Chart Industries, Inc.

Good morning and welcome to the Chart Industries, Inc. 2022 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. If you have not received the release, you may access it by visiting Chart's website at www.chartindustries.com. A telephone replay of today's broadcast will be available following the conclusion of the call until Friday, March 3, 2023. 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, including 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 Avenko, Chart Industry CEO, who may begin.

Thank you, Justin, and thanks, everybody, for joining us this morning. With me today is Joe Brinkman, our CFO, and together we will walk through the presentation that was released this morning. While the deck has numerous updates that can be reviewed at your convenience, our formal remarks today will focus on our 2023 outlook, our record fourth quarter and full year 2022 results, the current operating environment, numerous tailwinds that both Chart and Howden are experiencing, and a status on the closing of our pending Howden acquisition. Before we get into our 2022 results and how they springboard us into our reiterated 2023 outlook, note that everything included in the supplemental presentation and our formal remarks today relates to continuing operations. We have reached a preliminary settlement in the Pacific Fertility Clinic litigation matter related to our 2020 divestiture of our cryo-bio business. And as noted in the press release, this will be included in discontinued operations. We are very pleased to put this episode from our prior divestiture behind us and resolve these 217 cases. More specifics regarding the settlement will be included in our 10-K filing. Starting on slide four, we reiterate our chart standalone outlook for 2023 for sales in the range of $2.1 to $2.2 billion. We are confident in this range given our strong visibility and further supported by the five items on the bottom of the slide. First, it is not unusual for project revenue to shift between quarters. We anticipate realizing pushed fourth quarter 2022 revenue in 2023, but we did not increase our outlook for that timing shift. Second, our outlook does not include any additional mid or large project orders between now and the end of the first half of 2023, which could provide additional revenue in the second half of the year. Third, even though we are seeing end market improvement in HLNG vehicle tank sales, our sales forecast for those HLNG tanks is flat with 2022. Fourth, as of the end of 2022, we had record backlog of $2.3 billion with approximately 60% of the full-year 2023 sales outlook already in backlog, higher than in prior years. And finally, we have existing capacity to deliver on our backlog and any potential new orders that could materialize throughout the year. We are also reiterating our previous 2023 guidance associated with our prior adjusted non-diluted earnings per share outlooks which was a 2023 standalone full-year equivalent adjusted EBITDA of $440 to $480 million, which you see. We will be using EBITDA as a financial metric going forward. In light of adjustments, cost, and variable metrics and timing associated with the Howden acquisition, we will not provide standalone chart adjusted earnings per non-diluted share for 2023. Yet following the close of the Howden acquisition, we will provide updated combined company guidance for the calendar year 2023 for sales, adjusted diluted earnings per share, EBITDA, and adjusted free cash flow. All of the current share count and interest information as of now is included in the supplemental presentation. Our adjusted 2023 full year free cash flow is also reiterated in the range of $250 to $300 million. including our reiterated capital expenditure outlook of $60 to $65 million. Effective in the results presented today for the fourth quarter of 2022, we are no longer adjusting inventory items for free cash flow. Seasonally, as in past years, our first quarter is typically our lowest quarter of the year, and we expect that normal first quarter seasonality in 2023. Given this and the timing of our backlog, we expect quarterly revenues, gross margin, and operating margins to continue to increase sequentially over the course of this year. The walk in the middle of this slide shows our backlog as of the end of 2022 that's available for 2023 sales recognition, giving us strong visibility to our year, as well as book and ship for the year, which is consistent with prior year's book and ship activity. Moving to slide five, this shows each of our segments and the anticipated standalone year-over-year 2023 full-year growth. We have the strongest backlog that we have ever had, and that supports confidence in heat transfer systems, specialty products, and cryotank solutions outlooks. In repair service and leasing, Lifecycle, which is our field service group, had the largest order month in December of 2022 and continued with a strong start to 2023 orders, supporting strong first-half 2023 RSL sales and margin. One example is a recent field service order for $2.6 million in the Middle East. We have included a section in the deck on slide 10 through 16 that provides specifics for end market tailwinds and their positive impact to Chart and Howden, and even more so to the combination of our companies together. We'll not spend time on this call today on those detailed slides, but rather speak to an overview as shown on slide six. Not only do we as Chart have our largest commercial pipeline for the next two years, We also have started 2023 very strong from an order perspective, with over $285 million of orders in January alone. So let me give a few market condition updates by segment. Related to HTS, we have seen more orders recently related to cryo plants being built by midstream companies, and we're seeing steady turnaround work in PETCHEM. Biofuel and renewable diesel activity continues with large air cooler demand. And demand with our LNG customers continues at robust levels. Small-scale and floating LNG continue to advance with several orders expected to be released in 2023. And we do also expect further big LNG activity this year in our order books. This expectation is not only for process technology and equipment, it is also for more opportunities for nitrogen rejection unit studies and potential NRU implementation orders. Related to specialty products. In hydrogen, we are seeing broader geographic penetration in places such as Korea, China, and Canada, as well as additional subsegments such as utility power generation, like the energy vault order we just received, as well as marine activity in hydrogen picking up for storage and fuel systems. Multiple government funding programs are incentivizing partnerships like the U.S. Department of Energy Hydrogen Hub Consortium's where we are also well positioned, as is Howden, for opportunities in production, transportation, and export projects. We're seeing increasing interest with heavy-duty fuel cell trucks, driving demand and active order activity for our hydrogen fuel station equipment with multiple customers. In carbon capture and storage, opportunities are growing in both size and quantity, driven by expansion of brewery and winery customers as well as expansion into newer segments such as lime kilns, biogas, coffee, and dry ice. CO2 shortages globally are driving immediate demand, and our customers are now looking to move from our large-scale carbon capture feed or engineering studies to actual CCUS plant deployment, including our expectation for initial equipment orders in the near term. There's also a helium shortage, which is driving a number of customers to move ahead with producing more volume, resulting in us seeing a heavy increase in quotation activities for our helium process technology. Food and beverage demand is also continuing its steady increase, and space exploration has kicked off 2023 with high demand levels, a strong funnel of projects, and multiple million-dollar-plus orders. Strength in our water treatment business continues as our average opportunity size is increasing, and we see significant chart water opportunities for growth ahead in international regions where access to clean drinking water and wastewater treatment is now receiving government funding. And for cryotank solutions, primarily related to industrial gas, our customers in this market have told us that they have all budgeted for normal year-over-year growth, and orders are in line with that so far in 2023. We included slide 7 to show some of our 2023 year-to-date orders because it demonstrates not only these macro tailwinds just described, but also our continued broad-based demand. I won't go through everything here, but pointing out just a couple of these so far in 2023, including an order for LNG systems with WESON heavy industries for $115 million, a floating LNG order for brazed aluminum heat exchangers for $19.5 million, and additional POs for our liquid hydrogen and oxygen trailers plus a water purification system for electrolyzer production. We have very strong commercial movement in carbon capture, as I just described the market tailwinds, both large and small, with orders for fans for a major direct air capture project, tanks and orcas for methane elimination, our first sale of Earthly Labs' 4cc oak units to a beverage distributor, and an expanded engineering work with KAUST in the Middle East. We announced our definitive agreement to acquire Howden, a leading global provider of mission-critical air and gas handling products and services, on November 9, 2022, with an anticipated closing date in the first half of 2023. Moving to slide 8, we completed our financing activities related to the transaction in December within our previously stated anticipated blended weighted average cost of debt range. We have received clearances from all except two of our total required regulatory approvals. Pending receipt of these two remaining international regulatory approvals, we now anticipate that the transaction could close in the next five days and are optimistic, based on information received as recently as this morning, that it could close before the end of the first quarter 2023. As a reminder for all the slides that refer to Howden in this presentation, we're still pending those approvals before closing. Both teams remain laser-focused on execution, and Howden, like Chart, continued to experience strong demand from numerous macro tailwinds in their end markets in the fourth quarter 2022 and into the first quarter of 2023. Our previously shared pro forma 2023 for the combined business outlook remains unchanged. Our view for the 12 months pro forma adjusted 2023 EBITDA is approximately $1 billion, inclusive of cost synergies. and we continue to anticipate reaching our estimated pro forma net leverage ratio target in the high 2X range by the end of 2024. We reiterate our financial policy as previously laid out and included in the appendix of the deck. We're currently pursuing divestitures of two product lines related to the combined business. While there can be no assurances of the completion of or proceeds from these activities, we continue to target a completion of these within the next three to six months and continue to anticipate combined proceeds of approximately $500 million from these divestitures. Slide 9 is a slide that we have shared previously and are including today to reiterate our confidence in the combined business 2024 outlook. And the next section, as I referred to earlier, slides 10 through 16, are those detailed end market updates and the positive impact the nexus of clean end markets have on Chart, Howden, and the combined offering. For now, let's move ahead to slide 18, Joe.

