue and outstanding accounts receivable for the six-month periods ended June 30, 2025 and 2024167 - The loss of a principal customer or a decline in purchases could have a material adverse effect on the company's operating results and financial position168 Seasonality and Weather Conditions and Fluctuations in Operating Results - The company's business is seasonal, with peak refrigerant sales occurring in the first nine months of each year. Unseasonably cool weather can adversely affect demand169 - Operating results can vary due to weather, customer requirements, refrigerant availability and price, regulatory changes, and timing of equipment retrofits169 Recent Accounting Pronouncements - The company is evaluating the impact of ASU 2023-09 (Income Taxes), effective for annual periods beginning after December 15, 2024, which requires additional disclosures for effective tax rate reconciliation and disaggregation of taxes paid69170 - The company is also evaluating ASU 2024-03 (Expense Disaggregation), effective for annual periods beginning after December 15, 2026, which requires additional disclosure about specific expense categories70170 Item 3 - Quantitative and Qualitative Disclosures About Market Risk Outlines market risk exposure from interest rate fluctuations on the credit facility and changes in refrigerant demand, price, and availability - The company is exposed to interest rate risk from fluctuations on its Amended Wells Fargo Facility, which had a $0.0 million outstanding balance as of June 30, 2025171 - Market risk also arises from fluctuations in the demand, price, and availability of refrigerants. Inability to source sufficient quantities or a decline in demand/price could negatively impact revenue or lead to inventory write-downs172 Item 4 - Controls and Procedures Management confirmed effective disclosure controls and procedures as of June 30, 2025, with no material changes to internal control - The company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025, providing reasonable assurance of timely and accurate information reporting173 - There were no material changes to the company's internal control over financial reporting during the quarter ended June 30, 2025175 PART II – OTHER INFORMATION Item 1A - Risk Factors Refers to risk factors from the 2024 Form 10-K, confirming no material changes in the quarter - No material changes to the risk factors previously disclosed in the company's Form 10-K for the year ended December 31, 2024, occurred during the quarter ended June 30, 2025177 Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds Details share repurchase activities under the authorized program, including shares bought back and remaining value for future repurchases Issuer Purchases of Equity Securities (April 1 - June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (millions of dollars) | | :-------------------------------- | :----------------------------- | :--------------------------- | :------------------------------------------------------------------------------------------------- | | April 1-30, 2025 | 495,065 | $5.46 | $8.2 | | May 1-31, 2025 | — | — | $5.5 | | June 1-30, 2025 | — | — | $5.5 | | Total | 495,065 | $5.46 | $5.5 | - The company's Board of Directors approved an increase to the share repurchase program, allowing for the purchase of up to $20 million in shares ($10 million each for 2024 and 2025), with an aggregate cap of $25 million182 Item 5 - Other Information Reports on an agreement with CFO Brian J. Bertaux, detailing non-compete clauses and severance terms for employment separations - An agreement with CFO Brian J. Bertaux (July 31, 2025) includes a 12-month non-compete clause in the United States following termination for any reason181 - The agreement provides for severance payments, including continuation of annual base salary and benefits for twelve months, and a lump sum bonus payment, in cases of involuntary separation without cause, disability, or voluntary separation for good reason181 - Upon such separation events, all stock options, stock appreciation rights, and similar rights held by Mr. Bertaux will become fully vested and remain exercisable for a specified period181183 Item 6 - Exhibits Lists all exhibits filed as part of the Form 10-Q, including CEO/CFO certifications and the agreement with Brian J. Bertaux - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1, 32.2) and the agreement with Brian J. Bertaux (10.1)185 Signatures Contains the required signatures for the Form 10-Q, confirming its official submission to the SEC - The report was signed by Brian F. Coleman, Chairman of the Board, President and Chief Executive Officer, and Brian J. Bertaux, Chief Financial Officer, on August 1, 2025189