Chart Industries, Inc.

Good morning and welcome to the Chart Industries, Inc. 2021 fourth quarter and full year results 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 release and supplemental presentation was issued earlier this morning and can be accessed 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, March 3, 2022. The replay information is contained in the company's press release. Before we begin, the company would like to remind you that 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 earning release and latest filings with the 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 Levanco, Chart Industries CEO.

Thank you, May. Good morning, everyone, and thanks for joining Joe Brinkman and me today for our fourth quarter and full year 2021 earnings call. As usual, I will refer to the supplemental presentation, which can be found on our website. Starting on slide three, I'm going to give you our punchline takeaways for those who want the summary version in one or two minutes here. We're extraordinarily pleased to share that our fourth quarter of 2021 set new quarterly records and orders backlog and sales, resulting in full year records for each of those as well. The fourth quarter was in line and for some metrics above our expectations that we had heading into the quarter, and we were able to accelerate some projects and burn some lower margin backlog off as well. Additionally, fourth quarter reported non-diluted earnings per share of 34 cents or adjusted non-diluted EPS of 73 cents was in line with our expectations and contributed to our record adjusted non-diluted full year EPS of $2.84. For 2022, as well as the coming years, I would describe our perspective as very excited about our positioning in the markets we play, our complete portfolio of molecule agnostic technology and equipment, And for the first time seeing all elements of LNG progressing quickly. I'm more confident in our baseline reiterated 2022 guidance given the commercial activity and our pricing and cost actions. And I'm also more confident than I have ever been previously that there will be upside to it given the pending big LNG potential work. Given the escalating fighting in Ukraine in the past day and what we know right now, our comments today remain intact. I'd also remind everyone that we're not a pure-play company in any end market or molecule. We are molecule agnostic and serve a variety of applications ranging from LNG to hydrogen to traditional oil and gas, which is one of the greatest aspects of our business. So if one or more of these end markets or applications is positively or negatively impacted from macro circumstances, others are likely to be oppositely impacted. Now let's get into detail on each of these and our outlook. On slide four, you can see that not only did we set records for the total company in orders, sales, and backlog, both in the fourth quarter and the full year, but that it was driven by very broad-based demand across our product categories and geographies. Additionally, the fourth quarter of 2021 marked the third time in 2021 that we set a new order record. Orders for the year were $1.68 billion, over 26% higher than the former full-year record orders. This resulted in record backlog of $1.19 billion, of which 80% approximately is forecasted to ship in 2022. Every application within our specialty product segment set a record for orders and sales in 2021, and each application had full year order growth above 15% compared to 2020. Total specialty products full year orders of $649 million were a 132% increase over 2020. Food and beverage full year orders were 49% higher than the full year 2020 and fourth quarter 2021 food and beverage sales also hit record highs. We anticipate continuing record order levels in food and beverage in 2022 with ongoing restaurant footprint growth and specific projects such as our national account Chick-fil-A doing refurbishment work to upgrade over 100 stores with our tanks beginning this month. Every product category within our cryo tank solution segment had record sales and record backlog for the year. For the full year 2021, we sold a total of 594 trailers, a nearly 65% increase over 2020. Additionally, orders for fueling stations set new records both in the fourth quarter as well as the full year, with 48 stations sold alone in the fourth quarter. Both broad-based demand as well as these trailer and station trends continued into 2022 so far, with an additional 13 stations booked in the first six weeks of this year, as well as an additional 109 trailer orders booked in that same 45-day period. These orders contributed to January 2022 being our highest order January in our history. Also, we have seen very strong demand for rail cars recently from multiple customers, including one order in February 2022 for $6 million. Rail is another differentiated specialty product category for us. The fourth quarter and full year 2021 were also our highest sales quarter and year in our history, with $378.9 million in sales for the quarter and $1.318 billion in sales for the year. Fourth quarter sales increased 21% when compared to the fourth quarter of 2020 and an increase of 32% when you exclude big LNG revenue, which was $25 million in the fourth quarter of 2020. Generally, we were able to meet customer delivery expectations in the fourth quarter of 21, despite the supply chain, logistics, inflation, and labor challenges I will speak to in a moment. Much of the ability to keep up with shipments was the result of our strategic inventory build throughout the year. We purchased just under $100 million of additional material in 2021 than in a typical year. With our remaining safety stock, we feel confident in our ability to execute against our backlog. The sales progression throughout 2021 is shown on slide five, as well as adjusted operating income as percent of sales. You can see that both the third and fourth quarter of 2021 had adjusted op-inc margin of approximately 8.7%. Pointing to the far right-hand side of the slide, you can also see that there was approximately $16.8 million that was a drag to operating income in Q4. These were costs which were not adjustments to either our adjusted operating margin or our adjusted EPS figures. Without these items, adjusted operating margin would have been just over 13%. These items included logistics, transport, freight costs, inefficiencies from labor disruptions, and specific increases in material costs and expedite fees. With respect to labor, our COVID-19 absences were still meaningful in the fourth quarter, yet better than the third. And these absences did not meaningfully impact our sales in the fourth quarter of 2021. Eight of our global manufacturing sites had 100% on-time delivery in the fourth quarter, which was worth noting given all of the well-advertised challenges across all industries. I'd point out that we have had continued absence early in the first quarter due to COVID globally, and we have contemplated that into our guidance. We have taken specific actions to date to address each of these, some of which you heard on our third quarter earnings call, and the next pages in the supplemental deck address additional steps taken to which will positively offset these challenges incrementally throughout 2022. This can't be accomplished with pricing alone, and so using our groupings of three that we like to do, we've taken pricing, cost reduction, and automation actions. While we did not adjust for the cost that I just described, there were certain one-time or specific costs and gains that we do add back or reduce from our adjusted EPS, and you can see those on slide six. We added back restructuring and severance costs, the write-off of bank fees resulting from our October 2021 refinance of our revolving credit facility, deal and acquisition-related costs, and organic capacity and startup costs. We reduced EPS, adjusted EPS in particular, by the gain booked in Q4 related to our original minority investment in Earthly Labs upon the completion of the full acquisition of that business in December of 2021, as well as the mark-to-market gains within the quarter on our equity investments. As previously indicated on the third quarter 2021 earnings call, we anticipate add-back amounts to reduce as we head into 2022, given timing of acquisition integrations, in-flight capacity startup expenses, as well as not anticipating any further banking or financing charges or changes. Details of the reported non-diluted EPS of $1.66 for the full year and the record adjusted non-diluted EPS of $2.84 is shown on slide seven. A detailed reconciliation to these is included in the press release financials. So let's talk about why we have confidence in our 2022 outlook and also our confidence in pricing covering costs on new orders since the end of the third quarter of 21. Slide 8 shows our three main material categories on the left side of the page, all increasingly above last year, so same point in time this year versus same point in time last year, of roughly 50% or more. between those two periods. Therefore, pricing actions were and continue to be absolutely necessary in combination with these cost reduction activities that we're about to speak to. We price in three categories as well, shown on the right-hand side of slide eight. Standard pricing for book and ship products, which we adjusted prices as we have seen costs change. Project-based pricing, for which we have meaningfully shortened bid validity timing to capture the most current material costs. And finally, the long-term agreement category, where, when possible, we have worked with our customers to adjust pricing mechanisms to more accurately reflect the current state versus the typical lagging mechanism, which works fine in environments that are not hyperinflationary. As I reflect on the fourth quarter and the first month