Hudson Technologies Stock

Greetings. Welcome to the Hudson Technologies Second Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, John Nesbett of IMS Investor Relations. You may begin.

Thank you. Good evening, and welcome to our conference call to discuss Hudson Technologies' financial results for the second quarter of 2026. On the call today are Ken Gaglione, President and Chief Executive Officer; and Brian Bertaux, Chief Financial Officer.

I'll now take a moment to read the safe harbor statement. During the course of this conference call, we'll 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 business as we see them today, they are not guarantees of future performance. 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 the factors that could cause our actual results to differ materially.

With that, we will now turn the call over to Ken Gaglione. Please go ahead, Ken.

Hey. Good evening, and thank you for joining us to discuss our second quarter results. The refrigerant selling season is underway, and I am generally pleased with our strong second quarter results against some rather challenging market and business conditions. Our priority remains long-term value creation, including our focus on operational excellence through the improvement of our core capabilities and longer-term efforts to create less cyclical, more diversified sources of revenue with the goal of reducing our dependency on spot refrigerant pricing.

We continued to execute on that vision in the second quarter by investing in the talent and technology we need to accomplish these goals with the backdrop of weaker-than-expected HFC market prices, illustrating the importance of shifting our business model to have less exposure to variations in pricing dynamics.

We're in an inflationary economy, and this tends to favor repair versus replacement of HVAC units and resulting demand for aftermarket refrigerants, but this is counter to what we saw in the quarter. There are several possible reasons for softness in HFC prices. At this point, we can only speculate that a few factors are contributing to the softness, including recent information we've seen about illegally imported refrigerants coming across the southern border, excess channel inventory or simply that while there have been short bursts of higher temperatures this summer, we haven't really seen a prolonged period of hot weather for a long enough period of time. The industry is acting on the question of illegal imports and we're optimistic the situation will improve in the long run. Additionally, the forecasted El Niño effect and accompanying warmer weather may also benefit our business as we round out the selling season.

For the quarter, sales revenue was up 8%, driven by a strong 12% increase in sales volume, while our increase in reclamation volume again demonstrates our customers' strong commitment to refrigerant life cycle management and Hudson's expanding network of recovered refrigerant sources. These positive results were offset by the HFC refrigerant pricing and higher costs related to our investments, both of which impacted net income. Brian will provide more detail on our financial results in a moment.

Turning to our business with the DLA. Orders during the second quarter were in line with our annual run rate for the DLA contract. The 5-year annual contract that was awarded to us and then rescinded due to a competitor's challenge is still in review. During the quarter, we were awarded a bridge contract, which keeps the current contract terms and conditions intact for 4 months through November 29, 2026, with 2 additional 3-month extensions through May of 2027. We are very confident this open matter will be resolved shortly.

Next, we often get questions about Hudson's activity in the rapidly expanding data center market. Most of what we read and hear about data centers today is focused on the immediate build opportunity for direct and indirect cooling and the role traditional HVAC systems play. These are generally first-fill opportunities for new systems dominated by virgin refrigerants sold to OEMs or through OEM channels. Hudson's business is centered on specialized high-speed recovery and legacy reclaimed refrigerant supply to the aftermarket.

Today, we have a nascent business with data centers, which is not a meaningful portion of our business today, but we expect this segment to be a much larger opportunity in 3 to 5 years as data center HVAC systems begin to need optimization, resupply or decommissioning. We will continue to look for ways to optimize our presence in the data center market. This expected future demand is yet another reason for investment today in operational readiness. First, as I noted earlier, recovered refrigerants are an important feedstock for operations.

During the quarter, we saw continued growth in recovered refrigerant volume as we leverage our past investments and acquisitions that expanded our recovery ability and more recently, the successful pilot of aftermarket small recovery trucks, or SRT, in the New York City area that further facilitates our life cycle refrigerant management program by focusing on high-density, lower-volume recoveries that our legacy service operations did not address. The solution is high speed, EPA compliant and allows our contractor partners to focus on other value-added revenue-generating activities.

By focusing on the contractor, we are not only expanding our access to recovered refrigerant, but also helping to increase overall industry recovery rates by simplifying the recovery and reward transaction so it is effortless as possible while still complying with EPA reporting requirements.

Second, when we receive recovered refrigerant from contractors for reclamation, the cylinders can contain one refrigerant or may be mixed with multiple refrigerants. Hudson has 2 of the 7 reclamation facilities in this country that can separate mixed refrigerants from a cylinder using fractional distillation. This enables the conversion of recovered refrigerant feedstock into salable products with greater efficiency compared to simple distillation or other methods.

While fractional distillation is not new, the proprietary way we accomplish the separation is one of Hudson's core competencies. We're building on that expertise. And during the quarter, we announced our intent to partner with Icorium, an NSF Innovation Corps start-up company based in Lawrence, Kansas, to scale their patented extractive distillation technology to increase our ability to separate complicated next-generation azeotropes and HFO refrigerant blends in one of the most efficient ways possible.

Unlocking this traditionally difficult separation capability allows Hudson to extract the most refrigerant from every pound of recovered gas, permitting faster transition of feedstock into working capital and producing a sustainable competitive advantage in the process. The intended partnership with Icorium is just one component of Hudson's advanced operations directive, which we expect will enable the company to expand both capability and capacity ahead of the next EPA phase down and before expected increase in that data center-related demand.

As announced previously, our facility in Illinois experienced extensive damage from a tornado on June 11, causing us to temporarily idle operations while the plant was secured. The good news is that the damage was mostly related to the building structure and no one was injured with the storm removing the roof and the equipment attached to it and water damage to the interior of the facility. While the plant was without power for approximately 1 week, there was no detectable damage to the separation columns or to our product inventory.

Facility was completely out of service for approximately 3 weeks with no loss of inventory and is now fully functioning while major repairs are underway. Expenses related to the full restoration will be covered by insurance and are not reflected in our second quarter P&L.

Now I'll turn the call over to Brian. Please go ahead, Brian.

Thank you, Ken, and good evening, everybody. I will now review our second quarter 2026 financial results with a comparison to the second quarter of 2025. Hudson reported $78.3 million in revenue, an increase of 8%. We posted a strong 12% growth in sales volume, which was partially offset by a 6% decline in average refrigerant sales price. During the 2025 quarter, essentially all refrigerant market prices rose as a result of supply chain constraints amid the EPA-mandated transition to HFO refrigerants.

Gross margin was 26% compared to 31% in the 2025 quarter. The drivers to the gross margin decline were twofold. First, as previously noted, HFO supply chain constraints caused a temporary positive impact on all refrigerant pricing in the 2025 quarter. This pricing comparison resulted in a 232 basis point reduction in gross margin for the 2026 quarter. Second, we experienced higher operating expenses, primarily due to increased fuel costs in the quarter related to the conflict in the Middle East and the corresponding impact to freight costs.

SG&A expenses were $12.4 million in the 2026 quarter, an increase of $3.1 million. The drivers to the increased SG&A costs were also twofold. We incurred costs related to the optimization of the recently launched ERP system as well as legal expenses incurred related to the reaward of our DLA contract. Second, we increased staffing and consulting resources that reflect our newly reinvigorated focus on longer-term initiatives to increase shareholder value, as Ken noted.

Net interest was flat in the 2026 quarter compared to net interest income of $700,000 last year, reflecting a lower cash balance on our unlevered balance sheet.

Hudson recorded net income of $4.9 million or $0.12 per diluted share, compared to net income of $10.2 million or $0.23 per diluted share in the 2025 quarter. The decline in net income reflects the combination of a continued trough in HFC refrigerant market pricing, inflationary pressures, primarily in freight, our ERP optimization as well as legal and consulting support to continue our reinvigorated commitment to investing in the future for long-term shareholder value creation.

The company continues to have an unlevered balance sheet, ending the quarter with $26 million in cash and no debt, reflecting a sequential $6 million increase in cash versus our cash position at March 31, 2026. Our capital allocation strategy remains focused on organic and strategic growth as well as opportunistic share repurchases. We did not purchase any shares of the company's stock during the 2026 quarter, reflecting our near-term cash management strategy. We have purchased $2.5 million in shares thus far in 2026.

At this time, with the trough in refrigerant market pricing and inflationary pressure expected to continue, we are revising our full year 2026 gross margin target from mid-20% to low-to-mid-20%. In addition, as we continue to invest resources for long-term shareholder value creation, we expect second half SG&A expenses to continue to show increases over 2025, but to a lesser extent than the first half.

I will now turn the call back over to Ken.

Thank you, Brian. We can't avoid the reality of soft market prices for HFCs and the impact it has on our profitability. But despite this headwind, we had a very strong quarter, focusing on meeting the growing service and refrigerant needs of our customers. The industry will continue to pursue the development and use of new lower GWP refrigerants, and we believe Hudson has the expertise, facilities and distribution network to bridge the transition now and in the future.

To secure our vision, we are making the incremental investments needed to make Hudson a more flexible, efficient competitor and ultimately, the preferred source for diverse refrigerant life cycle management solutions.

Thank you for your attention. Operator, we'll now open the call to questions.

[Operator Instructions] First question comes from Jason Tilchen with Canaccord Genuity.

Maybe one for Ken to start. Just wondering if you could maybe share some of the -- share an update on how the ERP implementation progressed during the quarter. Maybe what are some of the early learnings as you continue to roll that out? And related to that, what may be the specific magnitude of the costs -- those expenses for the optimization that were incurred during Q2, when those may start to roll off as well?

