Chart Industries, Inc.

Continue to stand by. Thank you for your patience. © transcript Emily Beynon Thank you. Thank you. Oh, my God. Thank you. Thank you. Good morning, and welcome to the Chart Industries Inc. 2022 First Quarter 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 Friday, May 6, 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 earnings 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 Ivanko, Chart Industries CEO.

Thank you, Liz. Good morning, everyone, and thanks for joining us today for our first quarter of 2022 earnings call. With me today is our CFO, Joe Brinkman, but you won't hear from him verbally as he has a cold, so his voice is pretty rough. We're going to try to save it for next week's Investor Day, which is next Thursday, May 5th. So you're stuck with me today, but as usual, I will refer to the supplemental presentation, which can be found on our website. Starting on slide three, the quarter included our sixth consecutive record quarter of backlogs, our highest-ever quarter of orders, and our continued progress of closing the gap of pricing and cost, which is demonstrated through our sequentially improving margin profile, as well as our continued completion of various acquisition integrations and capacity expansion projects. You will see this reflected in our add-backs to earnings per share, excluding the mark-to-market gains and losses of our inorganic investments net of effects, are down 42% when compared to Q4 2021. But first, let's walk through what's happening in our markets. Demand for our products, in particular LNG and other energy solutions and equipment, accelerated as a result of the Russia-Ukraine conflict that began February 24th, our last earnings call. We have seen an increase in actual orders as well as inquiries from both public and private sector entities surrounding the need for infrastructure to access molecules to support energy security, independence, and resiliency, all with the backdrop of the requirement for alternative sources of supply and can focus on sustainability. We continue to hear from various entities that the conflict has spotlighted the need for construction and action now to address these themes. Slide three provides some examples from the past 45 days of actions taken by governments and private industry to support this energy independence, resiliency, security, and sustainability. These themes were in part reflected in our record orders of $636.8 million and record backlog of just about $1.5 billion. but perhaps more meaningfully reflected in our growing pipeline of commercial opportunities, the largest pipeline we have ever had. On slide four, you can see that these records were not just driven by one segment or product category on the left-hand side of the chart. Two of our four segments, as well as the total company, posted all-time record backlog in the first quarter, while seven product groupings within those segments also ended with record backlogs. Total company backlog increased over 58% when compared to the same quarter in 2021, and cryotank solutions, specialty products, and heat transfer systems backlogs were each up 49%, 55%, and 77% respectively. We'll talk through orders and sales in the next few slides, but before we get into those specifics, let me take a moment to share a few other noteworthy highlights from our first quarter, some of which are shown on the right-hand side of the slide, a few to point out specifically around the hydrogen side of the business. While much of the past two months has been around immediacy of natural gas and LNG, there has not been a slowdown in the focus and action surrounding more sustainable and ESG-oriented answers. For example, we completed a memorandum of understanding with a major industrial gas customer for liquid hydrogen equipment globally, which adds to the continued expansion of our hydrogen install base in a variety of different geographic regions. Additionally, we see China as a meaningful future hydrogen region, with an announcement in March from their National Development and Reform Commission that China aims to produce 100,000 to 200,000 tons of green hydrogen a year and have 50,000 hydrogen-fueled vehicles by 2025. We executed an LOI with Greenstone Renewables to be their exclusive liquefaction technology and equipment supplier for their 100% renewable solar hydrogen production project. We have not yet booked an order associated with this, but expect to do so later this year. We became the first founding member of Semvita Factory's gold hydrogen synthetic biology process. You can see some of Semvita Factory's early successes through their collaboration with United Airlines and Oxilo Carbon Ventures for commercialization of sustainable aviation fuel. As an aside, we are hearing more about SAF, which is another opportunity for us. While the end product is an alternative liquid fuel, there are situations where the hydrogen needs to be stored and transported from the production site to the SAF producer's plants. We're currently quoting on 30 different hydrogen liquefaction projects with 30 different potential customers. And these 30 are part of the 419 potential customers we are currently working with for liquefaction, storage, transport, and end-use hydrogen solutions. Just as a point of reference, two years ago this month, we were talking with approximately 30 potential hydrogen customers. And one year ago this month, we were talking with 214 of them. We've increased the number of individual customers that we have sold hydrogen technology or equipment to by 70% in the past six months, further evidence that there continues to be ongoing support of hydrogen as a key part of the energy transition. Now, turning to slide five, you can see our $636.8 million of all-time record orders. When backing out the $228 million of big LNG orders received in the first quarter, we booked over $400 million of non-big LNG orders, which included New Fortress Energy's order for fast LNG, too. We're very excited and proud to continue our work with NFV on their FAST LNG unique, expeditious, and creative solution, and we kicked off April with a letter of intent for FAST. EMEA in India first quarter 2022 orders were a 9% sequential increase over the fourth quarter 2021, and the strongest first quarter of the year in the history of the region. It is rare in our cryotank solution segment to have sequential Q4 to Q1 increase in orders, but that is the case this year. and we do expect additional success in the later quarters this year. We also booked 65 individual orders, each greater than $1 million in magnitude, twice as many of those as we booked in Q1 of 2021, and making this our fourth consecutive quarter with this metric being over 60 individual orders per quarter. All of this contributed to our book-to-bill ratio of 1.8, or excluding the big LNG orders, of 1.15 in the quarter. I just shared our record orders and backlog, which are included on slide 6, Sales of $354 million was our highest first quarter sales in our history, an increase of 22.7% when compared to the first quarter of 2021. All four segment sales increased more than 14% over that same period, with specialty products leading the way on a year-over-year increase of 39%. Slide 7 visually shows our continued progress on pricing and cost actions. Reflected in our first quarter, 2022 reported gross margin as a percent of sales of 23.6%, and adjusted gross margin as a percent of sales of 26.1% when excluding restructuring and organic startup capacity costs. This demonstrates our progress in incremental and sequential quarterly improvement in our margin profile. I would also note that we continue to face in the first quarter additional headwinds that we do not adjust for in either gross or operating margin. Some of these we anticipate to continue throughout the remainder of the year, such as additional logistics, transport, and freight costs. Others we anticipate will improve in the second half, including China COVID impacts, electricity and gas costs in our European shops as weather improves, and manufacturing inefficiencies of previously outsourced products brought in-house as we leverage the synergies from our recent acquisitions. And still others were truly one-time in Q1, such as inefficiencies from robotic cell repair, which is now completed, and the repair of our collapsed storm sewer in Minnesota. You can review slide 8 specifics on your own, but the takeaway is that our add-backs, excluding mark-to-market net of effects, were sequentially 42% lower in the first quarter than they were in the fourth quarter of 2021. We continue to complete acquisition integrations. We do not anticipate refinancing costs this year, and some of our organic capacity comes online throughout 2022. Note that we will continue to have mark-to-market adjustments each quarter. Our first quarter of 2022 reported non-diluted EPS of $0.28 included a negative impact of $0.11 from the quarter's marked market of our inorganic investments net of tax, as well as operational one-time costs related to restructuring, startup capacity, and deal and integration, totaling $0.26. When adjusting for these items, adjusted