Hudson Technologies Inc (HDSN) 2021 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Hudson Technologies Second Quarter 2021 Earnings Call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, John Nesbett.

女士們先生們，下午好，歡迎來到 Hudson Technologies 2021 年第二季度財報電話會議。 （操作員說明）現在我很高興將發言權交給主持人 John Nesbett。

Sir, the floor is yours.

先生，地板是你的。

Thank you. Good afternoon, and welcome to our conference call to discuss Hudson Technologies financial results for the second quarter 2022. On the call today are Brian Coleman, President and Chief Executive Officer; and Nat Krishnamurti, Chief Financial Officer.

謝謝。下午好，歡迎參加我們的電話會議，討論 Hudson Technologies 2022 年第二季度的財務業績。今天的電話會議是總裁兼首席執行官 Brian Coleman；和首席財務官 Nat Krishnamurti。

I'd now take a moment to read the safe harbor statement. During the course of this conference call, we will make certain forward-looking statements. All statements that address expectations, opinions or predictions about the future are forward-looking statements. Although they reflect our current expectations and are based on our best view of the industry and of our businesses, as we see them today, we are not -- they are not guarantees of future performance.

我現在花點時間閱讀安全港聲明。在本次電話會議期間，我們將做出某些前瞻性陳述。所有涉及對未來的期望、意見或預測的陳述均為前瞻性陳述。儘管它們反映了我們當前的期望，並且基於我們對行業和我們業務的最佳看法，但正如我們今天所看到的那樣，我們並不是——它們不是未來業績的保證。

Please understand that these statements involve a number of risks and assumptions. And since these elements can change and in certain cases, are not within our control, we would ask that you consider and interpret them in that light. We urge you to review Hudson's most recent Form 10-K and other subsequent SEC filings for a discussion of the principal risks and uncertainties that affect our business and our performance and other factors that could cause our actual results to differ materially.

請理解，這些陳述涉及許多風險和假設。由於這些元素可能會發生變化，並且在某些情況下不在我們的控制範圍內，因此我們會要求您從這個角度考慮和解釋它們。我們敦促您查看 Hudson 最近的 10-K 表格和其他隨後提交給美國證券交易委員會的文件，以討論影響我們業務和業績的主要風險和不確定性以及可能導致我們的實際結果出現重大差異的其他因素。

With that, I will now turn the call over to Brian Coleman. Go ahead, Brian.

有了這個，我現在將把電話轉給布賴恩科爾曼。來吧，布賴恩。

Thank you. Good evening, and thank you for joining us. We are pleased to have delivered very strong second quarter results, characterized by substantial revenue growth, significantly improved margins and improved profitability. During the quarter, we benefited from very strong demand, coupled with favorable pricing trends across our portfolio of refrigerants. As we anticipated, we saw increased sales activity related to the continued reopening of our economy.

謝謝。晚上好，感謝您加入我們。我們很高興在第二季度取得了非常強勁的業績，其特點是收入大幅增長、利潤率和盈利能力顯著提高。在本季度，我們受益於非常強勁的需求，以及我們製冷劑產品組合的有利定價趨勢。正如我們預期的那樣，我們看到與經濟持續重新開放相關的銷售活動有所增加。

Additionally, the return to business as usual coincided with the warm summer weather in the North and Northeast, which has historically driven heightened demand in the marketplace as cooling systems come back online. From our vantage point today, we're seeing more normal levels of demand than we had seen last year. From a pricing standpoint, during the second quarter, we saw improved pricing across most refrigerants we sell, and we believe prices will remain stable for the near term with the expectation of increases in 2022 season as the implementation of the AIM Act phasedown begins.

此外，恢復正常營業恰逢北部和東北部溫暖的夏季天氣，隨著冷卻系統重新上線，這在歷史上推動了市場需求的增加。從我們今天的角度來看，我們看到的需求水平比去年更正常。從定價的角度來看，在第二季度，我們看到我們銷售的大多數製冷劑的價格都有所提高，我們相信價格在短期內將保持穩定，隨著 AIM 法案逐步開始實施，預計 2022 年價格會上漲。

With that reference in mind, I'd like to take a minute to discuss our gross margin performance. The significantly improved gross margin in the second quarter is primarily attributable to the higher selling prices of certain refrigerants. As you know, we take a FIFO approach to inventory management. And during the second quarter, we were largely selling through inventory we had acquired at lower costs. Therefore, we saw a more favorable impact on our gross margin performance.

