Jennifer Belodeau - IMS Kevin Zugibe - Chairman and CEO Brian Coleman - President and COO

Ryan Merkel - William Blair Steve Dyer - Craig Hallum Gerry Sweeney - ROTH Capital Matthew Sherwood - Cooper Creek Partners Richard Butcher - Argonne Capital Craig Hoagland - Anderson Hoagland & Co. Shawn Boyd - Next Mark Capital

Greetings and welcome to the Hudson Technologies' First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. An interactive question-and-answer session will follow formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Ms. Jennifer Belodeau. Thank you. You may begin.

Thank you. Good evening and welcome to our conference call to discuss Hudson Technologies’ financial results for the 2017 first quarter. On the call today, we have Kevin Zugibe, Hudson’s Chairman and Chief Executive Officer; and Brian Coleman, Hudson’s President and Chief Operating Officer. Kevin will review the company’s business operations and future growth strategies, and Brian will review the financials and immediately thereafter, we will take questions from call participants. I'll take a moment now 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 the best view of the industry and our business as we see them today, they are not guarantees of future performance. These statements involve a number of risks and assumptions, and since these elements can change, we would ask that you interpret them in that light. We urge you to review Hudson’s Form 10-K and other SEC filings for a discussion of the principal risks and uncertainties that affect our performance and other factors that could cause our actual results to differ materially. Okay. With that I'd now turn the call over to Kevin. Go ahead, Kevin.

Good evening and thank you for joining us. I hope all of you had a chance to review our first quarter 2017 earnings release issued this afternoon. We had a strong start to 2017 and our first quarter results reflect solid revenue growth, improved gross margin performance, and increased profitability. Our revenue growth resulted from increased sales volume and higher pricing of certain refrigerants including 22. While we're still in the early of the 2017 selling season, we are particularly encouraged by the price and demand for R-22 refrigerant, which should drive earnings and reclamation growth for the foreseeable future. As of the end of the first quarter, R-22 prices have increased to approximately $22 per pound. R-22 refrigerants remain the most widely used refrigerants and our company is clearly benefiting from the price increases associated with the ongoing phase out activity. We remain confident that reclaimed R-22 is the best solution to meet demand and we anticipate that we will see an increase in R-22 pounds reclaimed during the cooling season which starts in the second quarter and runs through the middle of fourth quarter. Even as the industry is transitioning away from R-22 to next-generation HFC refrigerants, HFCs have also been targeted for phase down beginning in 2019. This represents another significant opportunity for our business because nearly all new equipment as well as the equipment that is replacing R-22 units runs on HFC refrigerant. With a larger installed base, we believe the HFC reclamation opportunity has the potential to be even larger than the current R-22 opportunity. We look forward to implying our reclamation capabilities to fulfill this fly gas associated with the systematic phase out of refrigerants and we're focused on meeting the needs of our customers as our industry develops and promotes next generation refrigerants and associated equipment. Even though environmental benefits are at the heart of these phase downs, the development and use of the next generation refrigerants and equipment will create economic opportunities in our industry and lead to job creation as these replacement products demand more skilled technicians. With the change in administration, there has been some speculation by outsiders of our industry regarding regulations and the specific role of the EPA. It is important to understand that in the fourth quarter 2014, the EPA published the final rule covering years 2015 to 2019. If the administration was interested in changing the remaining two years of the phase out, the administration would have to engage Congress and amend existing legislation as currently the EPA has no authority to change the phase out. Obviously in the current political environment, the likelihood of legislative action is extremely low, but more importantly from a business standpoint, it is unlikely given all plans and conversion of production plants would be in jeopardy and stakeholder in our industry do not support modification to the law. Lastly, our industry welcomes the opportunity to work with the new administration as it begins to build out its executive agenda to drive the creation of more domestic jobs and increase production specifically in support of the HFC phase out. As previously mentioned this anticipated phase out is good for American jobs and business and is widely supported by all trade organizations supporting our industry. We're pleased to have begun 2017 with a strong first quarter and we believe our long-term industry experience, technological expertise, and distribution network leaves us well-positioned as we move into the heart of our selling season. We continue to review our growth initiatives as well believe the M&A will continue to be an integral part of our overall growth model going forward. With that, I'll hand it over to Brian to provide our detailed financial results.

