Chart Industries, Inc.

Good morning and welcome to the CHART Industries Incorporated 2021 First Quarter Conference Call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, there will be a question and answer session. The company's supplemental presentation was issued earlier this morning. If you have not received the release, you may access it by visiting CHART's website at www.chartindustries.com. A telephone replay of today's broadcast will be available following the conclusion of the call until Thursday, April 29, 2021. The replay information is contained in the company's press release. Before we begin, the company would like to remind you that the statements made during this call that are not historical, in fact, are forward-looking statements. Please refer to the information regarding forward-looking statements and risk factors included in the company's earnings release and latest filings with the SEC or SEC. The company undertakes no obligation to update publicly or revise any forward-looking statement. I would now like to turn the conference call over to Jill Ivanko, Chart Industries CEO.

Thanks, Nora, and good morning, everyone. I think it's apropos that we're sharing our results here on Earth Day and the first day of the Global Climate Summit. In particular, as we see heightened demand for our products for the clean energy revolution. We're pleased to share with you our strong start to 2021. On slide three of the presentation that was released this morning, you can see our results compared to the first quarter of 2020 and 2019. In all metrics except sales, results were above our first quarter expectations. And while I think slide three speaks for itself, let me point out a few things. First, if someone asked me to pick one metric that I think is the most indicative of our success to come in the next few years, I would select orders. While the drivers for 2021 indicate we are trending toward a great financial year, this is just the beginning of this decade, which I believe will show expansive growth. That being from the combination of booming hydrogen growth, LNG's cost competitiveness, and an effective energy transition tool, the kick-starting of carbon capture, and the underlying premise of the increasing need for a hybrid of molecules as industry recovers and investment is made in infrastructure. Orders of $417.2 million in Q1 were the highest in our history, excluding big LNG, driven by broad-based demand, including a recovery in certain end markets, continued demand for our clean products, supporting the macro trend of sustainability, and a combination of larger liquefaction orders for both LNG and hydrogen. Additionally, we had 32 orders over $1 million each in the quarter. This continued record-level order activity contributed to record backlog with or without Big LNG of $934 million. This is the second quarter in a row of record orders and backlog, further setting up a very strong remainder of 2021. Both reported and adjusted gross margin as a percent of sales were the highest in four years with or without Big LNG. Growth margin is sequentially increasing in both dollars and percent of sales, with reported growth margin as a percent of sales of 29.1%, and when adjusted for one-time cost, 29.9%, up 140 basis points from a year ago and over 500 basis points from two years ago. This demonstrates the increasing mix of our higher-margined specialty and repair service and leasing businesses, which comprise 41.1% of our total first quarter revenue, the highest it has ever been. As a point of reference, RSL and specialty as a percent of revenue for the full year 2020 was 34.1%. Gross margin was a key contributor to our adjusted diluted earnings per share of 80 cents, even on lower than anticipated sales. This includes six cents from our investments. This is a nearly 200% increase compared to the first quarter of 2020, reflecting continued operational execution across the segment. Sales were slightly lower than expected in the first quarter, Two specific timing shifts to the second quarter, and therefore are still within the year. Specifically, sales of $288.5 million were impacted by revenue recognition being in April for shipped ISO containers and other products that were in transit at March 31st, and $5 million of Venture Global's Calcasieu Pass project that shifted to the second quarter based on updated schedule alignment with the customer. Also included on this slide are the comparisons to the first quarter of 2019, which had no COVID-19 challenges, and also shows the positive financial impacts the strategic changes to our portfolio have had on our order book, top line, and margin. Back to that one metric to look at for the explosive growth of the business that's on the horizon, orders. When you remove big LNG, orders increased over 34% since the first quarter of 2019. Now moving to segment specifics, starting with specialty on slide four, Our specialty segment had record backlog orders and gross profit in the first quarter, along with record sales in HLNG vehicle tanks, food and beverage, and water treatment. Gross margin improved sequentially from the fourth quarter with favorable margin mix from cannabis and space-related sales, as well as improving operational execution in certain locations of our factories. Everyone wants to talk hydrogen, which had record orders and gross profit in the first quarter. We will get into details on a coming slide, but to get you excited about that market, if you're not already, let me give you an astounding data point. In addition to our hydrogen orders already in backlog, we are working with 214 hydrogen customers and potential customers under 54 nondisclosure agreements. That's a significant increase when you compare to one year ago when we were in conversations with just over 30 customers and potential customers about hydrogen equipment and under four NDAs at that point in time. You're all familiar with slide five, and in the first quarter, we continued to expand our investments, our own portfolio, and our commercial agreements to pull chart products through to more customers, projects, and geographies specifically related to specialty. The bottom row shows our year-to-date activity, and you've heard a lot about each of these throughout the quarter. I'd point out that already each has brought us commercial opportunities and orders. So moving to slide six, let's discuss how each of these has increased our specialty products addressable market. As a reminder, the addressable market shown on slide six reflects our best internal estimates on our relatively near-term next three to four year overall market opportunity with our existing processing equipment. It does not include new products in development unless indicated, nor additional benefits from other potential commercial partnerships. The acquisition of Cryo Technologies increased our hydrogen addressable market in the near term by $800 million. and added a $250 million helium liquefaction element to the market opportunity. This great combination of cryo technologies and chart offers combined content for the very broad liquefaction process market. Our content on these projects ranges from $15 to $100 million each. Similarly, the Transform Materials investment in commercial MOU brings chart content to their unique hydrogen and acetylene process and expanded our total addressable market by $150 million. We'll talk more about hydrogen details on the next slide. But first, don't forget the burgeoning carbon capture market for our carbon and direct air capture process, our extensive heat exchanger offering, and our February 2021 investment in Savante offers the most unique combination in the market of process technology and equipment with low CapEx and high purity. Our $15 million investment in Savante was for just under 10%. brings with it a commercial MOU as well as being alongside key ESG investors such as Temasek, OGCI, Chevron, Mitsui, Suncor, and others. The proposed U.S. infrastructure plan also includes a focus on building CCUS facilities and expanding the 45Q tax credit, which further supports our view that carbon capture is a high-potential breakout market for our products and technologies. It's not only driven by the U.S. and Canada, who also recently upheld the national carbon tax, but also our global pipeline of various stage quoting activity for carbon and direct air capture, ranging from the Middle East to Norway to Mexico. With over 80 projects in various stages of our commercial quotation pipeline, compared to 20 only six months ago, we see this as a key market to the next decade. Another strategic synergistic acquisition that touches on the clean revolution, this time clean water, with Blue and Green, which brought us water treatment technology, and when combined with our tanks, offers a full dissolution water treatment package. Since we completed the big acquisition in November of 2020, $5.5 million of orders where we sold both blue and green technology and chart equipment together. With President Biden's American Jobs Plan anticipated to include spending of over $100 billion toward the United States aging water systems, we anticipate the demand for this part of our nexus of clean products and technologies to significantly accelerate. Three of our specialty areas that have not received the same amount of attention as the world of cleaner and greener are cannabis, gas by rail, and food and beverage. Each of these three have growing demand, pun intended, driven by a combination of macro and specific product tailwinds. Just under a month ago, legislation was passed to legalize recreational marijuana in New York State. New York is the 15th state, along with the District of Columbia, to have legalized cannabis for recreational use. and 43% of the U.S. population now live in states where recreational marijuana is legal. We expect continued increasing demand as public policy in the United States directionally supports the botanical market and as cannabis producers and packagers add scale to their manufacturing. We supply this market through the same distributors that service restaurants and convenience stores, and many of these distributors are expanding their businesses to meet the increasing demand. In the first quarter, we saw an increase in orders for our ORCA CO2 delivery trucks, which is a leading indicator of the growth our customers expect in this particular market. The gas by rail market is one that we've been prepared for since 2014 with a very unique offering. And while it has definitely had fits and starts, we're seeing this market gain traction both in the U.S. and Europe. In the first quarter, we booked a 10 Argonne rail car order. Our equipment was used in an LNG in Europe. and we shipped the first LNG by rail tender car for the $22 million order that's in our backlog from December 31st, 2019. Our customers have indicated that rail is going to continue to gain traction, and we expect to make a dent in our $200 million addressable market, as these are typically ordered in groups versus individual orders, making each multi-million dollar order levels. Food and beverage is one of our more consistent markets within specialty, but also was one of the hardest hit by COVID last year. We saw a recovery in the fourth quarter of 2020, and that recovery continued into the first part of 2021 with new restaurant openings picking up. For example, we received food and bev orders from national accounts including Chick-fil-A, Yum Brands, Jack in the Box, Quick Trip, The Other Quick Trip, Buffalo Wild Wings, Jimmy John's, Regal Cinemas, and Cinemark all in the first quarter. Also, month to date in April, our beverage daily order rate is tracking higher than