考慮到這一點，我想花點時間討論一下我們的毛利率表現。第二季度毛利率的顯著改善主要是由於某些製冷劑的售價較高。如您所知，我們採用 FIFO 方法進行庫存管理。在第二季度，我們主要通過以較低成本獲得的庫存進行銷售。因此，我們看到了對我們毛利率表現的更有利影響。

Moving forward through the balance of the cooling season, we expect to see a return to more historical gross margin performance of the upper 20s to the lower 30% levels, with particularly HFC refrigerant inventory at price points more in line with the current selling prices. Hudson is well positioned in the refrigerant supply chain at 2 key points serving as a leading provider of all types of refrigerants. To give some context, we sell HFCs, which are currently the most commonly used refrigerant and represents the largest installed base of equipment as well as legacy refrigerants like CFCs and HCFCs.

展望未來，通過冷卻季節的平衡，我們預計毛利率將恢復到 20% 以上的歷史水平，降至 30% 以下的水平，尤其是 HFC 製冷劑庫存的價格更符合當前的銷售價格。作為所有類型製冷劑的領先供應商，Hudson 在製冷劑供應鏈的兩個關鍵點處於有利地位。為了提供一些背景信息，我們銷售 HFC，這是目前最常用的製冷劑，代表著最大的設備安裝基礎以及 CFC 和 HCFC 等傳統製冷劑。

And eventually, we will serve as a supply source for next-generation HFOs. We are securing our leadership position and with our capabilities and relationships, we remain optimistic about our prospects for the future. As we discussed before, our industry is on the cusp of exciting new regulatory changes, and we remain focused on the opportunities before us as environmental and sustainability legislation is adopted.

最終，我們將成為下一代 HFO 的供應來源。我們正在確保我們的領導地位，並且憑藉我們的能力和關係，我們對未來的前景保持樂觀。正如我們之前所討論的，我們的行業正處於激動人心的新監管變革的風口浪尖，隨著環境和可持續發展立法的通過，我們將繼續關注擺在我們面前的機遇。

The AIM Act, which was passed in December of 2020, requires the phasedown of HFC production over the next 15 years with a cumulative 40% reduction in the baseline scheduled to take place in just 2.5 years. With a large and growing installed base of HFC systems, reclamation will be critical to maintaining necessary HFC supply levels to ensure an orderly phasedown. As a leading reclaimer, we believe this represents a significant long-term opportunity for Hudson to act as an HFC supplier while also supporting the transition away from the production of virgin HFCs.

2020 年 12 月通過的 AIM 法案要求在未來 15 年內逐步減少 HFC 生產，計劃在短短 2.5 年內將基準線累計減少 40%。隨著 HFC 系統的安裝基礎越來越大，回收對於維持必要的 HFC 供應水平以確保有序逐步減少至關重要。作為一家領先的回收商，我們認為這代表著哈德森作為 HFC 供應商的重要長期機會，同時也支持從生產原始 HFC 的過渡。

In September, the EPA will finalize the HFC allocations likely for the years 2022 and '23. Hudson believes it will receive allocations under this rule making. With the Allocation rule, we'll have more visibility around how the industry will be positioned to meet demand as HFC production becomes more limited. Moreover, the EPA will have to administer other aspects of the AIM Act over the next several months, which should help fine-tune the overall financial opportunity for our company.

9 月，EPA 將最終確定 2022 年和 23 年的 HFC 配額。 Hudson 認為它將根據這一規則制定獲得分配。有了分配規則，隨著 HFC 生產變得更加有限，我們將更清楚地了解該行業將如何定位以滿足需求。此外，EPA 將不得不在未來幾個月內管理 AIM 法案的其他方面，這應該有助於微調我們公司的整體財務機會。

With the establishment of an allocation framework, the AIM Act mandates the EPA to support the growth and development of the reclamation market. Hudson represents approximately 35% of all refrigerant reclamation activity in the U.S., and our capabilities as a reclaimer uniquely position us to support the phasedown of HFC refrigerants and as an effective resource in a circular economy of the refrigerant industry.