Thank you, Kevin. Revenues for the first quarter increased 38% to $38.8 million as compared to $28.2 million in the first quarter of 2016. The revenue increase was primarily driven by an increase in both volume and the price of certain refrigerants. Gross margin was 32% as compared to 27% in the same quarter last year. Operating expenses for the quarter increased to $3.1 million compared to $2.5 million in the previous year quarter. The increase in operating expenses is primarily due to $500,000 of non-recurring operating expenses related to corporate development initiatives. Net income for the quarter was $5.7 million or $0.14 per basic and $0.13 per diluted share compared to net income of $2.9 million or $0.09 per basic and diluted share in the first quarter 2016. Our balance sheet remains strong. Our cash balance was $40 million as of March 31st, 2017, due primarily to the capital raise that was completed in December of 2016. This capital provides us with a solid platform to evaluate and execute M&A opportunities as we continue to process to support the long-term growth of our business and we remain focused on these initiatives. Additionally, as of March 31st, 2017, the company has $72.4 million in inventory compared to $68.6 million at December 31st, 2016. The increase in inventory due to timing of inventory purchases. Moreover, at the end of the first quarter, we had approximately $105 million in working capital. I will now turn the call back over to Kevin.

2017 is off to an encouraging start and we're focused on continuing our first quarter momentum as we moved through our refrigerant sales season. With our capabilities long-standing relationships and leadership roles in the industry, we believe the ongoing phase out of R-22 and future phase downs of the next generation HFCs represent a significant growth opportunity for our company. As our industry continues to evolve with the development in use of next-generation climate and ozone-friendly technology in refrigerants, we believe we're uniquely positioned to help our customers seamlessly navigate the transitioning marketplace and to ensure that Hudson can capitalize on the large opportunities that are clearly evolving right in front of us. Operator, we'll now open up the call to questions.

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Ryan Merkel from William Blair. Please go ahead.

Hey, good afternoon guys.

Hello Ryan.

First on gross margin which is very good trend, is that mainly a function of R-22 prices being up nicely year-over-year or are there other factors that drove that?

A major portion of that increase really is the R-22, but we certainly have benefited with some increases in HFC pricing relative to the various tariffs and the two separate cases; one on HFCs excluding 134a and then more recent case that HFC-134a. So, we certainly have benefited relative price of margin on HFCs, but most of the driver is coming from the 22 and the price increases you're seeing.

Right. Okay. Then -- I know it's early but does the nice first quarter gross margin change your mind about gross margin for the year because I think on the last call you were sort of telling us it should be below 30 for this year, you were more comfortable on the upper 20s, but seem to me that that might have moved up, but you tell?

Again, it could have an effect of a specifically what you said is moving up. We're happy with it. Again it’s a nine month season, so it's hard to get too far ahead of it. Before you say yes, it could move us to 30 or little higher now. Again certainly like what we saw, we don't see it stopping. Necessarily, you can't tell nine-month season, but be a little more optimistic, that's a little bit higher than we're saying, yes.

Okay. And then last question, the energy services business, just give us an update there because I think last year that was a little bit of disappointment, has anything change there, has progress the improved at all?

So, when there's a disappointment to us as strategy and you target the industry in certain places, in certain paths, we found strengths in certain areas. And actually working with others with -- that had a fingerprint all over the globe actually, not just in the U.S., that we can tie into somewhat of a faster path, it looks like rather than knocking on doors to get jobs, working with some of the larger companies that have energy systems already in there, that don't have the skillset or the technology that we offer, it seems to be a faster path to jump on with them as more of an add-on their existing service. So, Ryan, pretty good growth in that area and we're hoping to see what happens in the next couple of quarters with that, but we actually -- from what we learned last year was actually -- internally it was actually very optimistic in that area even though the end results, the numbers didn’t show that.

Got it. Good to hear. Okay, I'll defer to others. Thanks.

Our next question comes from Steve Dyer from Craig Hallum. Please go ahead.

