Hudson Technologies Q3 Earnings Call Highlights

Key Points

• Third-quarter results declined: Revenue fell 20% year over year to $59.4 million, while net income dropped to $2 million, as lower HFC prices and a 9% volume decline weighed on performance.
• Margins exceeded expectations despite market pressure: Gross margin was 25%, and management maintained its full-year target of low-to-mid-20% margins by emphasizing higher-margin sales and cost reductions. The company ended the quarter debt-free with $35.3 million in cash.
• Hudson is pursuing longer-term growth: The company signed a refrigerant-separation technology agreement with Icorium and secured a renewed $210 million Defense Logistics Agency contract, while continuing to expand services and reduce its exposure to short-term refrigerant price volatility.

Hudson Technologies NASDAQ: HDSN reported lower third-quarter revenue and earnings as ample refrigerant channel inventory continued to pressure hydrofluorocarbon, or HFC, pricing, although management said a deliberate focus on higher-margin sales helped the company exceed its gross-margin expectations.

Revenue for the third quarter of 2026 was $59.4 million, down 20% from the prior-year period. Sales volume declined 9%, while average selling prices fell 17%, CFO Brian Bertaux said. Net income was $2 million, or $0.05 per diluted share, compared with $12.4 million, or $0.27 per diluted share, a year earlier.

President and CEO Ken Gaglione said the company chose to prioritize profitable sales and cost reductions rather than pursue volume in a weak pricing environment. Hudson’s sales volume was still up 9% through the first nine months of 2026, he said.

Margins and expenses

Third-quarter gross margin was 25%, below the 32% reported in the comparable 2025 quarter but above management’s expectations. Bertaux attributed the year-over-year comparison in part to price volatility associated with the AIM Act transition during 2025.

Hudson reaffirmed its full-year 2026 gross-margin target in the low-to-mid-20% range. During the question-and-answer session, Bertaux said pricing in the third quarter was similar to the second quarter and had stabilized during 2026. He said the company currently expects pricing in 2027 to be roughly in line with 2026.

Selling, general and administrative expenses rose $1.9 million year over year to $10.8 million. The increase reflected continuing costs related to the company’s D365 enterprise resource planning system, as well as added personnel and consultants supporting long-term initiatives. Bertaux said third-quarter ERP expense was 50% lower than in the second quarter.

The company ended the quarter debt-free with $35.3 million in cash, up $10 million from June 30. Hudson did not repurchase shares during the quarter, saying it is prioritizing investments in strategic and operational initiatives. Year to date, the company has repurchased $2.5 million of shares.

Inventory conditions weigh on HFC market

Gaglione said channel inventory has remained a key factor in weak HFC pricing and demand for reclaimed refrigerants. Environmental Protection Agency data released during the quarter showed U.S. HFC inventory declined 3% year over year in 2025, the latest available data. Total reported HFC inventories have declined approximately 27% from 2022, when the AIM Act took effect, through 2025, according to Hudson.

Management said existing channel inventory could continue to moderate pricing and reclaimed refrigerant demand as the industry approaches the next scheduled HFC phase-down in 2029. Still, Gaglione cited several potential sources of demand beyond earlier projections, including data centers, HFC components contained in some next-generation hydrofluoroolefin blends, and possible future adjustments to the HFC allowance framework.

In response to an analyst question, Gaglione said Hudson believes EPA models may underrepresent demand from data centers and from HFO blends that contain HFCs, including R-513A, R-448A and R-449A. He also said projected inventory levels are difficult to estimate several years in advance.

Management said demand softness has been visible broadly, with greater pressure in residential and light-commercial markets because of factors including inflation. Gaglione also said the company continues to see activity related to illegal imports, though Hudson had no new enforcement developments to report during the quarter.

Technology, services and government contract initiatives

Hudson signed a joint development agreement during the quarter with Icorium, a Kansas-based company specializing in mixed refrigerant separation technology. The company said Icorium’s patented extractive distillation process could complement Hudson’s existing fractional-distillation capabilities by processing complex refrigerant mixtures, including certain next-generation blends and azeotropes.

If successfully commercialized, Hudson said the technology could improve recovery rates, reduce refrigerant destruction and inventory days on hand, improve working-capital efficiency and reduce reliance on virgin refrigerant. Management also said the technology could make recovery easier for contractors by allowing mixed recovered refrigerants to be combined in a single cylinder rather than sorted by product type.

Gaglione said Hudson is also pursuing growth in services and collaboration opportunities. He said the company’s services business is effectively at capacity and that Hudson is considering strategic hires, while noting there were no acquisitions to announce.

Separately, Hudson was re-awarded a $210 million Defense Logistics Agency contract in August. The five-year award runs through July 2031 and includes an opportunity for an additional five-year extension through July 2036. The contract generated $11 million of third-quarter revenue.

Looking ahead, management said it plans to continue investing in separation technology, facility improvements, operating efficiency, talent and market development. Gaglione said the company is seeking to build a more scalable business with less exposure to short-term refrigerant price fluctuations while expanding its higher-value reclaimed and specialty refrigerant offerings.

About Hudson Technologies (NASDAQ:HDSN)

Hudson Technologies, Inc NASDAQ: HDSN provides refrigerant products and services for the heating, ventilation, air conditioning and refrigeration (HVACR) industry. The company supplies reclaimed and recycled refrigerants, as well as virgin refrigerants and related products, to customers that operate or service commercial, industrial and residential cooling systems.

Its services include refrigerant reclamation, refrigerant management, cylinder management, technical support and logistics.

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