隨著分配框架的建立，AIM 法案要求 EPA 支持填海市場的增長和發展。哈德森約占美國所有製冷劑回收活動的 35%，我們作為回收商的能力使我們能夠支持逐步減少 HFC 製冷劑，並成為製冷劑行業循環經濟中的有效資源。

We are energized by the opportunities we're seeing not only to grow our business but also to provide our services to benefit the environment. We're pleased with our progress to date in the 2021 selling season and look forward to continuing to meet the demands of our customers as the end markets they serve return to normal operations.

我們看到的機遇讓我們充滿活力，不僅可以發展我們的業務，還可以提供有益於環境的服務。我們對 2021 年銷售季迄今取得的進展感到滿意，並期待在客戶服務的終端市場恢復正常運營時繼續滿足他們的需求。

We're encouraged by the opportunities we're seeing in the marketplace, and we look forward to leveraging our capabilities to enhance our leadership role as a refrigerant provider and reclaimer as the HFC phasedown begins. Now I'll turn the call over to Nat to review the financials.

我們對在市場上看到的機會感到鼓舞，我們期待著隨著 HFC 逐步減少的開始，利用我們的能力來加強我們作為製冷劑供應商和回收商的領導地位。現在我會把電話轉給 Nat 來審查財務狀況。

Go ahead, Nat.

去吧，納特。

Thank you, Brian. For the second quarter ended June 30, 2021, Hudson recorded revenues of $60.5 million, an increase of 27% compared to $47.7 million in the comparable 2020 period. The growth is related to increased volume as well as increased selling prices for certain refrigerants during the quarter.

謝謝你，布萊恩。截至 2021 年 6 月 30 日的第二季度，Hudson 的收入為 6050 萬美元，與 2020 年同期的 4770 萬美元相比增長了 27%。這一增長與本季度某些製冷劑的銷量增加以及銷售價格上漲有關。

Gross margin was 36% for the second quarter of 2021 compared to 27% in the second quarter of 2020. The improved gross margin is primarily attributable to higher selling prices in the quarter, which in the context of our FIFO approach to inventory, favorably impacted our margin performance. As Brian mentioned, we expect to see a return to more historical gross margin performance as we close out the selling season with inventory that was purchased at a higher price.

2021 年第二季度的毛利率為 36%，而 2020 年第二季度為 27%。毛利率的提高主要是由於本季度銷售價格上漲，在我們採用 FIFO 庫存方法的背景下，這對我們產生了有利影響我們的保證金表現。正如 Brian 提到的那樣，隨著我們以更高價格購買的庫存結束銷售季節，我們預計毛利率將恢復到歷史水平。

SG&A for the second quarter of 2021 was $6.8 million, consistent with SG&A in the second quarter of 2020 and decreased as a percentage of revenue to 11.1% as compared to 14.2% of sales in the same quarter last year. We recorded operating income of $14.4 million in the second quarter of 2021 compared to operating income of $5.2 million in the second quarter of 2020.

2021 年第二季度的 SG&A 為 680 萬美元，與 2020 年第二季度的 SG&A 一致，佔收入的百分比下降至 11.1%，而去年同期佔銷售額的 14.2%。我們在 2021 年第二季度的營業收入為 1440 萬美元，而 2020 年第二季度的營業收入為 520 萬美元。

Interest expense for the second quarter of 2021 was $2.9 million compared to $3.1 million reported during the second quarter of 2020, mainly due to principal payments made on the term loan. The company recorded net income of $11.3 million or $0.26 per basic and $0.24 per diluted share in the second quarter of 2021, compared to net income of $2.4 million or $0.06 per basic and diluted share in the same period of 2020.