non-diluted EPS was $0.65, as shown on slide 9. Our analysts were debuting our first slide in the appendix, which we thought was a great recommendation from one of our analysts and is intended to make the walk from reported to adjusted with dollars much easier. So moving to slide 10, this is the first of two slides that you have seen for the past few quarters providing our perspective on direct business impacts from the six biggest challenges in our current operating environment. Material cost and availability is by far our highest ongoing concern, and we focus our discussion on the three main material inputs in our business. aluminum, stainless, and carbon steel. Throughout 2021, we strategically decided to increase our on-hand inventory balance as a result of increases in material costs and the frequently discussed availability challenges of materials. Given the uncertain supply chain and material cost environment that worsened as a result of the Russia-Ukraine conflict, we've chosen to continue to strategically build safety stock of key raw material inputs, especially given our ability to source these globally while attempting to procure them at lower cost points in the market. Because we did build safety stock last year, we are able to monitor pricing and purchase at better entry points based on the material price indices. Cost per ton does vary by the hour, so we've taken advantage of those entry points the past six weeks to buy at non-peak levels. In some cases, we had put in place the option to forward buy and pay at current month fixed costs. We did this in the United States for stainless steel in early February at the prior month fixed cost, which has proven to be a near-term success. Considering the surcharge on this particular supplier, stainless is up 57% now compared to February. We, like most companies, are not immune to the well-documented supply chain disruptions, yet there is nothing meaningfully new to discuss on this topic shown on row two. Row three is the continued force majeure we are under from our United States gas suppliers to our manufacturing plants. This started with nitrogen in the southeast in August of 2021, and now helium is the challenge across the U.S. We have not had a month without being under force majeure from the supply base since August of 2021. And while we have a variety of alternatives that are in play and underway, it still creates inefficiencies for us. We expect that the situation will improve in the summer, yet we are planning for the worst case of continuation throughout the remainder of the year, which is included in our current outlook. On slide 11, I'm going to skip to row six, as rows four and five are currently in decent shape. ChartChina exceeded their first quarter 2022 forecast, even when faced with a week of COVID-related lockdown where no production could be done. The team gathered a small group of our assemblers and was given clearance to ship, yet the team had to stay 24 hours on site for that time period. So congratulations and thank you to our ChartChina team. Also, we anticipate the second quarter to have some logistics headwinds in our China facility. Less specific to our shop, but more so as a result of port congestion, the worst it has been in six months in the South China hubs, as well as a growing backlog at Shanghai. We're watching COVID restrictions and the risk of additional sourcing challenges given the situations in particular in Q2. It is worth noting, though, that we do have other options globally on sourcing and shipping. Slide 12 is the same information that was shown on our last earnings call, 2021 pricing actions taken. We've included it here just for sequential reference. So now moving on to slide 13, what actions we've taken year-to-date 2022. As you've heard, material costs and other hyperinflationary trends continued throughout the first quarter. We continue to update pricing based on market conditions in our three main categories of pricing mechanisms, as shown on the right-hand side of slide 13. In the first quarter, we had our long-term agreement index adjusted price updates. All standard price lists had pricing adjustments, Specific regions had increases based on material cost in that region. Our 15% market condition surcharge was in effect the entire first quarter 2022 for non-contract customers, and we increased the surcharge after the material cost changes did not temper but rather increased. An example of one of the variety of macro headwinds that we have been improving through specific actions is shown on slide 14, is the delta between freight costs and our ability to pass that through to our customers. The left-hand graph on the slide shows the global container freight index for the past three years. From January of 2021 to January of 2022, you can see the dramatic increase in freight cost of over 300%. And that comes on the heels of the prior 12-month cost increase of over 200%. Now, turn your attention to the right-hand graph, which is our delta between freight cost and freight we pass to our customers. You can see that the first quarter of 2022 was the smallest gap, or said differently, the best quarter we've had in the past six quarters of closing this gap. This comes as a result of standardizing our approaches to free cost pass-through and eliminating free freight on volume discounts. So coupling the cost-out activities and pricing actions with our capacity expansions will allow us to continue to profitably grow. On slide 15, you can see our anticipated CapEx for 2022, which is unchanged from our prior guidance in the range of $50 to $55 million for the full year. The green boxes are updates today. The first is that we have completed our vacuum-insulated pipe manufacturing line in our European shop. The second is our first quarter 2022 CAPEX spend of $12.6 million. And finally, we plan to share our next series of CAPEX projects for 2023 through 2025 at our investor day next week. Now, we don't always time our capacity expansion perfectly, but we came pretty close with the timing of our newest brazed aluminum heat exchanger furnace and line. An update is shown on slide 16, and this line is scheduled to be fully operational in the first quarter of 2023. This adds flexibility for a variety of core sizes, as well as adding a location that's close to New Iberia, Louisiana, for ease of transport of the brazed cores to our water-adjacent cold box facility. Also making great progress is our Shree City, India expansion on slide 17, primarily for tanks and potentially trailers. Already partially in use as of this month, expected to be 100% operating in July of this year. It adds another level of flexibility for us in the region, for India for India manufacturing, as well as for export. And we'll utilize it as we expand our water treatment business in India. As a reminder, we booked record orders in India as a whole last year. Now let's look at the progress by segment, as well as some specific wins in our nexus of clean, starting on slide 18. As I mentioned previously, each segment sales were up 14% or more when compared to the first quarter of 2021. and the record specialty orders from 2021 are starting to convert to sales as well. Both reported and adjusted gross margin as a percent of sales sequentially increased, not just for chart as a whole, but in each of our four segments compared to the fourth quarter of 21. So slide 19 is our menu of clean solutions that you've seen on numerous occasions for the nexus of clean, clean power, clean water, clean food, and clean industrials. While much of the past two months has been around immediacy of natural gas and LNG, There has not been a slowdown in the focus on actions surrounding more sustainable and ESG-oriented answers. That's the second time that I've said that exact sentence in this call to date, and that's really important because we're seeing multiple different in-flight types of focus on ways to solve for the energy discussion that we've been having in the macro environment. So we're pleased that we inorganically completed the acquisitions and investments that we did in late 2020 and throughout 2021, as we're seeing numerous... opportunities across these interlinkages of clean options. And you can see some of those examples on slide 20. LA Turbine had their highest order quarter in five years, while Earthly Labs had historical record high orders, including orders with 12 new customers. These 12 new customers contributed to our total 84 new customers in the first quarter. Water treatment sales grew over 500% from Q1 21 to Q1 22, and sequentially grew 21% over the fourth quarter. despite the water treatment shop team members being hit hard by COVID the first part of this quarter. One of the very exciting parts of the chart water business, from my perspective, is seeing the cross-selling between our core food and beverage customers, Blue and Green and AdEdge's water customers, Earthly Labs' small-scale carbon capture breweries, wineries, and distilleries, and our larger-scale carbon capture business, SES. One example is Blue and Green sold the largest industrial sale in our history for a containerized S-DOX unit, to International