Thanks, Jill. Slides 18 through 20 are updates on our supply chain, as well as our pricing strategies and actions. On slide 18, you can see our top raw material inputs, as well as the global container freight index. We are back to end of 2020 levels for aluminum, carbon steel, and freight, while stainless steel is out of its peak range, but not back to pre-COVID levels. Turning to slide 19, While we are not yet seeing consistency in the input costs, we are seeing better availability from the supply chain, as well as tempering costs, and expect that to continue this year, barring no unforeseen geopolitical events. We also expect the cost of energy to be more stable this year than in the prior two. The first column of data from the left-hand side of the slide is changing costs from January 31st of 2022 to January 31st of 2023. You can see decline IN COST IN ALL THREE. THE SECOND COLUMN SHOWS THE VARIABILITY WITHIN THE 2022 YEAR, SO WHILE COST IS TEMPERING, WE STILL MUST STRATEGICALLY SOURCE FROM OUR LOCAL AND GLOBAL SUPPLY BASE. WITH THE VARIABILITY STILL IN PLAY, WE CONTINUE TO HOLD OUR PRICING PRACTICES THAT WE HAVE DEPLOYED THE PAST 24 MONTHS AS WELL AS CONTINUE TO SURGICALLY INCREASE PRICE AS SHOWN ON SLIDE 20. WE'RE ALSO CONTINUING TO MAINTAIN OUR SURCHARGE. WE HAVE NOT SEEN THIS IMPACT DEMAND TO DATE. I will now hand it back to Jill to cover the next section, our fourth quarter and full year 2022 results.