Jason, thanks for the question. Yes, the ERP system optimization, I think, has gone better in the second quarter. It's definitely been a process. And I think that the cost -- magnitude of the cost, yes, we've spent a lot to optimize and get things sorted out. But we're seeing that cost is going to be reduced in the second half. It's not going to continue at the same rate.

So there's over $1 million in the first half that we've invested in ERP optimization, and it will be lower in the second half.

Great. And then in the prepared remarks, you mentioned that the dynamic you saw with pricing in the quarter didn't necessarily match the sort of typical dynamic you would see in an inflationary economy. You mentioned some of those potential causes of the softness in pricing. Just wondering what you think is needed in order to maybe drive more of a normalization in that behavior and any other sort of thoughts that you have on the operating environment would be helpful.

Yes, it's definitely not a typical increase that we would have seen or a typical firming that we would have seen going into the season on HFCs. What it's telling us is that I think, in my opinion, there's excess channel inventory on HFCs that are keeping prices suppressed. I also think, and this is sort of new information, that there is more of an impact on illegal refrigerants coming in than we might have expected previously. So that's also having a dampening effect.

What will impact the rest of the season is going to be prolonged heat, and I think we are seeing some of that. I think it would also help if some of the inflationary pressures were reduced, but I'm not really forecasting that. I think that's going to stay the same for the rest of the year.

Okay. Great. And then last quick one for me is, maybe one for Brian, just could you provide a little bit more color on the specifics around some of those -- some of the areas where from an operating perspective, where you're seeing those inflationary pressures and to the magnitude that you expect them to persist in the second half?

Yes. So it's across several different areas, but primarily in freight. So freight is where we saw the biggest increase. And unfortunately, in this dynamic, we can typically -- in the past, you could always pass along freight in the pricing. But with this trough in HFC pricing, that didn't happen. So with that increase in freight, that was certainly a contributor to the margin decline.

The next question comes from Gerry Sweeney with ROTH Capital.

I had a question about the distillation technology. Obviously, it sounds like it potentially helps you separate mixed gas or dirty gas and gas comes back in all shapes, forms and fashions as that's related to the quality. Do you have any idea of how much more gas this could potentially open up for you for reclaim? Because my understanding was some of the mixed gas -- it was too mixed that made the fractional distillation very challenging or you had to run it through multiple times to sort of get to a point where you need to use it.

Right. You hit it exactly right, Gerry. What makes it inefficient is multiple passes through a very tall column to separate some of these more complicated blends or highly contaminated gases, correct? There are gases that we are unable to -- or components that we are unable to do effectively with fractional distillation that we will be able to effectively do tomorrow with extractive. That's a key unlock for us. And we'll be able to share more detail about what that is and what the volume is going forward. But that is absolutely a critical component for us.

The second part of the story is this also unlocks our ability to move potentially into adjacencies that we would not have been able to access otherwise with fractional distillation.

What would be some of those adjacencies if you have the ability to?

Yes. I'm not going to get into it. But in broad strokes, right, this is a much more sensitive type of separation. So it gets us to a higher purity level and it's a more sensitive type of distillation. So that puts us into a space where higher purity materials for other market segments in other areas, that's where this is going to come into play.

And this may be too early to ask, but the economics behind the cost, is it as efficient as the current system? Or how should we think about it from that perspective?

I don't think it's -- sorry, go ahead, Gerry.

I wasn't sure if there would be an advantage. It provided more of an advantage on a cost basis.

I think it is early to say. But right now, we're estimating that it's going to be mostly useful for those complicated, highly contaminated blends. But as we get to scale down the road, then it should be on a -- it should be a cost equivalent basis as fractional.

[Operator Instructions] The next question comes from Josh Nichols with B. Riley Securities.

This is Matthew on for Josh. So in terms of pricing, you're running down about like 6% against last year's peak. I'm wondering, as those comps ease through the back half, do you see current price levels holding? And would you call the trend stabilizing or still under pressure?

We would see them stabilizing. So there was just a small uptick in 410A in Q2 versus Q1, very small, and we think it's stabilizing, just call it in the $6 area. $6 per pound.

Got it. And how much of a factor is the illegal import pressure on pricing? Like, do you expect that to ease with enforcement? How persistent is that? And, yes, if you could quantify that a little bit in terms of the impact.

It's hard to quantify, as you might expect, but I think it's a bigger factor than we would have thought at the beginning of the year. But we are working with industry partners and our consortia of interested parties here to understand what the magnitude is. But it is in the millions of pounds is what I've come to understand. So this is a significant issue for the industry, and it is being addressed.

What's going to be the second half outlook? I'm optimistic, but I can't say with any certainty that this is going to be settled by the end of the year.

Got it. That was helpful. I guess last question for me is just more on the Icorium technology. Just wondering what it does for your yield in terms of how much more recovered product you can convert to salable versus conventional fractional distillation.

Yes. And I'll say this. I think it's a very exciting technology, but it is a commercialization. So we are taking something. We've done a lot of work on this over the past couple of years. I think that there's a huge opportunity here to separate out, as I said earlier, a component that we've not yet been able to separate effectively with fractional distillation, and we can do that with extractive. That's been demonstrated.

So that alone is going to justify the investment. And then the improvement in yield on regular -- let's say, regular cross gases, that's yet to be determined. But we are expecting this to be quite significant.

The next question is coming from Ryan Sigdahl with Craig-Hallum.

I will be the first to congratulate you guys on getting the 5-year, $210 million Defense Logistics Agency. It hit just now. So congratulations.

My question is, so -- you mentioned increased staffing as you focus on some of these longer-term initiatives. You talked about service in the past, et cetera. But I guess my inclination is you must be feeling pretty good about the pipeline of opportunities given you're bringing on fixed costs ahead of that. But can you give us an update kind of what you're working on, your confidence level and any other details there?

Yes, absolutely. And thanks, Ryan. Appreciate the notice. For everyone's benefit, what came across the wire as we were speaking is the DLA reaward has been reawarded. So that matter is now behind us. It's been a 7-month stretch and we're very pleased that DLA has recognized and validated our commitment to their success. So thanks, Ryan.

Yes. When it comes to the investment, right, there's 2 or 3 major pillars here. And I'm going to include the extractive distillation in this because they're all linked together. But our predictive modeling business, and that's a nascent service area, has actually done quite well. We have won 4 contracts this year so far for predictive servicing on multiple chillers. We're focusing that activity and to support that activity, we need to have improved skill sets and new skill sets in the organization.

So that's what we're really focusing on is the predictive modeling services as well as the small truck recovery program, where we've added staff and we're adding locations to support that. That's already revenue positive and we are excited by the pilot work that's been done in the New York City area. And we're going to continue that in other areas of the country, other major metropolitan areas with the rollout continuing for the rest of the year.

So those are the areas where we're supporting staffing as well as regular services business. We're at capacity with our services group. We have done some data center work with our regular services group this year, and that's very exciting. I don't talk too much about it, but it's a great growth area for us as that goes forward.

And as I mentioned in my comments, we're going to need the service team to support it. So those are the areas that we've been investing in.

And I'll even add to that. We have competitors on the line. So we're investing with consultants and such for things that we can't speak to now, but that we feel will have very good impact on shareholder value in the future. So one day in the near future, we'll be looking forward to speaking to those.

Good teaser for your competitors on the line, Brian, to look out behind their back. Maybe just one other one. You guys have done a nice job of outperforming growing volume. I can't help, but given the decrement to gross margin. Are you guys emphasizing volume over price and margin? And are you able to do that in the market if you wanted to?

Yes, it's a good question. So we are balancing this. So we actually pulled back volume when the market prices started to erode further back in June. We made a strategic decision to start focusing on higher-margin product mix. So we did give up some revenue on top line just to look at higher-margin product sales. So we do have that ability, but it is a balancing act. And it was impaired somewhat in June by the plant being down.

Some of our R-22 sales could not be executed in June as a result of the plant being down. So those either got pushed into the next quarter -- into this quarter or didn't happen at all. So it is a balancing act, but we are able to fine-tune that as we go forward.

We have reached the end of the question-and-answer session, and I will now turn the call over to management for closing remarks.

Okay. Thank you, operator. And thank you, everyone, for your interest in Hudson Technologies, particularly this quarter. I want to thank again our employees for their continued support and dedication to our business and both our long-term shareholders and those that recently joined us for their support during an exciting period of the company's evolution.

This was a tough quarter. We had a lot of headwinds with the plant and the accident. But again, our employees pulled us through, and I am extremely proud of the work that's been done to grow sales, grow volume in that environment. So thank you, everyone. We look forward to speaking to you after the third quarter results. Have a good night.

Thank you. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the Hudson Technologies First Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Jen Belodeau of IMS Investor Relations. You may begin.

Thank you, John. Good evening, and welcome to our conference call to discuss Hudson Technologies financial results for the first quarter of 2026. On the call today are Ken Gaglione, Hudson's President and Chief Executive Officer; and Brian Bertaux, Hudson's CFO.

I'll 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 view of the industry and of our business as we see them today, they are not guarantees of future performance. Please understand that these statements involve a number of risks and assumptions. 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. 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.

With that out of the way, I'll turn the call over to Ken Gaglione. Please go ahead, Ken.

Good evening, and thank you for joining us to discuss Hudson's first quarter results. The first quarter is typically slow for our industry. But for Hudson, it was about executing on the operational and organizational progress we need to create the foundation for healthy, diversified growth in the years ahead.