of 2022, material costs and availability behaved materially, pun intended, as we had expected heading into each quarter, and we took additional actions that I'll go into on slide nine. Before turning the page, nearly all of what you hear are challenges on this topic. Just let me take one moment and point out a piece of positive news, which is that we are seeing better availability in carbon and stainless steel recently, and carbon steel pricing has been trending down over the last 60 days. Additionally, availability of containers and trucks has been improving, and container cost was down 13% from the end of Q3 to the end of Q4 2021. If there's one slide in this presentation that should provide you with a level of detail that we're comfortable with coming out of the cost price drag as we burn off lagging backlog, it is slide nine. In addition to the pricing actions you heard about in October, we implemented two additional price increases in the fourth quarter of 2021 and increased our temporary surcharges, which are expected to cover our additional costs on new orders. To open 2022, we took further price increases on specific product categories and LTA mechanisms adjusted up for certain agreements. Given the increases in transport and freight costs that are well documented, we have eliminated free freight on volume discounts, and in order to keep product moving through our shops, we have implemented storage fees for customers delaying picking up product. As I said earlier, staying ahead of the inflationary environment and other cost challenges cannot be accomplished with pricing alone. The second leg of this is organic cost-out actions, and you can see specifics on slide 10. We have approximately $29 million of cost-out actions underway, with $14.5 million of it related to sourcing, $10 million operational, whether bringing outside work in, automating processes, robotic welding, just to name a few, and about $2.5 million by leveraging our Hyderabad India Center of Excellence for certain functions and open roles. Some of the automation, productivity, and optimization projects in flight require organic capital expenditure investment, and you can see specifics of that on slide 11. In addition to our investments in augmented reality for welding training, robotics on certain product lines in our facilities globally, and 3D printing for jigs and fixtures, we are also investing in expanding capacity for high-demand products. The capacity expansion couples with our flex manufacturing approach, which has been underway for about two years now. with the intent to have each of our products being capable of being made in more than one location, as well as focusing certain facilities with specific skill sets on higher value-add products. There are numerous of these types of projects underway, so let me just speak to a few of them briefly. We're well underway on adding a 98-inch brazing furnace and associated brazed aluminum heat exchanger line to our Tulsa, Oklahoma manufacturing location. This will allow brazed cores to be manufactured both in Wisconsin and Oklahoma, and provide flexibility for specialty products as well as big LNG. This line is expected to be complete around the end of the year. This is located at the same site as our expanded TulsaFlex manufacturing, where we're doing higher volume, larger components such as skids for a variety of our product lines. And not to just be a volume facility, we have our 3D printing capabilities at this site as well. Our Germany trailer facility is very busy, as you heard with the numbers that I shared earlier, and we're expanding it onto the adjacent land that we own. This expansion not only allows for expanded industrial trailer and gaseous hydrogen trailer manufacturing that we currently do at that site, but also will give us production capacity for liquid hydrogen trailers in the EU. Once the expansion is complete, this location will offer service and refurbishment of stationary equipment. Our Sri City, India expansion is underway, also at our own land at our existing site. Our India business posted record orders and sales in 2021, and demand is expected to continue to increase. And you've heard us talk about our love of the Teddy trailer and tank location in Theodore, Alabama, which came to us through our acquisition of the business in October of 2020. The location set numerous records for production, order intake, sales, and margin in 2021, and we are leveraging a talented workforce and local pool of talent as well as the 300,000 square foot facility for additional product manufacturing. freeing up space in other locations. We accelerated certain capital investments into the fourth quarter of 21, as shown on slide 12, which resulted in full year 2021 capital spend of $52.7 million. Fourth quarter 2021 capital spend of $16 million included certain activity in our capacity expansions just described, as well as robotics. Consistent with our expectations, we generated cash from operations of $20 million in the fourth quarter, When adjusted for one-time impacts, adjusted free cash flow was 34 million net of capital expenditures. Throughout 2021, we strategically decided to increase our on-hand inventory balance as a result of the significant increases in material costs and the already frequently discussed availability challenges. This decision resulted in lower than typical free cash flow for the year. We are pleased with the decision as we were and are able to meet our broad-based demand. And while we continue to carry higher than typical inventory levels into this year, 2022, to meet this demand in an ongoing difficult supply chain environment, we still anticipate that free cash flow for 2022 will reflect the tempering of these challenges as the year progresses, as well as the timing of sales out of our backlog. Our outlook for 2022 free cash flow is approximately $175 million to $225 million, excluding any free cash flow impacts from big LNG work that is anticipated to be booked in the year but is not yet in backlog. So now let's turn our attention to innovation that is underway, segment specifics in our 2022 outlook. Slide 13 shows our nexus of clean menu, full solutions including process technology and equipment for clean power, water, food, and industrials. The neat part of this menu is that customers can choose the total solution or treat it as an a la carte menu, picking what piece or part they need. As I said earlier, our equipment is molecule and technology agnostic, so it can work for a variety of needs. Furthering this full solution set and expanding our carbon capture and food, beverage, and cannabis applications and specialty products was the completion of our acquisition of Earthly Labs in December of 2021, the world leader in installations of small-scale carbon capture. Through Earthly Labs, we booked our first winery install at Trefethen Winery, our first distillery at our first New Zealand installation, and our first UK customer. Not to be outdone, though, was our chart water platform, which consists of ad-edge and blue and green process technologies with chart equipment, which posted record orders, backlog, and sales in both the fourth quarter as well as the full year. We're beginning to see multiple water treatment opportunities in non-North American locations, such as India, including a $6 million win yesterday. Specialty products tends to be the segment also with the most first-of-a-kind, and you can see that on slide 14. There were 22 of these folks in the fourth quarter 2021, contributing 79 in the full year. On the right-hand side of slide 14, you can see our 402 new customers for the full year 2021, with 37 percent in EMEA in India, 29 percent in North America, 24 percent in China, and 10 percent in the rest of the world. Another way of looking at how broad-based the demand that we're seeing really is. One of the things we pride ourselves on as well is our leading innovation mindset and being the first to translate that innovation into actual products and orders. We're very privileged to have, as a result of our acquisitions in the nexus of clean, all of the founders and CEOs of those businesses decide to stay in the chart family. In order to harness their amazing intellect, entrepreneurial spirit, and start to leverage the interlinkages among clean power, water, food, and industrials, we've created our Founders Innovation Team, as seen on slide 15. And internally, we call that the Ocean's Eleven Team, but our lawyer said I can't really use that for copyright purposes, so we'll go with Founders Innovation Team. These founders continue to run their businesses, but have joined forces to come up with innovative ideas on bringing their individual products or technologies together and we've already seen immediate impacts to the business as shown on slide 16, and that's just a subset of what's happening. For example, AdEdge is utilizing our Tulsa Flex manufacturing facility and our repair service and leasing 24-hour service capabilities, which resulted in a win of $1.4 million reverse osmosis contracts just in January. Both AdEdge and Earthly Labs are selling water treatment to Earthly's brewery customers. That's less than two months in. And also pretty neat is that we have a new addition to our emerging leader program from the ad-edge team, bringing additional high-potential talent into the broader business. Our founders innovation team is also coming up with the next generation of technologies. Slide 17 shows one that the ad-edge team is working with hydrogen companies to design and implement into electrolyzer offerings. This is a containerized water treatment solution for ultra-pure water for green hydrogen electrolysis. All right, so that's pretty cool. but nobody can ask me a technical question in Q&A on that particular application. For the technical stuff, I'm going to turn it over to Brinkman.

