Q3 2026 Hudson Technologies Inc Earnings Call

October 28, 2026

Operator: Good evening, ladies and gentlemen, and welcome to the Hudson Technologies Q3 2026 earnings conference call. All lines have been placed on listen-only mode, and the floor will be opened for your questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to your host for today, Jennifer Belodeau of IMS Investor Relations. Please go ahead. The floor is yours.

Speaker #1: Good evening, ladies and gentlemen. And welcome to the HUDSON TECHNOLOGIES third quarter 2026 earnings conference call. All lines have been placed on listen-only mode, and the flow will be opened for your questions and comments following the presentation.

Speaker #1: At this time, it is my pleasure to turn the floor over to your host for today, Jennifer Belodeau of IMS Investor Relations. Please go ahead.

Speaker #1: The floor is yours.

Jennifer Belodeau: Thank you. Good evening, and welcome to our conference call to discuss Hudson Technologies' financial results for Q3 2026. On the call today are Ken Gaglione, President and Chief Executive Officer, and Brian Bertaux, CFO. I will 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.

Speaker #2: Thank you. Good evening, and welcome to our conference call to discuss HUDSON TECHNOLOGIES financial results for the third quarter of 2026. On the call today are Ken Gaglione, president and chief executive officer, and Brian Bertaux, CFO.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Jennifer Belodeau: 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.

Speaker #2: 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.

Speaker #2: With that out of the way, I'll turn the call over to Ken Gaglione.

Ken Gaglione: Good evening, and thank you for joining us to review our Q3 results and the progress we are making to position Hudson for sustained long-term growth. Q3 revenue and volume fell below expectations as ample channel inventory kept HFC market prices low. In this soft pricing environment, Hudson elected to concentrate on profitable sales and cost reductions to deliver gross margin that exceeded expectations. I am pleased with our strong 9% year-to-date sales volume increases and meaningful progress made on strategic initiatives designed to strengthen margins, expand capabilities, and create shareholder value. Of note this period, the EPA released data showing that US HFC inventory declined 3% year over year in 2025, the latest data available. Although the channel inventory decline was less than expected, and we believe it is a meaningful contributing factor in the continued weakness in 134a pricing, the long-term trend remains clear.

Speaker #3: Good evening, and thank you for joining us to review our third quarter results and the progress we are making to position HUDSON for sustained long-term growth.

Speaker #3: Third quarter revenue and volume fell below expectations as ample channel inventory kept HFC market prices low. In this soft pricing environment, HUDSON elected to concentrate on profitable sales and cost reductions to deliver gross margin that exceeded expectations.

Speaker #3: I am pleased with our strong 9% year-to-date sales volume increases and meaningful progress made on strategic initiatives designed to strengthen margins, expand capabilities, and create shareholder value.

Speaker #3: Of note, this period, the EPA release data showing that U.S. HFC inventory declined 3% year over year in 2025, the latest data available. Although the channel inventory decline was less than expected, and we believe it is a meaningful contributing factor in the continued weakness in 410(a) pricing, the long-term trend remains clear.

Ken Gaglione: From 2022, when the AIM Act took effect through 2025, reported total HFC inventories have declined approximately 27%, and reclamation is expected to become an increasingly important domestic source of refrigerant supply. At current levels, channel inventories could continue to moderate pricing and demand for reclaimed refrigerant as the industry approaches the next phase down in 2029. However, we also see several factors that may create demand beyond earlier projections, including the continued use of HFC components in certain next generation HFO blends. Opportunities in new markets such as data centers and the potential for future adjustments to tighten the HFC allowance framework to keep the AIM Act phase down objectives on track. Additionally, certain state policies are creating early demand for reclaimed product. For example, both California and New York have regulations taking effect in January 2027 that require the use of certified reclaimed refrigerant in certain automotive applications.

Speaker #3: From 2022, when the AMAC took effect, through 2025, reported total HFC inventories have declined approximately 27%, and reclamation is expected to become an increasingly important domestic source of refrigerant supply.

Speaker #3: At current levels, channel inventories could continue to moderate pricing and demand for reclaimed refrigerant as the industry approaches the next phase down in 2029.