We made solid progress heightened by strengthening our management team, making critical additions to our Board of Directors, launching our ERP system and the signing of a license agreement for the reclamation and resale of our next-generation refrigerants. Overall, we posted strong top line results to start the year, driven by a commitment to excellence demonstrated by our employees at all levels of the company.

The leadership team is deeply grateful and thank all of our employees for their efforts during the first quarter, especially the introduction of the new ERP system.

So we kicked off the 2026 selling season with revenue growth of 9% to $60.2 million, driven by strong sales volume and firming HFC prices, partially driven by unseasonably warm temperatures in the South West region, some uncertainty in global supply lines driving demand and overdelivery by our sales team.

I'd like to point out that the first quarter revenue growth was stronger than we had expected and guided in our fourth quarter communications earlier this year. Our concern then was that the new ERP system launch and implementation challenges that we were facing, which are not uncommon occurrence with a transition of this magnitude, would negatively impact results.

With our visibility at the time, we expected first quarter revenue growth to be constrained to the low- to mid-single digits. But thanks to our people, the initial headwinds had less of an impact than we anticipated. And that, combined with strong execution and those warmer temperatures contributed to revenue outperforming our expectations.

The ERP system is now integrated and functional. And while we do expect to continue optimizing it for most of this year, we do not expect any major disruptions. The effort is already beginning to deliver the benefits of improved and faster management decision-making based on a single source of readily available data.

We experienced gross margin pressure in the first quarter of '26 related to year-over-year sales mix. While traditional HFC pricing was higher in the first quarter slightly above $6 a pound, the first quarter of 2025 included a larger concentration of higher-priced and higher-margin HFO refrigerants.

As you might remember, during that period last year, we started the season with an industry-wide shortage of 454B, which is an HFO refrigerant and popular replacement for R-410A in new equipment. The shortage resulted in Hudson seeing heightened demand for 454B as contractors needed to top off new systems as they came online and from inventory building to alleviate concerns over availability later in the season. Refrigerant producers effectively addressed this shortfall as the year progressed, and we view last year's increased aftermarket demand for HFOs as an outlier.

We also restructured the management team in the first quarter of '26 to better serve our long-term business objectives. This included the promotion of Rob Stoody to Senior Vice President of Operations. Rob is an industry veteran who not only leads our initiatives to integrate both our supply chain and plant operation, but also maintains his legacy role managing our relationship with the DLA. He is supported by a dedicated team of professionals focused on enabling our ERP system and preparing for new growth aligned with our strategic plan. We are well positioned today to meet demand for all types of refrigerants. And under Rob's guidance, we will further streamline and expand our capabilities and capacity to separate and reclaim more complex next-generation blends in the future.

We also made changes to our sales and marketing organization in the first quarter. Kirk Reimer, who was formerly Hudson's Vice President of Sales, now assumes expanded responsibilities for core marketing and the execution of certain strategic growth initiatives as Vice President of Sales & Marketing. Kirk has played a key role building our national sales team and go-to-market strategies and now has a renewed emphasis on building our core marketing organization and supporting focused growth in the services component of our business. We added significant marketing talent to Kirk's organization in the first quarter, and we will continue developing our marketing and service personnel in the months ahead.

The HVAC industry, as you might know, requires a wide variety of products and services to keep cooling systems operating, and we want to ensure that the market recognizes our unique capabilities in meeting customers' needs whenever, wherever and however they need us.

Additionally, we enhanced our Board composition with the replacement of 2 outgoing directors with 2 new independent directors, Alan Sheriff and Jeff Feeler. Coming into this year, it was a priority of mine to build on the strong competencies of our Board by adding new directors with diverse professional experiences and distinct perspectives in areas where we will need as the company continues to grow. Alan and Jeff bring the additional operations, M&A and capital markets expertise needed to advise and bring new perspective to the company's identification and assessment of new opportunities.

Long-standing Board member, Mr. Rich Parrillo, was appointed Lead Independent Director, assuming responsibility from outgoing Director, Mr. Vincent Abbatecola, who retired from the Board this period. The company would like to thank Vinny for his more than 30 years of dedicated service to the Board and to Hudson Technologies success.

Together with our current members of the Board, these new members and other changes fortify the Hudson Board by expanding our financial and operational depth of expertise and variety of perspective.

As we've discussed on previous calls, our capabilities place us in 2 important points in the refrigerant supply chain as a provider to wholesalers who supply contractors working in the residential and light commercial space and as a direct supplier to customers with 24/7 cooling needs such as supermarkets and industrial facilities. This provides some resilience to our earnings. And with our new team in place, I believe we are very well positioned to expand our leadership position in refrigerant recovery and reclamation while we explore new opportunities as our industry and customers adapt to an always-changing refrigeration market.

A couple of other notes here of importance. Regarding the status of our rescinded DLA contract, Hudson continues to support DLA while it updates its award procedure in response to a competitor's challenge earlier this year. We cannot predict the outcome, but we remain confident in our successful track record servicing the DLA and expect a favorable outcome when the analysis is complete.

In this time of uncertain political change, I'd like to take a moment to speak to certain regulatory forces and their potential impact on the company. The strong regulatory tailwind provided to reclaimed refrigerant providers like Hudson by enactment of the AIM Act in 2020 remains a cornerstone of EPA's plans to step down HFC use another 30% in 2029.

Recovered and reclaimed refrigerants are expected to fill the void between reduced supply of virgin refrigerants and actual market demand from legacy HVAC systems for HFCs, we do not expect this AIM Act-driven supply-demand imbalance to change materially. But we have seen our efforts in some states like California and New York and some other climate alliance states to legislate accelerated reduction in the use of high GWP refrigerants in favor of reclaim refrigerant for some segments, while other efforts by other parties have sought to slow or alter the phasedown schedule over primarily economic or logistic concerns. The outcome of these competing efforts is unclear. However, Hudson is well positioned through our supply of legacy HFC refrigerants and new capabilities to support their replacement products to continue our growth regardless of the outcome.

Also, given the current macroeconomic environment with rapidly changing and unclear domestic policies, higher consumer prices and damaged global trading alliances, the potential impact on refrigerant supply is difficult to estimate and always a concern to the business. We will continue to monitor it.

So in closing, we used the first quarter to execute important organizational and operational imperatives outlined previously and in accordance with our strategic plan. Our performance in the first quarter reinforces my belief that we are uniquely positioned with the right people, products and services needed to continue our core growth, improve our leadership position in value-added refrigerant life cycle management solutions.

We are focusing on driving organic growth through our ability to provide refrigerants through our extensive national footprint and building our recovery and reclamation capabilities today while exploring real opportunities to further innovate with the goal of diversifying our revenue stream and reducing seasonality in the future. Our first quarter results reflect trends that should provide a solid platform for the 2026 selling season.

Now I'll turn the call over to Brian Bertaux again to review our first quarter 2026 financial results. Go ahead, Brian.

Thank you, Ken. I'll review our Q1 '26 financial results with a comparison to Q1 '25. We recorded revenue of $60.2 million, a 9% increase compared to the $55.3 million posted last year. As Ken mentioned, revenue came in higher than we anticipated, driven by strong sales volume and organizational execution as well as warm weather in the Western U.S.

Gross profit was $11.8 million in the quarter and gross margin was 20% compared to gross profit of $12.1 million and gross margin of 22% last year. The Q1 '26 gross margin declined slightly, primarily due to the mix of refrigerants sold as compared to last year. The Q1 '25 sales mix included a broader range of higher-priced and higher-margin HFO refrigerants as contractors topped off newly installed equipment as the systems first entered the marketplace.

We expect gross margin to improve as we continue through the selling season. Hudson recorded SG&A expenses of $9.5 million compared to $8.2 million in Q1 '25. The increased SG&A spend was primarily related to the post-implementation enhancement of our ERP system and continued focus on strategic initiatives.

Operating income was $1.5 million compared to $3.1 million in Q1 '25. This variance was mostly attributed to the higher SG&A expense. Income before income taxes was $1.6 million compared to $3.7 million in Q1 '25. Income tax expense was $1.3 million compared to $900,000 in Q1 '25. The increased income tax expense for the quarter relates to approximately $900,000 or $0.02 per share and income tax expenses related to a nonoperating item as well as executive stock compensation.

We recorded net income of $300,000 or $0.01 per diluted share compared to net income of $2.8 million or $0.06 per diluted share in Q1 '25. The company's unlevered balance sheet remains strong at March 31, 2026, with $19 million of cash, and we are positioned well from a working capital perspective as we enter the selling season. During the first quarter, we purchased $2.5 million of common stock as part of our opportunistic buyback program.

Now I'll turn the call back to Ken for his closing remarks.

Thank you, Brian. So as we continue through the 2026 selling season, we're focused not only on driving success this year, but on positioning Hudson to capitalize on opportunities to deliver strong long-term growth and profitability.

Our additions to the management team and the Board demonstrate our commitment to intensifying our strategic initiatives while driving operational excellence. Again, Hudson is uniquely advantaged with the combined strength of our extensive customer base, industry partnerships, national footprint, proprietary technology and decades of expertise in this industry.

Our focus now is to leverage these advantages to enhance our capabilities and open up new opportunities [Technical Difficulty]

Please continue to hold. We'll have our speakers reconnected once again shortly.

I'm sorry, we've had technical difficulties tonight, but we're going to open the line up now, operator, for Q&A.