Thanks, Jill. Now let's turn to a few data points for the four segments. Starting on slide 18, you can see our hottest specialty products area, hydrogen. Fourth quarter 2021 specialty products orders of $182.3 million included hydrogen and helium orders of $85.4 million, including a 15-ton per day hydrogen liquefier, 19 hydrogen trailers with five of these sold for use in south korea for the full year 2021 we received orders for 62 hydrogen trailers compared to a prior record of 26 ordered in 2020. this activity contributed to full year hydrogen and helium orders of 282 million dollars a record year and a 640 percent increase over 2020. also we recently announced the first ever successful test of a fuel cell operating with liquid hydrogen utilizing Ballard's fuel cell and Chart's hydrogen vehicle fuel system. We supported students at the University of Delft with their development of a Le Mans-style hydrogen race car, and in the fourth quarter, we completed an MOU with Howden for the development of more standardized and integrated hydrogen solutions. It is also noteworthy that the geographic spread of hydrogen customers is expanding. and we are in the various stages of discussions with over 300 potential customers globally. We included slide 19 for information on some of the countries that are becoming more active commercially in hydrogen over the past three to six months. Also, a differentiator for our hydrogen product offering is our ability to have certifications in these regions, as there are currently no global hydrogen certifications. The China Group Code is a great example for the liquid hydrogen storage tanks. As a reminder, And as a result of this, we booked a $9 million hydrogen order in the third quarter of 2021 for a customer's project in China. What isn't shown on the slide in the deck, but worth quickly touching on, is carbon capture. Our large industrial carbon capture offering, Sustainable Energy Solutions Cryogenic Carbon Capture, has recently had wider commercial acceptance. We are currently working with 199 potential and current customers for the SES offering. In the fourth quarter, we booked an order for a feasibility study using our CCC technology with international flavors and fragrances. Also, the National Oil and Gas Company in Columbia signed a contract with us to conduct a feasibility study in a flue gas stream for one of EcoPetrol's refineries. The result of the evaluation will be used by EcoPetrol to estimate the feasibility of this technology in reducing its CO2 emissions. We continue to believe that carbon capture needs to be a key part of this decade's plan to achieve both public and private sector 2030 carbon emission reduction targets. Moving to cryotank solutions, slide 20 focuses on ChartChina. I mentioned the group code and liquid hydrogen tank order on the last slide, which is one of many examples that our China business is evolving into a key supplier both to our sites as well as our external customers. This location is by far our largest intercompany supplier, which allows us to leverage our flex manufacturing capabilities that Jill described earlier. And note the numerous records set by the team on the left-hand side of the slide, including full year 2021 record orders, sales, operating income dollars, and operating income as a percent of sales. Lastly, on the right-hand side of slide 20, you can see some of the recent Chinese policies which indicates support for cleaner power. We are well positioned in the country to be a key participant in fulfilling equipment needs for these upcoming national policies. We continue to target 20 percent of total revenue in the coming few years for our repair, service, and leasing segment. There are numerous drivers of that growth, including the additional footprint we have in place, 2021 being our first full year of having more fulsome repair and service capabilities and customers in Europe, additional long-term agreements, and increasing level of onsite startup work. One of the larger drivers of this growth is the leasing business. You can see on slide 21 the significant progress made in a short period of time on increasing our assets available in our leasing fleet, as well as more than doubling the number of customers with active leases in one year. And perhaps the most impactful is the revenue from leasing of $49 million in 2021, expected to grow in 2022. It is finally a very exciting time for LNG, whether big LNG, small LNG, LNG infrastructure, all of which are positives to us. We were actively involved in the startup processes at Venture Global's Calcasieu Pass export terminal this past month. And in the fourth quarter 2021, we were issued another patent for our IPSMR process technologies covering the process system itself. Additionally, IPSMR and IPSMR Plus have been qualified by another major international energy company, Total Energies. We continue to expect Venture Global Plaquemines Pass Phase 1 to proceed to FID in the first half of 2022. This project is anticipated to include approximately 136 million of chart content. In the fourth quarter of 2021, we received a $1 million first release on engineering work on this project, and yesterday, a second release of $9 million. Chenier, whose Corpus Christi Stage 3 project we anticipate will include approximately $375 million of our content, also released us on engineering work in December 2021, and we expect a full notice to proceed in 2022. The Lurie and Driftwood Project Phase 1 continues to progress toward their intent to proceed to construction in early 2022. We anticipate this will include over 350 million of chart content, none of which is in our backlog. We were awarded approximately $80 million of orders for three small and utility scale LNG liquefaction projects with three different customers during the last week of 2021. Contributing to our total of seven liquefier orders in 2021, our record number OF LIQUIFIER'S BOOK IN OUR HISTORY. AND WE BELIEVE THIS IS JUST THE BEGINNING OF THE SMALL-SCALE TREND. OUR COMMERCIAL PIPELINE OF SMALL UTILITY SCALE AND REGAS POTENTIAL PROJECTS TOTAL OVER $1.5 BILLION. THERE WAS A LINE IN OUR PRESS RELEASE RELATED TO WHAT WE EXPECT TO BE A CONSTRUCTIVE OIL AND GAS SPENDING ENVIRONMENT THIS YEAR. IN THE PAST FEW MONTHS, WE HAVE SEEN AN UPTICK IN PROCESS AND UPSTREAM INQUIRIES AND IN TRADITIONAL APPLICATIONS, AS WELL AS NEW ENERGY-FOCUSED INFRASTRUCTURE PROJECTS. Additionally, biogas projects are gaining traction as their production cost is not impacted by direct market pricing. Back to you, Jill, for slide 23.

