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HUDSON TECHNOLOGIES INC /NY (HDSN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was seasonally soft and price-driven: revenue fell 23% YoY to $34.6M, gross margin compressed to 17%, and EPS was a loss of $0.06; FY 2024 revenue was $237.1M with 28% gross margin, below the revised top-line target but in line on margin .
  • Management reiterated the long-term reclamation thesis, citing EPA mandates for reclaimed refrigerant from 2029 and an 18% increase in reclaim activity in 2024, supported by the USA Refrigerants acquisition to expand recovery sourcing .
  • Balance sheet strength is a key positive: $70.1M cash and no debt at YE 2024; buybacks totaled $8.1M in 2024, with program size increased to $20M spanning 2024–2025 .
  • Near-term outlook cautious: HFC pricing (~$6/lb, 410A ~70% of aftermarket demand) and upstream inventories remain headwinds; 2025 gross margin is guided to the mid-to-upper 20s and DLA revenue to low-to-mid $30Ms .
  • S&P Global consensus estimates were not available at time of analysis due to a data access limit; we cannot quantify Q4 beats/misses vs Street but will update when accessible [SPGI request limit error].

What Went Well and What Went Wrong

What Went Well

  • Reclamation momentum and positioning: reclaim volumes rose 18% in 2024, and EPA mandates plus state actions (e.g., California) support structurally higher reclaimed demand over time .
  • Strategic execution and capital allocation: USA Refrigerants acquisition enhanced recovery network; $8.1M buybacks executed; YE cash reached $70.1M with no debt, providing flexibility .
  • Operating discipline into seasonality: SG&A fell YoY in Q4 to $8.0M; management achieved the revised FY gross margin target (28%) despite price pressure .

What Went Wrong

  • Price-led compression: HFC pricing declined up to 45% YoY during the selling season, driving Q4 gross margin down to 17% and a $2.6M net loss; full-year operating income fell to $29.3M vs $78.2M in 2023 .
  • Tough DLA comp and lower activity: 2023 surge purchases (~$20M) made 2024 a difficult comparison; 2024 full-year DLA revenue was $36M, with 2025 expected to revert to normal levels (low-to-mid $30Ms) .
  • Inventory and pricing visibility: upstream inventories likely remained significant and pricing of 410A (~$6/lb) showed no improvement exiting the year, constraining near-term margin recovery .

Financial Results

Sequential and Prior-Year Comparison

MetricQ2 2024Q3 2024Q4 2024
Revenue ($M)$75.3 $61.9 $34.6
Gross Margin (%)30% 26% 17%
Operating Income ($M)$12.8 $7.0 ($3.2)
Net Income ($M)$9.6 $7.8 ($2.6)
Diluted EPS ($)$0.20 $0.17 ($0.06)

Q4 Year-over-Year

MetricQ4 2023Q4 2024
Revenue ($M)$44.9 $34.6
Gross Margin (%)31% 17%
Operating Income (Loss) ($M)$4.7 ($3.2)
Net Income (Loss) ($M)$3.9 ($2.6)
Diluted EPS ($)$0.08 ($0.06)

FY 2024 vs FY 2023

MetricFY 2023FY 2024
Revenue ($M)$289.0 $237.1
Gross Margin (%)39% 28%
Operating Income ($M)$78.2 $29.3
Net Income ($M)$52.2 $24.4
Diluted EPS ($)$1.10 $0.52
Cash from Operations ($M)$58.5 $91.8

KPIs and Balance Sheet

KPIQ2 2024Q3 2024Q4 2024
Cash & Cash Equivalents ($M)$30.5 $56.5 $70.1
Inventories ($M)$123.7 $103.5 $96.2
Share Repurchases ($M)Board authorized $10M program $2.6 repurchased $8.1 repurchased in 2024; $5.5 in Q4
DLA Revenue ($M)N/A~$9 in Q3 $36 FY 2024
Reclaimed Volume GrowthN/AN/A+18% YoY in 2024
HFC Price (410A proxy)N/A~$6/lb exit Q3 Just under $6/lb exiting FY

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024$240–$250M (Q2 commentary) “Low end of prior range” (Q3) Lowered; actual $237.1M below range
Gross MarginFY 2024~30% (Q2) ~28% (Q3) Lowered; achieved 28%
Gross MarginFY 2025N/AMid-to-upper 20s New
DLA RevenueFY 2025N/ALow-to-mid $30Ms; decision on successor contract likely late 2025 New
Share Repurchase2024–2025Up to $10M total Up to $20M (up to $10M each year) Raised