2021 年第二季度的利息支出為 290 萬美元，而 2020 年第二季度報告的利息支出為 310 萬美元，這主要是由於定期貸款的本金支付所致。該公司在 2021 年第二季度的淨收入為 1130 萬美元或每股基本股 0.26 美元和稀釋後每股 0.24 美元，而 2020 年同期的淨收入為 240 萬美元或每股基本股和稀釋後每股 0.06 美元。

At June 30, 2021, we had approximately $41 million of total availability, consisting of our cash balance and revolver availability. We have strong liquidity, and our term loan and revolving loan credit facilities provide us with a solid financial platform and flexibility as we look forward.

截至 2021 年 6 月 30 日，我們的總可用資金約為 4100 萬美元，包括我們的現金餘額和可用左輪手槍。我們擁有強大的流動性，我們的定期貸款和循環貸款信貸額度為我們提供了堅實的財務平台和我們期待的靈活性。

Our leverage ratio at June 30, 2021 was 4.18 as compared to 5.84 and 11.22 as of December 31, 2020 and 2019, respectively. This improvement is a result of both increased earnings and delevering the balance sheet. As discussed on the last call, we have initiated the process to refinance our debt and expect to be complete during the fourth quarter of this year.

我們在 2021 年 6 月 30 日的槓桿率為 4.18，而截至 2020 年 12 月 31 日和 2019 年 12 月 31 日分別為 5.84 和 11.22。這種改善是收益增加和資產負債表去槓桿化的結果。正如在上次電話會議上討論的那樣，我們已經啟動了為我們的債務再融資的程序，預計將在今年第四季度完成。

I will now turn the call back over to Brian.

我現在將把電話轉回給布賴恩。

Thank you, Nat.

謝謝你，奈特。

As we close out the 2021 selling season, we're excited about the opportunities ahead and are focused on growing our leadership position in the refrigerant and reclamation industry.

隨著 2021 年銷售季的結束，我們對未來的機遇感到興奮，並專注於提升我們在製冷劑和回收行業的領導地位。

Operator, we'll now open the call to questions.

接線員，我們現在開始提問。

(Operator Instructions) The first question is coming from Ryan Sigdahl from Craig-Hallum.

（操作員說明）第一個問題來自 Craig-Hallum 的 Ryan Sigdahl。

Congrats on the strong results. First one to start on reclamation. Given the increase -- significant increases in R-22 pricing, therefore, ability likely to pay more than dirty gas, does that help to improve the feedstock supply?

祝賀你取得了優異的成績。第一個開始填海。考慮到 R-22 定價的顯著增加，因此，可能支付比臟氣更多的費用，這是否有助於改善原料供應？

Not really, Ryan. We expressed frustration in the recovery rates of R-22 for a number of years now. We certainly did expect reclamation to have grown at levels much higher than where we are today and the last reported date, it only shows about 8 million pounds being reclaimed annually. So the economic factor hasn't really stimulated increases or changes in behavior. Now I think an important distinction about the HFC phaseout though, is that in the HFC phaseout as the AIM Act is currently constructed, has legislated so it's the law now, the EPA has mandated to find ways to help grow the reclamation market.

不是真的，瑞安。多年來，我們對 R-22 的回收率表示失望。我們當然確實預計開墾的增長水平會比我們今天和上次報告的日期高得多，它只顯示每年約有 800 萬磅被開墾。所以經濟因素並沒有真正刺激行為的增加或改變。現在，我認為關於 HFC 淘汰的一個重要區別是，在 HFC 淘汰中，由於 AIM 法案目前正在製定，已經立法，所以它現在是法律，EPA 已授權尋找幫助發展回收市場的方法。

So what we are expecting is through various means, and these are the further rule-making that the EPA will be dealing with in the future, the EPA is going to seek ways to help encourage increase the overall recovery rates, which really leads to the increases in reclamation volumes. Another factor, I think, that's probably important on why HFCs are different than the prior phase out. For example, in the State of California, there's a lot of reporting requirements regarding recovery rates and so forth at the contractor level. And now that the OEMs are part of a rule making specific to the State of California are being asked to include a certain percentage of reclaim in their factory charge units, I believe the industry is going to be more engaged on an overall basis to encourage recoveries. And when you think about in 2.5 years, a 40% reduction off of the current cap relative to the HFC phasedown, that's a very significant constraint on supply that likely reclaim will have to meet some portion of that overall need.