Both the fourth quarter and full year 2022 were records and multiple reported as well as adjusted metrics. As you can see on slide 22, our full year set historical records and reported backlog, orders, sales, and EBITDA as well as adjusted EBITDA. Additionally, not shown here is our full year 2022 record reported gross profit and record reported operating income. THE BOTTOM ROW OF SLIDE 22 SHOWS FOURTH QUARTER OF 2022 REPORTED RECORDS, WHICH INCLUDE RECORD BACKLOG, SALES, OPERATING MARGIN, AND EBITDA, AS WELL AS THE ADJUSTED METRICS FOR BOTH OPERATING MARGIN AND EBITDA. WE ARE PLEASED WITH ALL OF THESE RECORDS, AND I AM ALSO VERY PLEASED WITH THE FACT THAT EACH MONTH IN THE FOURTH QUARTER OF 2022 HAD BOTH GROSS MARGIN AS A PERCENT OF SALES AND OPERATING MARGIN AS A PERCENT OF SALES SEQUENTIALLY INCREASE WITH OUR EXIT RATE FROM DECEMBER OF REPORTED GROSS MARGIN as a percent of sales of 31%. Slide 23 shows that our records are broad-based, not just one part or segment of the business driving the growth in each area. For the full year, all four segments had record sales, and three of the four segments posted record orders, operating income, and operating income as a percent of sales. Moving on to slide 24, we had our four highest order quarters in our history in 2022. The first three quarters of 2022 included big LNG orders, the first time in our history where we had multiple big LNG orders in a year. Fourth quarter orders were $525.9 million and did not include any big LNG. This contributed to the full year 2022 order growth of 65.9%. Over-the-road vehicle tank orders, which were impacted by the higher natural gas price in Europe in 2022, declined 85% year over year. And when excluding both big LNG and over-the-road tanks, total orders were up 37%, as shown on the last row of the table on slide 24. And as mentioned previously on prior calls, average orders per quarter for the five years of 2016 through 2020 were $251 million per quarter. For 2021 and 2022, ex-Big LNG average orders per quarter were $479 million. We expect our baseline quarterly orders to be approximately $350 to $375 million and can increase in any given quarter from there, depending on mid to large projects that get booked. The bottom of slide 25 is important to point out. Remember that we have our HLNG vehicle tank for Class 8 heavy duty LNG trucks, and we introduced our liquid hydrogen onboard tank as well. Prior to 2022, we sold the HLNG tanks to only a handful of customers. While the business was down last year, we still sold tanks to 16 different customers, nine of whom were new, and two customers that purchased the liquid hydrogen onboard tanks from us. We believe our highly differentiated over-the-road tank offering will be a key part of our unique solution set for both LNG and hydrogen as our partners commercialize their FCETs. Even with the decline in over-the-road vehicle tanks, we had record orders in 2022, both with and without big LNG, driven by a variety of small to midsize projects in the $15 million to $50 million range as shown on slide 26. These are the types of full solution projects that support less cyclicality as we book more of them. In the fourth quarter of 2022, we booked New Fortress Energy's Fast 4 and Fast 5 projects, as well as a $22 million pet chem project in a large order with a key private space launch company. We also received a letter of intent for a hydrogen liquefier from a longtime industrial gas customer, which is not yet booked into our backlog, but we do expect to book it in the first half of 2023. We also currently have an active pipeline for 27 other hydrogen liquefier opportunities. Fourth quarter and full year 2022 were both records for sales. Slide 27 shows our 20% plus organic growth. both for the full year as well as Q4 over Q4 2021 on the table marked A. Even with the 4% foreign exchange headwinds, we grew 22.4% for the full year. Section B on slide 27 shows the 22.4% year-over-year sales growth, and similar to orders, the decline in sales in our short book and ship over-the-road vehicle tank sales was 79%. Excluding that, Our sales for 2022 would have been an increase of 33.5% compared to the full year 2021, which was previously our highest sales year in our history. Table C walks through the fourth quarter 2022 foreign exchange headwind to sales and specific timing shifts of revenue into 2023. None of this is lost business, and as mentioned earlier, contributes to our confidence in our reiterated sales outlook range of $2.1 to $2.2 billion for the full year. The gray box on the right-hand side of slide 27 shows that these record sales, both in the fourth quarter and the full year 2022, were broadly supported across multiple end markets and multiple products. Water, space, and carbon capture each grew over 100%, while hydrogen, air coolers, brazed, and HTS systems each grew more than 47%. Record reported operating income as a percent of sales for the fourth quarter 2022 of 13.6% is higher than any period adjusted, as you can see on slide 28. And record adjusted operating income as a percent of sales of 17% was supported by the sequential increase in reported gross margin and operating margin in each of the three months of the quarter. Slide 29 shows our record fourth quarter 2022 EBITDA of $102.1 million. or 