Speaker #3: However, we also see several factors that may create demand beyond earlier projections, including the continued use of HFC components in certain next-generation HFO blends.

Speaker #3: Opportunities in new markets, such as data centers and the potential for future adjustments, to tighten the HFC allowance framework to keep the AMSAC phase-down objectives on track.

Speaker #3: Additionally, certain state policies are creating early demand for reclaimed product. For example, both California and New York have regulations taking effect in January 2027 that require the use of certified reclaimed refrigerant in certain automotive applications.

Ken Gaglione: We will continue to take advantage of these and other opportunities as early adopters prepare for the 2029 phase down. As noted separately, we signed a joint development agreement during the quarter with Icorium, a Kansas-based company specializing in next-generation technology for mixed refrigerant separation. The agreement gives Hudson dedicated access to advanced engineering resources and technology, first-mover advantages during the initial commercialization period, and creates a path to expand our separation capabilities and capacity. This patented extractive distillation technology is expected to complement our existing fractional distillation systems by processing complex refrigerant mixtures, including those difficult next-generation blends and azeotropes with greater speed, recovery, and efficiency. If successfully commercialized, this technology will help convert more recovered refrigerant into saleable product, reduce destruction and inventory days on hand, improve working capital efficiency, and lower our reliance on virgin refrigerant.

Speaker #3: We will continue to pursue opportunities as early adopters prepare for the 2029 phase-down. As noted separately, we signed a joint development agreement during the quarter with IQUORIUM, a Kansas-based company specializing in next-generation technology for mixed refrigerant separation.

Speaker #3: The agreement gives Hudson dedicated access to advanced engineering resources and technology, first-mover advantages during the initial commercialization period, and creates a path to expand our separation capabilities and capacity.

Speaker #3: This patented extractive distillation technology is expected to complement our existing fractional distillation systems by processing complex refrigerant mixtures. Including those difficult next-generation blends and ASIATROPES.

Speaker #3: With greater speed, recovery, and efficiency. If successfully commercialized, this technology will help convert more recovered refrigerant into saleable product, reduce destruction and inventory days on hand, improve working capital efficiency, and lower our reliance on virgin refrigerant.

Ken Gaglione: Because the technology enables the separation of mixed refrigerants, it may also make refrigerant recovery more convenient and economical for contractors who will be able to combine the refrigerants they recover into one cylinder rather than sorting by product type into several cylinders. This small adjustment can have a big impact and help reduce the friction at the point of recovery and support higher industry recovery rates. We believe the broader industry can benefit from this partnership while also strengthening Hudson's cost position and enabling us to establish a differentiated technology-enabled platform for refrigerant recovery, purification, and separation services. Also noteworthy, in August 2026, Hudson was re-awarded the $210 million DLA contract. The award extends this important strategic relationship for 5 years through July 2031, with the opportunity for an additional 5-year extension through July 2036. During the Q3, the DLA contract contributed $11 million in revenue.

Speaker #3: Because the technology enables the separation of mixed refrigerants, it may also make refrigerant recovery more convenient and economical for contractors, who will be able to combine the refrigerants they recover into one cylinder rather than sorting by product type into several cylinders.

Speaker #3: This small adjustment can have a big impact and help reduce friction at the point of recovery, supporting higher industry recovery rates. We believe the broader industry can benefit from this partnership while also strengthening Hudson's cost position and enabling us to establish a differentiated, technology-enabled platform for refrigerant recovery, purification, and separation services.

Speaker #3: Also noteworthy, in August 2026, Hudson was reawarded the $210 million DLA contract. The award extends this important strategic relationship for five years, through July 2031, with the opportunity for an additional five-year extension through July 2036.

Speaker #3: During the third quarter, the DLA contract contributed $11 million in revenue. We are continuing to optimize our D365 ERP platform implementation and strengthen the operating discipline, data visibility, inventory controls, and decision-making capabilities it supports.