[Operator Instructions] The first question comes from Ryan Sigdahl with Craig-Hallum.

I want to start with gross margin. I get the year-over-year compare. But when I look back, it's the lowest Q1 since before COVID. So I guess surprised given HFC pricing was up year-over-year and quarter-over-quarter. Just curious what's going on in the gross margin side?

I would just tell you, it is a tough comp against last year's first quarter. And remember that our Q1 and Q4 are our lowest margin quarters, and we are still sticking with our overall guidance of, say, mid-25s for margin overall. So it's just a low point for the year or just call it out a season, and we expect to pick up margin into Q2 and Q3.

Yes. I was looking at Q1 to try and be seasonally comparable when I went back. I think previously, you had said flat to up slightly for the year. Now mid-20% maybe saying the same thing, but gross margin was 25% last year. I guess, is it still 25% or better?

Yes, correct.

ERP transition, are you willing to quantify how much of an incremental cost that was? And then if any of that is lingering still in Q2 or the rest of the year?

We don't want to go into great detail on it, but let's just say it was a strong contributor, probably half of the increase year-over-year. And yes, as Ken noted, we'll continue to invest in optimizing the ERP system throughout the rest of the year. So we'd expect the same level of SG&A activity.

Ryan, do you have any follow-up?

I do, but if they're not there.

Did you not hear us?

All right. You're back.

Yes. Did you hear the answer to the question, Ryan?

I think I caught most of it. Well, maybe just for my last question, just on the early season weather, which you called out, but we certainly had a nice stint of warm weather well earlier in the Northeast, et cetera. But just can you talk through kind of the activity that's been happening from a preseason standpoint and what kind of the narrative it is from the industry as we head into the summer selling?

Yes. Thanks, Ryan. So you're correct, right? There was a heat dome that hit the Southwest early -- much earlier than anticipated that drove folks to look to increase inventory and maybe there was some lingering questions about what happened last year to make sure that they had product available. Right now, it looks like that's become -- start -- it's normalized or regressed back to where we would normally expect it. So no more large excursions on the outlook.

Our next question comes from Jason Tilchen with Canaccord Genuity.

I guess to start, as it relates to the Q2 guide, can you sort of unpack some of the trends at the beginning of April and what's contemplated in terms of volume compared to pricing? And then also on the gross margin, you mentioned that improvement expected throughout the year. Anything else in terms of some of the key puts and takes and the cadence maybe Q2 versus the second half?

Well, we gave our revenue guidance, and it's kind of the same story as Q1, where we'll expect better volume year-over-year in Q2. But with that 454B shortage last year, all refrigerants, HFOs and HFCs had a lift in Q2 and Q3, and then pricing came back down as the situation just normalized. So therefore, we're expecting higher volume, but less from a pricing that we'd expect pricing to be lower than last year because of that event with the HFO shortages.

Last quarter, you talked about some of the opportunities that you're exploring to diversify into some adjacent areas on the services side. Just wondering if you could maybe provide an update on those efforts. What are some of the gating factors to keep in mind as you're looking to make those moves and what's excited you about those opportunities thus far?

Yes, certainly. So I did indicate that we're looking to diversify revenue and improve quality perhaps and reduce the seasonality of the business. We have identified several interesting opportunities. Not really in a position to go into any great detail right now, but there are significant activities in this industry that we are looking to take advantage of.

One last follow-up. In the prepared remarks, you mentioned some uncertainty in the global supply chain being a tailwind to demand in the quarter. I'm wondering if you could just expand on that a little bit? And also has that persisted into Q2? How much of that is sort of baked into the guidance you provided?

Sure. So what happens is the refrigerant producers rely on certain materials coming through the Gulf and other places certain feedstocks to produce refrigerants. And the intel that we get from refrigerant producers is that those costs are increasing, and we're starting to see lift to prices as a result and increases being passed through the channel by the producers as a result of this uncertainty and some other factors, but mostly the uncertainty around supply through the Gulf of raw materials, certain raw materials.

There's just generally, I would say, in the market, overall uncertainty about where prices are going and consumer confidence and inflation are all not going in the right direction is the things that we're hearing. That tends to favor -- in our industry, that tends to favor repair over replace and repairing equipment over replacing equipment tends to favor legacy HFC source and supply, and that's where we're well positioned, as I indicated in the comments, to take advantage of that one way or the other. So it's an uncertain time, and we're just trying to reflect that uncertainty.

[Operator Instructions] The next question comes from Josh Nichols with B. Riley.

This is Matthew on for Josh. So in the release, you guys used the word firming, which is a step-up from balanced regarding the pricing momentum. I was just wondering if you can put some more color around where R-410A sits today and whether you're seeing the type of seasonal price appreciation that kicked in last May or not.

Right. So we are -- I just indicated that we are starting to see firming in 410A pricing. As we get closer to the season, we sort of expect that to continue. We're guiding conservative here on where we think it's going to land. So generally, I think it's going to be a little bit consistent with last year's performance.

Separately -- do you see any early traction on the Solstice licensing deal for R-448A? Are you seeing any reclamation volumes start to come through there?

Right. So we have a licensing agreement for R-448A and R-449A. 449 is actually a Chemours product. It's been cross-licensed. So the answer to your question is that those products are forward-looking and they primarily are for the supermarket segments that have converted earlier to those materials.

So we're just getting underway with that. We haven't seen a lot of traction with it. We wouldn't expect to see a lot of traction with it just now, but we do have materials in-house. We do have the capability, and we have gotten interest from parties in California and other areas where those products are dominant. So it's looking very positive, but nothing to report just yet.

Last question for me. Just with cash coming down to about $19 million in 1Q. I'm just wondering how you're thinking about the pace of more buybacks versus preserving cash for M&A or what that capital allocation strategy is there?

Well, we are unlevered and with a cash position, and we'd expect this to be the low point for the year. So we expect to be generating cash flow. And again, we'll continue to apply our capital allocation strategy with opportunistic share repurchases and always looking at strategic opportunities.

We have reached the end of the question-and-answer session, and I will now turn the call to Ken for closing remarks.

All right. Thank you, operator. I'd like to apologize for the technical difficulties we've had tonight on the line. We do not understand that, but we will figure it out.

I'd also like to thank our employees for their commitment to our success this quarter and to thank all of you for your interest and support of Hudson Technologies mission and commitment to sustainable practices around refrigerant life cycle management.

We look forward to speaking with you again in August to discuss our second quarter results.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the Hudson Technologies Fourth Quarter and Year-End 2025 Earnings Call. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to your host, Jen Belodeau of IMS Investor Relations. You may begin.

Thank you. Good evening, and welcome to our conference call to discuss Hudson Technologies financial results for fourth quarter and year-end 2025. On the call today are Ken Gaglione, Hudson's President and Chief Executive Officer; Brian Bertaux, CFO; and Kate Houghton, Hudson's Senior Vice President of Sales and Marketing.

I'll 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, they are not guarantees of future performance.

Please understand that these statements involve a number of risks and assumptions, and since those elements can change and in certain cases, are not within our control, we 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 of the factors that could cause our actual results to differ materially.

During the call, we will also be referring to certain non-GAAP financial measures. For a detailed reconciliation of these measures to GAAP financial measures, we refer you to the press release issued earlier this afternoon and the 8-K filed this afternoon with the SEC. With that, we will now turn the call over to Ken Gaglione. Please go ahead, Ken.

Good evening, everyone, and thank you for joining us. Since we're turning to Hudson as CEO in November, I've already had a chance to speak with many of you, and I'm pleased to have this opportunity tonight to address a broader audience of investors and analysts. It's been a very busy and productive 3 months with our internal operating teams as well as with key customers, the many positive changes and a lot of progress in a few years since I left Hudson. And I found the underlying foundation of the company and my return remains very solid.

Hudson is comprised of a tremendous group of knowledgeable and service-oriented professionals with a commitment to delivering innovation and sustainable refrigerant products services and technology that our customers need in this continuously evolving and frequently complex HVAC landscape. I'm excited to be back and to have this opportunity to lead Hudson as we write our next chapter.

Before we get into the financial results, I want to take this opportunity to discuss my vision for Hudson and our strategy and priorities going forward. As you know, Hudson has been an industry leader in refrigerant distribution and an innovator in reclamation and refrigerant management service for decades, our founder pioneered refrigerant reclamation in the U.S., and we successfully navigated 2 previous refrigerant phaseouts. CFCs in the late '90s and HCFCs in the mid-2000s and now we're currently moving through another phasedown of HFCs to HFOs.

Our core business of refrigerant reclamation sales and associated services remains the focus of our organic growth strategy. This is critical to our commitment to the refrigerant life cycle management and sustainability, whereby we help to ensure optimum system performance using environmentally beneficial reclaimed refrigerants. There are many opportunities for our continued growth in support of this core mission.

In the near term and in alignment with our capital allocation strategy, we're focused on investing in a few concentrated areas that I'd like to speak about tonight, infrastructure, inventory and ERP. First, investing in our infrastructure includes expanding our separation technology and automation to ensure we are well prepared and positioned to meet the evolving needs of our customers and the new more complex HFO refrigerant blends. Additionally, we are investing in inventory that is crucial to our operations and supports our well-earned reputation for efficiently supplying our customers with the refrigerants they need when they need them.