23.1% as a percent of sales. When adjusted for one-time items related to the gain for the revaluation of our investment in Savante following its sales securities to additional investors, including Chevron, share-based compensation, and the non-recurring costs reflected in adjusted operating income, adjusted EBITDA for the fourth quarter of 2022 was $97.5 million, or 22.1% of sales. Reported fourth quarter 2022 non-diluted earnings per share was $0.42, as shown on slide 30. When adjusted for one-time items primarily related to housing deal-related costs, financing, other integration costs, and the gain I just described, as well as our marked market of our inorganic investments, fourth quarter adjusted non-diluted EPS was $1.67. FULL YEAR 2022 REPORTED NON-DILUTED EPS OF $2.21 IS A HISTORICAL RECORD, AS IS OUR ADJUSTED NON-DILUTED EPS FOR THE FULL YEAR OF $4.69. SLIDE 31 SHOWS YOU FOURTH QUARTER TO FOURTH QUARTER, 21 TO 22, AND FULL YEAR COMPARISONS OF ADJUSTED EPS. THE MEANINGFUL INCREASE IN BOTH OF THESE PERIODS IS DRIVEN BY SEGMENT OPERATIONAL PERFORMANCE IN THE RESULTS, WHICH IS OFFSET IN PART BY TAX AND INTEREST. Slide 32 shows the Q3 22 to Q4 22 sequential adjusted EPS walk. Sequential operation improvements continued while tax was a sequential headwind. Slide 33 shows the fourth quarter 2022 net cash provided by operating activities of $30.5 million and capex of 26. Capital expenditures in the fourth quarter 2022 included acceleration of the installation of our brazing furnace and production line, our cold box rooftop expansion, and putting more leasing fleet assets into service. Demand for our cores and cold boxes continues at record levels, both for LNG applications of all sizes, oil and gas applications, as well as our specialty products, full solution offerings for hydrogen, water, and carbon capture. We also continue to see strong commercial activity for our standard leasing fleet, which is primarily mobile transports and ISO containers. When adjusted for housing-related costs, financing costs, and income adjustments, adjusted free cash flow for the fourth quarter was $71.5 million. Pointing to the right-hand side of slide 33, we did not adjust for the fourth quarter's negative foreign exchange headwind, the accelerated capacity capital just described, and for specific customer receivables that came in early January versus our expectation into the fourth quarter. Slides 35 through 40 provide more segments, details, and opportunities ahead. Starting on slide 35, this is our regular LNG opportunity outlook. And I point out in rows one and two, we have a new international opportunity that arose since our last update. And in row three, our potential opportunity set has grown as a result of the international additional potential project, as well as potential expanded scope on others in the pipeline, including for heavy hydrocarbon removal systems, or NRUs, as I described earlier. We booked multiple small and floating scale projects in the fourth quarter, and we also anticipate all sizes of LNG projects demand to continue into 2023. We do expect additional big LNG orders in the year, although we have not included any of those in our outlook, and we anticipate one in the first half of 2023. And although we don't show a table of these stats for hydrogen, it's another end market where our commercial pipeline is growing, including being in various stages of conversations with 786 potential and actual hydrogen customers with over 180 projects that we reasonably anticipate can move to order stage in the next three years. In 2022, we executed 30 individual memoranda of understanding with partners. And on slide 36, you can see the end market split further supporting broad-based growth ahead. Ten of these were executed in the fourth quarter of 22, including with WESON, VIRBIO, RAVEN for CCUS and hydrogen, and Hydrogenics for water treatment solutions. We've already received orders from 13 of these partners to date. And so far in 2023, we have executed three new agreements with additional partners, including NICOLA for hydrogen offering and MOUs with ROTEC for high-flow reverse osmosis in water treatment, and with Gen H2 to incorporate chart equipment into their small-scale hydrogen liquefaction systems. Our first-of-a-kind orders are a differentiator for us. You've heard me talk about that previously. And in 2022, we added 89 of these to the order book and 168 over the past two years. You can see a few of the fourth quarter first-of-a-kinds on slide 37, including an award from Guyana Water Incorporated for two projects to support the water infrastructure initiative in Guyana. We also added 327 new customers in 2022, and that's shown on slide 38. Contributing to these 327 were fourth quarter 2022 orders from new customers, including Energy Vault, an order from Yarmouth, Massachusetts, for the first-ever fluorosorb water treatment solution in the state of Massachusetts, and a pre-seed study order for SES cryogenic carbon capture technology for CARMOS and the European funding source Walloon Region in the lime industry. and industry that we anticipate will quickly begin to implement carbon capture utilization and storage solutions. We've already seen repeat orders from 119 of our new customers that we booked in 2021 in 2022.