Thanks, Brinkman. Considering our record order Q4 in full year 2021, record backlog as year end, as well as visibility to our strongest ever commercial pipeline of potential work, we reinforce our anticipated 2022 full year sales outlook range of $1.7 billion to $1.85 billion. This outlook does not include any additional or new big LNG projects, although we do expect orders, as Brinkman just said, in the first half of 2022. It does include the engineering work, which began for two big LNG projects in December. Associated adjusted non-diluted EPS is expected to be in the range of $5.25 to $6.50 on approximately 35.6 million weighted shares outstanding and assumes a 19% effective tax rate. We anticipate the first half of 2022 will include a margin drag, similar to what we described last quarter, from historical levels from the ongoing macro challenges, but increasingly be offset as the year progresses by the positive impact from the actions we described on today's call, as well as ones that we'll continue to take as we respond to ever-moving macro situations. Slide 24 is important to your modeling. Our first quarter is typically sequentially lower than the prior fourth quarter, This is expected to be the same for Q1 of 2022. Also, the timing of our first quarter 2022 sales are seasonally in line with a typical chart year, where the first quarter is the lowest of the year given Chinese New Year and customer capital spend behavior. Sales are expected to sequentially increase throughout the year. Our historical revenue timing has typically been stronger second and third quarters, with the lower quarters being the first and the fourth. In 2021, we experienced steadily increasing revenues quarter by quarter through the year. We expect that trend to occur again in 2022, in particular, given the timing of revenue recognition related to the four liquefaction orders that we booked the last week of December 2021. You can also see the legal clarification in the last bullet on slide 24 that the slide is not intended to convey specific quarterly guidance, and we don't intend to provide quarterly guidance information on a quarterly basis. All right, before opening it up for Q&A, I'd like to provide an update on our latest information regarding the one specific pre-closing liability that we maintained related to the divestiture of the cryobiological business, which was completed on October 1, 2020, with a sale to CryoPort. This relates to the lawsuits related to Pacific Fertility Clinic, details of which can be found in our previous 10Qs and 10Ks. and including additional information in our 10-K, which we intend to file later today. We have not reached a conclusion that losses in these cases are currently probable. However, based on further developments, including the status of the various lawsuits, preliminary discussions in an attempt to resolve the entirety of these cases, and the consideration of insurance coverage, we estimate that losses ranging from zero to up to $50 million are reasonably possible. This is a current estimate, so the ultimate costs arising from this matter could be materially lower or higher, depending on the actual costs incurred to resolve the claims in the lawsuits. We'll provide updates in future quarterly filings to the extent any developments change. Additionally, registration for our Investor Day on May 5th of this year at the New York Stock Exchange, which is scheduled from 7.30 to 11.30 a.m. Eastern Time, is now open. Registration can be completed online at the link that's shown on slide 25 of the supplemental deck. So with that, May, let's open it up for Q&A.

As a reminder, 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. Please limit yourself to ask one question and one follow-up. First question is from the line of Eric Stein from Craig Hallam. Your line is now open.

Hi, Jill. Hi, Joe.

Hey, Eric.

Hi. So maybe just starting on the orders, I know you're trying to stay ahead of it, the materials costs. You've got some surcharges. You mentioned storage fees, all of that, and still having a record order quarter in year in the face of that. I mean, are you getting any pushback on that? from the market, or is there a level that you foresee that you think that would start to impact order levels?

Generally, our customers are very reasonable, understand what the current situation is, and it has not meaningfully impacted the demand, as you commented in your question. So we see pieces and parts in terms of pushback. It depends on any particular situation or product category, which we work to manage through with the customers. and that in some cases can be, you know, moving delivery schedules around and replacing componentry with other components. So there's a lot of different moving pieces that go into how we handle this and how we price and the timing of such. At this point, we continue to move those prices forward and include additional surcharges where necessary, and we intend to keep doing that. And what we've seen here is that if there is lost business related to those pricing changes, that there are others that are looking for those slots.

Okay, that's great. And then maybe just to follow up on that, I mean, obviously, again, big corner. I mean, do you see that as indicative? I know that it's continued in January. I mean, was there any aspect of that that maybe was a buy ahead of those price increases or just kind of a, you know, maybe not that this level is sustainable, but that you see sustainable order strength going forward?