Ken Gaglione: We are continuing to optimize our D365 ERP platform implementation and strengthen the operating discipline, data visibility, inventory controls, and decision-making capabilities it supports. Together with broader process and facility improvements, these efforts are designed to simplify workflows, increase productivity, reduce costs, and create a more scalable operating platform for the future. Our commercial focus will remain on increasing the value of every pound we sell through a stronger product mix, disciplined pricing, and growth in higher value reclaimed and specialty refrigerants to support core customer requirements. This approach allowed us to strengthen our cash position in the quarter, providing us the financial flexibility to continue investing in our strategic priorities. As we move forward through the Q4 and prepare for 2027, we will continue strengthening our core capabilities to support the growth strategy.

Speaker #3: Together with broader process and facility improvements, these efforts are designed to simplify workflows and increase productivity, reduce costs, and create a more scalable operating platform for the future.

Speaker #3: Our commercial focus will remain on increasing the value of every pound we sell through a stronger product mix, disciplined pricing, and growth in higher-value reclaimed and specialty refrigerants to support core customer requirements.

Speaker #3: This approach allowed us to strengthen our cast position in the quarter, providing us the financial flexibility to continue investing in our strategic priorities. As we move forward through the fourth quarter and prepare for 2027, we will continue strengthening our core capabilities to support the growth strategy.

Ken Gaglione: Our priorities include advancing the new separation technology and making disciplined investments in our facilities, operating efficiency, talent acquisition, and market development. Taken together, we are managing market forces beyond our control while building a more resilient, higher value business designed to reduce our future exposure to short-term refrigerant price fluctuations. Now I'll turn the call over to Brian. Brian, please go ahead.

Speaker #3: Our priorities include advancing the new separation technology and making disciplined investments in our facilities, operating efficiency, talent acquisition, and market development. Taken together, we are managing market forces beyond our control while building a more resilient, higher-value business designed to reduce our future exposure to short-term refrigerant price fluctuations.

Speaker #3: Now I'll turn the call over to Brian. Brian, please go ahead.

Brian Bertaux: Thank you, Ken, and good evening. I'll walk through our Q3 2026 results compared with the same period in 2025. Hudson generated $59.4 million in revenue, a 20% decrease from the 2025 quarter. Sales volume declined 9% and average prices fell 17%. During the prior year quarter, refrigerant prices rose broadly as supply chain constraints accompanied the EPA-mandated shift to next generation cooling equipment that uses lower GWP refrigerants. Gross margin was 25%, better than expected, though below the 32% reported in the 2025 quarter, given the 2025 AIM Act-related price fluctuations. SG&A expenses increased by $1.9 million to $10.8 million in the 2026 quarter. The increase was driven by two factors. First, we continued to incur costs for the new ERP system, although Q3 ERP expense was 50% lower than in the Q2. Second, we expanded our team and engaged consultants to support long-term growth.

Speaker #4: Thank you, Ken, and good evening. I'll walk through our third quarter 2026 results compared with the same period in 2025. HUDSON generated $59.4 million in revenue, a 20% decrease from the 2025 quarter.

Speaker #4: Sales volume declined 9% and average prices fell 17%. During the prior year quarter, refrigerant prices rose broadly as supply chain constraints accompanied the EPA-mandated shift to next-generation cooling equipment that uses lower GWP refrigerants.

Speaker #4: Gross margin was 25%, better than expected, though below the 32% reported in the 2025 quarter, given the 2025 AMAC-related price fluctuations. SG&A expenses increased by $1.9 million to $10.8 million in the 2026 quarter.

Speaker #4: The increase was driven by two factors: first, we continued to incur costs for the new ERP system, although third-quarter ERP expense was 50% lower than in the second quarter.

Speaker #4: Second, we expanded our team and engaged consultants to support long-term growth. Net interest was essentially flat in the 2026 quarter, versus $800,000 of net interest income last year due to a lower cash balance on our debt-free balance sheet.