Flavors and Fragrances, or IFF. Blue and Green introduced IFF to SES, and they did a paid engineering study for our cryogenic carbon capture technology for large-scale industrial manufacturing. Since Earthly Labs joined us in December of 2022, in coupling up food and beverage, water solutions, and small-scale carbon capture, we've had 28 cross-selling opportunities between these businesses already, with total order potential greater than $40 million if each comes to fruition. And this month, we launched our sustainable brewery solutions package, an all-encompassing approach to beer breweries. That includes rain harvesting, water treatment and reuse, CCUS, and dosing. This is a perfect example of the nexus of clean. Industrial carbon capture opportunities continue to increase. In January of this year, we had 199 potential CCC or SES cryogenic carbon capture customers. As of the first week of April 2022, we had 252 and have sent 148 proposals out. We're under 81 NDAs for our SES large scale carbon capture technology. This past quarter, there's also been an all at once interest in our gas by rail offering as seen on slide 21. We saw orders come in for Argonne rail cars with a pipeline of more to potentially follow and a large commercial pipeline of LNG rail cars on the horizon. with commercialization taking hold in other geographies. We're uniquely positioned to serve the gas by rail industry. We expect to increase the size of our addressable market for this offering in the coming months if the commercial pipeline continues as it has this past quarter. Slide 22 addresses why we are seeing more LNG opportunities. We shared last quarter that was the first time in our history where the three facets of our LNG offering were all increasing at the same time, those three being big LNG, small and utility-scale LNG, and LNG equipment. This quarter's macro environment, as I laid out at the outset of the call, coupled with a few chart-specific wins, is driving the opportunity even higher. You can read the macro bullets on your own, but let me add a little bit of color to the right-hand side of the slide. Modular mid-scale approach to export terminals is gaining traction beyond the U.S. Gulf Coast, including in regions such as South Africa, which is different than before when our larger IPSMR process opportunities were typically solely North American. IPSMR and IPSMR Plus continue to receive qualification by LNG operators, including international companies, most recently qualified by Total Energies for their upcoming projects. Couple this with our ongoing differentiation via many international patents and our latest process patent, which we had announced on our last call. Our process lends itself to retrofitting for increased gas output in brownfield locations, And IPSMR efficiency leads to lower CO2 per ton of LNG. So our heavy hydrocarbon removal process handles the extreme gas compositions while maximizing LNG production. And finally, IPSMR is proving to be an ideal solution for floating LNG. So now turn to slide 23, and you can see the increase in our real commercial opportunity pipeline. Three main contributors. First, the resurrection of more big LNG projects. Second, the addition of specific international liquefaction opportunities. And third, the increase in potential floating projects. Export terminal projects that were either considered dead or at a minimum a long shot are now back with fervor. For example, just yesterday, the Magnolia LNG project, for which we will have content, this is a project that's already FERC and DOE permitted, received DOE approval for an increase to Magnolia LNG's authorization to export additional 0.8 million tons per annum. This trend in general is reflected in the doubling of the number of reasonably possible projects to move to order stage in the next two years. I'd also point you to the second from the bottom row on the lower chart, showing the doubling of floating LNG projects in our bid pipeline. And while the order potential size of small-scale LNG hasn't dramatically increased, the number of and dollar amount of projects that we think move ahead this year certainly has. Booking some of these opportunities in the coming few months could drive the potential to reach the higher end of our guidance range, as shown on slide 24. Our anticipated 2022 full-year sales outlook is in the range of $1.725 to $1.85 billion with associated non-diluted adjusted EPS of $5.35 to $6.50 on approximately 35.83 million weighted shares outstanding. The weighted shares outstanding number is an increase from our prior guidance, which was 35.6 million shares. all of this assumes a 19% tax rate. Our current sales outlook includes approximately $25 to $40 million of big LNG-related revenue in the year. We want to reiterate again that our sales timing is expected to sequentially increase throughout the year with the big LNG revenue, primarily in the latter part of 2022. And I say latter half, latter part. We debated semantics on that, but Suffice it to say that there's nothing meaningful from big LNG revenue in Q2, but the range we're providing here today is in the second half. Recently, key customers from our HLNG vehicle tank products lowered their 2022 purchasing forecast as a result of the macroeconomic challenges in the vehicle industry, citing specifically the second quarter 2022 impacts. We do anticipate that this is timing into 2023 as the vehicle industry works through their supply challenges. There are specific opportunities that I mentioned on the last slide in our commercial pipeline that if booked as orders in the coming few months could drive our outlook toward the higher end of the range. As we said previously, we do anticipate the first half of 2022 will continue to have a margin drag from historical levels from the ongoing macro challenges, but increasingly the offset as the year progresses by the positive impact from the actions that I've laid out today. Now, with big LNG orders booked, and anticipating additional big LNG orders later this year, our 2023 through 2025 outlooks all increased meaningfully. And perhaps this is the biggest modeling takeaway of the call. As I mentioned earlier in the call, we made the decision to continue our strategic safety stock inventory build, and in turn, this resulted in lower free cash flow for the first quarter of 2022. It allows us to meet our customers' ongoing delivery timeliness and record demand levels, thereby continuing to secure additional business. Even with these challenges and this strategic decision, our net cash used by operating activities was only negative $22 million, and when adjusted for unusual items was positive $8 million. This included an increase in inventory in the first quarter of 2022, driven by the strategic sourcing decisions we made to add the safety stock, the increases in material costs, and the purchasing of material for our larger projects that were booked in the fourth quarter of 2021 and the first quarter of 2022. So even considering the inventory headwinds, we do continue to anticipate that with the payment schedules for big LNG projects work in backlog and some of the other working capital activities on the horizon, that our full year 2022 adjusted free cash flow will be in the range of $175 to $225 million. This month, we did release our third annual sustainability report, which we're very proud of, highlighting the meaningful progress we have made toward our 30% carbon emission reduction target by 2030, as well as all progress on all of the elements of our ESG activities. I encourage you to read the entire report, as I obviously can't cover it all on this call, but I'm going to point out just a couple of notable items. Last year, we reduced our GHG intensity metric by about 14%. Last year, we instituted an ESG component to our short-term incentive awards, and we've maintained that metric-driven target for this year's awards, too. And in summary, we contributed five of the United Nations Sustainable Development Goals. Part of ESG is safety as our number one priority, including as of the end of March 2022, having our lowest ever 12-month total recordable incident rate. Many of you ask, how easy is it for competition to enter these very attractive applications and markets that we play in? I've shared on numerous occasions that cryogenics is not easy, not the process, not the technology, design, or manufacturing of these types of solutions. One such reason is that it has to be done with safety as the number one priority given the high pressures, flammability, and other varying characteristics of handling these molecules. Our biggest safety-advocated chart, and I would go so far as to say in the cryogenic industry, is Tom Druby, one of our very own engineering fellows and vice president of engineering. This month, Tom received the distinguished Charles H. Glazer Safety Award for 2022, which is presented annually by the Compressed Gas Association, or CGA, to an individual in recognition of their safety leadership in the industrial gas industry. We are very proud to be on the same team as you, Tom. Thanks for all of your safety work. And now, Liz, please open it up for Q&A.