So I would say my answer to the buying ahead at the end of the fourth quarter is no. That was the case at the end of the second quarter last year. So far different in terms of The reason for Q2 being the former record and Q4 being the new record didn't have really anything in the fourth quarter to do with buying ahead of pricing. Most of that price was already taken in the quarter itself. There's definitely forward progress on particular projects, which I think drove these customers saying, hey, I have to get this moving. And so, therefore, I tell one story. Heck, we had our team negotiating with a customer in Germany Christmas Eve night, and they wanted to stay until they got the design and everything locked and loaded because the timing on implementation of said projects is very important to these customers. So we're seeing timing, lead times, deliveries being – as if not more important to our customers than the pricing discussions and challenges that we have to have those conversations on. Do I think that this trend continues? I would tell you I was surprised that January order levels were as strong as they were. I would have anticipated at least a breath after the December. And if you looked at the way the Q4 order intake went for those three months, December was the highest of the three months. So I was expecting everybody to just take a New Year's pause for a moment, and that did not happen. What's interesting is it's not any piece or part. It's pretty widespread. I commented in my script around rail cars in particular because that's another indicator that you're seeing infrastructure capital spend continuing on, and it's not just a piece or a part on the rail car side. So we've got multiple customers coming to us for rail cars right now. trailers. You know, transportation and movement and infrastructure is really hot right now.

Okay, that's great, Cutler. Thanks, Jill.

We have our next question from the line of Ben Nolan from CIFL. Your line is now open.

Great. Thanks. Hey, Jill and Joe. So I wanted to get to Big L&G. I know we hate to talk about it, but Just a few things. First of all, as it relates to Plaquemines and there was the limited notice to proceed, how much of that revenue hits this year versus next year? And then ultimately, assuming some of these things do move forward, what's the right number to think about, the 2022 impact versus what's a little bit later?

Yeah. So let's start with the second half of the question. If If Plaquemines moves to full notice to proceed for us, which would be the full order of $136 million on phase one in the coming, let's just say, two months here, I do anticipate that to be the case, then I'd approximate $25 million to $30 million of revenue associated with that into 2022. And then you could spread the rest across another seven quarters evenly. With respect to the limited notice to proceed, including the additional $9 million yesterday, that's a good indicator that the project is progressing as we're expecting it to. And included in that 25 to 30 is the 10 that I'm talking about. So that's how to think about that. And then you can pretty evenly utilize that math across other projects. related to, okay, if you book it in March, you start to get the revenue in September. You can put that amount of book-to-revenue time to these other projects and pretty evenly extrapolate what I just said on Plaquemines.

Okay, that's helpful. And then switching gears to my follow-up, is it relates to the increased level of activity around U.S. oil and gas, just, you know, drilling and production and so forth. I know you guys are a little bit more midstream focused, and so there might be a little bit of a lag there, but assuming that we stay on this kind of a pace, how should we think about sort of what, or is there a way to think about what the impact of that might be to growth in the heat exchanger business. I guess that's probably where it mostly is. And, you know, relative to sort of your – what's already in your guidance.

Yeah, thanks for picking up on that. That was part of my opening comments around, you know, being molecule agnostic, we still – you know, we do simply still serve the oil and gas markets as they need. We've built very minimal – positive growth associated with this into our outlook because we haven't seen a lot of speculative buys, like in a historical upcycle for oil and gas. With that said, as Brinkman briefly mentioned, we have seen an uptick in process and upstream inquiries in some of the traditional applications over the last two months. So I would say that there's not a lot of upside built into the current guide. as we're in a little bit of wait-and-see mode, but that if it progresses and holds as you described, that is upside to what is built into our current guide.

Okay. All right. I appreciate it. Thanks, Jill.

Thanks, Ben. Next question is from the line of John Walsh from Credit Suisse. Your line is now open.

Hi. Good morning, and congrats on wrapping up a strong year. Thanks, John. Wanted to kind of first start and maybe help us understand some of the margin dynamics as we look forward. I apologize if I missed it. Can you talk about what your kind of margin in your backlog looks like, either on a year-over-year basis as you put some of these larger projects and first-of-a-kind in there?

Sure. Sure. And, John, just to be specific, looking forward, is that your question, into 2022? Yeah, correct.

Yeah. So as you execute on that backlog, I think this quarter you said you executed on some lower-priced backlog. Just how much of the margin lift is already kind of baked because it's just executing on the backlog? Correct.

Yeah, and there's definitely – I would say that one of the questions I anticipate somebody to ask is around the cryotank solutions gross margin in the fourth quarter, which I refer to that as accelerating some of the backlog burn-off, and that's the segment where the majority of the lag is. So that's a positive to stepping out of this for 2022 segment. And I would say Q1, you'll still see us burning that off, which with the way a typical Q1 is from a revenue perspective and burning some of that off, I'd look at the gross margin there in the middle 20%, and I'm not adjusting that. So let's just say 26%-ish as we're in the first quarter, and then I'd meaningfully step it up there into Q2-ish. to 28-ish plus. And then Q3 and Q4, based on how the projects are and how we price those projects, we have a high level of confidence in that we've priced it appropriately. We have the materials associated with that. Again, we bought a lot of that material in the fourth quarter and the third quarter. So the second half is really strong in terms of the margin associated with these projects in backlog.

Great. And then maybe shifting gears to cash, you know, could you just maybe remind us your priorities if these big LNG projects hit? That's going to be a nice influx of cash. You obviously pulled forward some CapEx spending, but how are you thinking about the balance between, you know, further M&A and maybe share repurchase?

Definitely. So let's see, I'll go out on a limb here and say that if I could have been buying shares, even though we're in a closed window, so I couldn't be buying shares in terms of share buyback, but I would have been over the last few weeks. With that said, our priorities for cash are around the CapEx that we described on the organic side. Number one for us is continuing to automate, optimize our manufacturing given our expectations of the continued demand. In terms of M&A and inorganic side of things, we are in opportunistic mode, so we feel great about when we did the deals we did and having the portfolio that we have right now. It's really the first time that we've had what we want in our offering completely, and we don't have anything in the offering that we want to get rid of. So that's a great place to be, to be very selective on the M&A side. And then, obviously, debt pay down with that cash. To your point, we would have a higher free cash number, assuming these big LNG projects unfold as we expect them to in 2022. And at that point, we'd be looking at other uses of the cash after the investment for growth organically and debt pay down. let us get there on the execution side, and then we look at other ways to utilize that cash if and when we have that conversation. But focus on growth, automation, productivity, and debt pay down.

Great. Thanks for taking the questions. I'll pass it along. Thank you, John.

Next question is from the line of Rob Brown from Lake Street Capital. Your line is now open.

Good morning, Jill. Hey, Rob. My question is on capacity. If big LNG orders start to hit, how are you on capacity? And I guess the Tulsa addition helps, but maybe where do you sit in capacity if you get these orders?