any month since February of 2020. One of the questions I regularly get asked is whether our hydrogen addressable market, as shown on slide seven, could be significantly or considerably larger in the next five to ten years. The answer is yes, and each day there's more and more confidence that hydrogen will be a key part of the clean energy destination. So what will drive us to increase our market size? There's two broad buckets. The first is continued public sector investment, and let me give you some recent anecdotes that support this. in addition to all the stats we shared a couple months back on our year-end earnings call. Last month, the Tokyo Olympic torch started its 121-day relay, and many of the legs will be hydrogen-powered. Japan is using this opportunity to raise awareness about hydrogen as a cleaner power fuel, as well as Japan's initiative to use it as its future green energy source. Industry coalitions will continue to accelerate hydrogen. In this past quarter, we were one of 11 founding member companies of Hydrogen Forward, as well as co-leading with Reliance Industries the India Hydrogen Alliance to promote hydrogen as a fuel and complement renewables in that geography. On April 9th, the White House released its fiscal year 2022 budget preview. This supports increased funding to advance carbon reduction and mitigation in sectors and applications that are difficult to decarbonize, including the industrial sector, with technologies and methods such as carbon capture and storage, hydrogen, and direct air capture. These were all specifically called out in that preview. A recent market analysis was completed by Emergen Research. They concluded that the global liquid hydrogen market is forecasted to be worth over $50 billion by 2027, driven by exponential growth in demand for electric vehicles to reduce emission levels, as well as the rising use of liquid hydrogen in manufacturing such as LED display and semiconductor manufacturing. Just to remind you, we're the only company that has been designing and manufacturing liquid hydrogen products that we offer for over 50 years. So the second driver of a potential increase to our total addressable market is our own organic and inorganic investment. We're well into the testing and near commercial readiness for our liquid hydrogen onboard vehicle tank, which we intend to release to market in the third quarter of this year at the ACT Expo. We haven't included in the current $2.3 billion TAM any expanded scope for our in-development hydrogen pump, nor any potential process or equipment content on projects that may be opportunities through our cornerstone investment in the 5T hydrogen fund, which is expected to launch in early 2022. And as you know, we've been an active participant in the Chinese group code for liquid hydrogen storage tanks, a lengthy process. We expect the final code and approval this quarter. Just last week, the Secretary General initiated the group code work for liquid hydrogen mobile equipment in China and invited us to participate in the code preparation led by the China Standards Committee. We're excited to be a part of this and add the certifications and capabilities for hydrogen mobile equipment to our Chinese manufacturing offering. But before we increase the hydrogen market size per chart, we want to show you the progress against our current TAM, which you can see on the right-hand side of slide seven. Not even a year into the hydrogen mania, we have already booked over $100 million of orders. And perhaps the two most meaningful things on this page are the orders by quarter table in the bottom right-hand corner. From Q3 2020 to Q4 2020, the orders more than doubled. And from Q4 2020 to Q1 2021, hydrogen orders more than tripled. And each of these is off a sequentially higher base than the last. The second meaningful thing is the breadth of the types of orders to date, ranging from hydrogen storage tanks to fueling station equipment, to liquid and gaseous hydrogen trailers, to liquefiers, to marine fuel applications. All right, so slide eight. Slide eight is one of my favorite ones that we do each quarter, in part because saying folking orders makes me smile, and more importantly because it shows the continued evolution of the business in penetrating the variety of applications that our existing product offering is used in. We continue to see strong demand for new and unique first-of-a-kind projects, not just from our existing customers, but also from our new customers, of which we had 105 in the first quarter. 72 of those new customers were customers outside of North America. We have also included meaningful existing customers and products in the middle column of the slide, because these show the stickiness of our existing customers coming to us for new innovative solutions, like Chick-fil-A switching to a larger tank to accommodate their growing CO2 needs, or one of our industrial gas major customers ordering 10 Argonne rail cars that I referenced earlier. Bango is a good example of how we're beginning to see the further penetration and growth in the cannabis market, and CalSTART is an exciting win for us. In March, CalSTART received a grant award from the California Energy Commission to develop an actionable hydrogen fuel cell-powered tugboat design that will be ready for construction and implementation at the Port of Los Angeles. This project, which is called HiZET, involves us and other consortium partners, including Ballard Power. Together, our teams will develop a pathway to decarbonize the marine sector by identifying and addressing challenges related to producing, delivering, transferring, and storing liquid hydrogen to power a zero-emission tugboat. I won't run through the others, as you can read about them on this slide. Slide nine is our second high-growth segment, repair service and leasing, or RSL. We continue to organically grow our RSL business, both through capital investments in a larger leasing fleet and strategic repair locations. This is returning to us immediately. With 44 new leases signed in the first quarter of 2021, compared to five new leases signed in the first quarter of 2020. Additionally, February was our first month with leasing revenue greater than $1 million, and this grew an additional 250% sequentially from February to March. RSL is set to have an extraordinary and record second quarter of 2021 due to the timing of some of the shipments that I mentioned around sales moving from first quarter to second quarter. Beyond leasing, the repair and service business continues to gain traction in Europe with a service and maintenance long-term agreement with Gatham for their LNG fueling station network in Finland and Sweden. The first quarter of 2021 more accurately represents a typical quarter for RSL from an order and gross margin as a percent of sales when you compare to the fourth quarter of 2020, which had an unusually high level of quick turn repairs and installations. We're currently accepting customer equipment at our new Greenfield Repair and Service Shop in South Carolina. and we anticipate beginning repairs in June at that site. Slide 10 moves into our more traditional business, Cryotank Solutions, or CTS. Record Cryotank Solutions backlog of $245.8 million as of the end of March is up just under 11% over the fourth quarter. Record orders and sales in CTS mobile equipment in the first quarter of 2021 supported this increasing backlog, and with record trailer orders in the quarter, both in units and dollars, We are increasing our CTS sales outlook for the full year 2021. Strong first quarter 2021 ORCA unit orders are a leading indicator for continued strong perma sales throughout the remainder of the year. And we have other activity, which we consider a bellwether sign of manufacturing recovery, that's directly linked to laser cutting for production. Industrial gas major customer activity, as well as independent distributor activity, was the strongest it has been since pre-COVID levels this past quarter. One of our top five industrial gas major customers ordered the most in any month in their history with us in March 2021. And we expect as more COVID-19 restrictions are lifted that our industrial gas customers' activity increases. Q1 was a very strong quarter for our independent industrial gas customers as well. For example, one of the independents placed more orders with us in the first quarter of 2021 than in all of last year. Our China business, also contributed to our strong first quarter with record backlog and record sales, as well as continuing to improve positive operating profit. You can see some of the accomplishments at the top of slide 11. I used to say cautiously optimistic about the China business and characterize earnings as a few thousand dollars. Well, based on current developments, Sherry and her team have put me in a position that I would say optimistic about continued and increasing strength in the China business, coupled with much higher than thousands of operating income. Additionally, global ISO container demand continued at heightened levels as the new year started. We booked orders for 121 ISO containers in the quarter and shipped 99 units. We expect demand to further increase in the remainder of the year. Slide 12 shows heat transfers first quarter metrics with the year-over-year order increase of 15% driven by the start of air-cooled heat exchanger and PET-CHEM market recovery. More impactful was our first LNG liquefaction order this year for New Fortress Energy's FAST LNG project. There are numerous small-scale LNG potential orders on the horizon. The chart on the bottom right-hand side of slide 12 shows 10 of these potential projects that are currently not in our backlog. We anticipate a subset of these to move forward to orders with either FID or notices to proceed in the remainder of 2021. Note that these are geographically diverse, and that is another indicator that LNG remains a part of this global energy transition. This is especially true in countries and regions working to move from coal and diesel to a cost-effective available and ready-now answer, which LNG is. Also, many LNG operators are implementing various carbon monitoring and reduction actions, which we're working with them to design flexibility into their facilities and to address cleaner options over the coming decades. Our HTS equipment is being sought after for applications ranging from carbon capture solutions to biogas. Even the traditionalists are exploring going green with upgrades and retrofits trending toward heat recovery, geothermal applications, and green diesel projects. We booked two green diesel projects with traditional hydrocarbon customers in the first quarter. And while we have not included the big LNG chart on this slide, Really, guys, it's only due to the space constraints of the slide. Like, don't read anything into that because we still aren't changing our perspective that we expect at least one big LNG order in the coming nine months. As you're well aware, the phase ones of projects we have already been named on, specifically Venture Global's Plaquemines, Chenier's Corpus Christi Stage 3, and Tellurian's Driftwood Project total over $750 million of potential pending chart orders. And speaking of big LNG, The decline in Venture Global Pass revenue, as expected, from Q4 to Q1, was the driver of lower heat transfer systems gross margin as a percent of sales. When you exclude that big LNG, gross margin as a percent of sales was up sequentially from Q4 to Q1. To reiterate, we are no longer relying on one or two big projects happening. Our margin profile and growth are dependent of that. So Merck's going to tell us about that now on slide 13.