If you'd like to ask a question at this time, please press the star, then the number one key on your touch-tone telephone. To withdraw your question, press the pound key. Our first question comes from John Walsh with Credit Suisse.

Hi, good morning, and congrats on the quarter.

Thanks, John. Good morning.

So I guess kind of the first question, appreciate the detail around that big order pipeline increase for the big LNG projects. Given how strong you're seeing demand, can you talk about any changes you're making in terms of maybe the percent you get as an upfront payment, anything around favorable pricing terms, anything else that you're able to kind of highlight there given the strong demand backdrop?

Definitely, and I would say generally speaking on these larger projects as a whole, historically, given the size of them, the ability to run them through our shops, the way our shops are set up, and the absorption impacts, they are higher than our average chart gross margin, and that's based on the 30% historical high rate. In terms of the current state of affairs, we've been very conscious around ensuring that bid validity timing with respect to material cost, which is an important piece of ensuring that we maintain the appropriate margin levels ourselves. And then in conjunction with that, given the difficulty of getting material and the higher prices of it, working with those operators either directly or via the EPC to ensure that they understand what that material cost looks like and when the right time to buy that is, which in turn does change that cash flow profile for us to be more tilted toward the front end. I would say that as a whole, on all of these projects, we're never upside down on cash flow with respect to material, and that continues to be the case, maybe with a little bit more wiggle room up front now, just to give us some flexibility to be able to appropriately purchase materials. And that same discussion applies fairly broadly on the smaller scale side, too. There could be some exceptions on the smaller scale side, just depending on what project it is or if it's a new application. And then in terms of pricing as a whole, we're very transparent with the customers on these big projects where this is the material cost environment that we're in, and so it's not us trying to grab a massive share of additional price. It's, hey, this is the cost of materials right now, and if you need to get started now, this is the amount that it has to be. So I'd say as a whole we've been able to – all in all, maintain, if not improve a little bit, both the cash and the pricing side.

Great. And then maybe just as a follow-on to that, you know, you're talking about better margins as we go through the year. You know, if we kind of isolate price-cost, either on a dollar basis or a margin impact, can you help us understand how that improves as we go through the year? Thank you.

So There's two pieces of the answer to that question. Well, there's obviously many more than that, but let me summarize it in two pieces, two being the backlog burn off of the lag from last summer and the second and third quarter of last year, and then the second being the timing around some of these mid-scale, small-scale, and larger projects, which we had chunk of, and those are the types of projects that had material bid validity. And so we were able to really get a meaningful mix as those start to take hold in the second half. So I'd step Q2 up moderately, but really the biggest increase is going to be Q2 to Q3. And then we'll see that level exit the year maybe a little bit better in Q4. That'll really just depend on how some of the bigger LNG projects revenue recognition between Q3 and Q4 plays out. But the most material step on the margin profile side on gross margin as a percent of sales will be Q2 to Q3.

Great. Thanks for taking the questions. Thank you, John.

Our next question comes from Martin Malloy with Johnson Rice.

Good morning. Hey, Martin. Hey. I was wondering if maybe you could expound a little bit in terms of what you're seeing for demand on the LNG equipment, related equipment, once the LNG gets to the other shore, the downstream LNG equipment, and in particular what you're seeing in Europe for demand. I know you mentioned in the press release from a European government organization, I think it was tens of millions of dollars worth of equipment orders. I assume that was LNG related. But maybe... you could just help us with the magnitude of demand that you're seeing for the regas transportation storage type equipment.

Yeah, great point. And I would say that on, I think it was slide 23 in the deck where we laid out, we kind of split the big LNG export terminal opportunity increase and the smaller scale. And in that, we were fairly conservative on the smaller scale side on regas expectations. We have seen certainly an increase in inquiries around regas terminals in Europe for each of the individual countries that you've seen in the news, and we pointed out looking to gain some more independence from an energy perspective. We haven't seen a material increase yet in orders with respect to regas terminals. Where we're seeing more of that activity is on the infrastructure side itself. If I need a near-term solution, as an example, to I can get gas here, but now I need to move it. And ISO containers are a great example, and we're starting to see an uptick again in ISOs. The order that you referenced for the European government, one of the European member states' governments, is around trailers, so again, around transport. Fueling stations is another one that we continue to see high-level inquiry on. So building the infrastructure once the gas gets there is definitely continuing to pace. Inquiries have increased on the regas side. And so more to follow on that. I think we're just starting to see that happen. The biggest discussion, there's two parallel paths of discussion happening in particular with the EU member states. One is I've got to make sure I solve for next winter. and two is I better get moving on a longer-term plan. And so we're seeing that manifest itself both through the equipment side on natural gas, but also through some of these alternative energy discussion points. So it's not I've completely thrown the baby out with the bathwater on sustainability. I still have to solve for that, but I need to do these two things in parallel.

Great. Thank you. As a follow-up question, I think on the last call you talked about gross profit margins approaching around 30% second half of this year. Is that still a good target?

Still a good target. I think we characterize it as exiting the year, and that just really goes to my answer to John's question around some of that bigger project work. Is it Q3, Q4? So it's very fair to still state that as the target.

Great. Thank you.

Thanks, Marty.

Our next question comes from Chase Mulvihill with Bank of America.

Hey, good morning, Jill. Hey, good morning, Chase. I guess first question I'm going to stick on the LNG theme. You know, obviously you're going to have some pretty strong or you've had some pretty strong LNG orders so far this year and those probably continue. You know, you talked about the three larger orders. you know, Schnur Stage 3 VG Plaquemines and Driftwood this year. But if we look past this and, you know, you probably had discussions or ongoing discussions, but could you talk about, you know, the timing of, you know, more big LNG orders here in the U.S., you know, and maybe, I don't know, size, you know, MTPA or anything you want to kind of frame for us once we get past these three orders?