Church China, which is primarily reflected in our crowd tank solution segment, continues to set records as they did in 2021 and surpassing many of those in 2022. As you can see in slide 39, 2022 reported an adjusted operating income as a percent of sales for Charge China doubled compared to 2021. They booked the highest number of ISO containers in our history in the year and did all of this very safely with no accidents in the entire year. Also, we are seeing increasing demand in particular in LNG and industrial gas in China in the first weeks of 2023. Also, our repair service and leasing segment is gaining steam. strong demand coming out of december and into january for field service as well as continuing to expand our leasing fleet which continues to provide our customers optionality and certain standard standard equipment that we have in the fleet we have signed 465 new leases in 2022 which is shown on slide 40. we are also pleased to announce our three-year master service agreement with verbio for lng vehicle fueling station maintenance and monitoring and expect that we can leverage Howden's aftermarket service and repair capabilities to expand these RSL growth drivers even further.

In the section starting on slide 42, we'll provide a few updates about Howden. Howden's privately held, and we still have the pending approvals I spoke of ahead of closing, so the information here is focused on the combination of the businesses and what they're experiencing in the markets, which, similar to chart, has very broad base demand. As you can see on slide 42, Howden complements our full solution offering via filling in mission-critical equipment into the portfolio, adding more options for our customers in our existing end markets, and adding end markets and geographies that are sustainability-oriented, for which the chart offering can immediately be utilized via Howden's relationships. Aftermarket service and repair, which is resilient through a cycle, will be over 30% of the combined business revenues, and that 30% is also 42-plus percent gross margin in the combined business. Post-close, We'll continue to report in our four current external reporting segments that you can see on slide 43. You can see on this slide also how naturally Howden fits into our segmentation and adds balance to RSL compared to the other segments. Slide 44 is a page that we have shown previously and have included again as it exemplifies the access that Howden provides to us in these high-growth specialty end markets driven by sustainability, CO2, and energy-resilient tailwinds. Our specialty total addressable market size increases meaningfully with the addition of Howden as shown on slide 45. The near-term TAMs shown here for the coming three years are unchanged from what we showed in our investor deck on January 5th, with Howden more than doubling our near-term specialty TAM. The new information on slide 45 is our anticipated CAGRs for the longer-term TAM by end market category. And like chart, Howden continues to see strong market demand for their solutions and products, with numerous wins across a variety of nexus of clean applications. Slide 46 shows four of these recent wins, including diaphragm compressors for Artura Powers Niagara Hydrogen Center in Canada, as well as supplying a hydrogen compression solution for Shell's Holland Hydrogen One facility in Rotterdam, which, when complete, will be Europe's largest renewable hydrogen plant. In other markets, Houghton will install a ventilation optimization system for Goldfield South Deep Gold Mine, to support a safe working environment and reducing the mine's energy consumption. There are numerous other recent Howden wins, which can be found on their website. Similar to chart, Howden partners in the industry. Recent MOUs executed by Howden in the first month of 2023 include with foreship and hydroxia, as shown on slide 47. You can read the details on each, both of which are oriented to providing solutions for customers to reduce their carbon emissions with Foreship focused on the marine industry and Hydraxia on hydrogen mobility. We anticipate that both of these partnerships, amongst others, can leverage Chart's capabilities in marine and hydrogen post-close of the acquisition. And now I'll hand it back to Brinkman to close out our prepared remarks.

To reiterate what Jill said earlier, both Chart and Howden teams are focused on delivering our commitments, and together we continue to not only be confident in our ability to deliver year one costs and commercial synergies, Our teams have also had the opportunity to identify more synergy potential. While we are not adjusting our outlook for these, they have great visibility and actionability, which not only provides confidence to the original figures, it adds further upside potential. Some examples of these are shown on slide 48, including numerous additional offices and other site consolidation in overlapping locations, resulting in $25 million plus in potential synergies. the ability for out in China to utilize our pressure vessel for compression skids, our digital NDT x-ray, all of which adds efficiencies as well as reducing outside spend. You can also see the commercial opportunities are growing, including with customers in sustainable fuels and marine that are working on e-methanol, looking for total solution, process optimization, and a reliable partner for all critical components that have approached us to discuss partnering. And in the final section of our prepared remarks, Jill and I want to thank our One Chart team members for their execution of a record year, not just in the multiple record financial metrics, numerous certifications as shown on slide 50, but in our ongoing ESG efforts, which include having our lowest safety incident rate in our history and over 75% of our sites with no accidents in a year or more. It is our 5,100 amazing team members that continue to drive our profitable growth and do so with our heart of innovation. We congratulate Andrea, Adam, and Rashida for winning our 2022 Global Innovation Contest with their amazing ideas as shown on slide 51. It is these and many other innovations that result in our industry leadership position as you can see on slide 52. We want to congratulate both Chart and Howden teams for being named finalists for the Hydrogen Technology of the Year Award in the 2023 Hydrogen Future Awards, which recognizes companies for their exceptional performance, innovative design, and contributions to the growth and development of the hydrogen industry. Slides 53 and 54 lay out some of the activities and accomplishments of both Chart and Howden in ESG, both internally and for our respective customers. Chart's annual sustainability report will be released in April of 2023, and we are reiterating our commitment to reducing Our carbon intensity 30% by 2030 compared to our 2020 baseline, as well as pledging carbon neutrality by 2050, inclusive of the pending Howden acquisition. And now, Justin, please open it up for Q&A.

And thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And we please ask that you limit yourself to one question and one follow-up. Again, we ask that you limit yourself to one question and one follow-up. And one moment for our first question. And our first question comes from Chase Mulville from Bank of America. Your line is now open.

Hey, good morning. Let's see. I guess the first question, if we just think about the 2023 order outlook, Obviously, you gave a lot of positive commentary there, Jill. I appreciate all the color. I know 2022 was obviously an exceptional year for orders. So maybe if you could kind of give us some, you gave us some kind of high level comments, but maybe put some takes from a high level, you know, what might be up, what might be down. And then, you know, do you think it's possible to hold orders flat? I know that might be a, you know, a big ask because 22 orders were really strong. So, but do you think that you would be able, is it possible to kind of hold orders flat when we look at 2023?

Yeah, thanks, Chase, and also happy birthday to you, Chase. Starting with 2022, as you mentioned, it was an exceptional order year with our four highest order quarters in our history all being in 2022. With that said, we've provided the $620.7 million of big LNG orders. My commentary, let me start there on Big LNG, is that we do expect to be released and book more than one Big LNG order in 2022. I don't think in total that it will be $620 million, but it certainly is expected to be in the hundreds of millions of dollar sizes for the Big LNG orders that we expect this year. Then when you go X big LNG across the board, as you mentioned in your question, our end markets are just hitting on all cylinders right now. And so I don't want folks to get too far out over their seeds, hence why we tried to give kind of that level baseline of the 350 to 375 a quarter. But we are seeing more and more activity in these small scale and mid-scale projects of the 15 to $50 million range. I provided the $285 million January month purposely so that folks can try to hone in on how they see the first quarter shaping up. We don't expect any of our non-big LNG end markets in 2023 from an order book perspective to decline. With that said, I think we've indicated the HLG vehicle tank. We've forecasted that as flat. We're starting to see some end market improvements there. So that's probably one of the ones that I'd model as a slower grower. And in our traditional oil and gas and energy business, we've seen an uptick in activity in the last six months or so. And the year has started out strong as well in that order book. That is probably the one other market I'd point out that It does have some variability around what you see in nat gas pricing and the price of oil driving customers' CapEx behavior. So all in all, we would expect XBIG LNG, the order book, to be up this year.

And thank you.

And one moment for our next question. And our next question comes from Eric Stein from Craig Hallam.

One moment for our next question. And our next question comes from Sam Burwell from Jefferies. Your line is open.

Hey, good morning, Jill. I actually wanted to ask another one on the big LNG side and appreciate the color that you gave around that to this point, but... The projects, at least in the U.S., that are probably most likely to FID near term are all of the more traditional, larger scale train variety and not modular train projects. So I was wondering, I mean, does that imply that you guys are confident that you can win market share for that type of LNG project? I mean, I'm just curious for color on your outlook for winning new big LNG projects going forward that might potentially be different from the stuff that you've done for Genear Venture Global.

Sure, Sam. Thanks for the question. And let me step back and start with a broader LNG, big LNG comment in that we have both the IPSMR, IPSMR plus process technologies, as well as equipment projects. So we can sell that as a package with the process or the equipment that goes into, like you described, the larger-scale variety that doesn't use the mid-scale process technology that we offer. So we are bullish on existing customers that we have doing expansions or new builds. So I won't go into specific customer names, but certainly more than one of our existing customers is – giving signals that they're going to do more projects ahead. And then on the large scale that don't use IPSMR process technology, we do anticipate content that ranges from air-cooled heat exchangers to pretreatment, which could use a brazed aluminum heat exchanger and cold box as well, to fans and a variety of different associated vacuum-insulated pipe, etc., With all of that said, an equipment-style only order for those types of projects can range from $50 million to a couple hundred million dollars per project. It just depends on the size, et cetera. So, all in all, we have a pretty broad opportunity set on the big LNG, ranging from just equipment through to the process technology.

Okay, understood. Follow-up on hydrogen. No orders in the quarter, although I see you called one out that's imminent. And then year-to-date, it looks like you did close to 65 million of orders. Curious, of those that you call out on slide seven, aside from the South Korea one that's obvious, were all those in the U.S.? Just trying to gauge... How has the IRA been digested by customers thus far? Are they still trying to work through all the nuances before they FID or fully underwrite a project and then send an order in to you guys? Do you expect that once it's better digested that hydrogen orders can accelerate and become more consistent quarter to quarter as you move forward?