Thanks, Jill. The strength in gross margin coupled with our SG&A cost control resulted in reported diluted earnings per share of $0.63, 10.5 times higher than the first quarter of 2020. When adjusted for one-time cost, primarily related to inorganic transactions and new facility startup costs as shown on line one, adjusted EPS was $0.80, up 196% when compared to one year ago. The 80 cents includes six cents of earnings from the mark-to-market this quarter of our strategic investments.

The damned if you do, damned if you don't slide is back on page 14. This is our walk from 2020 sales to our current low end of the sales guide for 2021 full year. Our current full year 2021 sales outlook is $1.36 to $1.41 billion, up from our prior guidance of $1.32 to $1.38 billion. The prior walk to the low end of the range is included in the appendix of the presentation on slide 19 if you need that for reference. The highlighted yellow boxes are what has changed since our prior outlook. Starting at the top, with the specific project box for heat transfer systems, this number is built up differently than last time. Previously, we had $47 million, which was based on two anticipated small-scale LNG projects. Now this includes the 2021 portion of expected revenue for a new Fortress Energy's fast LNG project, as well as current year expected sales for a petrochemical project that's already in the backlog. Additionally, we have included one small-scale LNG project that we would expect to be booked in the second quarter and result in approximately $10 million of second-half revenues. This morning, we executed a letter of intent for the supply of technology and equipment packages for a confidential liquid faction project in the Northeast United States The award, which is valued in excess of $20 million for us, includes innovative and environmentally conscious design aspects. The project is subject to final regulatory approvals and final investment decision, which are expected in the coming weeks. Beyond that, there are no additional small-scale LNG or other specific projects built into the low end of our guide, although we do expect more to come into the order book this year, as I mentioned on the HTF slide. But these would primarily benefit a little bit late in the year and then 2022 revenues. The next change is an increase from zero year-over-year growth in mobile equipment to an increase of 4% driven by the first quarter trailer order activity that I talked about on CTS. We hadn't previously included any growth due to two specific mobile equipment sales in 2020 that aren't repeating, but the start to this year has given us confidence to increase this, which will be reflected in the second half of 2021 revenues. Third, we have increased our hydrogen outlook based on the actual backlog as of the end of the first quarter of 2021. Specialty products, in particular hydrogen, are still on the newer end of customer behavior, so we did not build a significant amount of second quarter orders into the outlook at the low end. Note that we do include $30 million of cryotechnology's revenue in the full year forecast. This was based on a first half 2021 expected helium liquefaction order. Well, it's been a busy morning because also this morning we received the letter of intent for cryotechnology's helium liquefaction large-scale helium plant, for one of the largest independent oil and gas producers in Russia. The scope of our supply for the minimum 5 million liter per year helium plant includes equipment, commissioning, and startup, and the order is expected to be greater than $40 million. In keeping with our strategy, to be clear, we do not have construction responsibility on this particular project. And finally, the last two highlights on the slide relate to HLNG over the road vehicle tanks. As I said on our year end earnings call, if HLNG order levels continued as they were in the second half of 2020, that number would grow. And so now it reflects that, and the eliminations is simply accounting around what is made in our respective manufacturing locations. Do remember that full-year 2021 sales include $21 million from CalCASU pass revenue, of which there is only $5 million remaining in backlog, as well as the $30 million that I just touched on for cryotechnologies. There is no additional big LNG revenue included in our outlook. And this year we expect the first half of 2021 to be lower than the second half, from a sales perspective based on the lead time of our backlog. Which brings us to the rest of our full-year 2021 guide on slide 15.