Looking back, we were somewhat light on inventory at the end of 2024. And as a result, misdelivering on some orders during the 2025 selling season, a situation that was corrected in the fourth quarter. We remain committed to investing in our inventory so that we are well positioned to deliver the service excellence that our customers have come to rely on.

More recently, we went live with the new ERP system in February 2026. This will add connectivity to our operations and provide a more efficient platform for our ability to reliably serve our customers. Like many new ERP implementations, we have had our share of start-up headaches, which Brian will cover in more detail.

Second, we're focused on the organic and strategic expansion of our service capabilities in the commercial market. In the short time that I've been back and working with our internal teams, we have identified several opportunities to apply our existing technology and expertise to provide additional service offerings to our customer base, the HVAC market has a multitude of servicing needs, and we believe we have an opportunity to capture more of that demand.

Some examples include the separation of packaging of new refrigerant blends that require specialized balancing and handling, providing new methods to recover refrigerant from underserved segments of the market, and HVAC system optimization services, just to name a few.

Third, we'll continue our disciplined approach to accretive acquisitions. In conjunction with driving organic growth, we will continue to evaluate our acquisition and alliance opportunities that complement our core capabilities and/or strengthen our geographical presence in the market. As example, our recent acquisition of [ Refrigerants, Inc. ], Is an example of that approach and has given us an enhanced presence in the western portion of the U.S. for both securing recovery refrigerant and refrigerant distribution.

And lastly, fourth, returning capital to our shareholders via our opportunistic stock repurchase program. We repurchased $20 million in stock during 2025 and intend to continue our practice of opportunistic buybacks in 2026. Let me take this opportunity to acknowledge that these initiatives build upon the strong foundation passed to me from my predecessor. And for that, I and the company are truly grateful. And I don't believe this is a time for a transformative change.

It's not necessary for our company right now. But instead, it's a time for diversification of our revenue stream to reduce seasonality and our dependence on a few dominant refrigerants. Our entire team here is committed to capitalizing on the opportunities in front of us this year.

Now I'll touch briefly on fourth quarter and full year results before turning the call over to my colleagues. As many of you know, Q4 is historically our weakest quarter from a sales volume perspective as it falls outside of our 9-month selling season. Nonetheless, we delivered impressive revenue growth of 28% in the fourth quarter 2025, primarily related to strong sales volume, which we believe is a promising indicator of the demand environment going into 2026 and a validation of our focus on driving volume by exceeding customer expectations.

Additionally, during the fourth quarter, we completed our accretive acquisition of [ Refrigerants, Inc. ] headquartered in Denver, which strengthens our presence and access to the recovered refrigerant supply chain in the Western United States. I'll give you a brief overview of our full 2025 financial performance.

We grew 4% for the full year to $246.6 million in annual sales volume with a growth of 6%. Our gross margin was 25%, and we posted non-GAAP adjusted net income of $19.7 million or $0.44 per diluted share. Also important here is that 2025 also marks our second consecutive year in achieving an 18% increase in reclamation volume. This is directly related to our activities at the contractor level.

As we frequently mentioned in these calls and elsewhere, refrigerant recovery is critical to the reclamation process and Hudson has been an industry leader in building awareness among contractors around the importance of recovery both from a sustainability standpoint and an economic perspective. We have substantially heightened our ability to secure recovered refrigerant via our acquisitions of USA refrigerants and [ Refrigerants, Inc. ] which expanded our recovery team and our geographic reach.

Expanding reclamation as a critical part of our supply chain, and it will be increasingly important with the EPA's further reduction in consumption allowances in 2029. I'll take a moment now and turn to our work for the Defense Logistics Agency or the DLA. Last year, we recorded revenue of $38 million for the full year under our DLA contract. As many of you know, during the fourth quarter, we announced that we had been awarded the renewal of our DLA contract to support the U.S. military as a prime contractor.

In late January '26, this last January, we were notified that a competitor had filed a bid protest regarding an administrative challenge to the DLA's evaluation of proposals and the contract award to Hudson Technologies. Our contract award has been rescinded while the DLA conducts its review of its internal processes. And while this development is disappointing, Hudson has a proven and successful 10-year working relationship with the DLA and we'll continue providing logistics support on our existing contract with runs through 2026. We are determined to preserve our position as a value partner to the DLA while this protest is being resolved, and we will provide further updates as we learn more.

In closing, I would say, overall, I am very pleased -- we are very pleased with our solid fourth quarter close to 2025, and we are energized for the opportunities we see to grow our business. Now I'll turn the call over to Kate Houghton, our Senior Vice President of Sales and Marketing, to provide some additional detail around Hudson's market opportunity.

Thank you, Ken, and good evening, everyone. We executed well in the fourth quarter and delivered increased sales volume and is what is historically our seasonally slowest quarter when a large portion of our customers transition from cooling applications to heating.

In fact, our execution in the back half of 2025 offset what had been a late start to our 9-month cooling season. It's still relatively early in the year, but as we begin the 2026 cooling season, we currently see supply and demand is balanced in the market with some slight refrigerant price appreciation.

At the close of 2025, the average price of HFCs was slightly below $6 per pound and as we report to you today, it's slightly above $6 per pound. As Ken mentioned, for the second consecutive year, we achieved an 18% increase in reclamation volume. We believe our solid growth reflects our successful grassroots effort to promote recovery and reclamation activities to the field technicians who facilitate the recovery and return process as well as the expanded recovery capabilities resulting from our acquisitions of USA refrigerants and Refrigerants, Inc.

During the fourth quarter, we continued to actively engage with our refrigeration technician and contractor partners to highlight the environmental and economic benefits of recovering and returning refrigerants rather than venting refrigerant, and we will continue these efforts as we move through 2026 and beyond. In addition to our industry outreach during 2025, we also launched 2 innovative reclaim pilot programs to promote recovery and reclamation process and technology.

In September, we began our partnership with [ DC Sustainable Energy Utility], or DCSU, to establish the nation's first refrigerant recovery and reclamation pilot in Washington, D.C. The program is linked to [ DCUs], greenhouse gas emission goals. And through this pilot, Hudson provides HVAC contractors with training on recovery best practices, supplies proper storage containers for use refrigerants, covers shipping and logistics and offers financial incentives for recovered refrigerant.

The pilot is off to a strong start with early positive results. Participating contractors have avoided 600,000 pounds of equivalent CO2 emissions by reclaiming with Hudson, and the program is set to expand to a wider range of participating contractors this year. We are encouraged that CSU program is also thinking about refrigerant recovery as greenhouse gas CO2e reduction rather than the typical view of reduced energy consumption. This approach is key to encouraging utilities around the country to accelerate the support of refrigerant reclamation in decarbonization efforts.

In December of 2025, we announced that Hudson was selected to support the [ California Air Resource Board], or CARB, with their refresh pilot program, the state's first program to incentivize refrigerant recovery and reclamation. In this pilot, Hudson will partner with contractors who are part of the California Energy Commission's Equitable Building decarbonization direct in-store program to provide training on safe and efficient recovery practices and as a purchaser of recovered HFCs and HCFCs for reclamation. We're very excited to be part of these innovative new programs and optimistic that we'll continue to see additional opportunities as more state and local governments adopt legislation mandating the use of reclaimed refrigerants.

Finally, I'd like to take a minute to address the recent development at the EPA revoking the endangerment finding established in the Obama administration. The endangerment finding has served as a basis for regulating certain pollutants, including HFCs under the Clean Air Act. The recision of this engagement finding primarily limits [ CEPA's ] ability to develop further HFC regulations under the Clean Air Act, and we don't believe it will affect the [ AMAX ] independent statutory authority for the HFC phasedown.

[ OEMs ] and refrigerant producers are already well on their way in developing next-generation lower GWP alternatives to HFC refrigerants and equipment and Hudson remains in a strong position to reclaim and provides HFCs to meet the anticipated continued demand into these 100 million plus units reach the end of their useful lives.

As we begin to move through 2026, I want to echo Ken's comments about our optimism for what lies ahead for Hudson. We have a strong foundation to build from, which includes our long-standing customer base, leadership position in supply of both surgeon and reclaim refrigerants of all types, innovative thinking to engage nontraditional industry partners in the growth of refrigerant recovery, sophisticated field service capabilities and the ability to leverage our proprietary technology and expertise to drive growth.

With our renewed focus on expanding our core business through complementary opportunities and focuses on strategic expansion in complementary areas, we believe we are well positioned to grow our leadership role in the marketplace. Now I'll turn the call over to Brian Bertaux to review our fourth quarter and full year 2025 results. Go ahead, Brian.

Thank you, Kate. First, I'll review our Q4 '25 financial results with a comparison to Q4 '24. We recorded $44.4 million in revenue, an increase of 28%, primarily driven by increased sales volume. As Kate noted, our strong sales volume execution in the back half of 2025 more than offset what had been a late start to our 9-month selling season.

We posted gross profit of $3.5 million compared to $5.8 million of Q4 '24. The Q4 25 gross profit reflected the impact of $4.2 million of inventory-related costs including a lower of cost or market adjustment resulting from the fourth quarter inventory build. Hudson recorded SG&A expenses of $13.9 million compared to $8 million in Q4 '24.

SG&A in the 25 quarter included $4 million of executive severance costs. Excluding the $4 million severance costs, non-GAAP adjusted SG&A was $9.9 million compared to $8 million in Q4 '24, with the variance related to increased staffing. Operating loss was $11.2 million compared to an operating loss of $3.2 million in Q4 '24. The Q4 '25 operating loss includes $8.2 million in inventory and the $4 million severance costs.