Brian Bertaux: Net interest was essentially flat in the 2026 quarter versus $800,000 of net interest income last year due to a lower cash balance on our debt-free balance sheet. Other income also differed significantly from the prior year quarter. In 2025, the company recognized $1.6 million of other income from a potential earn-out related to the 2024 acquisition of USA Refrigerants that ultimately did not materialize. Hudson reported net income of $2 million, or $0.05 per diluted share, compared with $12.4 million or $0.27 per diluted share in the 2025 quarter. The decline in net income reflects continued softness in HFC refrigerant pricing, ERP optimization costs, and investments in personnel and initiatives designed to create shareholder value. The company ended the quarter debt-free with $35.3 million in cash, a $10 million increase from 30 June 2026.

Speaker #4: Other income also differed significantly from the prior year quarter. In 2025, the company recognized $1.6 million of other income from a potential earn-out related to the 2024 acquisition of USA Refrigerants that ultimately did not materialize.

Speaker #4: HUDSON reported net income of $2 million or 5 cents per diluted share compared with $12.4 million or 27 cents per diluted share in the 2025 quarter.

Speaker #4: The decline in net income reflects continued softness in HFC refrigerant pricing, ERP optimization costs, and investments in personnel and initiatives designed to create shareholder value.

Speaker #4: The company ended the quarter debt-free with $35.3 million in cash, a $10 million increase from June 30,

Speaker #5: 2026.

Brian Bertaux: Our capital allocation priorities remain organic and strategic growth, complemented by opportunistic share repurchases. We did not repurchase shares during the 2026 Q3 because investing in the business remains our near-term priority. Year to date, we have repurchased $2.5 million of shares. We are reaffirming our 2026 gross margin target at the low to mid 20% range. With that, I'll turn the call back to Ken.

Speaker #6: Our capital allocation priorities remain organic and strategic growth complemented by opportunistic share repurchases. We did not repurchase shares during the 2026 3rd quarter because investing in the business remains our near-term priority.

Speaker #6: Year to date, we have repurchased $2.5 million of shares. We are reaffirming our 2026 gross margin target at the low to mid-20% range. With that, I'll turn the call back to Ken.

Ken Gaglione: Thank you, Brian. While near-term HFC market pricing remains challenging, we are encouraged by the 9% sales volume growth achieved through the first nine months of 2026, reflecting the strength of our customer relationships and leadership role in the refrigerant marketplace. As the industry transitions to new lower GWP refrigerants, we believe Hudson's expertise, facilities, and national distribution network position us to continue to support customers across the refrigerant life cycle and capture expanding market opportunities. The investments we are making today in technology, operating efficiency, and organizational capability are designed to create a more agile, scalable, and differentiated company in the future. With a debt-free balance sheet and a clear strategy, we believe Hudson is well positioned to strengthen profitability, generate sustainable cash flows, and deliver attractive long-term value for our shareholders. Operator, we'll now open the call to questions.

Speaker #5: Thank you, Brian.

Speaker #7: While near-term HFC market pricing remains challenging, we are encouraged by the 9% sales volume growth achieved through the first 9 months of 2026, reflecting the strength of our customer relationships and leadership role in the refrigerant marketplace.

Speaker #7: As the industry transitions to new lower GWP refrigerants, we believe Hudson's expertise, facilities, and national distribution network position us to continue to support customers across the refrigerant lifecycle and capture expanding market opportunities.

Speaker #7: The investments we are making today in technology, operating efficiency, and organizational capability are designed to create a more agile, scalable, and differentiated company in the future.

Speaker #7: With a debt-free balance sheet and a balanced strategy, we believe Hudson is well positioned to strengthen profitability, generate sustainable cash flows, and deliver attractive long-term value for our shareholders.

Speaker #7: Operator, we'll now open the call to questions.

Operator: Thank you. Ladies and gentlemen, at this time, we'll be conducting our question and answer session. If you wish to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press star two if you wish to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is coming from Ryan Sigdahl with Craig-Hallum. Your line is live.

Speaker #8: Thank you. Ladies and gentlemen, at this time we'll be conducting our question and answer session. If you wish to ask a question, please press star 1 on your telephone keypad.

Speaker #8: A confirmation tone will indicate your line is in the question queue, and you may press star 2 if you wish to remove your question from the queue.

Speaker #8: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions.

Speaker #8: Thank you. Our first question is coming from Ryan Sigdahl with Craig-Hallam. Your line is live.