Thanks, good afternoon guys.

Hello Steve.

I was just wondering if you could comment a little bit on the seasonality, I know honestly R-22 pricing has increased a lot over the last year, I'm wondering if you're seeing any difference in buying behavior early in the season, any stockpile, any earlier than the normal buying?

It probably -- and usually the first quarter irrespective of specifically R-22 and price increases is always a mix bag. When does someone decide to free-up working capital and begin to stock their shelves? And it's always been a very difficult thing for us to forecast. Is it January? Is it March? Might someone one year buy a little bit more the first quarter, a little less in the second quarter and vice versa? So, we've always had this point of view and shared with shareholders that really it’s a nine-month season and everything balances themselves out. I think specific to 22 in this year, there probably were folks that believe that they will be price increases throughout the year and may have had a little bit more working capital to put the work and made buys in their online from an opportunistic point of view, but there probably was a similar number of folks that felt -- let's say differently in that and they may not had additional working capital to work and therefore, may have been unable to purchase more of volumes than they might have in past. So, probably end up being neutral and sort of customer-by-customer basis and the decision-by-decision basis. So, there was nothing particularly unusual we felt about the overall quarter or any trends relative to the remainder of the season.

Okay, thanks Brian. I know what is nine-month season, so the quarter-to-quarter forecasting is difficult. I mean do you anticipate that this year takes out of a normal trajectory where Q2, Q3 are the peak quarter, one maybe a little bit higher than the other and then at a higher level than Q1 absent the beginning of any DoD contract?

It easily could be and were probably headed towards that. The biggest thing we're waiting for that would tell us for sure is when does the heat come? So, again, when we get some hot days, right now all the selling -- all of the selling that we've done -- our industry has done is really primarily to load their shelves, mostly people haven't turned their systems on yet. When that happens, if that's early, great, we're going to have -- it’s a better here. so it's not how long it goes on for us. It's not how hot it is -- three or four days in a row earlier. So, we get them up somewhat earlier in the month, two months, then usually tells you you're going to have a much better summer, second, third quarter. So, we just need to see that first. So, -- and there's no reason to think it's not going to head that way.

Okay, great. And then pricing was sort of up into the right pretty steadily last year. I mean it seems like it's a certain level of between 21, 22 for the most part, do you have sort of a view on where you think it goes or I mean obviously you'd like to see it go a higher than lower, but what's sort of your sense as to the trajectory this year?

So, we spoke it many times about the reference point of CFCs, in particularly R-12 going from $1 to $3 [ph] a pound and that's the idea that 22 is possibly or likely going to do that. Our view on that price dynamic remains unchanged. So, obviously, $22 mark where still from our perspective not as stealing. So far, though this year, it looks a little different than last year. And that last year there was a lot of small increases. We started the year off with a nice jump from let's say 18, 21 and 22, but we haven't seen the kinds of successive increases that we saw last year. So, it's possible like last year was a very strong price increase in the third quarter. Is it possible that that doesn't happen this year? It's hard to say. But we definitely think as Kevin said when the warmer weather kicks in that we'll see price increases. So, right now the pricing dynamic is a little different than last year, but it doesn't necessarily set a trend for the entire season and the warmer weather will be indicator for us.

Great. And then last one for me, and I'll turn it over. Just wondering if there's any changes, updates, et cetera, to the DoD contract? I think historically you talked about maybe some modest revenue in Q3 and then building from there any change there as far as you know?

No, there's really no update. We may sound little bit like broken record and that we really want to get into servicing the contract which will start in our third quarter this year. It will start to kick-in at the very tail end of July into early August. And once we get through that first quarter and certainly for the second quarter, we'll have much better feel as to the order taking sizes and then estimates about volumes and what we think we can do to possibly increase volumes go forward.

Got it. Thanks guys. Nice quarter.

Thanks.

Our next question is from Gerry Sweeney from ROTH Capital. Please go ahead.

Hey, good afternoon guys.

Hey Gerry.

Hello Gerry.