Non-GAAP adjusted operating loss, which excludes the $4 million of severance-related costs was $7.2 million compared to Q4 '24 operating loss of $3.2 million. We recorded a net loss of $8.6 million or $0.20 per diluted share which includes the after-tax impact of the $8.2 million of previously described costs compared to a net loss of $2.6 million or $0.06 per diluted share in Q4 '24. Non-GAAP adjusted net loss was $5.4 million or $0.13 per diluted share, which excludes the after-tax impact of the $4 million executive severance cost compared to a non-GAAP net loss of $2.6 million or $0.06 per share for Q4 '24.

Turning to the full year. Hudson posted $246.6 million in revenue a 4% increase from 2024, and that increase was primarily related to a 6% increase in sales volume, which was partially offset by slightly lower pricing. Revenue from our DLA contract was $38 million in 2025. 2025 gross margin was 25.2% compared to 27.7% in 2024. This reflects slightly lower refrigerant market prices and higher freight costs.

2025 SG&A was $40.2 million compared to $33 million in 2024. Non-GAAP adjusted SG&A was $36.2 million compared to $32.6 million in 2024. Excluding the $4 million of severance costs, the increase in SG&A includes the midyear 2024 increase to our sales staff.

The company recorded operating income of $18.6 million compared to $29.3 million in 2024. Non-GAAP adjusted operating income was $22.6 million compared to $29.7 million in 2024. The decrease from 2024 reflects the aforementioned lower gross profit and increased SG&A costs, primarily from increased staffing. Hudson recorded net income of $16.7 million or $0.37 per diluted share compared to net income of $24.4 million or $0.52 per diluted share in 2024. Non-GAAP adjusted net income and diluted earnings per share were $19.7 million and $0.44, respectively, compared to non-GAAP EPS and diluted shares of $24.7 million and $0.52, respectively, for 2024.

The company's unlevered balance sheet remains strong at year-end with $39.5 million of cash. During the quarter, we demonstrated our commitment to our capital allocation strategy of organic and strategic growth and opportunistic share repurchases. In Q4 '25, we invested in restocking inventory acquired Refrigerants, Inc., and repurchased $14 million of company stock. The investment in inventory at year-end ensures that we are well positioned for the 2026 selling season.

Consistent with our capital allocation strategy, we repurchased $20 million of common stock in 2025, and we expect to continue to pursue opportunistic buybacks in 2026 with our $20 million authorization. As Ken noted, we recently went live with a new ERP system that we expect will add an activity to our operations and provide a better platform for reliably serving our customers.

Like many new ERP implementations, we have experienced some start-up inefficiencies in Q1 2026. Despite that headwind, we expect Q1 2026 revenue to increase by a low to mid-single-digit percentage as compared to Q1 2025, and we don't expect the ERP-related inefficiencies to persist in the second quarter and forward. Now I'll turn the call back to Ken for his closing remarks.

Thank you, Brian. So 2025 was a year of notable changes and foundational progress for Hudson. We enter 2026 energized by the opportunities we see to grow our leadership role as a provider of sustainable refrigerant and reclamation products, technologies and services through strong execution as well as through our strategy to expand our core capabilities by leveraging new opportunities in adjacent markets. Operator, we'll now open it up for questions.

[Operator Instructions] First question comes from Gerry Sweeney with ROTH Capital.

I just wanted to talk about -- I mean, you highlighted some of your, I think, key focuses going forward in organic and accretive and specifically, I wanted to get an idea of what we were thinking in terms of maybe opportunities around service, HVAC optimization and removing some of the lack of, a better word, focus on just refrigerants and reclamation and moving some seasonality.

Absolutely, Jerry. Thanks for the question. So I'll add a little color to that. And when people think about services in the HVAC industry, they tend to immediately think about contracting services, people [indiscernible] in the way the technicians, but that's not really what we're speaking about directly. When we talk about our services expansion, we are looking at other types of services that -- and there are a lot of them that are hidden behind, let's say, chiller operations that people are less familiar with, including proactive services where we monitor and measure chiller performance.

We look at other aspects of the chiller in terms of its operating performance, which we've been doing with our services group for some time. And there's adjacencies to where there are services that we can provide with new infrastructure capabilities for [ ATL ] refrigerants, HFO refrigerants, complicated HFO refrigerant blends that we feel we have a unique advantage in the marketplace to take -- to help balance those refrigerants, package them and redeploy them.

Got you. And when you're talking to as you speak, you're referencing like commercial sized opportunities.

Correct. Yes.

How do you go about sort of opening up this opportunity? Obviously, you do have -- Hudson has had a service component that's been around for years. And I think it's received lots of attention maybe from the investment community, but maybe not from the internal aspect, but curious as to how you built this out.

Yes. Great question, Jerry. So thinking about it, as Ken touched upon, thinking about taking our services in a more proactive manner versus an emergency response. So Hudson is very well known in the industry for an emergency response to large chiller built systems.

Taking our expertise into that stage before you have to have an emergency response, how do you better manage that chiller, how do you proactively think about it as an asset? And all the things that go into that with the refrigerant circuit is one of those areas that we're focusing on and spending more time on lightly.

Got you. And one more question. This may be very early in the process, but maybe do you have any like aspirational targets as to where revenue could be in terms of maybe opportunities outside just direct refrigerants distribution. So maybe a balancing perspective.

Yes. That's a little hard to say, but we do have some targets we're developing, Jerry, in terms of percentages of sales. And as I said earlier, the key for us is to reduce our dependency on certain refrigerants as we go forward into our strat plan. So I think we'll be able to give you some guidance on that, a little better guidance on that in the coming months. But right now, it's a little bit early to say.

Next question is from Ryan Sigdahl with Craig Hallum.

This is [ Matthew Rob ] on for Ryan. I just want to start on HFC pricing, like it seems like things are mostly stable. I think you mentioned slightly above $6 a pound. I guess just any update on the trends you're seeing whether it be inventory, what's going on in the channel? What you're hearing from tax in the field? And then I don't know if I caught it, was there any change in expectation on pricing for 2026 as a whole?

Yes. That's again, great question, Matthew. And thank you for that. So as we said, when it came into the beginning of the year, pricing and typically, we're talking use [ 410s ] a bellwether because it's the dominant HFC refrigerant, it's a little bit below $6 a pound. It's a little -- as we're talking to you today. It's a little bit above $6 a pound. We see right now that the market is balanced in terms of supply and demand.

So not thinking about and not seeing indications right now of some of the shortages and disruptions that happened in the market last year. We're seeing the signs of small price appreciation. It's still a little early in the year, some places in the country, including with Cliff Lake, New Jersey, have 2 feet of snow on the ground. And it's not a lot of people thinking about turning on their ACs yet. But we are starting to see a little bit of upward price appreciation, and we think we'll see that continue.

Understood. Maybe moving over to I guess, broadly, do you have any expectation for the mix in '26? We've heard from some of the [indiscernible] that the aftermarket demand for HFO is going to kick in more so in the second half of '26. Do you have any thoughts on what that mix could be for Hudson? And then any commentary maybe on HFO pricing versus HFC pricing would be helpful.

Let me take a stab at it, Ryan. I mean the HFO demand for a company like cuts in is all service demand, right? It's all aftermarket demand. And the build-out for HFOs is ongoing for first fill and OEM, as you mentioned. So I'm not expecting -- we're not expecting to see any real significant increase in HFO demand from our side for, let's say, the first part of 2027. So we still -- we see it today. We see it. We get it. We understand it. We know how to rebalance it. But in terms of actual real continuous service demand, I wouldn't think it would be second half of this year. I think more likely you're looking at early next year.

The next question is from Austin Moeller with Canaccord.

So just my first question here. How much cylinder inventory do you expect to need to meet demand in 2026? And how close are you to that target given the build?

We really don't speak to the cylinders. However, we have the inventory both in refrigerants and cylinders, again, not to short the market, we leaned in heavy. So we feel ready and equipped to meet all demand for 2026.

Okay. And what do you view as the most important factor this year to improving the gross margin relative to last year? Is it just appreciation in pricing? Or are there other factors we should be focused on?

Well, in addition, I mean pricing is one variable, but we work day in and day out. We use fixed asset investments to automate things and to reduce costs. We have a new ERP system that we spoke to that should provide us efficiencies, better information, better information to make informed decisions. So with information, with investments in fixed assets and just focus on continuous improvement, we find ways to reduce costs.

[Operator Instructions] The next question comes from Josh Nichols with B. Riley.

This is Matthew Maus on for Josh Nichols. I guess to start off on the inventory build. You mentioned feeling light on inventory at the end of 2024, not having enough firepower in 2025. So I'm wondering at what price levels were you accumulating in 4Q? And how does the full dynamic set up for margins as you sell in the sell through the peak season?

Yes. So just number one, if you historically looked over, say, the last 7 years, we typically have maybe a little bit more than 6 months of inventory on hand at any given year. And we entered 2024 significantly below that. So we did miss themselves, and it didn't move the needle. We just -- we -- as far as our reliability and service our customers, we don't want to miss 1 cell. So for 2025, we just went back up to more historical standards and around a 6-month inventory days on hand.

Got it. So then with pricing at around like $6 a pound and inventory stock. I'm assuming at similar levels, how should we think about gross margins for 2026 directionally?

Gross margins for 2026. And as we noted in our last call, if there's no real change in pricing, then really our gross margin for '26 should be comparable to '25.