Earnings Call Themes & Trends

TopicQ2 2024 (Previous Mentions)Q3 2024 (Previous Mentions)Q4 2024 (Current Period)Trend
HFC Pricing & MarginsPricing down ~25% YoY in Q2; FY rev guide $240–$250M; GM ~30% Additional ~20% price drop to ~$6/lb; GM target ~28% Price at just under ~$6/lb; Q4 GM 17%; FY GM 28% Continued pressure; cautious near term
EPA/AIM Act & ReclamationExpect final Refrigerant Management Rule; mandates supportive Rule finalized; mandates reclaimed use from 2029; reclaim data growth Reinforced mandates; 18% reclaim volume growth in 2024 Structural tailwind
DLA ContractLower activity vs 2023 surge Tough comp; ~$9M Q3; FY trend lower $36M FY; 2025 outlook low-to-mid $30Ms; successor decision likely late 2025 Normalizing
Inventory & Supply-DemandNoted pricing headwind; inventories discussed broadly EPA inventory data still high; petition to lower allowances possible Upstream inventories still significant; cautious early 2025 Monitoring
OEM Transition (Low GWP)Anticipated transition impacts Industry transitioning; data context Early disruption; legacy 410A sell-through; supply issues expected to normalize Transition in progress
Tariffs/MacroNot highlightedConcern on allowances; Europe precedent High Chinese HFC tariffs (200–285%); steel tariffs may raise cylinder costs; pass-through expected Cost pass-through
Strategic M&A/RecoveryUSA Refrigerants acquisition to boost recovered sourcing Integration going well; enhancing recovery Expanded recovery network; continued focus on recovery economics Executing

Management Commentary

  • “HFC pricing in 2024 declined up to 45%... our overall reclaim activity increased 18% in 2024.”
  • “With the USA Refrigerants acquisition... [we] strengthened our reclaimed refrigerant supply chain.”
  • “For the moment, we see the 2025 gross margin ranging from the mid- to upper 20s... we have a concern that upstream inventories may still be at a high level.”
  • “During 2023, we saw... surge purchases of approximately $20 million... 2024 returned to a more normalized DLA purchasing level.”
  • “Our strong unlevered balance sheet with $70.1 million in cash and no debt... continues executing on our three-pillar capital allocation strategy.”

Q&A Highlights

  • Channel inventory visibility: Management expects 2024 EPA inventory totals to be “a good bit lower” than 2023, but still significant; pricing changes likely only evident by April/May .
  • Inventory strategy and cost basis: Company aims to reload at lower prices; expects further reductions in inventory dollars as pricing resets in 2025 .
  • Mix and access to virgin vs reclaimed: HFCs dominated by virgin supply; reclaimed currently single-digit percent of total HFC demand; Hudson’s mix better than market due to reclaim access .
  • DLA contract outlook: 2025 revenue expected in low-to-mid $30Ms; successor contract decision more likely in late 2025 .
  • Tariffs impact: Existing Chinese HFC tariffs already high (200–285%); steel tariffs may increase cylinder costs; pass-through anticipated .
  • OEM transition: Chunkiness expected in near-term as low-GWP equipment launches; 410A units still selling through in 2025 .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q4 2024 EPS, revenue, and EBITDA, but data was unavailable due to a daily request limit from the provider at time of analysis. As a result, we cannot quantify beats/misses versus Wall Street consensus for Q4 2024 at this time; we will update once access is restored [SPGI request limit error].
  • Internally, management noted FY revenue slightly below its revised $240M target and achieving the revised FY gross margin target of 28%, indicating the internal performance relative to guidance rather than Street consensus .

Key Takeaways for Investors

  • Price-led compression dominated Q4: revenue down 23% YoY, GM 17%, EPS ($0.06); near-term margins hinge on HFC price normalization and inventory drawdown .
  • Structural reclamation tailwinds intact: EPA mandates from 2029 and state momentum support reclaimed demand; Hudson’s reclaim volumes rose 18% in 2024, and recovery sourcing strengthened via USA Refrigerants .
  • Balance sheet optionality: $70.1M cash, no debt, and $20M buyback capacity provide room for continued strategic investments and opportunistic repurchases amid price volatility .
  • 2025 setup: Gross margin guided mid-to-upper 20s; DLA expected low-to-mid $30Ms; pricing and upstream inventory remain key variables into the cooling season—watch April/May for inflection signals .
  • Mix evolution: Reclaimed remains a small share of HFC demand today; higher reclaimed penetration (and price normalization) would be accretive to margins over time .
  • Transition dynamics: Low-GWP equipment launch causing near-term supply “chunkiness” but expected to normalize; legacy 410A sell-through continues in 2025 .
  • Trading lens: Near-term catalysts include any early-season pricing firming, EPA inventory prints, DLA renewal timing, and buyback pace; risks center on persistent price pressure and slow inventory drawdown .