Just quickly on the inventory side, how do you feel about your inventory of R-22 heading into the pre-season buying for probably exiting that appeared right now and going into the rest of the summer? With the caveat that weather can change things dramatically, but just want to get a feel for your inventory, specifically on the R-22 side?

We're still approaching the way we manage inventory similarly to prior years or past experience as there still is some amount of virgin refrigerant. We never really know whether the virgin supply is allocation or stockpiled, but it appears obviously that that the amount of virgin supply out there is certainly above allocation levels, which then indicates or-- one believe that we're consuming the stockpile. So, our approach, our view on inventory is pretty much the same as it been for many years. We know are most focused on is the ability to grow the amount of use or reclaimable refrigerant that continues to be our -- probably our number one goal and looking to be able to acquire more pounds this year than last year and continue to grow that supply side. So, that's most or nearly all of our focus is on the reclaim side of the 22 supply.

On the reclaim side that's actually -- it was my next question. And I know that reclaim is really not a first quarter activity, it's more June, July, August, September et cetera, but there has been some talk in the industry across the Board that reclaimed numbers haven't been as strong or robust as people expected last year and some of the EPA numbers that came out of in for 2015, they were down year-over-year. Curious as to -- again, it's early, but your thoughts on how its developing this year, but also as we look at different strategies, opportunities to increase Hudson's ability to reclaim 30 gas?

So, when we look at the market, we're going to so much. So, what we see each year we're up, we don't see that stopping. We have no reason to believe this year will be much better year again. Early -- it's too early obviously to be getting reclaim pounds back so we don't have the indication of it, but there's just no sign that it wouldn’t grow. Its grown every single year. Our strategy seemed to work. Surprise it's certain things we hear with the EPA, do we think they are apples-to-apples comparison here year-to-year? No, we definitely don't. We think they're looking at closer to see that they can feel comfortable with what's reported as reclaim and what's not compared to past years. So, yes, from our vantage point, we're not so sure, these numbers are indicative of what's happening, everything tells us it's growing. So, as stockpiles are getting clearly whittled down, when that becomes a little clearer to some people that they are gone. I think also we'll have a mental impact to help them which will help us drive more. We're always looking at different strategies to help wholesalers, to help ourselves go find more pounds. We see a number of them -- number we implement, a number of new tactics out there trying get a message out, get money in people's hands. So, we have high hopes, but it's still --- we have no [Indiscernible] about that. It's just surprising we hear some of the words, because we haven’t heard anyone else of actually even competitors say that. So, it's kind of -- we're not so sure that they EPA numbers are indicative of what's really happening.

Yes, okay. And then -- and just again back to the pricing, I mean you guys know I do a bunch of channel checks and what I was sort of showing was pricing edging up and not a whole lot but $0.25, $0.50 may be each month. And if my memory serves correct, last year that was somewhat similar until we hit a large heatwave I guess in the Northeast, Midwest type and that was until late June and that's when prices really skyrocketed which seem to me suggest that what stockpiling was dwindling quickly and there's a lot of scarcity in the market. I mean is that what you're sort of expecting this year based on your previous commentary?

Its hard to say. So, whether they have stockpile or not, people that can control that much inventory don't mean it to dump too much at a time. So, they have always been very good at controlling price increases. So, by jumping up when it got hot, didn’t mean that they are coming down very fast. They could be just whittling it out. So, if they continue that process, same thing could happen again as they put more out. Just hard to say we're the rat [ph] in the chain as far as -- we can't see where it is, how many pounds are left, how much of effect it would be. But again when the hot weather comes, that usually tells us what people are willing to do and that means if you have a lot of gas, are you still going to whittle it out and just raise the price, you're going to put too much -- it is difficult for us to tell for sure, but it wouldn’t shock us if that followed the same path or just a slower increase. We definitely think there will be more price increases when it gets hot. Will it be as aggressive as it was last year on your exponential growth rate in price? That was pretty significant in later half of the summer. Don't know if that will happen, but it could, we just don't know.

Okay. And then final question was -- I'm also hearing on the HFC front that market could be tightening up potentially significantly; again, if it’s a hot summer, there could be some larger price increases in that as well. And I think it was specific HFCs that are used in the blends that may be typed because of some of the tariffs or the -- yes, the tariffs. Any thoughts on that and are you positioned all right if that were to occur?