所以我們期待的是通過各種方式，這些是 EPA 將來要處理的進一步規則制定，EPA 將尋求方法來幫助鼓勵提高整體回收率，這確實會導致填海量增加。我認為，另一個因素可能對氫氟碳化合物與之前淘汰的產品不同的原因很重要。例如，在加利福尼亞州，有很多關於承包商級別的回收率等的報告要求。現在，原始設備製造商是加利福尼亞州特定規則的一部分，被要求在其工廠收費單位中包括一定比例的回收，我相信該行業將在整體基礎上更加參與以鼓勵回收.當你考慮在 2.5 年內，相對於 HFC 逐步減少，當前上限減少 40%，這是對供應的一個非常重要的限制，可能回收將不得不滿足總體需求的一部分。

That's helpful. Do you think there's anything that could stimulate R-22 just to help get that feedstock and change behavior? Or is it really shifting from R-22 onto the HFC opportunity at this point?

這很有幫助。你認為有什麼可以刺激 R-22 來幫助獲得原料和改變行為嗎？或者此時真的是從 R-22 轉向 HFC 的機會嗎？

I mean, we certainly are not giving up on the R-22, and we certainly would love to increase the volumes of recovery on R-22. And certainly, now that the price is over $20 a pound, we're making closer to $10 per pound when years ago, we were maybe making only $5 per pound. So again, it's always a gross profit dollar story per pound recovered and resold. So yes, we would look to see increases; yes, we tried to enter different parts of the channel and we're looking to grow our overall R-22 reclaim. but we're basically suggesting, from a modeling point of view, stick with the current 8-million-pound number. And we know that there should be some further upside in the sale price of R-22 as we continue with the phaseout and being solely sourced with reclaim product and the stockpile should eventually be eliminated.

我的意思是，我們當然不會放棄 R-22，我們當然希望增加 R-22 的回收量。當然，現在價格超過每磅 20 美元，我們每磅的收入接近 10 美元，而幾年前，我們可能每磅只賺 5 美元。所以再一次，它總是每磅回收和轉售的毛利美元故事。所以是的，我們希望看到增長；是的，我們試圖進入渠道的不同部分，我們正在尋求增加我們的整體 R-22 回收。但我們基本上是建議，從建模的角度來看，堅持目前的 800 萬英鎊的數字。而且我們知道，隨著我們繼續逐步淘汰並僅使用回收產品採購，最終應該消除庫存，R-22 的銷售價格應該會進一步上漲。

Got it. So stability in volumes under reclamation for R-22, just not growth at this point?

知道了。那麼 R-22 的回收量穩定，只是此時沒有增長？

That's what we would say is best to model right now because we haven't really cracked the nut on finding ways to grow the overall recovery rate.

這就是我們現在所說的最好的模型，因為我們還沒有真正找到提高整體恢復率的方法。

Helpful. Then just on pricing, I don't think I caught it if you mentioned it, but what was pricing in the quarter and then also current pricing?

有幫助。然後就定價而言，如果您提到它，我想我沒有聽清楚，但是本季度的定價是多少，還有當前的定價是多少？

So pricing is now over $20 a pound. We started within the quarter around closer to $15. So we saw growth of R-22 through the quarter and it continues to be at those levels. We still -- over time, we can't say when, we still have that expectation that R-22 could get to $30 a pound, possibly more as we had seen with the CFC phaseout. So we still think there's price increases available to R-22.

所以定價現在超過每磅 20 美元。我們在本季度內開始接近 15 美元。因此，我們看到整個季度 R-22 的增長，並且繼續保持在這些水平。我們仍然 - 隨著時間的推移，我們不能說什麼時候，我們仍然期望 R-22 可以達到每磅 30 美元，可能會像我們在逐步淘汰 CFC 時看到的那樣更高。所以我們仍然認為 R-22 可以提價。

And then on the Department of Defense DLA contract, it looks like it was amended, raised the maximum value recently here. Any update there on that amendment as well as how that contract is progressing.