Jill just told you about the sales guide, and we anticipate associated full-year non-diluted adjusted earnings per share to be approximately $3.75 to $4.15 on 35.5 million weighted average shares outstanding, up from our previous estimate of $3.50 to $4 per share. our assumed effective tax rate is 18% for the full year of 2021. One of the questions that is top of mind for many companies, including us, is around material price increases. While we have seen price increases in nickel and stainless steel, we have strong protections in our customer agreements for material pass-through. In some cases, these are immediate, and in other cases, there is a three- to six-month delay. We expect the second half This will positively impact CTS in particular. The first quarter 2021 free cash flow was negative $3 million after $11.5 million of capital expenditures. This was in line with our typical first quarter FCF seasonality being the lowest quarter of the year. This year, in particular, the first quarter FCF was impacted by the following three factors. First, the timing of the ISO container revenue recognition that shifted from Q1 to Q2 2021 which will directly and positively impact FCF in the second quarter of 2021. Second, strength in March 2021 orders for HLNG vehicle tanks and beverage equipment drove an increase in inventory in the first quarter of 2021. These products typically have a four- to eight-week lead time, and therefore the end-of-the-quarter inventory levels represent this book to build timing. And third, the necessity to have material available for the on-time delivery of our remainder of the year shipments and strong orders on longer lead time products, such as trailers and rail cars, will contribute to our anticipated strong second half 2021 FCF. We expect FCF to sequentially increase each quarter this year given the shipment forecast for the remainder of 2021. And we are increasing our expected full year 2021 free cash flow outlook to be between $200 and $220 million. Included in this outlook is $40 to $50 million of capital expenditures, for which the details are on the right hand of the chart. These are all organic investments to expedite growth, profitability, and flexibility in strategic areas of the business, and unchanged from our prior guidance. As many of you are aware, our business is also unique in how we approach ESG, as shown in part on slide 16. Not only are our ESG priorities embedded in our own culture, we also are positioned to help our customers achieve their sustainability targets in a number of different ways, whether that's through reducing the amount of plastic used in packaging to lowering greenhouse gas emissions by enabling the transition toward cleaner fuels. Two weeks ago, we released our updated sustainability report, which included metrics from 2020 as well as certain go-forward targets. I will just point out a few to encourage you to read the full report. With safety as our highest priority, our team members achieved our lowest total recordable incident rate in history in 2020. Our culture of diversity and inclusion is supported by a global D&I committee made up of more than 50 team members from around the world, advancing community involvement, education, and training, amongst many others. We have set a target to reduce our carbon intensity 30% by 2030 and have specific initiatives in place to help us meet this goal. Last year, we made progress towards achieving our target by reducing GHG intensity by almost 6% year over year. In 2020, CHART reduced Scope 1 and Scope 2 emissions by 8.5% and 8.9% respectively, while reducing total energy consumption by 15.9%. And so, with these jumping off points, we have introduced our carbon neutral target by 2050, as well as including an ESG component to our short-term incentive targets for 2021, directly tying executive compensation with ESG goals. And on the right-hand side of the slide, you will see a few neat examples of measurable outcomes that we helped our customers accomplish contributing toward a greener and cleaner environment. With that, now... I'll turn it over to Nora to open it up for questions.

Thank you. If you have a question at this time, please press the star and then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Just a reminder, you are only allowed to ask one question and one follow-up on your turn. Thank you. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ian McPherson with Siemens. Your line is open.

Good morning. Thanks. Jill, obviously the growth in specialty products speaks for itself. It's extraordinary. The other side that I wanted to probe into was just on RSL because you don't have the obvious growth comps in the first quarter with your orders or the sequential revenue growth that sort of tilt us toward your full year walk. So I wanted to ask for some more color on what you expect with orders here in the second quarter and whether it's more the repair service or the leasing business that you expect to propel the growth from the beginning of the year to the latter part of the year.

Yeah, it's a combination of things on RSL. And, you know, go back to Q1 of 2020, there was a one-time repair order for a customer in Saudi. But if you take that out and you look at where are we today, there's two big drivers. The first is around the leasing business and the order of the leases that... The number of leases and the size of them that we've booked over the last two quarters really are going to start hitting through the revenue line in Q2, Q3, and Q4. And a portion of that was we didn't have the fleet, so we had actually customers lined up for the leases, and we needed to build the fleet to fulfill those leases. So that's an incremental step up. You'll see that move up in Q2. And then you'll see that move up significantly in Q3 and Q4 because a lot of those start ticking through starting in July. The second piece is around the repair side of the business. So that's really a combination of two things. One is the additional capacity and strategic location in South Carolina, which will start repairs in June. And then the second is around the industrial gas customers have very specific products that they are currently taking out of their existing assets, getting them repaired to put them back in. And so we have a pretty good line of sight to what that looks like. I can't obviously give you details to customer specificity, but suffice it to say that the increases in terms of the forecast for those customers line out very well with the way that our guide looks.

That's perfect. Thanks, Jill. For a follow-up question, just for clarity's sake, I was going to see if we could get the bridge from your Q1 adjusted EPS to the new upwardly revised full-year range. Just what would be the adjusted Q1 earnings that's comparable apples to apples with the 365 to 415 for the full year?

Yeah, Ian, I'm not sure I specifically understand the question on

Well, we're adjusting for tax rate and basic share count, et cetera, with the full year range. So I just wanted to translate that to what the Q1 comparable EPS is.

So we didn't adjust our tax rate or our share count in our guide compared to our actual. So maybe that's a better one for us to take offline, and I'll have Greg shoot you an email with that. But, you know, I would say if I was back at the envelope thing, it would be 85 cents. But let's get you a specific answer on that.

No problem. Thanks, Jill.

Thanks.

Your next question comes from the line of Eric Stein with Craig Hallam. Your line is open.

Hi, Jill. Hi, Scott.

Hey, Eric.

Hi, Eric. Hey, so maybe just touching on you called out the letter of intent for the large-scale helium project. And that's not an end market we've necessarily heard a whole lot from or potentially a new end market. Just curious if you could talk about the pipeline there and, you know, maybe the geographic breakdown. And what you're talking about, is that kind of the typical size for one of these projects?

Yeah, it's a really interesting market. And, frankly, we used to do it 40 years ago, and then we really didn't pursue it as part of our strategy. And then through the cryotechnology deals where that – capability came very naturally with their liquefaction technologies. And helium is a really unique molecule in terms of the characteristics and the quality and price of it as well. So when you find a helium-rich location like this particular customer has, that's something to take advantage of. The project pipeline for us, we've sized the addressable market as two of these a year. And if we got two of these a year, we'd tick right past that near-term addressable market that we have for helium liquefaction. The pipeline is not nearly as robust as what you see on the hydrogen side, although helium process can be used in hydrogen processing as well. But it's certainly a very, very realistic potential for us to get two a year on these And the product sizes are 25 to 50, and it really depends on the particulars of the size. So this particular one that we signed the LOI this morning, we particularly called it out as a minimum of five. And that's because you could go up and you can get more efficiencies and so on, and that can change the scope in the game. And so that's also why we said it's a minimum of 40, because as the customer determines what size plant they actually want, that could scale up a little bit for us as well. And I guess I could answer the second part of your question, which was geographies. And most of the helium liquefaction we see is in unique regions of the world, but certainly helium liquefaction is used in other processes in the U.S., but I would say it's about 70% non-U.S.