There's probably a couple of different things that are happening right now with HFCs. We talked about tariffs and certainly, the implementation of these tariffs have helped support higher prices for HFCs as a general observation. The other side though that is occurring, there globally is a disruption on supply relative to particular components and/or blended HFCs. Most of the world's production now does come from China and there appears to have been quite a number of different production issues whether it became plant failures or government oversight. Sometimes these messages are slightly unclear, but it does seem that whether it be the United States or Europe, a lot of markets around the world are experiencing some supply shortages. Are these going to be temporary? Are they going to continue through the season? All these different things, we certainly don't know. We generally try to have a diverse supply side relative to products that possibly could help mitigate any particular problems, but understanding the reality and how real these problems are and how long that will continue, we'll know better obviously as we get through the second quarter.

Okay, great. I appreciate it. Thank you as always.

Thanks.

Our next question is from [Indiscernible] from B. Riley and Co. Please go ahead.

Good afternoon guys and thanks for taking the questions here.

Hello.

So, I'm looking at the sequential build of working capital, specifically the receivables and payables, can you maybe help us understand how you plan to manage working capital through the cooling season, especially as prices move?

Every year we go through a balancing act of cash flow and working capital. First off, we have very little working capital need other than to support inventory. We don't have a lot of capital expenditures; typically capital expenditures are significantly less than the overall depreciation and amortization expense. We have very little debt service. So, as we grow the dollars in inventory, which doesn’t necessarily mean we're growing pounds, it could be the price per pound is higher. It usually is coming from our cash flow. Sometimes we'll need to use our revolving -- our existing ABL facility with the PNC to support that cash flow. But because we have a significant amount of cash, we don't see any particular needs for borrowing and we don't see any particular concerns relative to timing of cash flow and its effect on receivables and payables and the like. What you will see is we'll have higher receivables in the first and second quarter, certainly compared to the fourth quarter, because the fourth quarter we have very little sales. But then you'll see the collection of those receivables and that turning into cash and then typically taking some amount of that cash and putting back into purchases. So, there's nothing unusual -- this particular quarter there's nothing unusual that we expect for the remainder of this refrigerant season relative to cash and working capital needs.

That's very helpful. Thanks for that. And some housekeeping items, do you have quarterly G&A CapEx, and stock comp on hand?

Basically relative to our CapEx expenses, they will just run through in terms of needs relative to mainly supporting reclamation and so forth. And so we just kind of focus on total dollars. There's no restrictions or limitations as to how much we can spend whether it be from the PNC facility and so forth and just typically from discipline point of view, there's no real unusual projects that caused us to go outside the typical dollar amount anywhere from let's a $1 million to $1.5 million per year. And so what -- how we look at it, simply is if we think reclaim is going to grow by X, how much capital dollars do we need to support that growth and then we apply that. often we apply it outside of the season, meaning let's say in the winter time into the spring in advance of a particular season anticipating growth and reclamation.

Understood. But I mean for the Q1, if you would have the depreciation CapEx in stock comp numbers at hand?

Sorry, I probably don't know specifically, but let's just say depreciation and amortization in Q1 is say $500,000 and I would say that our CapEx was under that figure for the first quarter. But I don't have the numbers. But we can certainly get back to you on that.

Yes, no worries. I'll look at the filing when it to comes do. Thanks for that. And then just kind of may be piggybacking off of one of the other questions asked. I mean would you anticipate more end user interest and perhaps refrigerant buybacks or banking programs in this coming season just on a given what's going on with the supply of 22?

I'm not sure about your question specifically to any users. Most R-22 application is a residential like commercial applications. So, let's say you as a homeowner with necessarily understand 22, its value, et cetera.

Yes, I meant for the wholesalers and distributors?

