Hudson Technologies(US:HDSN)2022-03-09 00:48Financial Data and Key Metrics Changes - For Q4 2021, Hudson recorded revenues of $37.8 million, a 71% increase compared to $22.1 million in Q4 2020, driven by higher selling prices for certain refrigerants [19] - Gross margin improved to 45% in Q4 2021 from 25% in Q4 2020, primarily due to higher selling prices [20] - For the full year 2021, revenues reached $192.7 million, a 31% increase from $147.6 million in 2020, with a gross margin of 37% compared to 24% in 2020 [23] Business Line Data and Key Metrics Changes - The company expects gross margin performance in 2022 to be in the low 30% range, with potential improvements as reclamation volumes increase [10][21] - Operating income for Q4 2021 was $9.3 million, compared to an operating loss of $1.7 million in Q4 2020 [22] Market Data and Key Metrics Changes - The average selling price of refrigerants increased sequentially from Q3 to Q4 2021, contrary to expectations of stability [8] - The AIM Act mandates a 10% step-down in production and consumption allowances for Virgin HCFs in 2022, with further phasedowns over the next 15 years [13] Company Strategy and Development Direction - Hudson aims to leverage its position as a leading reclaimer to support the transition away from Virgin HCFs, with a focus on sustainability and reclamation capabilities [14][17] - The company is actively pursuing opportunities to assist OEMs in meeting California Air Resources Board (CARB) requirements for reclaim refrigerants [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2022, anticipating revenues could exceed $270 million if pricing trends continue [8] - The company highlighted the importance of reclamation in maintaining necessary HSC supply levels amid regulatory changes [13] Other Important Information - Hudson completed refinancing its debt with a new $85 million term loan and increased its ABL facility to $90 million, improving its cost of capital [11][25] - The company's leverage ratio improved significantly to 1.93:1 for the trailing 12 months ended December 31, 2021, down from 5.42:1 in the previous year [24] Q&A Session Summary Question: How is the HSC recovery in the market going? - Management noted that past reclamation volumes were lower than expected, but current regulations and stakeholder involvement may drive growth in reclamation [31][36] Question: Is pricing pressure due to supply chain issues or the AIM Act? - Management indicated that both supply chain issues and the AIM Act are contributing to pricing increases, with supply chain challenges expected to persist in the near term [37] Question: Are there any shifts in buying patterns for refrigerants this year? - Management suggested a potential hybrid approach to inventory, with some companies possibly stocking more products earlier due to concerns about availability [39] Question: What are the current price assumptions for R-22 and R-410A? - Management stated that R-22 pricing is around $30 per pound, while HFC pricing is above $10 per pound, reflecting significant increases throughout 2021 [41][42] Question: How does the gross margin expectation for 2022 compare to 2024 targets? - Management expects low 30% gross margins to be sustainable, with potential for improvement as reclaimed volumes grow, particularly in 2023 [43][44] Question: Can you discuss the debt refinance process and lender selection? - Management explained that they engaged a broad range of lenders and chose TCW due to their strong relationship and understanding of the business [48][50]