Hudson Technologies Forecasts Mid-20% Gross Margin in 2025 as Refrigerant Prices Stabilize and Reclamation Expands

Mei 18, 2025 Posting Komentar

Insights from the Earnings Call: Hudson Technologies (HDSN) First Quarter of 2025

Management View

CEO Brian Coleman highlighted a drop in revenue to $55.3 million during the first quarter of 2025, primarily due to a 40% reduction in refrigerant prices from what they were in the same period last year. Nonetheless, there has been growth in sales volume, mostly because of the company’s purchase of USA Refrigerants in 2024, enhancing their ability to reclaim volumes as well as boost buying power.
Coleman highlighted a recent increase in pricing for HFCs, particularly HFC 410A, which constitutes around 70% of aftermarket demand. Prices had risen from below $6 per pound at the start of the quarter to over $6 per pound by its end.
Management projected gross margins for 2025 to stabilize closer to the mid-20% range, an improvement from the 22% gross margin achieved in Q1 2025.
Brian Bertaux, who serves as CFO, highlighted the robust financial standing of the firm, concluding the quarter with $81 million in cash and zero debt. Additionally, he noted active share buybacks amounting to $4.5 million so far this year.

Outlook

The firm anticipates that the gross margins for the entire year of 2025 will likely move toward the middle 20% range, bolstered by stabilized prices and cost recovery measures designed to counterbalance increased duties and expenses.
Management expects ongoing expansion in reclaim operations as the sector shifts towards using low-GWP refrigerants. The growing market demand is projected to coincide with higher temperatures anticipated around late May and early June.
It is anticipated that embracing lower-GWP refrigerants along with adhering to the provisions of the AIM Act will create substantial long-term expansion prospects for the firm’s reclamation sector.

Financial Results

The revenue for the first quarter of 2025 amounted to $55.3 million, showing a decrease of 15% compared to the same period last year. This drop occurred even with higher sales volumes because of reduced pricing in the refrigerant market.
The gross margin stood at 22%, a decline from 33% in the first quarter of 2024, due to persistent pricing challenges in the refrigerant sector.
Operating income stood at $3.1 million, a significant decrease from $12.8 million in the same quarter of the previous year. Net income was $2.8 million, or $0.06 per diluted share, compared to $9.6 million, or $0.20 per diluted share, in Q1 2024.
The company repurchased $1.8 million worth of shares during the quarter, contributing to a total of $4.5 million in 2025 share buybacks.

Q&A

Ryan Sigdahl from Craig-Hallum asked what has caused the recent surge in refrigerant prices and whether these hikes will be long-lasting. The CEO, Coleman, pointed out that supply chain issues and increased tariffs were behind the rise, yet he expressed doubt regarding how permanent they would be until there’s more visibility into future demand as summer approaches.
Sigdahl inquired about the effects of cylinder inflation and supply issues. Coleman clarified that reusable cylinders help reduce these impacts for Hudson, although he mentioned difficulties related to the new valve standards required for low-GWP refrigerants.
Austin Moeller from Canaccord Genuity queried how tariffs impact refrigerant imports and allowances. Coleman addressed this by stating that substantial duties on Chinese imports along with fluctuations in Indian tariff policies influence market conditions; however, he highlighted Hudson’s robust variety of procurement approaches.
Moeller inquired about the demand for low-GWP refrigerants following the modifications introduced by the AIM Act. Coleman admitted to some initial supply issues but anticipates that the market will settle down within a few months.

Sentiment Analysis

Experts showed guarded hope, emphasizing stable prices and increased recovery, yet they voiced worries about high stockpiles and economic fluctuations.
The management kept an optimistic tone, emphasizing effective strategy implementation, robust financial standing, and substantial long-term expansion prospects despite changes within the industry.
In comparison to the prior quarter, management seemed more assured regarding enhancements in gross margins and price steadiness; however, doubt concerning upstream stock levels remained present.

Quarter-over-Quarter Comparison

Revenue decreased from $34.6 million in Q4 2024 to $55.3 million in Q1 2025, reflecting seasonal trends and pricing pressures.
Gross margin declined from 28% in Q4 2024 to 22% in Q1 2025, though management projects an improvement in subsequent quarters.
In the shift from quarter four of 2024 to quarter one of 2025, analysts redirected their attention from worries about inventories to examining pricing trends and reclaiming opportunities.
Management showed greater assurance in revenue recovery and stable prices during this quarter.

Risks and Concerns

The management pointed out potential risks due to tariffs and supply chain disruptions, specifically regarding upcoming generation of refrigerants such as 454B and 32.
Experts expressed worries regarding the adjustment of inventories and possible fluctuations in the cost of refrigerants.
The firm’s dependence on consistent regulatory climates and favorable economic circumstances continues to be a significant hazard.

Final Takeaway

In the first quarter of 2025, Hudson Technologies experienced a difficult period marked by reduced revenues and profit margins because of falling refrigerant prices. However, they highlighted an increase in reclaim volumes along with signs of stabilizing pricing recently observed. The company’s solid financial position coupled with consistent stock repurchases and their proactive approach towards adopting lower-GWP refrigerants have led management to remain hopeful regarding future expansion opportunities even as current market conditions present some short-term challenges.

Review the complete earnings call transcript here.

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