Got it. And just last one on the DLA. Is there any update on the bid process time line? And should we assume a similar $38 million run rate for 2026 under the existing contract?

I think that's a fair assumption. We think it's going -- we're good through the end of this contract that we have currently. We see it continuing through the end of the year. So that's our projection as well. And I think the updates, there's been some recent activity that's positive for us, but it's hard to know right now what the timing looks like. So I'd rather not comment about it. It's a convoluted process they go through. But I think in the end, we're very optimistic that we're going to prevail.

We have reached the end of the question-and-answer session, and I will now turn the call over to management for closing remarks.

All right. Thank you, operator. So I appreciate everyone's interest in Hudson Technologies. I think you understand that we have a lot of opportunity here for growth. And on behalf of Kate, Brian and myself, I want to thank our employees, particularly our employees for their commitment to our success. And we also want to thank you for your interest and support of Hudson's Technologies mission and our commitment to the sustainable practices around refrigerant life cycle management.

At Hudson, that's not just a slogan, it's not just words, it's actually something that we really believe in, and we believe in effective refrigerant life cycle management. We look forward to speaking with you in May to discuss our first quarter 2026 results.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Good day, everyone, and welcome to the Hudson Technologies Third Quarter 2025 Earnings Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Jennifer Belodeau. Ma'am, the floor is yours.

Thank you. Good evening, and welcome to our conference call to discuss Hudson Technologies financial results for the third quarter of 2025. On the call today are Vincent Abbatecola, Hudson's Lead Independent Director; Brian Bertaux, CFO and Interim CEO; and Kate Houghton, Hudson's Senior Vice President of Sales and Marketing.

I'll 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, they are not guarantees of future performance. Please understand that these statements involve a number of risks and assumptions, 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.

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.

With that, we will now turn the call over to Vincent Abbatecola from our Board of Directors. Please go ahead, Vincent.

Thank you, Jennifer. Good evening all, and thank you for joining us. Earlier this week, we announced that Brian Coleman has stepped down as Chairman and Chief Executive Officer of Hudson Technologies. Brian had a long and successful tenure with Hudson. And on behalf of the Board, we thank him for his dedication and contributions to our company. He was particularly instrumental during the difficult time after the passing of our founder, Kevin Zugibe. Brian's leadership and financial acumen allowed Hudson to further strengthen its competitive positioning while also transforming our balance sheet. We sincerely wish Brian Coleman every success in the future.

Our company is now centered on advancing our growth strategy to focus on both organic and inorganic opportunities to build upon our strong foundation, a strategy which we believe requires alternative CEO skill sets. Our Board is in the final stage of our search to select a Chief Executive Officer candidate who will lead Hudson in the next phase of its growth, and we expect to announce an appointment in the near term.

I'll now turn this call over to Brian Bertaux, Hudson's Chief Financial Officer, who has assumed the CEO responsibilities during this interim period. The Board very much thanks Brian for filling that role. Please go ahead, Brian.

Thank you, Vincent, and good evening, everybody. I am humbled to serve as Interim CFO for Hudson Technologies during this transition. I effectively served in a similar role at another point in my career, and I'm fortunate we have a great leadership team and passionate employees at Hudson. Together, we will continue to drive the company forward and increasing shareholder value.

We are very pleased with our strong third quarter results to close out our 9-month refrigerant selling season. Key third quarter highlights include 20% revenue growth, 32% gross margin and a 59% increase in net income of $12.4 million. Our third quarter revenue growth was driven by both increased sales volume and a higher average sales price of refrigerants. Additionally, we continue to expand our strategic supply chain of aftermarket refrigerants through outreach and awareness campaigns to encourage the return of used refrigerant by contractors to service cooling systems.

We will provide a full overview of our annual growth in refrigerant reclamation during our next call when we report full year 2025 results. HFCs were approximately $8 per pound in the third quarter. When we discuss pricing, we generally focus on 410A, which represents about 70% of the total aftermarket demand for HFCs. Also, I'm extremely pleased to note that we were recently awarded the renewal of the contract to support the U.S. Military as prime contractor with the U.S. Defense Logistics Agency, the DLA.

We are energized to have won the Indefinite Delivery and Quantity contract, which is valued at $210 million for the first 5-year base period and includes a 5-year renewal option. Hudson has served as prime contractor to the DLA since 2016, and we believe their selection demonstrates the strength of our partnership and our success in reliably providing critical materials to the nation's many military installations and facilities. There was tremendous effort by our team to win this competitive bid, and I, on behalf of the entire company, want to thank them for their strong execution and track record servicing the contract over the last 9 years. We look forward to continue our relationship as a valued partner to the U.S. military in the supply of refrigerants, industrial gases and equipment.

Now we want to turn to 2024 HFC market data as recently reported by the EPA. 2024 refrigerant reclamation activity for the industry grew by 19%. Hudson's reclamation grew at about the same rate. HFC inventory levels declined 18% in 2024. We expected a steeper decline in inventory as 2024 HFC production was curtailed 30% from 2023 levels through the AIM Act. So consistent with 2023, the 2024 update indicates the supply in the channel remains plentiful related to demand.

Over time, 410A refrigerant market dominance will be taken over by lower GWP new generation refrigerants. As with other refrigerant phaseouts, 410A demand will continue for another 20-plus years as 410A units remain in service through their useful lives. Therefore, our concern remains that an ideal supply and demand balance in the HSC refrigerant landscape may not occur until 2029, which is when the next production curtailment will occur.

Now I'll turn the call over to Kate Houghton, Senior Vice President of Sales and Marketing, to provide some additional detail around Hudson's market opportunity. Kate?

Thank you, Brian, and good evening, everyone. We saw increased sales volume in the third quarter as temperatures warmed up across the country and cooling systems were activated in earnest. With systems turned on and in regular use, service appointments typically tick up as operating issues are identified.

Our sales activity in the third quarter largely mitigated what had been a late start to our 9-month season. We executed strongly during this year's selling season, ensuring that our customers had the refrigerants they needed when and where they needed them. And we continue to make excellent progress promoting recovery and reclamation activities to the field technicians who are integral in the recovery and return process. Without field technicians recovering refrigerant from a unit, reclamation does not occur, and our continued outreach to influence technician participation is reflected in the positive growth of our reclaim numbers.

The fourth quarter is historically our slowest quarter as a large portion of our customers transition from cooling applications to heating. The 2024 EPA data released in September largely aligned with our expectations and visibility of the market. While we believe the time frame to supply-demand imbalance has lengthened slightly, we remain confident that the current phase down of HFC Refrigerants represents a significant long-term growth opportunity for Hudson.

Additionally, the EPA has certain proposals currently under review that would potentially make changes to the technology transition rule of the AIM Act. In a recent proposal, the EPA seeks to extend compliance dates for certain equipment transitions for applications in supermarket systems and industrial process refrigeration, amongst others. The proposal includes extending the compliant dates for the move to lower GWP equipment solutions as far out as to 2032. In addition, the EPA recognizes that there may be the possibility of stranding equipment that had been manufactured prior to January 1, 2025 and is allowing for the sell-through of that manufactured equipment to continue beyond December 31, 2025.

The proposed rule should not materially impact Hudson and may provide a slight advantage for our business. It's also important to note that while technology transition time frame is under review, the core elements of the AIM Act, including the allowance system and refrigerant management rule, which mandates phasedown of HFCs remain in place. We are closely monitoring all developments and are in direct and frequent contact with the EPA as well as members of Congress.

Federal regulations aside, Hudson is well positioned to capitalize on state-by-state initiatives around the use of lower GWP refrigerants and equipment. Several states have already instituted requirements for the use of reclaim refrigerant in their municipal buildings and for higher GWP HFCs and we expect more to follow. We remain committed to increasing our position as a thought leader and vocal promoter of responsible refrigerant management. And in early September, we sponsored a panel discussion as part of Climate Week NYC entitled Reclaiming the Future Together, Power on the Growth of Refrigerant Reclamation.

During this event, we brought together a distinguished group of industry experts, including representatives from HARDI, the District of Columbia Sustainable Energy Utility, from Lennox International and from Rocky Mountain Institute to discuss the economic benefits and the environmental importance of refrigerant reclamation. At this event, we discussed the first of its kind DC SEU refrigerant recovery pilot, which focuses on greenhouse gas emission reduction. We remain committed to developing partnerships such as with the DC SEU to reach all corners of the refrigerant recovery market.

In addition to events like Climate Week, we remain active working with refrigeration technicians and contractors to encourage the recovery and return of refrigerants during the processing of servicing a cooling system rather than the practice of venting refrigerant. With the increase in 2024 reclamation activity in the industry as tracked by the EPA as well as the consistent growth we've seen in our company's reclamation business, we believe our efforts are driving meaningful progress.

Our extensive long-standing customer network, proprietary technology and national footprint position us well as a source for newly manufactured refrigerants as new lower GWP products are introduced and also as a resource for recovery and reclamation activity. We believe our strength in all aspects of refrigerant supply as well as recovery, reclamation and sophisticated field service is a competitive advantage as we look to expand existing customer relationships and win new customers while also ensuring a smooth transition during the ongoing and future refrigerant phase down.

Now I'll turn the call back to Brian to review our third quarter financial results. Go ahead, Brian.