So, that is our intended meaning we believe that the wholesalers distributors want to see is significant value in bringing in used 22 that's what our strategy was geared towards working with them. We always felt that to the extent that they needed to sell R-22 for the future years, they wouldn't be able to get access to version R-22 because there would be the limitation of virgin production. And at some point to stop [Indiscernible] consume, so at that point in time all that is available for wholesalers still 22 would to be supporting the use of reclaim refrigerants and so that has been our strategy and for quite a number of years believing that they definitely see value in supporting the return of 30 are used 22.

All right. Thanks. That's all from me.

Our next question comes from Matthew Sherwood from Cooper Creek Partners. Please go ahead.

Hi guys. Great quarter.

Thanks.

Just had a quick question on the volume environment. I don't know if you said what the volume were this quarter, and I know it's been asked a little bit, but just wanted to get your take on where the volumes were and your outlook for both R-22 and other gas?

So, normally, we don't talk about the volumes increases in early quarters, typically, because we back to expression of it’s a nine-month season. We express -- we're probably a decade now that we do expect to see double-digit volume growth and that volume growth is let's say in that 10% to 12% range. We've had quarters where the first quarter had been up 20%, but we would not necessarily report on it because it didn't necessarily change our position that for the nine-month season and they only end up being up 10%. Our first quarter is up on volume within ranges similar to our expectations. But I can say it necessarily mean anything particularly, it's how that we end up for nine-month season.

Great. And then I guess just sort of -- there has been some questions on just securing enough R-22 or 30 gas here, but where do you think we stand in terms of stockpile for the virgin R-22 and do you think they're working down at the paper that faith you sort of expressed for the longer term so that--

It's difficult, again, from -- clarity for us is again we think we know the key players in the industry pretty well, doesn’t mean they are going to tell exactly what they have, but at one point I think the number was 210 million pounds in 2013 when the EPA sends out 114 letters and they responded.

Has it been dwindled down, we think positively it has, but to what level, we just can't tell. So, we have to go by reaction to suppliers that people would have got in the past, the allocation -- how they are allocating their customer, cutting down. They wouldn’t be going it like that as they had as much as they did, so we know that they are down, but how far it's difficult. Everyone claims they have nothing, but they obviously have a little more than they are saying, but it's just difficult for us to sell. So, is that 110 now, $30 million, $40 million, $50 million, it's hard for us to say. We just can't tell what's left.

Aer you still full of confidence that at some time in the relatively in your future next year or so we should get to a point where R-22 -- where reclaim begins to sort of take share from virgin and your longer term buying protection begins to play out, that's why you have in your deck?

Yes, we have no reason to believe it's not going to. Again, with that because I think overshadowing us somewhat the unknown of that stockpile and think that affect people affect the prices out there, it affects the margins, plus everything out that. So, it just get unknown. At one point someone is not going to be [Indiscernible] because it glaring obvious that they are out, but at this point, if some, how much? We just don't know and that yes, we don't think it's going to be revamp much longer for the amount that EPA believe demand is out there compared to what they produce today. Obviously, they have to be eating in their stockpile, so it's just -- we're hoping it's soon not a lot.

Great. Thanks a lot.

Our next question is from Richard Butcher from Argonne Capital. Please go ahead.

Hey guys. Thanks for taking my call. This is kind of in relation to the last question that was asked; maybe ask it a little bit of a different way. I mean how do you feel that your reclaim volumes and the overall reclaimed volume for the market are shaping up for the year? I know it's early discuss but just given the pivotal nature of the reclaim volumes you think you'll be giving guidance or be disclosing that in the future or at any point in the future, especially now that it's becoming a little more pivotal to the performance of the shares?

Well, really you could argue that in the first quarter, reclaim volumes are not as existent. I mean there's very little activity specifically to R-22, because R-22 is mainly cooling application. So, you need warm weather for 22 system to be turned on. And it's only when its turned on, you think there's -- find out there's a problem and then you have the potential for recovery. So, the first quarter just doesn’t have any indicator one way or another. As it relief to reporting we have been reporting reclamation volumes, but typically, we're doing it once a year at the end of the season and talking about it relative to growth over the prior year and so on down the line. So, we have been doing that, I believe, for a number of years now. I'm not sure if there's another part to your question. I think I've answered it, but if there's another part to it, could you just add to that please?