Yeah, that's a really good point that let me address with some specificity here. And I would piggyback. I think Lorenzo of Baker Hughes commented 100 to 150 MTPA starting construction in the next couple of years. We would concur with that general estimate. And from there, some of these projects might actually – There is potential that some of them aren't even after the three that we talk about publicly. They could maybe fall in the middle there, but let's just talk about them as after those three. We're seeing various different size MTPA projects. Some of them are building upon existing projects in the United States, so you would know the ones that are operating currently. And those add-ons are in the range of kind of two to four MTPA to existing sites. We're seeing the potential for, and your question was specific to the U.S., but I think one of these non-U.S. maybe in the eight MTPA range outside of the U.S. has the potential to move ahead. And then you've got some more work on CP2, that's ventricle with calcium pass 2. I think that certainly is one that moves ahead in the coming couple of years. And then you've got some of these other guys that are on the U.S. Gulf Coast. Ranging typical ones that I would say there are going to be in the 10 to 15 MTPA range, so you could guess their names, certainly. And then maybe a little bit further out, but certainly a positive was just my comment about, like, Magnolia and Texas LNG. But I'd put that in more of the second tranche, so not the 23-24 type of timing. Maybe get started in 24. That second tranche is pretty big, too, in my opinion, which is a little bit different than what we had believed before. So we had believed that there would be this group in this cycle, and then there would be a hiatus, and maybe there was another cycle in 27-28. We now view this as they're going to continue to stack on themselves without that hiatus in the middle of the decade. So the second tranche would be in my category of we would have said they were dead or at least far from being possible, and we're starting to see activity on those as well.

Okay, that makes sense. Can I follow up real quickly on that one question? You said 8-NTPEA. on an international project, would that one be modular as well, or would they kind of be larger stick projects?

It would be modular as well. So we're pretty excited. There's a couple of these internationally that have changed direction now to modular mid-scale from their original thought process, and we're pretty far along in those discussions.

Okay. And then a real quick follow-up on specialty products. You talked a little bit about the softness in first quarter, but could you maybe just provide an outlook on expectations for the rest of the year as this segment recovers, especially kind of maybe on the margin side?

Yes. So specialty continued on in terms of demand as we had expected it to be in the first quarter. So the demand side is in line significantly. I think somebody offline had asked me a question about hydrogen orders at $30 million. That's all equipment. So that's actually a pretty good quarter when you're talking all equipment and no liquefaction. So the demand side, we expect to continue to grow in specialty sequentially and build off of the starting point there. From the profit side, the first quarter, really the biggest impact on specialty hydrogen perspective was HLNG vehicle tanks. So we had to do some rejiggering around of capacity. So we had planned for a different forecast, and then you've heard these truck makers indicate that they're not able to get semiconductors. So we expect to sequentially step that out as the year continues on with, let's see, gross margin increasing sequentially every quarter. The second half is stronger than the second quarter because of the timing on our liquefaction, both our helium and hydrogen liquefaction revenue. So I'd stair-step it, but with the second half being certainly back in the mid-30%. Okay. Perfect.

All righty, I'll turn it back over. Thanks, Jill.

Thank you. Our next question comes from Eric Stein with Craig Hallam.

Hi, Jill. Eric. Good morning. So maybe could we just talk about, you know, any details you can provide on the hydrogen agreement with the industrial gas company? Just interested, you know, as you've kind of seen a little bit of a shift from the first movers to now the really big players getting into it, you know, maybe details on that agreement, anything you can share on, you know, potential outlook in that regard.

Yeah, that was a very big win for us. We're really pleased with – Any of those types of agreements are very good, but when you get a customer that's very well established in terms of handling and building larger scale hydrogen, that's even more impactful, I would say, in the near term to our hydrogen outlook. Obviously, we can't tell you which customer, and we don't want to give away any competitive intel on their behalf, but this covers a wide variety of geography. And I'd say that really goes from the U.S., so obviously all the majors play in the U.S. It goes to Asia, and my comment around expectation for China hydrogen to expand, this would be something that we would expect this particular player to do in that region. Europe and North America, including Canada. So all in all, this covers... all the equipment that we provide, and that includes Braze Aluminum heat exchanger cores, which is a really, really big win for us. When you look back historically, we didn't typically serve any of these larger customers on the Braze side. There were incumbents like Sumitomo and Kobe, and since a couple years back when the Sumitomo challenges were in play, we've taken this market advantage to try to have our offering at least get tried in the field, and that ability to do that has proven that our brazed cores really are high performing and high quality. This is a win for scale, it's a win for speed and projects that are funded and happening now, and it's a win for us on getting our equipment into a more variety of geographies, all of which require specific equipment certification on the hydrogen side. and us having that, or at least being partially along the certification process, is another differentiator for others trying to enter that space.

Is it fair to say there are other agreements like this out there, given your place in the market, given what you just talked about on the heat exchanger side?

It is fair to say that we have a variety of agreements at various stages on hydrogen, on carbon capture, on general products, and Now we're starting to see that actually step up a little bit on the water treatment side. So, yes, it is very fair to make that statement.

Got it. So then maybe just turning to Big LNG, I thought it was really interesting that Plaquemines Phase 2, that you got an order for that, I mean, well in advance of even what you probably thought and certainly what they had discussed publicly. You know, just curious – Given the acceleration of the size and the timing of this and that this cycle probably goes longer, what are you seeing in terms of the advantage you've got, scarcity of production capacity driving those potential orders your way?

Yes, I concur with everything you summarized there in particular that it was a surprise to us as well to have that possibility. six of the 18 come our way so early this year. We had anticipated that we might get it in this year, but certainly not early in the year. With that said, I think the size of these and, as you pointed out, the continuation of them in order without the typical cycle going down and stopping and then starting back up, I think you're going to see a more steady state of construction over the coming decade. With that said, the my prepared remark of we aren't very good at timing capacity expansions, but we got pretty close on this, is proving to be very beneficial in the ability to take on more of these projects of all sizes. The other thing that is helping in this in terms of speed is we've done so many of these that we can do them in a very, very short lead time. And if the lead time we quote isn't short enough, and a customer says, I need it a month or two or four sooner, we're able to make that happen. And I think that's by far the biggest differentiator. And coupled that with this Tulsa expansion gives us a lot of confidence in our ability to continue to serve the specialty markets that also require brazed aluminum heat exchangers for manufacturing, whether that's helium or hydrogen or biogas. So I think it's The combination of our experience making these products, they're proven in the field, and the capacity that we have allows us to be flexible and work with the customer to meet their schedule.

Okay, that's great. Thanks, Jill.

Talk to you.

Our next question comes from Ben Nolan with Stiefel.

