Hudson Technologies Q2 Earnings Call Highlights

Key Points

• Second-quarter revenue rose 8% to $78.3 million as refrigerant sales volumes increased 12%, but lower average prices and higher freight costs reduced gross margin to 26% from 31% a year earlier. Net income declined to $4.9 million, or $0.12 per diluted share.
• Hudson lowered its full-year 2026 gross-margin outlook to the low-to-mid-20% range, citing continued pricing and inflationary pressures, while elevated SG&A spending is expected to persist as the company invests in ERP optimization and strategic initiatives.
• The company secured a new five-year, $210 million Defense Logistics Agency contract and is expanding refrigerant recovery and reclamation capabilities, including a potential technology partnership to process difficult next-generation refrigerants.

Hudson Technologies NASDAQ: HDSN reported second-quarter revenue growth driven by higher refrigerant sales volumes, though lower HFC refrigerant prices, higher freight costs and increased spending on technology and longer-term initiatives weighed on profitability.

Revenue for the second quarter of 2026 rose 8% year over year to $78.3 million. Sales volume increased 12%, partially offset by a 6% decline in average refrigerant selling prices. Net income fell to $4.9 million, or $0.12 per diluted share, from $10.2 million, or $0.23 per diluted share, a year earlier.

Pricing and freight pressures reduce margins

Gross margin declined to 26% from 31% in the prior-year quarter. Chief Financial Officer Brian Bertaux said the comparison was affected by elevated refrigerant prices in the 2025 quarter, when supply-chain constraints related to the EPA-mandated transition to HFO refrigerants boosted market pricing.

Bertaux also cited higher operating costs, particularly freight expenses tied to increased fuel costs during the conflict in the Middle East. He said Hudson had historically been able to pass freight costs through in pricing, but that was more difficult during the current trough in HFC pricing.

President and Chief Executive Officer Ken Gaglione said the company believes excess channel inventory and illegally imported refrigerants are contributing to softer HFC pricing. He also pointed to the absence of a prolonged period of hot weather during the selling season to date. Hudson is working with industry partners on the illegal-import issue, which Gaglione said involves “millions of pounds” of refrigerant, although he said the company could not quantify its precise market impact.

Gaglione said pricing appeared to be stabilizing, noting a small sequential increase in R-410A pricing during the second quarter. He also said prolonged heat could support demand during the balance of the selling season.

• Second-quarter revenue: $78.3 million, up 8% year over year.
• Sales volume: Up 12%.
• Average refrigerant selling price: Down 6%.
• Gross margin: 26%, versus 31% a year earlier.
• Cash at quarter-end: $26 million, with no debt.

Outlook revised as investments continue

Hudson revised its full-year 2026 gross-margin target to the low-to-mid-20% range, from a previous expectation of mid-20% margins. Bertaux said the company expects inflationary pressures to continue and anticipates second-half SG&A expenses will remain above 2025 levels, though increases should be less pronounced than in the first half.

SG&A expense rose $3.1 million to $12.4 million in the quarter. The increase included costs to optimize Hudson’s recently launched ERP system, legal costs associated with its Defense Logistics Agency contract process, and additional staffing and consulting resources for strategic initiatives.

Gaglione said Hudson spent more than $1 million during the first half on ERP optimization and expects those costs to decline in the second half. The company did not repurchase stock during the second quarter, citing near-term cash management, although it has repurchased $2.5 million of shares so far in 2026.

DLA award resolved; recovery and service investments expand

During the call, management said the Defense Logistics Agency re-awarded Hudson a five-year, $210 million contract. The award followed a seven-month review after a previously awarded contract was rescinded following a competitor challenge. Hudson had received a bridge contract during the review period that maintained existing terms through Nov. 29, 2026, with potential extensions through May 2027.

Gaglione said the company is continuing to build less cyclical revenue sources through refrigerant recovery, reclamation and services. Hudson reported continued growth in recovered refrigerant volumes and is expanding a pilot program using small recovery trucks in New York City to address high-density, lower-volume recovery opportunities.

The company also announced its intention to partner with Icorium, a Lawrence, Kansas-based NSF I-Corps startup, to scale patented extractive distillation technology. Gaglione said the technology could improve Hudson’s ability to separate difficult next-generation azeotropes, HFO blends and highly contaminated recovered refrigerants. He said the technology has demonstrated an ability to separate components that Hudson has not been able to process effectively through conventional fractional distillation.

Hudson has two of the country’s seven reclamation facilities capable of separating mixed refrigerants through fractional distillation, according to Gaglione. He said extractive distillation could also potentially open opportunities in adjacent markets requiring higher-purity materials, though the company did not provide details.

Illinois facility restored after tornado

Hudson’s Illinois facility was temporarily idled after a June 11 tornado damaged the building, removed its roof and caused interior water damage. Gaglione said no employees were injured, and there was no detectable damage to separation columns or product inventory.

The plant was without power for about a week and fully out of service for roughly three weeks. It has since returned to full operation while major repairs continue. Hudson said restoration expenses will be covered by insurance and were not reflected in second-quarter results.

Gaglione said the outage limited some R-22 sales in June, with certain orders either shifting into the current quarter or not occurring. He added that Hudson pulled back some volume as market prices weakened in June, shifting its sales focus toward higher-margin product mix.

Looking longer term, management said data centers are not currently a meaningful portion of Hudson’s business. The company expects the market could become a larger opportunity in three to five years as cooling systems require optimization, refrigerant resupply or decommissioning.

About Hudson Technologies (NASDAQ:HDSN)

Hudson Technologies, Inc is a U.S.-based provider of refrigerant management and sustainability solutions, specializing in the recovery, reclamation and recycling of refrigerant gases. The company's core business centers on collecting used refrigerants—such as CFCs, HCFCs and HFCs—from industrial, commercial and institutional customers, processing them in certified reclamation facilities and returning material that meets industry purity standards.

Headquartered in Purchase, New York, Hudson Technologies operates a network of reclamation centers across the continental United States.

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