Matthew Robb: Hey, thanks. This is Matthew Robb on for Ryan. So help me understand the volume that you saw in the quarter. Volume's been up 9% year to date. It was down 9% in Q3. It seems like you guys leaned into margin a little bit, pulled back on volume. Was that an intentional shift, or was there something else going on industry-wise?

Matthew Raab: Hey, thanks. This is Matthew Raab on for Ryan. So help me understand the volume that you saw in the quarter. Volume's been up 9% year to date. It was down 9% in Q3. It seems like you guys leaned into margin a little bit, pulled back on volume. Was that an intentional shift, or was there something else going on industry-wise?

Speaker #9: Hey, thanks. This is Matthew Robb on for Ryan. So help me understand the volume that you saw in the quarter. Volume's been up 9% year-to-date.

Speaker #9: It was down 9% in Q3. It seems like you guys leaned into margin a little bit, pulled back on volume. Was that an intentional shift or was there something else going on industry-wise?

Ken Gaglione: Yeah. That's exactly what happened. It's not industry-wide. We intentionally focused more on profitable sales this quarter than volume.

Speaker #7: Hi, yeah, that's exactly what happened. It's not industry-wide. We intentionally focused more on profitable sales this quarter than volume.

Matthew Robb: Any color on reclaimed volume within that?

Matthew Raab: Any color on reclaimed volume within that?

Speaker #9: Is there any color on reclaim volume within that? Reclaim volume was—go ahead, Brian.

Ken Gaglione: Reclaimed volume-

Brian Bertaux: Reclaimed volume

Ken Gaglione: this quarter was. Go ahead, Brian.

Brian Bertaux: Reclaimed volume is trending about the same growth as last year.

Speaker #6: Reclaim volume is trending about the same growth as last year.

Matthew Robb: Okay. Understood. Then on the EPA inventory, Ken, you mentioned it, ample channel inventory. Any more context you are willing to share at this point? On our math, it implies demand is down something like 20%, or was down 20% in 2025. Do you have any view on demand that would change materially from what the EPA has said? Or are there any other factors that we may be missing? Thank you.

Matthew Raab: Okay. Understood. Then on the EPA inventory, Ken, you mentioned it, ample channel inventory. Any more context you are willing to share at this point? On our math, it implies demand is down something like 20%, or was down 20% in 2025. Do you have any view on demand that would change materially from what the EPA has said? Or are there any other factors that we may be missing? Thank you.

Speaker #9: Okay, understood. And then on the EPA inventory, Ken, you mentioned it, ample channel inventory. Any more context you're willing to share? At this point, I mean, on our math, it implies demand's down something like 20% in— or was down 20% in '25.

Speaker #9: Do you have any view on demand that would change materially from what the EPA has said? Or are there any other factors that, that we, we may be missing?

Speaker #9: Thank you.

Ken Gaglione: Yeah. I can offer you a little bit of color on that. We understand the model. There is a model there that suggests excess HFC inventories, but we also think that the EPA model underrepresents some of the additional demand from other markets that they did not consider. For example, the data center market is underrepresented in the EPA data. Some of the HFO blends as well contain a significant amount of HFCs that we think is underrepresented. For example, R-513A, R-448A, R-449A. Those blends contain HFCs that are not factored into the EPA model. We think that there is an underrepresentation in the EPA model, but we understand that projecting HFC inventories a couple of years out is pretty difficult.

Speaker #7: Yes, I can offer you a little bit of color on that. We understand the model—there is a model that suggests excess HFC inventories—but we also think that the EPA model underrepresents some of the additional demand from other markets that they did not consider.

Speaker #7: For example, the data center market is underrepresented in the EPA data. Some of the HFO blends as well contain a significant amount of HFCs that we think is underrepresented. For example, 513, 448, 449—those blends contain HFCs that are not factored into the EPA model.

Speaker #7: So we think that there is an underrepresentation in the EPA model, but we understand that projecting HFC inventories a couple of years out is pretty difficult.

Matthew Robb: Understood. Thank you very much.

Matthew Raab: Understood. Thank you very much.