Hey, Jill. Hi. I wanted to get to something that didn't really come up much, but seems like it should be increasingly a thing. As we're seeing a lot of oil and gas development or drilling and rig counts going up and everything, an area that has sort of been a little nascent for a little while is the air-cooled heat exchangers and maybe developments on gas processing that could seem like pop up here. Are you starting to see any green shoots there at all?

Yes. Yeah, you know, I wish I'd had you around to put what we were having in our script, because I forgot about that one. It is a little bit early on making a broad-based statement, but in short, the answer is yes. We're starting to see some green shoots on those more traditional, whether it's PET-CAM or NAT gas processing, certainly many more in play and moving approaches. I think the metric I was using last year to kind of give a sense of what's happening in the market in those spaces was, you know, is quoting activity increasing? And now I'd say order activity is increasing. So these are moving much quicker from, okay, what's the price and what can you do to taking hold? And you see that in our, let me take a quick look at sequential. Yeah, the last couple of quarters, we've definitely seen that in the order book. The other The other place that we're seeing that that serves this market a lot is our VRV shop in Oronago, and we've seen a couple of bigger projects, bigger kind of in the 8 to 12 range for these types of applications. So I think this year, I think you make a good point. This year we could see that as an increase that we've very conservatively built the year out in terms of our current outlook. Okay.

Okay. And then as a follow-on, I could, you'd mentioned, I think you said 30 hydrogen liquefaction plants that you're, I guess, quoting on at the moment. Any sense as to sort of how over the course of the year, how you, the progress or how you see that playing out sort of maybe relative to where we were?

So we had, we didn't, we did not, originally anticipate that we would have a hydrogen liquefier order in Q1. We kind of knew that heading in. I'm not sure if we vaguely signaled it or strongly signaled it, but it wasn't a surprise that we only had equipment. I will be extraordinarily disappointed in our hydrogen commercial team if we don't have a liquefier booked in Q2. I think that you're going to see quite a bit more activity in the second half of the year because you're starting to get more capital into some of these projects that are individual projects. So starting to separate from the larger guys who are more established and doing repetitive projects, now you're starting to see some other entrants in the space that are getting to the point of being fully funded and starting construction, and they want to start getting online, taking advantage of being a producer. So I think one big challenge to the commercial team, too, in Q2, But realistically, I think you get one in Q2, and then the second half, you see two or three.

That's perfect. I appreciate it. Thank you.

Thanks, Ben.

Our next question comes from Robert Brown with Lake Street Capital.

Morning, Jill. Just wanted to follow up a little bit on capacity, given the demand growth. When do you sort of see you have to add capacity and have capacity constraints, or do you feel like you're pretty good for the next couple of years?

Okay, so our strategy on capacity expansion is to have three to four meaningful capacity expansions in flight at any given moment. We have a very detailed plan on that, which we'll share a little bit of. Some of it's competitively strategic that we don't want to share. But you see the staggering of how we have India coming online mid-year this year. We've got the brazing line coming on early next year. The trailer expansion in Germany will come online middle of next year. And what we do around our strategy on this is we look at the demand profile and whether or not we have baseload volume to support the expansion or the greenfield. And that's a very important step in this. So for example, we already had base load volume in our Germany trailer facility expansion. And then you throw that tens of millions of dollars of European government order on top of that, and it says, okay, this is a payback of sub one year. That's our thinking on how we approach it so that we don't get behind the eight ball. And typically these expansions take about 12 months for us to complete if they're rooftop. So our next tranche of expansions, there will be, let's see, one to two that kick off later this year. One will be on the energy side of the business, and one will be on the tank side of the business. And that will allow us to meet some more of the specialty demand that we anticipate and continue to take on some of the small-scale LNG. So all in all, all said, it's a stacked approach of timing of these projects, which also allows the team to execute flawlessly and still deliver on time, not miss any potential orders. And we might be a little early on some of it, but I'd rather be a little early than too late to the party. So you'll see that continue through 2025 is kind of how far out we've planned at this point.

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

Our next question comes from Mark Bianchi with Cowan.

Hey, thanks, and thanks for slide 28. It made the morning go a lot more smoothly for me.

Yeah, I was going to call it, we were going to call it the Mark slide, but we didn't know if you'd appreciate that or not. Thank you for the suggestion.

Pointing out my inability to do math. Our confusing numbers, but good suggestion.

Thanks, Mark.

Yeah, thanks. So we've got like 25 to 40 million bucks of big LNG revenue baked into the revenue guide for this year. If I strip that out, we're kind of like 1.7 to 1.8 for the non-big LNG revenue this year. I'm curious, you talked a little bit about the hydrogen order outlook. How do you see the order outlook X big LNG maybe on a book-to-bill ratio basis versus that 1.7 to 1.8?

Yeah, I think our expectation in Q2 that we would be certainly 0.05 range on book-to-bill, and then it steps up in the second half with some more of these small-to-mid projects that are non-big LNG liquefaction projects. So you'd expect that to be closer to, more similar to 1.1 to 1.13 book-to-bill in the second half.

Okay. Okay. Super. And then the next one, I know you don't want to guide specifically to quarterly results or anything, but just maybe to give us a little bit of a steer so everybody's not over their skis on the second quarter. I mean, I'm thinking maybe revenue's up in the ballpark of 10% and you get 100 basis points of margin expansion on gross profit, but just curious how you react to that.

Yes, and I will give my legal disclaimer that we will not give quarterly guidance. I think you are spot on.

Okay, great. I'll turn it back. Thanks.

Thanks, Mark.

Our next question comes from Tom Hayes with North Coast Research.

Thanks, Jill. Good morning. Hi, Tom. Hey, I was just wondering, you guys called out in the formal announcement your expectations on the food and beverage lines. I didn't get a lot of detail in the slides, but I was just wondering your thoughts on what's going to push that forward in 2022.

Yeah, so the food and beverage, yeah, it's interesting because what I think is sometimes lost in how we communicate the markets is that there's a lot of different products that go into the food and beverage market, as an example. So when we talk food and beverage specifically, that's excluding like Earthly Labs small-scale carbon capture because we capture that through the carbon capture side of the business, but you're still hitting the food and beverage customers. So let me answer it in two parts. The first is the traditional food and beverage, which is our tanks and our dosers for you'd have national account applications, like I referenced Chick-fil-A, those types of customers and the products that go into them. What we like about how the year is setting up is you have a combination of folks that hadn't done much during the COVID shutdowns on the restaurant side combined with quite a bit of infrastructure and franchise build this year. And so we see the setup that Q1 was really good food and bed-wise, quite surprising to us actually in terms of the order book, but we see that continuing to increase as the year unfolds. and that's on the tank and doser side. You have only seen the start of the Earthly Labs order book. The thing about the Earthly Labs solution is there are so many customers that we already have that this is a prime application for, and so we're able to very quickly pull that through through the... team and you're hitting just a greater volume of customers than Earthly on their own with just a few commercial folks were able to do. And so what I like about that business is we're starting to sell the CC Elm. So we were selling the smaller unit, which is the Oak. Now we're starting to sell the Elm, which is a larger unit and is six times the cost of the smaller unit. It obviously has value that goes along with that. and we're able to – we sold the first one of that last quarter. We're seeing an abundance of interest in that. So to hit the food and bev answer, you're going to have to look both at food and bev and carbon capture.