Got it. That's helpful. Maybe just the last one for me. Just turning to the vehicle tanks, obviously very strong there in Europe. You called out the new regulations in Austria. We know about the toll exemption in Germany, which has been driving that. Are there any other regulations you see out there in different parts of Europe that could even accelerate the growth from where you've seen it to this point?

Actually, outside of Europe is where we see a growth accelerator for the second half of this year from an order book standpoint. In particular, there's one customer in Japan that I think is going to move ahead on this. There's the mine haul type of trucks, which are in Russia in the Middle East. And probably the most active for us has been some of the LNG bus activity in in terms of our quotation pipeline, and there's a lot of activity around that in South America. So some of that's regulation-driven, and others, it's just over the course of time, the customers are finally getting to the point where we're going to do something, and this is a real step for them to do it because it's available and it's cost-effective.

Okay, thank you very much.

Take care. Your next question comes from the line of Rob Brown. with Lake Street Capital. Your line is open.

Good morning, Jill. Good morning, Scott.

Hey, Rob. Hey, Rob. Hi.

The question is really on the carbon capture market. You talked about a pipeline expansion there. Could you give us some further color on the pipeline, and when do you sort of see that turning to orders? Is that really more of a 2022 order timeline?

Well, I hope my commercial carbon capture team is listening because I'm going to commit them to one of these projects being booked in 2021. which, by the way, is not in the little end of our guide. So I think that this is nearer term than going to start happening, although it's definitely we're still at the demonstration scale type of project size. But if you take like a Silvante where they already have a pipeline of orders that they're working on and projects that they're working on, including larger scale carbon capture work, It's just the construction and the pre-work and all of that takes a few years to get to where that plant's going to be up and running. The expanded pipeline has been dramatic. So I think it's gotten the concept and the idea of carbon and direct air capture has gotten a lot more airtime over the last three months in particular. And so that's drawing a variety of types of customers to look at this as part of the solution or a total solution. In many cases, what we're talking about with customers is how does this become part of an integrated solution? And back to the concepts of there's really three buckets of types of customers that are working on this. One bucket is I've got to solve the carbon emission problem of my existing assets that I own because that's probably the biggest problem and people are now having to take action to start getting closer to these climate targets that they've put out. The second bucket are pure play guys. that are primarily focused on DAC or direct air capture. And then the third bucket are folks that are looking at how do I use this in a closed loop cycle, whether it's going to be on a really small scale for food and beverage or whether it's on a larger scale like the cement and the concrete curing. What I like about this market in particular is it's similar to small-scale LNG projects where you get in early and you help design the solution and the answer. And there's two things that we're really good at in the design side, which are the combination of low CapEx and high efficiency, and in the case of carbon capture, low CapEx and high purity. So we're uniquely positioned to kind of replicate the commercial approach that we've taken on small-scale LNGs.

Okay, great. And then on the leasing business, just going back to that a little bit, what do you see that growing into over time, and how much of an asset base can that be for you?

Yeah, the leasing business is definitely, you know, from an asset-based perspective right now, our fleet's about $10 million worth of assets that we have, and we're continuing to build those assets out. As I commented on the call, it's ahead of So we get an order and then we build the fleet. We actually don't have a set of assets sitting around here that aren't leased, which is a unique position right now, right? So we're kind of in that scale-up position. I think the direct answer to your question is going to depend on how, if this growth continues the way that we expect, that number is going to grow, assuming it's still standard equipment. focused on mobiles and focused on ISOs, et cetera, so that we can redeploy it. But we've seen an exceptional customer response, even more surprising, that exceptional customer response we thought would be focused on the United States, but it's also been in Europe. And so we're going to continue to take advantage of this particular aspect of the business and I'd just reiterate to everybody that these are long-term leases. These are 5-, 7-, 10-year leases. They come with interest rates associated with them, and they are on standard equipment. We think that this business continues to grow very, very quickly. And this year, while we have forecasted the leasing piece of the business in that 15% to 20% growth range, From a sales perspective, the orders are going to be much more higher growth than the sales are for this year.

Okay, thank you. I'll turn it over.

Your next question comes from the line of James West with Evercore ISI. Your line is open.

Good morning, Jill.

Hey, James.

So with the hydrogen customer base expanding so rapidly as it has this year, I mean, those are just highly impressive numbers. are you seeing any trends in what the hydrogen customers are going to be doing with the hydrogen? Is there more on the mobility side, more on power storage or energy storage, or more as a power source for, you know, hard or decarbonized heavy industry? Anything noticeable?

Yeah, we're seeing power to mobility and then as a power source. And it's interesting because it's a pretty broad set of – types of applications that it's going to be used as a power source. The other thing that we're seeing is a pragmatism toward the different colors of hydrogen. So it's now about, hey, I need this fast. I need to solve this, and so let's figure out what that looks like versus let's design to the utmost green answer, and that's going to take us a lot longer. So one of the behaviors that has changed over the last, I would say, three to four months has been a matter a heck of a lot more. So the demand is out there by the end users, and the people providing the molecule need to produce it, need to have the supply, and transport it there quickly. And you see that also in our hydrogen transport pipeline, not only in backlog, but also in quotations.

Okay, that's actually very interesting, that trend. So are they, is it, okay, let's just get this done, we're not worried about if it's blue or gray, but do they still have an intention to go green over time?

Yes, absolutely. And it's various different types of projects. And some of them are doing green now, but others are saying, let me get liquefaction started. And in the case of our technology, right, we can handle any color. And so that's one of the elements that a lot of these guys like. We can, over the course of time, have different compositions.

Okay, understood. Thanks.

Thank you. Your next question comes from the line up there below with CT. Your line is open.

Hey, Jill. Hi, Mark. I had kind of a higher level question just on the liquefaction equipment that you guys provide for hydrogen and helium, I guess for LNG also. I guess my question is, what's kind of the competitive landscape for those products? I'm trying to get a sense of like, obviously we all know the opportunity on the hydrogen and helium side. Do you guys have... I guess what's the competitive landscape on that front? And do you have a market share target? Is that the right way to look at your outlook? Is there stuff about your equipment that's proprietary that your competitors don't have? Just kind of trying to get a sense of the competitive landscape.

Yeah, totally. Great question and totally understand what you're getting at here. And I can say that where we sit today, it's a very unique and differentiated process. as well as set of equipment, and it's very, very hard to replicate or duplicate. When we acquired Cryo Technologies, many of the times on liquefaction projects, in particular hydrogen, we would see them as our competitor in the bidding process. In terms of there are other companies out there that do liquefaction, and some of them even are our customers as well. But it's hard to do. It takes a long time to develop. And you've got to make sure it works. And that's something that a lot of times our customers, if they do decide to go with a competitor, one of the very few, end up coming back to us because the liquefaction process, regardless of what we're talking about, whether LNG or hydrogen, doesn't actually work to the specification, the efficiency, and the output that's there. The other thing I'd point out is We are really unique in the equipment that we have that goes with the process. I've commented before, you can choose the full menu, the full solution, or you can choose the a la carte menu and the pieces and the parts. But the equipment itself and the manufacturing equipment is also extremely differentiated and not easy to do. If you just take the Brazelunum heat exchanger as one anecdote of many in our portfolio, that there's four competitors in the world that can do a brazil limit heat exchanger, and we are the only one that manufactures them in North America. And I could go on through the list, right, but you kind of get a sense of that. And where, you know, what we're continuing to do is stay differentiated by our own R&D, as well as the investments that we're making, because individual components can be not, can be replicated, and you can have competition come in that way, but it's going to be really hard for somebody to come in and have everything from vacuum-insulated pipe to liquid hydrogen storage tank that's certified to hydrogen transport to a fueling station to a pump to an onboard tank all the way through to liquefaction process. And I think market share is correct. I think that's the way to think about it. So we've done our best to size the market realistically in kind of the first half of this decade and And then from there, you know, I would say if you wanted to say it at a global level, you know, we would target 60, 70% of that should be our share. And now there's pieces and parts that are going to move, and there's always the danger of putting out that level of specificity. But the reality is with little competition, especially on that full service solution, we should be winning that high.

