Hudson Technologies(HDSN) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2020, Hudson recorded revenues of $36.4 million, an increase of 5% compared to $34.7 million in Q1 2019, primarily due to an increase in the volume of refrigerants sold [20] - Gross margin for Q1 2020 was 23%, up from 20% in Q1 2019, attributed to selling lower-priced inventory [21] - The company reported a net loss of $2.9 million, or a loss of $0.07 per share, compared to a net loss of $4 million, or a loss of $0.09 per share in the same period of 2019 [22] - Selling, general and administrative expenses for Q1 2020 were $7.3 million, up from $6.0 million in Q1 2019, mainly due to increased nonrecurring professional fees [23] - Interest expense for Q1 2020 was $3.3 million, a decrease of $0.9 million from $4.2 million in Q1 2019, due to paying down $14 million of principal term loan debt [24] - Total debt balance at March 31, 2020, was approximately $109.6 million, with a term loan leverage ratio of 11.28x [25] Business Line Data and Key Metrics Changes - The company experienced an increase in overall sales volume to customers, indicating a positive trend in demand for refrigerants [17] - The pricing of R-22 has shown some strengthening, with current prices in the higher $10 range, indicating a stable market [39][40] Market Data and Key Metrics Changes - The marketplace is expected to adopt a phaseout of HFC refrigerants, with the AIM Act potentially leading to increased pricing due to a tightening supply-demand balance [14][15] - The company anticipates a tightening in the supply of virgin R-22 due to the elimination of R-22 production importation in 2020 [11] Company Strategy and Development Direction - Hudson aims to leverage its strong distribution network and proprietary technology to reclaim refrigerants, positioning itself as a producer and supplier of phased-out refrigerants [18] - The company is preparing for future demand for HFO refrigerants, which are designed to replace HFCs, indicating a strategic shift towards more environmentally friendly products [15] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the potential negative impact of COVID-19 on demand and pricing for refrigerants, noting that the economic factors resulting from governmental restrictions could affect sales [12][13] - Despite current challenges, management remains optimistic about long-term growth opportunities, citing a solid foundation due to a well-established customer base and the ability to provide refrigerants as needed [27][28] Other Important Information - The company has maintained operations during the pandemic, ensuring the supply of products while adhering to health guidelines [8][9] - Management highlighted the importance of employee safety and product quality during the crisis [9] Q&A Session Summary Question: Customer inventory levels - Management indicated that customer inventories are generally low, based on sales calls and discussions with customers [33][35] Question: R-22 pricing trends - Management confirmed that R-22 prices are currently stable, with higher $10 prices observed [39][40] Question: Reclaim volume initiatives - Management is initiating new programs to spur reclaim volume and has optimism about these efforts [45] Question: Inventory from Airgas acquisition - Management expects to sell through higher-priced inventory by the end of Q2 and anticipates improved margins in the latter half of the year [46] Question: Impact of COVID-19 on demand - Management noted that it is still early in the season to assess the impact of COVID-19 on demand, with uncertainty remaining [48]