We're in very good shape on capacity. We've been planning for these for years, and As you may recall, back in 2016, 2017, we added the world's largest brazing furnace into our La Crosse, Wisconsin facility, which actually we have the two world's largest brazing furnaces there. And then our decision to put the 98-inch furnace into Tulsa adds some flexibility. And the reason we didn't do another of the world's largest is because the 98-inch core, so the world's largest 138 inches, the 98-inch cores, are more common in the small-scale applications, in the hydrogen applications, specialty applications. And so now we'll have a really nice balance of the 98-inch furnaces in both locations and then the two larger ones for the big LNG in Wisconsin. So all told, that even if all of these big LNG projects hit at the same exact time, we're ready for that. We're actually ramped up in terms of labor for that and we're more than capable to bring on additional liquefaction projects into our backlog with our current state capacity.

Okay, great. Excellent. And then on the carbon capture market, you're seeing some stuff starting to hit. How do you see that playing out over the next year or two? Do you see projects kicking off, or is it still early development work?

That's a really interesting question because, I would have thought that that market would be more commercialized to date, and it hasn't been. Now, in the last six months, we've seen these pre-feed and feed studies, and as Joe just described, the one with ISF and the additional one we just booked with the National Oil and Gas of Columbia, these are real projects. So I anticipate we will be booking a full carbon capture industrial-size project within the next six months. So given the timing of the way the feeds are and how it's kind of usually 10 to 20 weeks on those, that's why I say in the next six months. So I think it's going to start to roll a little bit here. I think it would accelerate meaningfully if – the 45Q were addressed in a broader-based fashion at a slightly higher 45Q credit price. With that said, none of these guys we're working with on the industrial side are waiting for that to happen. They're saying, I've got to move. Sustainability and ESG is a really important part of our culture as well, and we can make the economics work even without 45Q. So I think on the larger industrial side, it's going to move. I think in some of these other applications, the 45Q is a meaningful part of the decision-making.

Okay, great. Thank you. I'll turn it over. Thanks, Rob.

We have our next question from Ian McPherson from Piper Sandler. Your line is now open.

Hi. Good morning, Phil, Joe.

Good morning, Ian.

Jill, the world is reminded this morning that energy security from the U.S. is probably at an increase in premium. And I know that you don't want to harp on big LNG as a central thesis, even though it's a big near-term event. But you've talked about optionality around some of your three primary areas. projects having accelerated phase two deployment as well. Do you think that recent events amplify those probabilities, or just how are you thinking about Gulf Coast LNG and maybe more runway for the cycle beyond this year as a consequence of what's happening in Europe?

I think that question is spot on, and I think that the current state of affairs is could further accelerate what was already accelerating toward these Phase IIs. So without going into a lot of detail on specific projects, we do expect that certain Phase IIs happen much faster than was previously designed, and perhaps more projects happen faster now, given the situation in the global domain. So net-net, this... unfortunate situation ultimately amplifies the fact that energy security and energy infrastructure is going to be a meaningful part of the coming years here, which in turn benefits the chart business.

Yeah, certainly. My others have been asked and answered. Appreciate all the color today. I'll pass it over.

Thanks, Ian. Appreciate you.

We have our next question from Andrews Medical. Evercore ISI, your line is now open.

Hey, good morning, Jill. Hey, Andres. Hey, so I guess my first question, and this is always interesting to me, is what you're seeing in terms of the industrial gas customers. I know a couple quarters ago it seemed like there was an inflection in demand from semiconductors and electronics. And just curious to see if you're seeing any change in your customer behavior just at a high level in terms of what we saw in Europe recently, just given the margin compression from higher electricity prices. And, you know, is there a sense that maybe that they're going to shift their buying behaviors away from Europe in light of that or anything related to it?

We have not seen that to date. I'm not – I think that that's a very good question to watch for, in particular in light of what's happening in the macro environment. So far, we haven't seen that. What we have seen is pieces and parts moving in different directions with these industrial gas customers around what type of molecules they're spending time and money on. So we've seen, obviously, we talk a lot about hydrogen. Helium is another one that we have seen more equipment interest around. So a little bit around the pieces and parts of the types of offerings that they have but less so geographic movement. I think that is something we will need to watch going forward. And in turn, it really is a benefit for us to have the global manufacturing footprint that we do have to be able to decide where we want to make wood and back to that flex manufacturing concept of making everything that we do in more than one location. And to go off just a little bit on a tangent here, we saw that, the local supply base has really benefited us. One example I have is sending a tank in a container from China to Germany in 2019 would cost us about $77,000, and now it costs us about $375,000. So you get the sense of the magnitude of moving the pieces around the globe and localization is a benefit in the footprint as well as in the supply chain.

Got it. Thank you. Thanks a lot. Very helpful caller. My second question is on India. The whole concept of energy transition, it's been very top-class. I'm just highlighting the recent green hydrogen policy. It seems like it's good in some sense, especially on the electricity side, as they waive some of the transmission charges, as an example. But it seems like it's lacking in other senses. We don't see you know, infrastructure development plans for transportation and storage of hydrogen, amongst a number of other items. So what's your sense on that as far as it pertains to chart and your footprint there and how that would benefit and market demand for your products?

We're very bullish on India and across the spectrum. Right now, we see quite a bit of India infrastructure on the natural gas side. We expect that will continue with key customers that you all would be aware of. We're heavily involved via the U.S.-India Strategic Partnership Forum as well as with Indian government on the setting of the strategies. And there is a focus and there will be actions associated and funding associated with not just cleaner power, cleaner energy, and I think it's broader than just hydrogen, but also with clean water. So we've set ourselves up, and it's also very important in India to manufacture in India, which we've been doing for decades via the BRV acquisition that we did a few years back, and they've been established for a couple of decades there. That's important to us, so we're really well positioned to be localized. In water... My comment about our win yesterday, over $6 million order win for a water treatment project, is important because we're seeing the government and the government officials paying close attention and putting real dollars to it. India on water treatment, they're working to provide clean tap water by 2024 to all of the households across 600,000 villages. That's a $50 billion investment. They've commented about 65 billion between now and 2025 on natural gas infrastructure. So real dollars are going into this, and I think that the national hydrogen strategy that was recently unveiled in last week there will very quickly move to real funding for projects. So we're thrilled with our position in India and think that that's upside. You know, we've just built regular growth off of 21 into 2022. I think that upside isn't 2022 per se. It'll be a little bit. But in the coming few years, this isn't a late decade. This is the first half of the 20s. So very excited about that. And thanks for picking up on that, Andres.