Thank you, Kate. I'll now review our third quarter 2025 financial results in a little more detail with a comparison to the 2024 quarter. Hudson recorded $74 million in revenue, an increase of 20%. Revenue growth in the quarter was driven by increased sales volume, coupled with an increase in our average sales price. We posted 32% gross margin, reflecting a 630 basis point increase in 2024 with the improvement related to favorable trends in refrigerant market pricing.

Gross profit at $23.7 million improved significantly as compared to $15.9 million in the 2024 quarter. We recorded $8.9 million in SG&A expenses compared to $8.1 million last year. The increase is related to staffing additions. With that, operating income essentially doubled to $14 million. We recognized $1.6 million and $2.3 million of favorable other income in the 2025 and 2024 quarters, respectively.

The 2025 other income related to a potential earn-out from last year's acquisition of USA Refrigerant that did not materialize. The 2024 other income was primarily related to a favorable legal settlement. Hudson recorded net income of $12.4 million or $0.27 per share compared to net income of $7.8 million or $0.17 per share last year. Our third quarter revenue performance essentially offset what was a late start to this year's selling season. With that, we finished the 9 months of 2025 with nearly the same revenue as 2024.

The company strengthened its unlevered balance sheet, ending the quarter with $90 million in cash. Our capital allocation strategy remains focused on organic and strategic growth as well as opportunistic share repurchases. We repurchased $1.3 million of stock in the third quarter, bringing our total purchases to $5.8 million thus far in 2025.

We are pleased to have delivered improved third quarter gross margin. However, as many of you know, our fourth quarter is our seasonally slowest quarter as the majority of our aftermarket customers transition from cooling to heating applications. With that in mind, we are maintaining our expectation of slightly above mid-20% gross margin for full year 2025.

In closing, we have built our business and long-standing customer base around our capabilities of getting the right refrigerant, to the right place, at the right time. As our industry continues to move through the lower GWP refrigerant phase downs, we are all well positioned to meet demand for current and next-generation refrigerants, leveraging our industry experience, proprietary technology and proven distribution network to ensure reliable customer service and satisfaction.

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

[Operator Instructions]

Your first question is coming from Gerry Sweeney from ROTH Capital.

This one may be for Vincent. I apologize. I think I got Vincent right. And when you said you're in the final stages of looking for a new CEO, and I think you also mentioned alternative skills. Just curious if you could give us a little bit more details on what alternative skill sets may mean? I'm assuming this is at least someone with some more acquisition experience, but I'm also curious if this infers maybe a different sales strategy or different reclaim strategy as well?

Jerry, this is Eric. I'll take that question. Really, what we're looking for, and I think you're hitting the nail on the head here is probably someone with a larger company background that both has experience with acquisitions, but also a lot of skills around organic growth of companies that have much larger lines than, say, just refrigerant reclamation and recycling that might have some insight into other complementary areas that we might be able to expand into like expanding our services offerings, et cetera.

Got you. That's fair. I appreciate it. And then this maybe for Brian. We always do a series of channel checks and we have some pretty good ones, I believe. And our indications and talks with our contacts alluded to, maybe HFC pricing seeing a bump because of issues with the HFO rollout, availability of gas, canisters, et cetera, and some of the pricing that we saw -- pricing increases that we saw this summer may be transitory. Our checks indicate that HFC prices are down around $6.50 per pound. Just curious as to what your thoughts are for next year with, we have a stockpile, maybe some of those HFO headwinds abate, where potentially pricing could be?

I would say your channel checks seem very accurate. And right now, we would expect that perhaps pricing for next year, just say, on the average for the whole year would be consistent with this year on the average for the whole year. But as we all know, that's just -- it's something that we would expect to happen. But in a volatile market, it's uncertain now.

No, that's fair. And we don't have a crystal ball. So I just want to get your thoughts on that. So got it. And I'll jump back in queue. I may have a question or 2 more, but I don't want to get much of your time.

Your next question is coming from Ryan Sigdahl from Craig-Hallum.

On the EPA data, similar thoughts as you guys kind of implies slightly lower demand, slightly higher supply. You mentioned potentially not being at an imbalance until 2029 or after. Curious how much that changes potentially the strategy from a core organic Hudson standpoint over the next couple of years and also maybe an M&A standpoint and if that had anything to do with kind of the timing for a change at CEO?

Ryan, I can take a crack at that. I think you're right. I mean we do see the same things in the market that other people see. I think beyond just us guessing where gas prices are, I think we know as a company, we need to reduce our overall exposure to the ups and downs of the gas market. And we're likely to do that through both organic expansions, but also likely through M&A and acquiring complementary lines that aren't necessarily completely tied to refrigerant gas prices.

Yes. DLA, congrats on the competitive renewal there. Any change from an assumption standpoint? I get kind of the upper bounds, but it had been running at the $30 million to $35 million of revenue. Is that still the right assumption? And then anything different with this contract? And then kind of last part of this would be government shutdown. Any impact there, I guess, in the near term?

Yes. So we are very pleased to have won that. I would tell you that over time, you'd expect it to be consistent with where it has been. Yes, the government shutdown is having some near-term volatility. So we've seen a little bit of an impact of that in the fourth quarter. Hopefully, it's just timing. But overall, when we think about the contract, it's consistent with the current contract.

Last one for me. Any benefit from selling A2Ls, both either from a volume revenue, but even more so kind of in the pricing commentary?

Yes. So this year saw the rollout of both R-32 and R-454B, and we were well positioned there. We had a good supply chain even through the shortages of the crisis, and we had a lot of activity there. We were able to service our core customers, take care of them and also see that follow through with some of our other HFCs. So we were pleased how we navigated that this year, and we're very well set up for going into 2026 relative to A2Ls.

And maybe just a follow-up on that. Do you expect the A2Ls to be kind of a core part of the go-forward business? Or was it more of a stop gap given supply chain challenges for others?

So certainly, as you look forward, A2L systems will start to become more of an impact for us and more of a larger part of our business. The HFCs, the 410As, the 134, that installation base is very dominant, and we'll continue to be in that space for a long time as those systems need repair and before they phase out. But you'll see that the A2L start to grow in terms of percentage and importance for us as we move forward. And certainly, again, we expect growth in that part of our business next year.

Your next question is coming from Matthew Maus from B. Riley.

This is Matthew, on for Josh. I guess just first on the 3Q beat, can you break down what drove that beat? Was it more volume or just better pricing or mix? And also, how did the USA refrigerants kind of track in 3Q?

It was more volume driven. So it was about 18% volume and a couple of points higher pricing. And USA refrigerants really had the same contribution as it's had throughout the year. So nothing notable with regards to USA refrigerant. But again, what we've really gained from USA refrigerant is having access to that aftermarket supply of refrigerants. So they're growing our base of lower-cost aftermarket refrigerants as compared to buying virgin refrigerants.

Got it. And just another quick one for me. I guess when looking at the inventory, I thought it was -- you guys hit a normalized level in the past 2 quarters and then there was a sequential build in 3Q. I'm just wondering what the thought process was there or the reasoning?

That's just where -- we want to make sure that we're at a point to adequately serve the market next year. So I would say that last year's cash flow was very much significantly impacted by our inventory reduction. Now you're seeing in 2025, really a normalized working capital structure for us, but we're very pleased that we had $25 million of operating cash flow, and that's at a normalized working capital structure. So we're generating very strong cash flow just mostly through operating income.

[Operator Instructions]

Your next question is coming from Andrew Steinhardt from Canaccord.

Brian, Eric, Kate and the rest of the team, this is Andrew, on for Austin. Congrats on the solid quarter here. I'll jump right into my first question. You guys have almost $90 million in cash with no debt on the balance sheet and have made the interest in growing inorganically pretty clear. Would the intent be to acquire a business that can reduce the seasonal impact to revenues? And I guess, what kind of specific capabilities, markets or businesses in general do you think add the most value to the company with its current footprint?

Yes. So that's a great question. We've talked about areas that we investigate M&A on previous calls. Certainly, large interest in service businesses and thinking about being closer aligned to those end user customers, whether that's aligned with our current field services and expansion of that complementary areas, maybe some areas that we haven't been in. But thinking about all of the things that go into HVAC cooling systems and adjacent spaces is where we're spending a lot of time and really looking at what's available and turning over some rocks to go into that. We have looked at other reclaimers, and so there are some other opportunities there potentially, but we really are focusing on that service area for our interest in acquisition.

Got it. That's helpful. And if I could just ask a follow-up kind of in a different direction here. volumes were pretty solid through the first 9 months of the year. Are there any plans to utilize a portion of the $90 million to add distribution centers based on current demand considering the satisfactory number of reclamation labs?

We're not going to speak to that in detail. But again, we are looking to optimize the $90 million strategic initiatives, acquisitions. So perhaps that may be on the list, but we're not going to go into any detail.

That concludes our Q&A session. I'll now hand the conference back to Brian Bertaux for closing remarks. Please go ahead.

Thank you. Our company's success is a result of the collective efforts of our 250 employees with contributions from everybody in this building, in our facilities across the country and those out in the field. Our team has consistently proved that they will always vigorously pursue the best in themselves and their departments for the benefit of our customers, our partners and the company.

We remain committed to growing our leadership position in the refrigerant and reclamation industry to drive improved financial results and increase shareholder value. On behalf of Kate, myself and the Board of Directors, we say thank you to all of our employees for your continued support and dedication to our business. And as always, we also thank both our long and short-term shareholders and those that recently joined us for their support. We look forward to speaking with you in March to discuss the fourth quarter and our full year 2025 results.

Have a good night, everybody.

Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.