Yes, absently, I guess my question was, are you going to disclose it quarterly?

We typically don't because as I said before, this quarter would be so -- its zero versus zero. Its extremely irrelevant reference point. At the end of the reclamation season, we typically do and so we don't have very good picture of where we stand compare to the previous year, actually until you get in closing in on the fourth quarter because when a ton of a gas is still coming.

All right. Well, that's fine. I mean our opinion would be very helpful for investors and last four -- last three quarters a year, but up to guys. And then also--

So, if I could just add I'm sorry. Even the second quarter to be frank is a very slow quarter too. You're only beginning to see the pounds come in at the earliest the latter part of May. So, we certainly could report something in the second quarter, but again, it would be so irrelevant. But we have talked about it in the third quarter saying that we see the increases, we may give ranges at the time in the third quarter, but certainly definitively at the end of the fourth quarter, we definitively say exactly how we made out for the year. Sorry for interrupting.

Yes, no that's fine. All right. And so how do you feel your channel partners have been communicating with commercial and residential end-users and in terms of the reclaim volumes -- in terms of the reclamation opportunity, I mean do you feel that your channel partners are communicating to market properly the opportunity that's in front of you and kind of why they need to be reclaiming this R-22?

No, I mean obviously we're never thinking we're getting enough pounds back. We never think -- we always think they can do better and so we're always giving them more tools to deliver to the end-users to the other small contractors whoever and trying to incentivize them whatever we feel their pain points are. But we'll help them and so we're always changing our program based on feedback. We added different channels to help wholesalers, other channels where we didn’t operate before were those contractors might bring back. But we think there's more everybody can do. So, that mindset of is there actually a shortage still weighs over a lot. Some people will say when I believe that when the stockpile is gone. So, always have some of that. So, yes, we're always trying to educate more wholesalers and more people and that they should draw more money down the contract pockets and make it easier to bring back and so always think there's more -- that everyone can do including Hudson. So, again, we'll start this year around, and the program will look a little different than it did last year as we learn more, we have our in-house meetings, we come up with our ideas for the new plant and in feedback any change were change frequently if we see something happening in the marketplace that can make it more attractive and easier for someone to deliver more gas to us.

Absolutely. Thank you. That was all.

Thanks.

Our question is from Craig Hoagland from Anderson Hoagland & Co. Please go ahead.

Hey guys. If you could -- thank you for clarifying what would be required to change the R-22 rule, and if you could speak a little bit about what might be required to get an HFC phased out? Whether that's a U.S. CDA process or whether there might be an international treaty like the Montréal Protocol or just how you see that's shaping up?

This the first big step was to get the amendment to the Montreal Protocol. Let's say industry stakeholders they don't favor a country by country solution they would favor a global solution and that's what has been created with the limits of Montreal Protocol let's say industry stakeholders, they don't favor a country-by-country solution, they would favor a global solution and that's what has been created with the amendments at Montreal Protocol. So, let's just say that was the first most important step. The second step now is the U.S. specifically adopting that. And as we understand the process, the State Department needs to initiate the amendment and introduce it to the Senate and the Senate would need to ratify it. So, we believe that's the standard protocol we believe that is the protocol that will be applied here. And once all that is done, then there will be the amendment to the Clean Air Act and then likely direction given pursuant to legislation for the EPA to administer the particular phase out of HFCs. So, there's a distinction typically with his phase outs that it's not EPA regulation it's actually law and legislation coming from Congress and the EPA is simply the administrator of that law. And historically, the way that this has been instructed is the law provides for five-year gaps of step downs and then the EPA is asked to figure out how to do it on an annual basis within the goalpost of five years. We believe that's exactly how the process will happen here. We believe that the stakeholder group which includes the chemical producers, the equipment manufacturers and all participants, even labor would support and do support the enactment of this amendment and so forth. One might say that the administration has been building out the various branches and State Department being one of them and so you're probably getting to the point now where they have staff build and are looking at each of these different agenda items and therefore, can begin the process of [Indiscernible] that we described.