Okay, that's perfect. Thank you. My other question was circling back to China. Can you remind me, you guys used to have manufacturing footprint there, right? And I think that you had de-emphasized China as a region because, you know, profits just weren't there. I guess what's changed? You went into it a little bit on the slide, but, like, what's changed in terms of the profitability and how are you servicing that market today?

Oh, wow. That could take a long time to answer on the what's changed. 30 seconds or less. Okay. So we consolidated our manufacturing footprint. We now operate primarily out of one location in China, which is a large facility. So that gave us a lot of efficiencies of being in one site and the appropriate layout. The second thing is we did a lot of cost actions and review. And frankly, I think it was just a little bit ignored, you know, and now that there's attention to it, that was a good thing. But I think most impactful is the management team that we have in place now. We made a change early last year, and the lady that is running the business has a really good handle on the pieces and parts. And after 19 years with Chart in various different commercial and operational roles, that makes a heck of a difference. Leadership makes a big difference. And I would say you haven't seen the end of the records coming out of China. It's going to be a key part of our portfolio for standard product.

Perfect. All right. Thanks, guys. I'll turn it back.

Thanks, Katie. Next question comes from the line of Conor Linov with Morgan Stanley. Your line is open.

Thanks. Good morning.

Hey, Conor.

I wanted to stay on that market share topic because it's been a consistent point of questions from investors. So the numbers optically are very high. I'm wondering if you could maybe just sort of define what your – viewing as the addressable market that you're taking that share of. Basically, the question is, put differently, how big is your content within an overall project? Because I think there's maybe some discrepancy in how we're thinking about total addressable market versus how you guys are sort of defining it here.

So if you're talking about hydrogen specifically, the answer is a really wide answer to that. If you're talking about a liquefaction project, our content is going to be a significant portion of the project itself, meaning 70% of the project. If you're talking about a storage tank that goes into a larger facility that's producing the molecule, it's going to be a very small percent of the total. And then if you get into a fueling station, you're talking anywhere from 1.2 to 2.5 million, but as a percent of the total, that's 25% of the cost of the fueling station. So it's a pretty, you'd have to break it down into the eight bullets that are comprising our bottoms-up addressable market, which we're happy to do. We can do that with you on our call this afternoon.

Yeah, sure. I mean, basically the point I'm driving at is you're not defining your share as 60% to 70% of that total project. It's 60% to 70% of that percentage of the product that you would be bidding for, correct?

You got it, exactly.

Okay, understood. And then just another common question that we get is, you know, with this type of growth you guys are looking at in some of these specialty markets, you know, I guess how would you frame for investors the capacity that you have to grow? Obviously, you know, a lot of this is sort of manufactured. I guess if you're going more on some of the process solutions, it's a little bit less capacity intensive. But how would you frame the need to expand your capacity to meet that growing need?

So we're well underway on that already, so we don't need to take on any additional capacity from a rooftop perspective. And like you said, the process side is really engineering, but the capacity from a manufacturing perspective, we had the addition of the Teddy Trailer Facility, which is now Teddy Trailers and Tanks, down in Theodore, Alabama in the fall through the Worthington trailer acquisition. And then that gave us 300,000 square feet by water, which makes a huge difference when you're talking about these larger pieces of equipment. And that's where we'll focus a lot of our overflow tank activity from Minnesota to Theodore. And that's where we'll primarily do the U.S. manufacturing for hydrogen transports. Then what we did, knowing that we had some of these other specialty areas that are starting to kick on also, was our Tulsa manufacturing facility, which previously was air-cooled heat exchangers. We consolidated the air-cooled heat exchanger manufacturing down to Beasley, Texas. And then we took that 500,000 square foot facility that we have in Tulsa, and we're in the process of setting up a variety of different lines, which internally we call flex manufacturing. And that'll give us quite a bit of flexibility around lead times and capacity. And we're well underway already. Our first line's ticking down there, and I'm not going to go into detail of what other product lines, because that's a competitive advantage that we'll have there. But we don't need to add – at this point, we don't need to add rooftop beyond the investments that we made in 2020 and the completion of the repair facility in South Carolina.

Got it. Appreciate all the context there. Thanks. Thanks, Mark.

Your next question comes from the lineup of Bill Molchanov with Raymond James. Your line is open.

Thanks for taking the question. I hate to start with kind of a dark topic, but you guys have manufacturing and corporate assets in India, which just hit 300,000 daily infections. How are you managing around that issue in terms of the workforce and the lockdown risk?

Yeah, and as you know very well, much more than we do around kind of the wave of COVID, seeing this next round of COVID infections, it's kind of rolling now. And in India in particular, we have always been deemed essential manufacturing. We have taken some steps over the course of the last 12 months to ensure that we have a flexible workforce. So we do use some contract labor as necessary. We've also had a group that works very close to the facility. In the case where we have individuals that need to quarantine, we have backups for each of those that are key positions. So we have not seen a direct negative impact in India to date. But as you can imagine, each facility, we have various different flexible answers to how we're handling that. Probably the location that we in the first quarter saw infection challenges from the legal rules was in the Czech Republic. So there were an increased amount of requirements for COVID testing for your employees. as well as exposure and amount of time at home and staying home for X amount of time if you had been exposed. And I can say that the leadership team in DNS East or historically DNS East, they've done an exceptional job of managing that, ensuring that we have the available COVID testing on a weekly basis and working from home where necessary.

Understood. Follow-up, kind of a housekeeping item. In the guidance, you talk about share count of 35.5 million, and I assume that's basic shares. Your fully diluted number, given where the stock is at, I think includes the convert. So that's, what, 5 million shares extra? Is that right?

Yeah, about four and change. Yeah, you're in the range there. And then once you take the hedge off of that, you take another two off of that for the hedge against the convert, next to about three additional.

Got it. So will the fully diluted share count from Q1 basically continue to roll forward?

Yeah, basically.

Yeah. Okay. Very clear. Thank you.

Thanks, Adele. Your next question comes from the line of Martin Malloy with Johnson Weiss. Your line is open.

Good morning.

Hi, Maureen.

Hi. I wanted to follow up on the earlier question about manufacturing capacity and with the order trends that you have and what you've outlined for your order outlook, could you talk about utilization and absorption of fixed costs and how that might impact margins? And I'm just thinking back to previous margin outlook where you talked about going from 11% in 2020 up to the high teens in 2023. Is there upside potential to that as the utilization increases?