Great. Thanks, Joel. I'll turn it back to the queue.

Next question is from the line of Mark Bianchi from Cohen. Your line is now open.

Hey, thanks. I wanted to talk about orders first and sort of the interplay between orders and revenue as we look beyond 22. So you have really strong order quarter here in fourth quarter. And if I annualize that, so if I assume you kind of get that level of orders for every quarter throughout 22, it just gets to the top end of the revenue guidance. So you're kind of barely at one times book to bill in 22 if you replicate that really strong order number. What What kind of orders do you expect in 22? And what sort of order number will we need to see to enable growth in 23? And this is all excluding big LNG.

Yeah, I understand your question, Mark. Good question. And what I would say is we are expecting, and we've started to see this in 21, but expect that this trend accelerates in 2022 around what we would deem small and mid-scale work, project work. It's said differently because I think there's varying definitions of MTPA sizes associated with small and mid-scale. But rather, for us, projects that are in kind of the $10 million to $50 million range, those used to be really few and far between. And we saw numerous of those in 21. And based on what's in our commercial potential pipeline, expect that those size orders are happening more frequently. So that's one of the key drivers in 2022 to get to that above one-time book-to-bill or orders-to-revenue metric. And the other side of that are the liquefier projects, which in some cases can be $50 to $75 million. So those are more frequent but not yet consistent every quarter, which is why we don't go out and say, hey, now 460 is our new every quarter level. So that's really the nuance to why we haven't just said, all right, take the record level and maintain that as happening every quarter, because there's not a level of consistency to those larger particular projects, but there's becoming level consistency to those middle-sized ones. So that's really what you'll need to see is the combination of more frequent little middles and a few biggers to get us to looking at the growth. The other side of things is what we don't build into kind of our regular book and ship in that 40% probability figure that you see, I think, on slide 23 or 22 in the deck of book and ship type of products. is the industrial gas majors. Those are not ones that we put into Salesforce for our pipeline method of approaching bookings. So those are kind of regular course of business, and we're seeing a lot of activity there and expect growth in that order book as well. So there's pieces and parts that go into that, and that's all excluding the big LNG side. But it's really going to be these little bigs and the bigs.

Okay. I'll have to add a row to my model for those. Yeah. On the, on hydrogen and helium, I've got a few questions around this. First one is just why do we group hydrogen and helium together? And what's the, maybe if you could parse the hydrogen number, I'd be curious to know what that is. And then as you think about that category of, What's the kind of growth outlook for 23? I think on the last call we talked, you thought it would be 40 to 50 percent, but you had a really strong fourth quarter. So I don't know if any of that opportunity was pulled forward.

Yes. So we lumped hydrogen and helium together. I would look to Brinkman, and he would say because they're both extraordinarily cold, coldest molecules. But with that said, you can utilize – technology for both that's very similar, and you can utilize, for example, a helium cycle to generate liquid hydrogen. So the characteristics of how you handle them are very similar, and therefore that's why we put them together. If you looked at the 282-ish million of hydrogen and helium orders last year, about 50 was helium associated. So the rest hydrogen related. Now there's some nuances to that because there's about 90 million in the remaining 230 that utilizes some helium technology for a hydrogen application. So it kind of gets a little bit hairy, but straight up helium was 50 of the 282. And no, they're While, yes, we were surprised by a couple of those orders happening in December, they've now been backfilled by additional potential orders in that commercial pipeline. So I don't view it as reducing the opportunity. Actually, the pipeline of potential orders across these categories is the highest that it has ever been as of the last time I checked was about a week ago. So it's filling up nicely.

Okay, great. Well, if I could just squeeze one more in on that point with hydrogen orders. We've seen Plug kind of continually do different kinds of deals to try to backward integrate here, the latest one with Fives. How much of a threat is that to the order outlook there? And maybe talk a little bit about the barriers around that business.

Definitely. So we were actually just with Plug on Friday, and they continue to – intend to buy from us across the spectrum of these types of applications with the intent that over the course of time they bring some of that in-house, not all of it in-house. In terms of the ability to take the pieces and parts that they have recently invested in or partnered up on and have it work together is very difficult to do. So I would equate it to the fact that if you had 10 different pieces of an airplane from 10 different parties that hadn't had a lot of experience in hydrogen applications, and then you had to put it together and make the airplane fly, that will take some development work and some time. So our view is that PLUG's approach to the hydrogen economy is a great thing for the economy, but also that cryogenics is hard to do. So there are some barriers to be able to very quickly accomplish that. I would also point out, Mark, that our outlook on the specialty side, in particular on hydrogen, is not changed and not at all heavily reliant on plug power as a particular customer, given that we have over 325 different potential customers we're currently working with. So I think it's great and healthy for the industry, but it will take time, and therefore we still expect them as a customer in the near and medium term, as well as in the long term, but probably at a lower level in the long term as they bring some of this capability in-house.

Great. Thanks so much.

Thank you.

Next question is from the line of Chase Mosehill from Bank of America. Your line is now open.

Hey, good morning, Jill. Good morning, Jason. So I guess a quick question on the guide. You know, pretty wide range here. I think if I'm doing the math right, it's about $45 million between the high end and the low end. So I guess, you know, two questions. Number one, is there any particular segment that's driving, you know, the variability here? I mean, if so, kind of which segment? And then number two, You know, pretty wide range. Would you care to, you know, push us towards the low end, the midpoint, or kind of the high end of annual guidance?

So the variability in that, well, it's just early in the year to be able to really hone in, in particular, given the large amount of potential in the first half in our commercial pipeline. No pressure selling Belling in the commercial team. to get those orders booked. So that really the first half kind of order book is what would drive you to the higher end of the range. If it goes the way that we anticipate it will, certainly we would refine that range, that direction. But the second half of your question, I have learned my lesson and I'm going to drive everybody to the low end of the range so that I can beat it. But I think we have a high level of confidence. We would not have reiterated that outlook just based on, and the fourth quarter gave me more conviction in that. So I think we're very comfortable with where consensus sits today. I'd note that of our approximately 20 analysts, seven to eight of them have some big LNG already in those numbers. And that's something just to, that we have to make sure we're clear on. So, you know, certainly if we book any of these big LNG projects, that's on top of our current guidance range. So we could get a little more specific when we have one of these booked as well. That would take you from the 1.7 to something certainly in the middle of that range.

