We believe that the current phasedown represents a significant opportunity for our business. And we anticipate that the elimination of this debt will enable us to further reduce our interest expense and improve our balance sheet.Īs you know, our industry is preparing for the unprecedented 40% baseline reduction in virgin HFC production and consumption allowances, which will be effective at the start of 2024. Notably, we're very pleased to achieve the full repayment well ahead of our March 2027 maturity date. Our ability to consistently deliver strong profitable and operating cash flow allowed us to aggressively pay down our debt during the last several quarters, and that progressed - that progress culminated with the full repayment of our term loan during the quarter. From our vantage point, we remain comfortable with our long-range gross margin target of 35%. As we mentioned last quarter, we are tracking toward the highest annual revenue from our DLA contract. Without those additional contributions, gross margins would have been closer to 38%. Margins were favorably impacted again this quarter, similar to what we saw in the second quarter of this year from higher-margin carbon sales and from sales related to the DLA contract. In addition, the late arrival of warmer weather to many parts of the U.S., which impacted demand for certain refrigerants slightly impacted volume unfavorably for this season.Įven with the significant pricing headwinds, we achieved our gross margin of 40%, which is slightly higher than our long-term targeted gross margin levels. Specifically, for the 9-month period, we saw a decline of approximately 17% in the sale price of certain refrigerants as compared to the first 9 months of last year. As we detailed previously, throughout most of 2022, we saw a substantial sale price increases without a corresponding increase in inventory price.Ĭonversely, the 2023 cooling season was characterized both a challenging pricing environment and lower sales volume for the 9-month season. The primary driver for the comparative decrease was a 27% decline in the sales price for certain refrigerants when compared to the third quarter of 2022. That said, as we expected, on a comparative basis, third quarter 2023 revenue margin decreased relative to the significantly strong revenue margin performance achieved in 2022. We delivered solid third quarter results, which included continued profitability and strong cash flow to close out our traditional 9-month cooling season. Good evening, and thank you for joining us. With that out of the way, I'll turn the call over to Brian Coleman. 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 of the factors that could cause our actual results to differ materially. And since those elements can change and in certain cases, are not within our control, we would ask that you consider and interpret them in that light. Please understand that these statements involve a number of risks and assumptions. 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, they are not guarantees of future performance. All statements that address expectations, opinions or predictions about the future are forward-looking statements. During the course of this conference call, we will make certain forward-looking statements. I'll now take a moment to read the safe harbor statement. On the call today are Brian Coleman, President and Chief Executive Officer and Nat Krishnamurti, CFO. Good evening, and welcome to our conference call to discuss Hudson Technologies financial results for the third quarter of 2023. I will now turn the conference over to your host, Jennifer Belodeau. (Operator Instructions) Please note, this conference is being recorded. Welcome to the Hudson Technologies Third Quarter 2023 Earnings Call. Jennifer Belodeau VP Institutional Marketing Services, Inc. Ryan Ronald Sigdahl Partner & Senior Research Analyst of Institutional Research Craig-Hallum Capital Group LLC, Research Division Sweeney MD & Senior Research Analyst ROTH MKM Partners, LLC, Research Division
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