Darn it, Marty. You had to go there. Yes. Yes. The answer is yes. And that's something that we think through. and we know very well on a facility-by-facility basis, and we try to also share some of that with our customers in the way that we price so that we can win more and more orders, but it definitely is upside to what we've said previously if this continues to grow at the levels we're seeing right now.

Okay. And then just on the cryogenic products, hydrogen pump. I'm sorry if I missed this in the prepared remarks, but any update in terms of the testing there and outlook for commercial introduction this year?

We have kind of three things that we're developing organically on the hydrogen side. The first is the onboard vehicle tank, and that one we're going to demonstrate that, show that in August at the ACT. So that's moving on all cylinders ahead. That's the second pun of the day. The second is the liquid hydrogen pump. That one's really hard to do. The team's done an exceptional job in a very short period of time, and it's in test phase right now. So the goal would be to have that out in commercial production before the end of the year. And then the third is the hydrogen test facility itself up in Minnesota and That's well underway. The equipment is there. The construction is nearly complete, and so we welcome our customers to come anytime to that test facility.

Great. Thank you. I'll turn it back.

Thanks, Mari. Your next question comes from the line of Mark Bianchi with Colvin. Your line is open.

Thank you. I wanted to go back to, surprise, surprise, hydrogen and talk about the order profile. Very, very strong orders in the first quarter, very strong improvement from fourth quarter. We know there's a large plug award in there, but I'm curious how you see that developing over the course of the year. Should we be building off of this first quarter level? Could you achieve the first quarter type level at some point later in the year? Just how are you thinking about the progression?

Yeah, so we're thinking about it exactly how you said it perfectly, which is there were a couple of the liquefaction orders in that first quarter number, but there's also 17 other liquefaction projects that we're currently bidding on. So our team's kind of thinking of it in the three to five range for the remainder of the year of additional hydrogen liquefaction orders, and they tend to be 25 to 40 million each, generally speaking. So how those roll out is harder to tell. I would place a bet that we get, you know, those in Q2 and then you see a strong Q3 on the order book side of liquefaction. The other area that's very strong in bidding and I think is going to come out of the gates from an order perspective in Q2 is the transport side. And then we are just inundated with requests for hydrogen transport slots, and given the lead times on those, that people are locking in those slots as well. So I think what you can see is a few of those liquefactions come in, and then, you know, the regular run rate of that growing off of itself. So you could easily see a multiple of 70 for the full year, right, you know. I can't tell you our exact number because that would be getting into too low a level of forecast to share, but it doesn't drop back to 5 or 10 or 20 each quarter. It's still continuing to grow.

That's very helpful context. Separately, just maybe dialing into second quarter a little bit more, I heard you on the RSL going to have a really exceptional second quarter. Could you talk to the other segments just from a kind of revenue trajectory and margin trajectory, just maybe if you want to rank them or however you want to just share with us some more detail on the second quarter progression?

For sure. So RSLE kind of got the sense that the top really benefit from some of the timing shift from Q1 to Q2, and the gross margin in that business kind of stays in the mid-30s. On the cryotank solution side, we see a step up from Q1 to Q2 in sales, not a significant one. So, you know, it's a little bit of a step up there. And then you see a real significant step up Q2 to Q3. And on that side of things, we've got an increase in gross margin as a percent of sales from Q1 to Q2 in that business. And then on Let's see, heat transfer side of things, we have it forecasted as flat. It might be a little bit down, just given the calc issue passed the way we had 15-ish in the first quarter, and we got about five in the second quarter, assuming that goes according to the updated schedule. So that one, flat to a little bit down, and you'll see a step down on gross margin in that business based on just the composition of that big LNG. Okay. And then the specialty side steps up by the most meaningful amount from Q1 to Q2 out of any of the four segments. And we see the gross margin in the mid-30s as well on specialty. That could be a little bit better to Marty's question, where we don't always bake in all of the absorption benefits, but at that level of sales, we should be getting some pickup from that perspective in specialty. So overall, I think we don't guide the question. but I think the consensus that's out there, we didn't have heartburn with it. Now it probably gets updated a little bit from our increasing guides, and we wouldn't have heartburn with that either.

Great. Thanks so much, Jill.

Thanks, Mark. Your next question comes from the line of John Walsh with Credit Suisse. Your line is open.

Hi, it's Tamjid for John. Good morning.

Hey, good morning.

So the one question that we had is around sort of your cost controls. Obviously, you sort of called that out in your prepared remarks. But can you give us more color about how you see sort of corporate costs coming back for the balance of the year?

We have it flat for the rest of the year. There's a couple of offsets in that. So in the first quarter, you get some stock options. changes in cost there. Then you have, as the year rolls out, elements around the short-term incentive accruals and the bonus plan. We have also built in some headcount additions to both engineering and sales, but we get some offsets through as inventory rolls out, some of those movements to reserves and so on. So generally speaking, we've modeled the rest of the year from an SG&A perspective to pretty similar to the first quarter.

Okay, thank you. That's very helpful. And then the other question that I had was just a point of clarification. So for your sales guidance revision, it seems like it's mostly driven by organic sort of specific project driven, right? It didn't have to do anything with M&A specifically?

Correct. That's right. Specific project driven. Now, some of those projects came, the quoting of those projects were being quoted by, for example, both Cryo Technologies and Chart. And so that in a tangential sort of way relates to M&A, but didn't come with the backlog from the acquisition itself. So they were specific project wins by Chart.

Okay, and just to follow up, these were like new projects. These are not like an upsizing of an existing project?

All new projects. All of the first quarter bookings that were specific projects were new projects, and the increase to the guide was from new projects.

Thank you very much. I'll pass it over.

Thank you. Your next question comes from the line of Greg Lewis with BTIG. Your line is open.

Realizing that the call's running a little long here, I just had a question around specialty or oxygen. Clearly, last year, that was a nice benefit to the business. Just as we think about specialty, it almost seems like if that's coming off, that it actually looks even better than expected. Is there any kind of way to unpack what that piece of the business did last year around demand or around COVID, and I'm assuming, you know, I get surges, et cetera, but I'm assuming that number is going to come way down this year. Is that kind of the right way to think about it?

You're spot on on how you're thinking about it, and maybe just a little data point that might or might not help. From Q4 to Q1, medical oxygen-related orders were down 4.3 million sequentially. Okay.

And any idea what it was for the full year of Tawami?

In terms of, so what we've done is we've modeled oxygen in our low end of the guide as keeping Q1 flat for the rest of the year. And so you could kind of take that, multiply by four, and you get close for the delta year over year.

Perfect. Thank you very much, Jill.

Thank you, Alex. Your next question comes from the line of Chase Mulvihill with Bank of America. Your line is open.

Probably nobody's left on the call at this point, but I'll go ahead and ask a couple of questions. Maybe Greg and I won't be last next time. But I guess first, if we could talk about heat transfer systems. And if I'm reading the chart right, I think you said $380 million of revenues for heat transfer in 2021 at the low end. If we kind of think about what that means for the quarterly cadence for the rest of the year, that would mean, you know, more than $100 million of quarterly revenues. I mean, I think you did $69 million in one queue, so pretty strong increase. Can you just kind of bridge the gap between the $69 million and, you know, greater than $100 million quarterly revenue for HTS for the rest of the year?