Okay, perfect. And then, you know, 2022 order outlook, I mean, obviously, you know, pretty strong, even if we just exclude big LNG. And, you know, 2021 specialty products, I mean, you know, massive jump in orders. How should we think about specialty product orders in 2022? I mean, you know, hydrogen and helium orders were, you know, 282 if my model's right. How much should those increase in 2022? And what about the kind of what I'll call baseline or base business of specialty products? Like how should we think about the order growth of that business this year?

Definitely. So included in the specialty in the hydrogen and helium, you had approximately 150 million of liquefiers. So the rest of that being equipment. Equipment, we expect to be double-digit growth. We expect the entirety of specialty to certainly continue at double-digit growth. When you start peeling back the layers, we expect another year of records on food and beverage. We expect space exploration to be certainly up probably 20% on that particular business. The rail business is going to be very active rail car side of specialty. Cannabis, we would expect to be record again. And when I say record, like these are 20 plus percent type of year over year increases that we're anticipating in these categories. Same with carbon capture. Where I would, same with water. Where I would say the, you've got to think through how you want to model the liquefaction versus the equipment on the hydrogen side. So similar to my answers to Mark's questions, how you think about when we get a liquefier order and they're not always every single quarter. That is what could drive the year-over-year growth to be a lower number on hydrogen helium, but that's really timing because we think these liquefaction orders are going to happen. It's just do they happen in Q2 or Q4 or Q1. And then the last one in specialty that I would call out that we expect to be Flat, if not down a little bit, would be the HLNG vehicle, over-the-road vehicle tanks, because we had such a huge year in 2021, and we're still seeing, our customers are still seeing the semiconductor supply chain challenges in the trucking industry. So that's one I would be cautious on.

Okay. All righty. Appreciate the call. I'll turn it back over. Thank you. Thanks, Jason.

Next question is from the line of Pavel Malchumov from Raymond James. Your line is now open.

Thanks for taking the question. You were asked a little bit earlier about the broader context of energy security, and I wanted to zoom in on your presence in Europe as it relates to green hydrogen, other aspects of the energy landscape. What percentage of revenue does that represent and where is the manufacturing located?

So for hydrogen in Europe in particular, we do mostly infrastructure in Europe. So the hydrogen liquefaction projects are right now in North America, so Canada and the US. In terms of the infrastructure, The projects would be primarily around Germany, the Czech Republic, and France and Italy would be where the hydrogen work is happening in terms of the customers and use of that infrastructure. And we manufacture the gaseous hydrogen trailers in Europe, in Germany. We do the liquid work in the United States for export to those customers in the EU. And then we have the ability to do all the products that we do in Europe outside of Europe as well. So that goes back to that doubling down of where we make what. So the question really would become if there was an issue in Europe, would we reallocate any of those particular production activities to another location? If we needed to do that, we certainly have the ability to do those tanks in Europe. China, in India, as well as in the United States. So we have the flexibility. I think it's a matter of whether the customer would want to take those from those locations.

Right. Price of net gas in Europe, $25. That's before the last 24 hours, I suppose. Have you noticed a noticeable urgency on the part of European customers to well, for one thing, reduce their reliance on conventional gas and in favor of biogas or green hydrogen as a replacement?

We've definitely seen an uptick in biogas. That's been one that has been accelerating over the last, I'd say, six months or so, half a year, which is six months, and not significantly. not a change in behavior around moving to green hydrogen. Those who were heading that direction were already heading that direction a year plus ago and so kind of have stayed the course versus seeing an acceleration of those types of projects. Yet we haven't seen any slowdown on the gas side either. So I'd say generally not a material impact to date, but I think that the point is valid, and we're paying attention to that. For us, it's, again, playing that molecule agnostic game. We can serve all of these different applications, and so we're willing to do that. It's just really what is the customer's desire to do so.

Got it.

Thank you very much.

Thank you, Bill.

Next is Craig Sher from 2E Brothers. Your line is now open.

Hi. Congratulations on another great quarter. Thank you, Craig. Just one question for me. It was already asked about your capacity to meet the potential tsunami of big LNG orders that could be coming in. But I'm a little more focused on, you know, the next two, three, four years in specialty. You know, if... I anticipated you might have $1.3 billion in specialty revenue in 2024, given where labor markets are and could possibly go. How confident are you that you can execute and deliver on everything the market may need?

I'm very confident given the completion of the investments that we laid out on one of the early slides in today's presentation, that's critical to this because you're absolutely right that the amount of demand ahead of us is incredible. And we talk about this at the board level around the number one thing that we need to do to just continue this explosive growth opportunity ahead of us is ensure that we have the capacity to meet this demand. So it is, we are entirely, what is it, all in, feed in first on these capacity expansion projects as well as the automation. I would say I'm less concerned on the labor particular point. I'm more concerned that we get the right machinery in the right locations so that we can take, for example, a larger skid out of a shop that we need another space for another line in, i.e., New Prague, Minnesota, where we do some of these particular hydrogen tanks. We also are going to do and are already doing these hydrogen tanks in Teddy, Alabama. So the pieces and parts that we've laid out, getting them to completion is important. the number one priority around ensuring we can meet the demand on the specialty side.

And do you see this as an ongoing process or do you think that, you know, your planned investments, you know, this year and what you've made more recently covers a lot of ground? Are you going to have to worry about this the next two, three years?

So I think that this year and next year, that's why we put the 23 forecast on CapEx on slide 11 of the deck at the 47 mark. Obviously, we're not that good to be that precise. But I think between what we've done to date and what's laid out on slide 11, we'll be in very good shape. And there's other kind of sub-tier projects that are in flight right now that I'm not going to drag you guys through, but those are also meaningful. So how do we leverage, for example, taking certain repair and service work out of combined shops and putting it into a greenfield shop that we already have built? How do we move the pieces and parts around? So with all of that and the subtext, I feel good about where we'll be after we're completed with the 12 projects on slide 11. Great.

Thank you.

Thank you.

Again, 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 pan key. Your next question is from the line of Web's Vaishnav from Coker Palmer. Your line is now open.

Hey, VEBS, if you're there, I can't hear you.

Okay, May, I think that VEBS might have had a technical error or dropped off. So if there are no further questions in the queue, May, we'll conclude the call for today.

Thank you, ma'am. This concludes today's conference call. You may all disconnect.