Speaker #7: Understood. Thank you very much. Thank you.

Operator: Thank you. Our next question is coming from Jason Tilchen with Canaccord Genuity. Your line is live.

Speaker #8: Our next question is coming from Jason Tilchin with Canaccord Genuity. Your line is live.

Jason Tilchen: Good afternoon. Thanks for taking my questions and appreciate all the color and prepared remarks. Maybe one for Ken to start. Last quarter you talked about some of the issues on pricing, not just related to inventories but also relating to illegal imports, and talked about how you were working with peers across the ecosystem to help address this issue. Just wondering if there is any update you can share on either how that has impacted the market over recent months and also those efforts, when we may see some of that activity start to be curtailed a bit.

Speaker #6: Good afternoon. Thanks for taking my questions and appreciate all the caller-prepared remarks. Maybe one for Ken to start. Last quarter, you talked about some of the the issues on pricing, not just related to inventories but also relating to illegal imports, and talked about how you were working with peers across the ecosystem to help address this issue.

Speaker #6: Just wondering if there's any update you can share on either how that has impacted the market overall.

Speaker #10: recent months and also those efforts when we may see some of that activity start to be curtailed a bit.

Ken Gaglione: Hi, Jason. Yes, thank you for the question. We still continue to see that kind of activity, although we have nothing new to report for the quarter, no new developments with respect to enforcement that I am aware of, that we are aware of. However, we do know during the quarter that this remains a significant point of attention for certain government bodies. So hopefully we will have more to report on that in the next quarter.

Speaker #7: Hi, Jason. Yeah, thank you for the question. We still continue to see that kind of activity, although we have nothing new to report for the quarter—no new developments with respect to enforcement.

Speaker #7: That I'm aware of, that we're aware of. However, we do know during the quarter that this remains a significant point of attention for certain government bodies.

Speaker #7: So hopefully we'll have more to report on that in the next quarter.

Jason Tilchen: Okay. Very helpful. Last quarter, you also talked about some of the investments you were making across the business to help diversify away from some of that spot exposure. Just maybe if you could talk about specifically on the services side, I think there was a hire made for a services manager recently. If you could just talk to some of the opportunities that you are particularly focused on in that area and how those efforts have trended throughout the quarter and into Q4.

Speaker #10: Okay. Very helpful. And last quarter, you also talked about some of the investments you were making across the business to help diversify away from some of that spot exposure.

Speaker #10: Just maybe if you could talk about specifically on the services side, I think there was a hire made for a services manager recently. If you could just talk to some of the opportunities that you're particularly focused on in that area and how those efforts have trended throughout the quarter and into Q4.

Ken Gaglione: All right. Thank you. So yes, we continue to focus on services, and I think I indicated previously that we are basically at capacity with our services business. So we are looking to make strategic hires. We have seen a lot of very great opportunities in the quarter that we capitalized on, and we continue to look for new collaboration opportunities. I do not have anything to report in terms of acquisitions right now, but the collaboration side is developing well.

Speaker #7: All right, thank you. So yes, we continue to focus on services, and I think I indicated previously that we are basically at capacity with our services business.

Speaker #7: So we are looking to make strategic hires. We have seen a lot of very great opportunities in the quarter that we capitalized on, and we continue to look for new collaboration opportunities.

Speaker #7: I don't have anything to report in terms of acquisitions right now, but the collaboration side is developing well. Thank you very much.

Jason Tilchen: Thank you very much.

Operator: Thank you. As a reminder, ladies and gentlemen, if you do have a question, please press star one on your telephone keypad. Our next question is coming from Josh Nichols with B. Riley Securities. Your line is live.

Speaker #8: Thank you. As a reminder, ladies and gentlemen, if you do have a question, please press star 1 on your telephone keypad. Our next question is coming from Josh Nichols with B.

Speaker #8: Riley Securities. Your line is live.

[Analyst] (B. Riley Securities): Hi, this is Matthew on for Josh. Thanks for taking my questions. To start off, you described customer demand as muted. Is that mostly residential and light commercial, or are you seeing it in commercial refrigeration in your direct accounts too?