Okay. Are there elements of the anti-regulation concept that might slow this down? We've got a -- you have to get rid of two for every one you put in, does this count as a one?

We don't think so as back to regulation versus administration and drawing that distinction. If they are administering the laws that technically regulation, so it's hard to say again how the administration is defining as two for one. The other side of the coin possibly and how outsiders of our industry might be viewing this is language about maybe there's no climate change and all these other issues. Often the context of statements are around what's called the Paris Accord which is predominantly associated with reductions of fossil fuel emissions and associated carbon emissions from that. And so there's certain industry stakeholders that may be against limitations or restrictions in that regard. As relates to specifically our industry, industry stakeholders are supporting and would have worked with the State Department to create the amendment to Montreal Protocol behind-the-scenes most folks would know it, behind-the-scenes this has been going on for a number of years where U.S. stakeholders including Hudson Technologies would have participated in meetings around the world to support the concept of these HFC phase out. So, the industry would like to see this happen, certainly environmentalist would like to see this happen. If you're the administration and you want to see job growth in United States, then in theory, you're going to see it happen too because it should support domestic jobs and growth there in.

So, the strategy is to have cleaner air and more jobs.

Yes, if you look at the pass as a verdict to the future and you look at R-22. R-22 was languishing, the price were down again R-22 gas for years and this went into effect, it went all the jobs had gone over, all the production had gone over to Asia and domestic producers were hurting the American manufacturers. When the allocation system came in, again, this was based on the Clean Air Act amendments, based on ozone depletion. That was forgotten about quickly, that was -- the process for this the fact is it was -- the jobs came back to the U.S., the production came back, these volumes came back to the domestic producers and manufacturers. The whole goal going forward, yes, HFCs are all about global warming, not ozone depletion at the heart of it is that. Montreal Protocol gets signed, Clean Air Act amendment gets signed and then when this goes into effect, the job go back to the U.S. again. It's all over in Asia right now is all the production, almost all HFC production comes from Mainland, China and basically as imported. This is the way if it goes back to the same way the R-22, for HFCs, we will put an allocation system that marks out a lot of producers from overseas, it will come back again. So, you think that Trump administration or so would jump all over this, be able to help job creation in the U.S. just like R-22 did and this will be a bigger scale. So, it would be the heart of it, global warming, but the reality is domestic growth.

Right. Okay. Thanks for the update.

Our next question comes from Shawn Boyd from Next Mark Capital. Please go ahead.

Afternoon and congrats on the quarter gentlemen.

Thanks.

Hello Shawn.

A lot of great color here, so I'm going to just wrap it up with one if I may. Given the cash on the balance sheet and the small amount of money that we spend on the corporate development initiatives in the quarter. Just wondered if you can give us an update on kind of what you're seeking out there? Are these potential acquisition similar to like Polar that you did couple of years ago? Are you looking for geographic reach? Are you looking for access in the new customers? What way you're thinking about here?

We're looking for everything. We -- a little bit of everything honestly. There is -- when you're trying to grow certain areas that you're very strong at, you look for better ways to market, maybe into other markets that the same products that we deal with really work for our industry, for our infrastructure of plants that we're not touching today. But it could be an overlap into what we're already doing. There's a whole bunch of areas right here so, nothing has changed and anything we've said over the last couple of months meaning what we see ahead of us. We like what we see ahead of us. We're quite excited about the prospects. And if anything its gone up our confidence in our interest level in this, but they would be very accretive for our company -- for our company we went to touch them. And they are not going to be in an area that's far off from what we're doing, meaning it's going to big he way of accelerating we're already done.

Got it. And so this might -- it sounds like you got -- we'll see them when they come, but it sounds like you still got something fairly front burner.

Absolutely. We're just as optimistic as we were back at the end of last year.

Got it. Got it. Okay, good enough for me. Thanks guys.

Thanks.

Thank you. This does conclude the question-and-answer session. I'd like to turn the floor back over to management for any closing comments.

Again, I'd like to thank our employees, our long time shareholders, and those who recently joined us for their continued support. Thank you everyone for participating in today's conference call and we look forward to speaking with you after the second quarter results. Thanks again.

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