然後在國防部 DLA 合同上，它看起來像是被修改了，最近在這裡提高了最大值。關於該修正案的任何更新以及該合同的進展情況。

So yes, we got the 5-year renewal. We may have done a press release, I think, in late June for that announcement. The DLA does their press releases in the context of when the contracts renew. So that's why there was a delay. Again, it's still a large pot of money. It's not a pot of money that's restricted on an annual basis. So unfortunately, we peaked it close to about $25 million right now, I think, in an annual revenue. But again, we're trying to find ways to increase the spend through the DLA contract as opposed to the various agencies using their annual budget. For the first time, the DLA has added a program manager to this contract. So we think that is going to help us in terms of marketing and awareness to be able to grow the dollars through that contract.

所以是的，我們獲得了 5 年續約。我認為，我們可能已經在 6 月下旬發布了該公告的新聞稿。 DLA 在合同續籤時發布新聞稿。所以這就是延遲的原因。同樣，這仍然是一大筆錢。不是按年限額的一桶錢。所以不幸的是，我認為我們現在的年收入達到了接近 2500 萬美元的頂峰。但同樣，我們正試圖通過 DLA 合同找到增加支出的方法，而不是各機構使用其年度預算。 DLA 首次在該合同中增加了一名項目經理。因此，我們認為這將在營銷和意識方面幫助我們能夠通過該合同增加美元。

One more for me, and then I'll turn it over. You mentioned debt refinance, you've started the process. Any more detail you can give there is expectation by Q4, but where you're at in the process, given the fundamental improvement for the company as well as the industry. What's your confidence there and where are you at the process?

再給我一份，然後我會把它翻過來。你提到了債務再融資，你已經開始了這個過程。考慮到公司和行業的根本改善，您可以在第四季度提供任何更多細節，但您在這個過程中所處的位置。你在那裡有什麼信心，你在這個過程中處於什麼位置？

Sure. No problem. This is Nat here. We're in preliminary stages right now as far as the process -- from a process perspective. As I mentioned on the call, the leverage ratio is down significantly from the last couple of years. So it puts us in a really good position as we move forward, and obviously, with the earnings growth as well, but even better positioned to move forward. We're expecting to close out probably sometime in Q4. So again, like I said, preliminary stages, we're working with multiple parties to advance.

當然。沒問題。我是奈特。就流程而言，我們現在正處於初步階段——從流程的角度來看。正如我在電話會議上提到的，槓桿率比過去幾年大幅下降。因此，這使我們在前進的過程中處於非常有利的位置，顯然，隨著收益的增長，我們也處於一個非常有利的位置，但甚至可以更好地前進。我們預計可能會在第四季度的某個時候結束。所以，就像我說的，在初步階段，我們正在與多方合作推進。

Thanks. Congrats again on the nice results, and I'll turn it over.

謝謝。再次祝賀好結果，我會把它翻過來。

(Operator Instructions) Okay. We have no remaining questions in the queue. I'd now like to turn the floor back to management for closing remarks.

（操作員說明）好的。隊列中沒有剩餘問題。我現在想把發言權轉回管理層，聽取結束語。

Well, thank you, operator.

嗯，謝謝接線員。

I'd like to thank all of our employees for their continued support and dedication to our business, particularly in these difficult times. I want to, again, thank our long-time shareholders for your support and those that recently joined us for their support.

我要感謝所有員工對我們業務的持續支持和奉獻，尤其是在這些困難時期。我想再次感謝我們的長期股東的支持以及最近加入我們的支持。

Thank you, everyone, for participating in today's conference call, and we look forward to speaking with you after the third quarter results, and have a good night, everybody.

謝謝大家參加今天的電話會議，我們期待在第三季度業績後與您交談，祝大家晚安。

Thank you, ladies and gentlemen. This does conclude today's conference call. Please disconnect your lines. Have a wonderful day.

謝謝你們，女士們，先生們。這確實結束了今天的電話會議。請斷開您的線路。祝你有美好的一天。