Matthew Maus: Hi, this is Matthew on for Josh. Thanks for taking my questions. To start off, you described customer demand as muted. Is that mostly residential and light commercial, or are you seeing it in commercial refrigeration in your direct accounts too?

Speaker #10: Hi, this is Matthew Young for Josh. Thanks for taking my questions. To start off, you described customer demand as muted. Is that mostly residential and light commercial, or are you seeing it in commercial?

Speaker #10: Commercial refrigeration and your direct accounts too?

Ken Gaglione: We are seeing it pretty much across the board, but I would say more in residential light commercial, only because of other market factors like inflation that are dampening demand.

Speaker #7: Now we're seeing it pretty much across the board, but I would say most— I would say more in residential, light commercial, only because of other market factors like inflation.

Speaker #7: that are dampening demand?

[Analyst] (B. Riley Securities): Got it. In terms of the volume shift not being industry-wide and you just focusing on higher margin sales, I am wondering, where is the kind of, in terms of 2027, what can we expect? Because you did about 25% gross margin this quarter. In terms of next year, I guess, are you expecting to push that a bit more and focus on that for longer? Just seems like more of an unexpected sudden shift.

Matthew Maus: Got it. In terms of the volume shift not being industry-wide and you just focusing on higher margin sales, I am wondering, where is the kind of, in terms of 2027, what can we expect? Because you did about 25% gross margin this quarter. In terms of next year, I guess, are you expecting to push that a bit more and focus on that for longer? Just seems like more of an unexpected sudden shift.

Speaker #10: Got it. And then in terms of the volume shift not being industry-wide and you just focusing on higher margin sales, I'm wondering where's the kind of in terms of 2027, like what can we expect?

Speaker #10: Because I mean, you know, you did like about 25% gross margin this quarter. In terms of next year, I guess, like are you expecting to push that a bit more and focus on that for longer?

Speaker #10: Just seems like more of an unexpected sudden shift.

Speaker #7: Yeah, it's a product mix shift for us. And what we've demonstrated is we have the ability to flex, to focus on margin when we need to, when the business requires it.

Ken Gaglione: Yeah. It is a product mix shift for us, and what we have demonstrated is we have the ability to flex to focus on margin when we need to, when the business requires it. There is no loss in share here, share of demand, because there is a certain percentage of our buyers are price buyers. We focus on our core buyers who are more interested in long-term relationships. Going forward, in our view, it is not really a question of sacrificing long-term volume or share of demand. It is simply a question of what is the product mix that we are going to focus on in the quarter.

Speaker #7: There's no loss in share here, share of demand, because there's a certain percentage of our buyers are price buyers. We focus on our core buyers who are more interested in long-term relationships.

Speaker #7: So going forward, it's not really— in our view, it's not really a question of sacrificing long-term volume or share of demand. It's simply a question of What's the product mix that we're going to focus on in the quarter?

[Analyst] (B. Riley Securities): Got it. All right, thanks. Then I guess similar to that, in terms of pricing, I realize pricing was down about 17%, as you mentioned. I am wondering where was pricing exiting the quarter versus that average during the quarter, and what are you assuming directionally for 2027 as far as you can predict?

Matthew Maus: Got it. All right, thanks. Then I guess similar to that, in terms of pricing, I realize pricing was down about 17%, as you mentioned. I am wondering where was pricing exiting the quarter versus that average during the quarter, and what are you assuming directionally for 2027 as far as you can predict?

Speaker #10: Got it. All right, thanks. And then, I guess similar to that, in terms of pricing, you know, realized pricing was down about 17%, as you mentioned.

Speaker #10: I'm wondering, where was pricing exiting the quarter versus the average during the quarter? And what are you assuming directionally for 2027?

Speaker #7: As far as you can predict. Yeah, Brian, why don't you take that one?

Ken Gaglione: Yeah, Brian, why don't you take that one?

Brian Bertaux: Yeah, so a couple things on that. Pricing in Q3 was very similar to Q2. Pricing has stabilized this year. As you recall, we had a tough comp last year because pricing fluctuated. I would tell you right now that we would expect pricing next year to be about the same as 2026.