Great. Appreciate the caller and looking forward to the meeting next week. Thank you.

Thank you, Tom. Look forward to it.

Our next question comes from Ian McPherson with Piper Sandler.

Good morning, Jill.

Hey, Ian. Good morning. Good morning.

I guess Greenstone Renewables was exciting enough for you that it's kind of a headline item in your release, so I just wanted to ask you to maybe expand on that opportunity. How big is that project for you over time, and what are you doing, and what's the duration, et cetera?

Yeah, and I put it in there purposely. I'm really glad. picked up on that, Ian. Thank you for that. The reason that we put that in there, the headline item, is threefold. Number one is that it's an exclusive arrangement with us, so we are the provider of technology to them. I see it as a multi-plant opportunity. While we're just talking, we focused in on the one that we expect to potentially move to order later this year. There's I like the idea of exclusivity of the technology on a company that's looking to do more than one of these. On the initial one, it's going to be kind of $35 to $40 million in terms of headline price for that order. And so you'd see kind of a similar range on the equivalent of a traditional hydrogen liquefaction plant at 12 to 15 tons per day. So that's why we're looking to do many more of these types of arrangements where the customer has a plan to have a multi-year build-out. And I like that because once you have the first design with them, then it's really easy to replicate. It's easy for us to manufacture. And in turn, the efficiencies that we get, we'll partially share that with the customer, but we'll also see that margin profile increase.

Great. That's interesting. Thanks. My the other thing I want to ask you about was on slide 23, highlighting how basically the big LNG pipeline for you has, you know, more than doubled in terms of number of projects and multiplied by more than that in terms of your potential revenue content over the next several years of bookings. But what we hear around the neighborhood is that ENC is probably going to be on the critical path in terms of their capacity bottlenecks to prosecute that much activity in that short a time frame. Do you agree with that? Do you think there might be a better outlook than some believe with regard to that E&C bottleneck to double the cadence of especially domestic LNG export?

We would wholly disagree with that word on the street. The capacity I think is in general fine and the speed is the critical path is certainly not chart equipment in terms of long lead times. So all in all, I think the short answer is absolutely. We think that we can take on much more of this work ourselves and deliver in 12 to 14 months on a braze in a cold box. And it could be shorter depending on the size of the core. It could be longer if it's much larger. But definitely, The flexibility that we have in play from the brazing side gives me confidence there. And then without going into a ton of detail, we've got some work underway on the very near-term additional capacity on the cold box footprint.

Yeah. No, I got you on the chart side. I was really thinking more on the EPC capacity. probably more sensitive to labor pinch, et cetera.

Okay, I missed your point completely, Ian. Sorry about that. I got you now. Tracking with you. Yeah, I think, first of all, the modular move helps that problem dramatically. So that's a positive because instead of having the stuff be stick-built at site, you can do it with meaningfully less people at the location itself. And you saw that with Calcasieu where the number of folks that they had on site, whether it was their own or the EPC, was dramatically lower than if you were doing a baseload type of facility. So I think that's also a plus in terms of the modularity side of things. What we're hearing is it depends on which EPC, it depends on which project, but it's We still talk to a ton of the EPCs on a regular basis, and no one is telling us we don't want to go bid with you, and that's on all size projects. So they're still looking and willing to and able to meet schedules, whether it's a small-scale hydrogen liquefier that they're bidding together with us on or one of these larger projects. So I think I'm guessing that you'll see some tension there. Yet the EPCs seem to be figuring that out. The Fab Yard side of things might be a constraint. So where these things are put together at respective Fab Yard posts, we're definitely seeing the interest in having multiple Fab Yards by some of the end users. So not having that constraint be, OK, my whole project's dependent on Fab Yard 1. So spreading the wealth, I think, is going to be a trend that you'll also see in the market.

That's great. Thanks. I appreciate the comments and look forward to next week.

Thanks, Ian. And you got me to tell that I'm expanding cold box capacity. Good job. See you next week.

All right. Thanks.

Bye.

Our next question comes from Pavel Mokhanov with Raymond James.

Thanks for taking the question. Back to Europe and specifically the green hydrogen build out. In the 60 days since the war started, have you noticed any substantive shift in the level of private sector or governmental awareness of green hydrogen as a displacement to Russian gas?

Yes, anecdotally would be my answer. So there's certainly been an increase in conversations of speed on green hydrogen, and that's in Europe, but also in other locations and other geographies that I think are paying more attention now to, I can't say that I'm going to do this in 2030 or 2040. really take my plan from hypothetical or theoretical into action. So I view it as a first step in accelerating those conversations. Haven't seen it translate to the order book yet.

Understood. More of an in-house question. I think the last four months is the longest period while you've been CEO that Chard has not done anything an extra M&A deal. Is that deliberate?

It is deliberate. I love you, Pavel. You're going to get me to go down a path here, and I think it's a really important one. We had a view back in late 2020 that there was a 12-month window of getting deals done that fit really closely into our portfolio and doing so at what we viewed as discipline to our investment principles. That proved to be true. We started to see other deals that were not absolutely necessary that we were passing on. So deals we were getting first looks that you've certainly seen other companies go by that we said either a piece of this that we don't want and we'd have to figure out how to get rid of it or that's a outside of our discipline valuation profile in terms of returns, all kinds of different reasons. So it's been on purpose for the way that the market has shifted, but also for absorbing and integrating the acquisitions that we have. And I hope that comes through in my commentary about the way that we're seeing these synergies start to unfold and very quickly, too. Now, the second part of my answer is it's deliberate, but it's not permanent. And so there are still opportunities in our pipeline, and next week we're going to talk through specificity around the three or four key areas that we're still opportunistically looking at potentially inorganically spending some money in. that we are looking at are very similar in profile, meaning headline price. So there's not a big go out and spend a billion dollars and have the company turn into a water treatment company as a whole. That's not the approach. We're going to stay with the Pac-Man approach that we've taken to date. And I feel really good about the integrations that have been completed so far. Heck, first quarter, we went live on JD Edwards, which is our universal global computer system at both Cryo Technologies as well as Ad Edge. And so getting these tight integrations under our belt really gives us the opportunity to leverage both the sales and the cost synergies, and we expect to continue to do that in the first half of this year.

Very clear. Thanks again.

Our next question comes from Adi Modak with Goldman Sachs.