Yes, so let me take the, I'll take your question in two parts. The first is year to date, and this is as of a couple nights ago, we were about $69 million in hydrogen related orders. And then just last night, I think we're close to finalizing $6 to $7 million additional hydrogen order on top of that. In terms of the second part of your question on the geographies and then the IRA and how that's impacting. We're seeing, obviously, like you said, the South Korea win. I put that on the slide in particular because that's an interesting one where we're actually providing that solution and building that out of chart China. We can build that tank in the US, in India, as well as in China. So we're seeing a nice ability to geographically hit these end markets in a cost-effective way on where we build what. We're seeing definitely the largest percent of our orders in 2022 for hydrogen and to start 2023 are North American. I say North American versus the U.S. because Canada has been pretty active as well. The IRA, I would say, is definitely generating an active commercial pipeline with respect to hydrogen, water, and CCUS. I think it's showing up in our order book to date more so in CCUS than it is in hydrogen, but that we would expect to see that accelerate in 2023, in particular as customers that are not your traditional hydrogen users like your industrial gas guys, but more of the hydrogen specific customers. digest how the credit system and the stimulus funds work, whether you can stack the credits if you do multiple different combinations of CCUS and hydrogen together as an example, as well as the IRS requirements and how that works with the IRA. The last thing I would add to that answer, Sam, is that We are well positioned in particular for hydrogen in the United States with our brazed aluminum heat exchanger manufacturing. We're the only company in the world that manufactures brazed in the United States. And the IRA allows for additional benefit for customers that purchase made in America equipment. So that's a nice backdrop tailwind on the IRA as well.

And thank you. And one moment for our next question. And our next question comes from Martin Malloy from Johnson Rice and Company. Your line is now open.

Good morning. Hi, Martin. Hi. I wanted to ask about, it's been a couple months since the Howden acquisition was announced. Could you maybe talk about your degree of confidence and how it may have improved or changed in terms of both the cost synergies as well as the commercial synergies. And then wanted to try to get an idea of the degree to which the commercial synergies have been incorporated into the slides four and eight and the expectations there.

Yeah, thanks, Marty. And I can tell you, we as a team, combined team at Chart as well as the Howden team, are so excited about this combination. And I have even, I was, as you're well aware, super convicted when we announced this on the strategic merits and the financial merits of this transaction. I mean, I have even more conviction, if that's possible, coming out of the last couple of months around the commercial and the cost synergies and the combination of this full solution offering. We've had customers, various customers from both businesses come talk to us about, hey, what can we do with you together because together you offer a true full solution to address things like e-methanol as an example for marine customers. We've had numerous marine customers that want to work with us on partnering for cleaner and greener solutions as an example. But I also have had the opportunity, and our entire executive staff has had the opportunity, to work together with the Howden team and identify further commercial and cost synergies. And Joe Biarr here, he kind of led the charge on that, so let me let him respond in detail.

Yeah, just to add to that, I had the opportunity to spend time with the chart and Howden team procurement synergy team earlier this week in Glasgow, Scotland, and reviewed the opportunity funnel for our procurement synergies. I was very pleased to see that it exceeds what we've guided thus far, at least from an opportunity pipeline. So very optimistic on our ability to hit that target from an execution standpoint. Also reviewed some of the facility consolidation synergies that I mentioned in the prepared remarks. And that's looking very attractive. So all steam ahead here on synergies.

And the other thing I'd add, Marty, another two things I would add are that we did not increase the number that we put out there compared to what we announced in November. but it gives us more and more confidence in delivering the numbers that we've committed to in our first year of ownership. And we laid out on one of the early slides in the supplemental presentation our anticipated first month of immediate annualized savings and then our view on the first six months, which we have direct line of sight on the actions associated with those synergies. So super excited and also, as I commented, optimistic that we get this deal closed here before the end of the first quarter.

Great. And for my follow-up question, I wanted to ask about the input costs on slide 18. And maybe you could just talk a little bit about what that means for you all, both in terms of margins and project economics for your customers, and then also maybe working capital.

Yeah, so as we commented on slide 18, we are pleased with the availability of our main material input costs as well as the trend we've seen in the tempering of those three. And the way we've built the forecast is assuming that where we sit today is where the input costs continue to be for the year. So additional tempering would be a positive. In addition to that, as Brinkman mentioned in our prepared remarks, we are holding price, and we do intend to address specific surgical price increases further as we get through 2023, and we've already done some of that in January of this year. Joe, anything you want to add on sourcing?

JUST AS WE TALKED ABOUT ON SLIDE 18, DEFINITELY SEEING MORE STABILITY ON THE MAIN INPUT COSTS, PRIMARILY THE METALS THERE. AND UNFORESEEN EVENTS IN THE WORLD CAN ADJUST THAT, BUT RIGHT NOW WE'RE SEEING STABILITY AND BETTER AVAILABILITY, WHICH IS REINFORCING OUR PRICING APPROACH AND OUR MARGIN IMPROVEMENT THAT WE'VE ALREADY SEEN TAKE HOLD HERE AND WILL CONTINUE TO TAKE HOLD. And then just from going back to the previous synergy comments, significant insourcing opportunities related to the Howden acquisition that are going to generate additional material cost out moving forward through these insourcing synergies. So another positive for us.