Speaker #6: Yeah, so a couple of things on that. Pricing in the 3rd quarter was very similar to the 2nd quarter. Pricing has stabilized this year.

Speaker #6: As you recall, we had a tough comp last year because pricing fluctuated. I would tell you right now though, we would expect pricing next year to be about the same as 2026.

[Analyst] (B. Riley Securities): Got it. Okay, that's helpful. Just one last one for me.

Matthew Maus: Got it. Okay, that's helpful. Just one last one for me.

Speaker #10: Got it. Okay, that's helpful. Just one last one for me. I mean, you guys have plenty of cash, right? $5 million or so. You're at $35 million or so of cash.

Brian Bertaux: This is Brian.

Brian Bertaux: You're at $35 million or so of cash. Stock's currently below book. I'm just wondering, how are you weighing buybacks against further investment in the business and accordion heading into the year-end?

Matthew Maus: You're at $35 million or so of cash. Stock's currently below book. I'm just wondering, how are you weighing buybacks against further investment in the business and accordion heading into the year-end?

Speaker #10: Stock's currently below book. I'm just wondering, how are you weighing buybacks against, you know, further investment in the business and, and Icorium heading into the year-end?

Brian Bertaux: Well, as we noted, we have the opportunity to invest in the business, invest in the long-term strategy, and then do share repurchases. Even though the stock's at an attractive price, we've been holding on purchases because we are going to lean into a lot more strategic and operational efficiency growth. So right now, we are not buying shares.

Speaker #6: Yeah, as we noted, where we have the opportunity to invest in the business, invest in long-term strategy, and then do share repurchases, even though the stock's at an attractive price, We've been holding on purchases because we are going to lean into a lot more strategic and operational efficiency growth.

Speaker #6: So, right now we are not buying shares. Got it. All right, that was all for me. Thanks for taking my questions.

[Analyst] (B. Riley Securities): Got it. All right. That was all for me. Thanks for taking my questions.

Matthew Maus: Got it. All right. That was all for me. Thanks for taking my questions.

Operator: Thank you. Ladies and gentlemen, we currently have no further questions in the queue at this time. I will be handing the call back over to Mr. Gaglione, but it appears his line has dropped temporarily, so please give me one moment while we try to reconnect. Once again, apologies, ladies and gentlemen. We appear to be struggling.

Speaker #8: Thank you, ladies and gentlemen. We currently have no further questions in the queue at this time. I will be handing the call back over to Mr. Gaglione, but it appears his line has dropped temporarily, so please give me one moment while we try to reconnect.

Speaker #8: Once again, apologies, ladies and gentlemen. We appear to be struggling. Have we got you back on, Ken? Yep, I'm back on. Sorry. Thank you, sir.

Ken Gaglione: I can.

Operator: Have we got you back on, Ken?

Ken Gaglione: Yep, I am back on. Sorry.

Operator: Thank you, sir. I was handing the call back to you, sir, for any closing remarks.

Speaker #8: I was handing the call back to you, sir, for any closing remarks.

Ken Gaglione: Well, first, let me thank everybody. Let me thank our employees for their continued dedication and support to our mission. Our success is driven by our employees, and we genuinely appreciate it. I think the takeaway here is we demonstrated again this quarter that near-term pricing will not change our long-term vision, and I would like to thank our longstanding and new shareholders for their support during the exciting stage of the company's evolution. We look forward to speaking with you again in February to discuss our full year 2026 results. Good night, everyone.

Speaker #7: Okay. Well, first, let me thank everybody. Let me thank our employees for their continued dedication and support to our mission. Our success is driven by our employees, and we genuinely appreciate it.

Speaker #7: I think the takeaway here is we demonstrated again this quarter that near-term pricing will not change our long-term vision, and I would like to thank our longstanding and new shareholders for their support during the exciting stage of the company's evolution.

Speaker #7: We look forward to speaking with you again in February to discuss our full year 2026 results. Good night, everyone.

Operator: Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time, and have a great rest of your evening.

Speaker #8: Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time and have a great rest of your evening.