Hudson Technologies maintains mid-20% gross margin target for 2025 backed by strong Q3 outlook

Earnings Call Insights: Hudson Technologies (HDSN) Q2 2025

Management View

• Brian F. Coleman, Chairman and CEO, opened by noting a slow start to the cooling season, highlighting the company’s focus on serving customer needs throughout the year: “During the quarter, we did see a lift in nearly all refrigerant pricing, some of which had to do with tariff increases. However, we did experience slightly lower sales volume when compared to the second quarter of last year.” Coleman also pointed out that refrigerant pricing improved, particularly for HFC 410A, which reached $8 per pound and supported gross margin performance. He stated, “With our visibility today and recognizing quarter 4 is our seasonally slowest quarter, we are maintaining our full year 2025 gross margin target of mid-20% or potentially slightly higher depending on the strength of the third quarter.”
• Coleman emphasized the company’s strong unlevered balance sheet at $84.3 million in cash and no debt, reiterating a capital allocation strategy focused on organic growth, acquisitions, and opportunistic share repurchases, with $2.7 million of stock repurchased in the quarter.
• Kathleen L. Houghton, Senior VP, highlighted the impact of prolonged cooler weather on sales, but noted increased activity late in Q2 and continuing into Q3. She called attention to the long-term opportunity created by the HFC phasedown: “We remain confident that the current phase down of HFC refrigerants represents a significant long-term growth opportunity for Hudson as reclaimed HFCs will be increasingly necessary to allow the installed base of units to achieve their full economic life as the supply of virgin HFCs becomes more limited.”
• Brian J. Bertaux, CFO, stated: “Hudson recorded $72.8 million in revenue, a decrease of 3%. Gross margin was 31% compared to 30% in the 2024 quarter, with the improvement driven by favorable trends in market pricing. Gross profit at $22.8 million was slightly higher than the 2024 quarter. We posted $9.3 million in SG&A expenses, which was slightly higher than last year due to increased staffing. The improvement in gross profit, which was offset by increased SG&A costs, put operating income at $12.7 million, just shy of the $12.8 million posted last year.”

Outlook

• Management is maintaining its full year 2025 gross margin target at mid-20% with some upside potential depending on Q3 performance. Coleman stated, “we are maintaining our full year 2025 gross margin target of mid-20% or potentially slightly higher depending on the strength of the third quarter.”
• No explicit changes were made to previous guidance, and the company continues to monitor regulatory developments, particularly those related to the AIM Act and EPA leadership.

Financial Results

• Revenue for the quarter was $72.8 million, with gross margin at 31%. Gross profit was $22.8 million. SG&A expenses were $9.3 million. Operating income was $12.7 million. Net interest income was $700,000. Net income was $10.2 million, or $0.23 per diluted share. The company ended the quarter with $84.3 million in cash and no debt, and repurchased $2.7 million in stock during the quarter, totaling $4.5 million year-to-date.
• Management cited increased refrigerant prices, especially for HFC 410A, as a driver of improved margins despite lower sales volume.

Q&A

• Ryan Ronald Sigdahl, Craig-Hallum: Asked if Hudson benefited from increased repair activity due to supply challenges and about participation in the A2L aftermarket. Kathleen L. Houghton responded, “We did see repair versus replace being an element of Q2 activity, leading to relatively strong demand in our core business. We do already participate in the aftermarket sales of A2L refrigerants…but it’s still small relative to the overall business at this point.” Coleman added, “…you could possibly expect to see almost a doubling in volume with A2Ls next year.”
• Sigdahl asked about current HFC prices. Coleman replied, “It’s peaked out around $8. Sometimes it’s a little above. And again, when we say 8, we’re really talking about 4 today. We’ve seen a slight retraction in that price, but we’re pretty much steady in that range.”
• Sigdahl inquired about reclamation volume growth. Houghton stated, “we don’t report reclamation activity until the end of the year, but we’re encouraged by the activity that we have going into Q3.”
• Gerard J. Sweeney, ROTH Capital: Asked about demand trends and the impact of regulatory discussions. Houghton noted, “we’ve seen strong volume and activity, and that’s continuing up until now…we’re continuing to expect to have a very solid Q3.” Coleman explained ongoing engagement with the EPA and Congress regarding the AIM Act.
• Austin Nathan Moeller, Canaccord: Asked about the impact of tariffs on refrigerant pricing. Coleman responded, “you’re right, the tariffs and its impact would be on imported refrigerants, but also imported steel…Recovered refrigerants is all U.S. sourced, there is no impact to tariffs and so on down the line. So we generally do get a benefit with price increases on the profitability of recovered gas.”

Sentiment Analysis

• Analysts focused on supply chain dynamics, HFC pricing, and the potential for growth in A2L and reclamation volumes, showing a neutral to slightly positive tone as they sought clarity on volumes and regulatory effects.
• Management maintained a confident and measured tone in prepared remarks, repeatedly emphasizing operational control and long-term positioning. In Q&A, management was transparent but reserved on specifics, especially regarding future contract volumes and reclamation data.
• Compared to the previous quarter, the sentiment shifted from cautious optimism about early season trends to more confidence regarding margin improvement and a strong Q3, while remaining cautious about Q4 seasonality.

Quarter-over-Quarter Comparison

• The current quarter saw improvement in gross margin and gross profit, driven by higher refrigerant prices, despite lower sales volume compared to Q1.
• Guidance remained steady, with the mid-20% gross margin target unchanged from last quarter, but with added confidence in potential upside due to recent pricing trends.
• Analyst focus shifted from early season uncertainties and inventory normalization in Q1 to margin sustainability, volume trends, and regulatory impacts in Q2.
• Management’s tone increased in confidence, citing stronger Q3 prospects and resilience in margin performance, while analysts remained focused on demand and regulatory headwinds.

Risks and Concerns

• Management highlighted weather-driven demand volatility and supply shortages for replacement refrigerants as ongoing challenges.
• Regulatory uncertainty, specifically surrounding the AIM Act and EPA leadership changes, was flagged, with Coleman stating, “We are closely monitoring all the developments and are in direct and frequent communication with the EPA as well as members of Congress.”
• Analysts raised concerns about the timing and volume of the DLA contract renewal, supply chain disruptions, and volatility in refrigerant pricing due to tariffs.

Final Takeaway

Hudson Technologies navigated a slow start to the cooling season and supply chain volatility to deliver improved gross margins, supported by higher refrigerant prices and continued growth opportunities in reclamation and next-generation refrigerants. Management remains focused on strong execution for the remainder of the year, maintaining a mid-20% gross margin target and leveraging a robust balance sheet for strategic growth initiatives and shareholder returns, while closely monitoring regulatory developments and market dynamics.

Read the full Earnings Call Transcript