[Management View]
Hudson Technologies reported $72.8 million in revenue for Q2 2025, a 3% decrease due to a late start in the cooling season, partially offset by higher average selling prices. Gross margin improved to 31%, driven by better market pricing and sequential increases in refrigerant prices. The company emphasized the impact of weather delays on sales and highlighted sequential price increases in key refrigerants, contributing to margin improvement and strategic positioning for industry supply shifts driven by regulatory phase-downs.

[Outlook]
Hudson Technologies maintains its full-year 2025 gross margin target of mid-20%, with potential for slight upside depending on third-quarter strength. Management expects aftermarket volume for A2L refrigerants to double next year as legacy HFC equipment phases out. The company remains focused on organic investments, acquisitions, and opportunistic buybacks.

[Financial Performance]
Revenue decreased by 3% YoY to $72.8 million. Gross margin improved to 31% from 30% in 2024. Net income increased to $10.1 million, or $0.23 per diluted share, compared to $9.6 million, or $0.20 per diluted share in 2024. The company ended the quarter with $84.3 million in cash and no debt.

[Q&A Highlights]
Question 1: Did you see any benefit from repair mix being up in the quarter given supply challenges on the R54 and A2L side, both system and gas? Did you participate directly in any of that aftermarket sell into the HUL from a new system and sell standpoint?

Answer: We did see repair versus replace being an element of Q2 activity, leading to relatively strong demand in our core business. We already participate in the aftermarket sales of A2L refrigerants, both 454B and 32, covering both existing HFCs and working in the A2L space in the aftermarket.

Question 2: Are you able to quantify how big the HOL market is for Hudson?

Answer: At this point, it is relatively small. There is aftermarket demand because many systems in the installation need a small amount of refrigerant due to the change in charge on OEM units, but it is still small relative to the overall business.

Question 3: What is the current price of HFCs?

Answer: It peaked out around $8 per pound, sometimes a little above. We have seen a slight retraction in that price, but we are pretty much steady in that range.

Question 4: Can you quantify from a reclamation standpoint how much that has grown and where the reclamation business is?

Answer: We do not report reclamation activity until the end of the year, but we are encouraged by the activity going into Q3. The influence of the USA acquisition is fully integrated, and we are not separating USA reclaim activity versus Hudson activity any longer.

Question 5: How do you feel about the stockpile current in-channel inventory at this point?

Answer: It is still a little early to answer directly. The EPA should be releasing the 2024 inventory data around September or October, and we will discuss it relative to our third-quarter results. We think there is some stabilizing between the annual allowances and overall demand.

Question 6: Any thoughts on the trend on volumes going forward?

Answer: We have seen strong volume and activity since mid-June, continuing up until now. With the heat around the country, we expect to have a very solid Q3.

Question 7: Any comments on the AIM Act and regulatory discussions?

Answer: The AIM Act was executed by President Trump in December 2020. The EPA is evaluating many regulations, but Hudson and the industry are diligent with both the EPA and Congress to reinforce the bipartisan policy and law of the AIM Act. Reclamation is important for the long-term benefit of American consumers.

Question 8: Are you noticing a different tone or tenor with contractors regarding reclamation?

Answer: We are starting to reach more contractors, and once they do a recovery and get the check, it becomes second nature and part of their business. We are well on our way to educating more contractors.

Question 9: Any update on the DLA contract and its competitive nature?

Answer: The proposed contract is no longer a small business set aside, which gave us an advantage previously. We do not know the exact number of bidders but estimate it to be between five to ten. We have a high level of success in terms of on-time performance, but we are cautious about the outcome.

Question 10: Impact of tariffs on refrigerant prices?

Answer: Tariffs impact imported refrigerants and steel. There has been some stability in tariffs recently, contributing to price increases and slight retraction. Recovered refrigerants are US sourced, so there is no impact from tariffs.

Question 11: Expectations for the DLA contract volume?

Answer: We do not know the exact volume for the new contract but do not necessarily anticipate higher volumes. We will provide updates once the award is announced.

[Sentiment Analysis]
Analysts and management maintained a positive tone, expressing confidence in the company's strategic positioning and future growth prospects. Management emphasized strong execution and proactive engagement with regulatory bodies.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 |
|-----------------------|---------------|---------------|
| Revenue | $72.8 million | $75.0 million |
| Gross Margin | 31% | 30% |
| Net Income | $10.1 million | $9.6 million |
| EPS (Diluted) | $0.23 | $0.20 |
| Cash | $84.3 million | $80.0 million |
| Debt | $0 | $0 |

[Risks and Concerns]
- Weather dependency impacting sales volume.
- Regulatory changes and potential impacts on the AIM Act.
- Volatility in refrigerant pricing due to tariffs and market dynamics.
- Competitive pressures in securing the DLA contract.

[Final Takeaway]
Hudson Technologies demonstrated resilience in Q2 2025 despite external challenges such as weather delays and supply shortages. The company achieved improved gross margins and maintained a strong financial position with no debt. Management remains optimistic about future growth, driven by regulatory phase-downs and increased demand for reclaimed refrigerants. The proactive engagement with regulatory bodies and strategic capital allocation further strengthen Hudson's market position. Investors should monitor the company's performance in Q3 and regulatory developments impacting the refrigerant industry.