Yeah, it's heavily weighted to Q3 and Q4, and that's driven by the specific projects that we have in here. So the Fast LNG project, revenue won't start on that project until Q3. And then couple that with the small-scale project that we announced LOI for. That will be later in the year that revenues start. And then finally, the Pet Chem project will begin a little bit in late Q2 revenue returning, and then the rest of that being through Q3 and Q4. So you have a low first half and then a significant step up to Q3 and Q4, with Q3 and Q4 being very similar to each other.

Okay. All right. Makes sense. And then can we transition over to specialty products and, you know, talk about the order outlook for the remainder of the year? Obviously, you've got a lot of tailwinds for this segment. But if we strip out the new Fortress order in first quarter, you know, the run rate looks like it's about 100 million, give or take some. Can we think about that as a minimum level of quarterly orders for this segment for the remainder of the year? And then, you know, if we think about that order rate and what it means for the backlog, maybe just speak a little bit to the growth that you think that specialty products could have from a top-line perspective in 2022.

Yeah, I think I'd use the threshold level per quarter for specialty X, the liquefaction of 90. But, you know, you're talking... You're talking rounding at that point. And, yeah, I think that exponential level of growth potential and specialty is highly significant. You know, we have 54% built in the low end of our guide from a revenue perspective, and that really doesn't assume any additional incremental liquefaction orders from a hydrogen perspective or multiples on the trailer side. So the opportunity set for specialty, and this is multi-year one, too, so this isn't just going to be kind of a flash in 21 and then goes away, is certainly well above what I was saying last year of double-digit. I guess my sandbag kind of came out on that one, but now we're talking 30-plus percent growth in this business.

Okay, perfect. I know we've run long here. Appreciate the time. Thanks, Jill.

Thank you. Your next question comes from the line of Ben Nolan with Stifel. Your line is open.

Thanks there, Chase. You're not last afternoon, but, um, so I, I wanted to follow up on, on the, the TAM really the whole specialty TAM sort of getting back to what Chase was talking about. As you, as you look to really that the 6 billion ish, uh, of TAM and without maybe getting granular is talking to hydrogen or whatever. But when you look at that, and that's the addressable market, what do you think through 2023, I guess, is how that is thought of? What do you think is realistic? And you were talking about the 30-plus percent growth for next year, or just in general. Of that $6 billion, if things go your way, I mean, how much of that translates to charge, I think, really?

Yeah, I mean, that's the bajillion-dollar question that's out there, and it's obviously, but I think given our differentiated position in particular on liquefaction and then in these little... What I think is probably most underappreciated about that just about $6 billion is some of these littler pockets where we start to win carbon indirect air capture, water treatment ramps up, the gas by rail. There's just a lot of other pieces and parts where the percent of our share is going to be bigger than something else, as an example. Realistically, I think we should be 30% to 35% of that in the next few years. I can handily break it down, but that's not an unrealistic figure we're seeing in the market right now.

That's awesome. I knew I could count on you to give me a straight answer. Appreciate that, Joe. The other thing I want to ask a little bit is as it relates to maybe some of the small-scale LNG, we saw that like the Stabless guys came out and just crushed it this quarter. And I think there's a whole lot going on about, especially in the wake of the freeze in Texas, about everybody trying to sort out backup energy needs. Can you maybe talk to – how that's playing out in terms of the potential and how meaningful is that to you guys in terms of what it could be versus maybe what it was at the beginning of the year in a dollars perspective?

Yeah, it's definitely there. For example, there's one backup after the whole Texas fiasco. There's one potential backup project, and it hasn't been determined that it's actually going to go, but if it does, it would be our equipment on it. And you're talking about just that project alone could be $50 million for chart content, and that's on the LNG side of things. And so it's real. I think the question is, how long does it last, right? Like, do people get over it? I mean, it's like people forget the hurricane a year later, forget this, or does the legislature stick with it, et cetera. But from the beginning of the year until now, our small-scale pipeline has easily grown 150 million from a quoting pipeline potential. And I think the more you see, like, the fast LNGs go in this more creative side of LNGs, I think that number is going to exponentially grow this year. I mean, it's amazing how many customer conversations we're having on the small-scale side for LNG.

All right. That's fantastic. Appreciate y'all.

Thanks, Ben.

Your next question comes from the line of Craig Shear with Tully Brothers. Your line is open.

Good morning. Thanks for taking the questions.

Hi, Craig.

We're hearing more and more about renewable natural gas and CNG transport opportunities, even in the U.S. Does this represent an opportunity for Chart, or is Chart's IP advantage mostly geared towards LNG truck tanks, primarily in Europe?

Well, in an ancillary way, we benefit from it, and I think the way that you see that is even in the comments that we made around booking to kind of green diesel projects, and we're more... suited toward heavy duty and above when you're talking about the transport side, but the pieces and parts that go into the stations that are going to be necessary and some of the electricity that's going to be needed and is going to need backup that we talked about with the last guy. So there's all kinds of elements of our componentry that will benefit from that, even if not direct CNG or natural gas renewable impact from a passenger vehicle perspective.

Great. And on a bigger picture question, Jill, chart seems to be becoming a victim of its own success. Frankly, it's just not easy to model 105 new customer orders, 72 outside of North America, and 21 first of a kind. And obviously, this is one of the reasons these calls go extra long. And I surmise this will only be more difficult over the next one to two years as your small-scale truck tanks, fueling stations, and distributed LNG orders combine with fulfillment of your specialty products TAM to spur an ever-increasing array of commercial wins. It's dizzying. This issue is only compounded by your expanding mark-to-market equity investment portfolio. I realize this question is probably years early, but how do you think about long-term share value creation by ultimately breaking off disparate pieces of the company? And when the time is right, do you expect there would eventually be robust mammoth industrial company demand for select chart crown jewels in addition to the potential of shareholder spinoffs?

Well, I think that was potentially the most thoughtful entire day so far. So, yes, I think everything you just said is spot on. I'd have to have my board here with me to give you a very specific answer of how we might think about that getting into any level of detail, but I certainly see, and I do think to your comment, it's a little bit early, but I don't think it's, I think it's in the decade, right, where you start seeing the potential for monetization of aspects of the business, but that's not something that we're thinking about right now. Our focus is to continue to grow, and like you said, it's It's taken on a lot of pieces of the business, and that's a beautiful place to be when you have multiple levers to pull and the high growth and higher margin aspects of the business becoming an increasingly higher portion of your mix of revenue. So our focus is to continue to grow, return to our shareholders through our earnings, and as... these markets evolve, I think we're strategically very well positioned with the portfolio we have today and will be even more so because we continue to add to that portfolio as the decade rolls out.

Thank you.

Okay, there are no further questions at this time. I would now like to turn the call back over to the presenters for closing remarks.

Thanks to everybody who joined, and specifically thank you to all of our chart team members, both old and new to our family, for your hard work to continue to accelerate the business. So let's go get Q2. Thanks, guys. Have a great day.

This concludes today's conference. Thank you for participation, and have a wonderful day. You may all disconnect.