Hey, Jo. Can you talk to the competitive landscape and your position, particularly with the IPSMR technology as you think about the modular LNG change expectation going forward? What kind of market share do you think the process technology could have?

Yes. So the IPSMR process technology differentiation, I talked a little bit about how it's proving to be useful on the heavy hydrocarbon removal side, on the floating LNG side, and on the retrofit for brownfield sites. And translating all of that to why, which I think is your question, is the modularity and the way that the process design works with the equipment makes it really suitable for smaller plot sizes. And so if you have a different shape or a smaller piece of land, IPSMR is very good for that. highly efficient, and in many cases it can actually generate more gas in the same space for the same amount of capex and opex than some of the other technologies that are out there. We also have seen the ability for IPSMR and IPSMR+, which, by the way, plus is something that you could actually retrofit IPSMR with the plus at a future point in time, where you have the ability to get more, if you say I'm doing a 1 million ton per annum liquefier, you can actually get 1.4 million tons per annum of gas out of that same liquefier using IPSMR. Now there's a lot of technical details to make that happen, but those are the types of things that are creating differentiation for IPSMR. I'm very pleased with the pickup and the traction of IPSMR in the market as a whole, and most tickled by the fact that it's starting to get international attention too. With that said, the other technologies that are out there are also very good. And so I think that there is going to be a mixed bag of answers as the different operators unfold what they want to do. It could be I already have a plant and I want to stay with that technology, so I don't want to change. We've seen some folks use one technology on one plant and another on another plant. So I'd say all in all, I think our potential for market share on the modular mid-scale side, so I'm excluding the base load, which aren't really even happening anymore, and then I'm excluding the small scale also because I think that's a different answer. The modular mid-scale, you know, I'd size it to be the potential to be 40 to 50 market share in that space. On the small scale, I think it's... meaningfully higher number because there's less competition on the small-scale side.

Great. And then you've talked about this a little bit before, but given the macro landscape changes, I wanted to ask how are you thinking about your capital allocation strategies between organic and inorganic investments and maybe the potential for balancing some of that growth with return of capital over time?

Yes. So certainly we think right now organic and inorganic investment for profitable growth is the right way to spend our money. You're seeing us do more organic of late, which is with respect to the capacity projects that we've described. The inorganic is, I'd say, a sub-bullet primarily because there's nothing we have to have into our portfolio. We're we're super pleased with this portfolio that over the course of time has come together. And that's really been through our own R&D group as well as the inorganic side. But there's a few out there that I think would make sense to add. And again, those would be at similar valuation or headline prices that you've seen us do over the last 18 months. We do expect as we get paid for the big LNG work that accelerates our ability to pay down debt. and get to a point, we would actually anticipate we get to a point, you know, to be certainly sub one leverage ratio. And at that point, it becomes a meaningful conversation in the boardroom about how do we think about a different way to return to shareholders. So I think that there is the potential for that conversation in the near to medium term horizon, but certainly in the current state, the investment for growth and debt pay down are our top allocation priorities.

Thanks, Audie.

Thanks, Audie.

Our next question comes from Craig Shear with Two Way Brothers.

Hi. I want to pick up on Audie and Paul's questions a little. On the 20 prospective big LNG orders, What proportion would you say are actively considering charts full IPSMR technology suite? And internationally, as you look at your opportunity sets, can you kind of provide any color about the growing chart content opportunity per international order that we're seeing now versus a year or two ago? And finally, on the hydrogen question, Do you see the increased 2023 to 2025 opportunity in LNG completely additive to at least the prior hydrogen outlook? Or could the latter, you know, the hydrogen outlook have some deferral as traditional energy independence takes precedence, you know, over the next couple of years?

All right. Thanks for the questions, Craig. So let me take one by one. When we look at the percent of the potential project content and which ones would use IPSMR, I'm going to answer this based on 5 MTPA and above. So I'm going to exclude the small-scale stuff. Let's see. Real quickly, back of the envelope, I've got... Certainly 60% of these would be in conversation for the potential to be IPSMR. Some of those have incumbents that are other process technologies. So if you wanted to peel the onion back, I think you'd have to risk adjust the ones that the incumbent has their process on their existing locations. So trying to displace is a lot harder than trying to sell the process to someone somebody who doesn't have an incumbent. So the 60%, you'd have to risk adjust that for that discussion, but you could apply that as a 50% to the 60% number. The second question on the international opportunities, I mean, those are wholly additive to our position from where we were a quarter ago, if we get that. And I feel like we're very well positioned. The international extensions, or new builds are a little bit slower in terms of moving forward. So a lot of this has been us working at this for three or four years to get qualified and get to the right teams in these larger organizations that are making the process technology decision. But those types of projects are similar. If we are to get IPSMR, it would be similar in size to some of the U.S. Gulf Coast work that we do. And then the hydrogen question versus LNG and whether the hydrogen opportunities would be, well, I guess I could answer it two ways. Hydrogen additive or is the LNG additive to the hydrogen? Either way I'd answer it is we believe hydrogen is additive and not a displacer to the things that we're talking about, at least in the first half of this decade. I think over the course of time, how those How that line crosses, I don't have a guess right now. It's too early to tell in terms of the evolution of the hydrogen economy. Yet the hydrogen folks that are working with us, a lot of the 419 have absolutely nothing to do with the LNG side. But we're starting to also see a little bit of a subset of the LNG players say, yeah, let me contemplate doing a mix. Let me contemplate thinking about the next step here. But no one is going now back to the authorities and going to rejigger a LNG facility and add hydrogen in because that's just going to add length of time before construction starts. So I think that's probably step two, maybe step three later this decade.

How easy would it be for you to do a rejiggering or brownfield adding hydrogen 10% hydrogen to a large-scale facility?

So it would depend on a lot of factors, how easy it is. Let's describe it maybe that we have looked at this for multiple different customers. Most of that's been on the smaller-scale side. And in the context of what are the critical points to design into LNG today to be able to potentially blend In many cases, it's up to 25% or 30% hydrogen. So there are some elements of the design that make it easier if you're going to retrofit it later. The second answer to that is you can take hydrogen equipment. In many cases, that's going to be different metallurgy, and we can accommodate multiple molecules, but it's not just an off-the-shelf type of product. I think the question is less applicable to us. So our answer would be, yes, we can do it. And the question would be more applicable to some of the interconnection points with other people's equipment. So having an interconnection point with a compressor, and a compressor would need to be able to handle that, the pipelines coming in and out. So it's a fairly – it's not a one-company answer. It would have to be an interconnection point of various different companies that could work together on that. I think it's actually very realistic, and I don't think it's one of these far-fetched ideas. I think you're going to see more and more of that. But again, I don't think that's a 22, 23, 24 type of timeframe.

Great. Thank you.

I'm showing no further questions in queue at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.