And all that ties to the back end of your question of working capital opportunity ahead. We've had inflated inventory levels in 21 and 22, and we have good line of sight of not needing to keep those inflated levels in 2023 and driving inventory reduction, as well as applying the best practices that Howden has had in improving their working capital as a percent of sales to the chart working capital business. So all in all, the setup for 2023, we have good visibility to the input costs. good visibility to the demand and the sales. And so we feel confident in being able to deliver the outlook that we've provided.

And thank you. And one moment for our follow-up question. And our next question comes from Chase Mulfield from Bank of America. Your line is now open.

Yeah, hey, thanks for letting me come back in, Jill. Apologies, I'm not sure what happened, but I'll ask my follow-up real quick. You know, and I just want to ask on margins. I mean, obviously, we can back into the margin number for 23, which is a pretty solid, you know, strong, you know, I think it's 21.5% at the midpoint for EBITDA margins. So, it's implied in your guidance. But can I ask specifically on specialty product margins? you know, in the fourth quarter, they took a step down, but if I look at the last few fourth quarters, they've stepped down. I don't know if there's some seasonality in that, but really is really kind of the question on 23 and specialty product margins. How should we be thinking about, you know, margins in 23 for specialty products?

Yeah, thanks, Chase, and I don't know what happened either. I promise you I didn't I didn't dump you out of the queue there. But no, you're absolutely right in your implied 21.5% midpoint on EBITDA. And we feel really good about it. I mean, we are just thrilled with where the sequential margins went in the fourth quarter and being driven by the operational side of the business versus below the line items. So all of that's a positive setup. With that said, on the specialty, you're correct. First of all, Q4 tends to be that way, which is driven by the book and ship element of the specialty business. But the reality in this particular Q4, if you compared to the prior Q4 of 21, the biggest driver was HLNG volume change, which the margins are nice on that. But if you looked at it, an absolute Q4 of 2022, we had a We had just under $10 million of revenue that was associated with first of a kind project that actually came in inside the quarter. And we had taken that at lower margins because we see an incredible business opportunity ahead with that particular customer. So that's reflected in the fourth quarter, as well as there were two hydrogen liquefier REV REC items that pushed out from Q4 into 2023 that would have helped, that would have been at higher margins than what we had before. So on specialty, you know, and we forecast the HLNG, as I commented, flat in 23 to 2022. And so for the full year, we're at about 34 to 34. five and a half, we call it 34 to 35% for the full year specialty gross margin.

And thank you. And one moment for our next question. And our next question comes from Eric Stein from Craig Hallam. Your line is now open.

Hi, Jill. Hi, Joe.

Hey, Eric.

Hey, happy that I, I guess I don't have to take it personally that my my line went dead as well. So hopefully I don't double up on questions here, but, um, so maybe, I mean, obviously strong orders in fourth quarter and you gave the January number. I mean, is there any way to quantify, um, you know, whether actual or from a high level, you know, what that number would look like with how, you know, given the additional content.

Yeah. Um, Thanks, Eric, and we don't know what happened technically, but apologies, and you did not ask a repeat question, so good question, and as you said, we're very pleased with $526 million of orders without any big LNG in the fourth quarter, so we... purposefully wanted to direct folks to ensure they understood that it's not a sequential Q2 to Q3 to Q4 is not actually a bad thing in terms of how the orders rolled out in 2022, that four of our four highest order quarters in our history were in that year. So I just take the first part of your question to reiterate that 526 in a quarter is pretty darn good. With that said, the real question you're asking on what could it look like with Howden, I'm unable at this point to give you what their fourth quarter orders were, but I am able to say that seeing very, very similar trends in the business and strength related to the end markets that I've described. A very fair combination would be to double RRSP. that would be right down the fairway in terms of how you'd look ahead to the two, the one plus one together. Now, additional content from the combination thereof, you know, we've sized year one commercial top line opportunity at $150 million. But the way that I would think about additional solution set order book is probably an incremental 20 to 30% on a full solution offering of order size that we would get.

Got it. Very helpful on that. And then I guess in my follow-up, you know, just curious, you know, you're getting close, but any thoughts on early reception of the deal, either from existing customers or some of the new customers that you've identified for charts?

Yeah, we have had exceptionally positive reception from existing customers, both Howden and Chart, as well as had some opportunities for new customers. Obviously, we're, like you said, we're in that period between sign and close where we continue to operate as individual businesses on our own, but we can immediately out of the gate take advantage of the one global commercial organization that will continue to deploy in the combined business and It's pretty, for me, it's pretty neat to see the two companies and the people working together and the ideas that have been generated between the two of them. And the ideas are endless when you start looking at CCUS and water and hydrogen. So I'm bullish that we're going to see, we're going to come out of the gate strong, not just on the Synergy side, but just, you know, seeing some of these customers. And I think our new customer metric will grow in 2023 compared to 2022. meaningfully given the combination. And then for our sales team that hopefully is listening, they actually committed to, without us having to push on them, committed to an exceptional increase expectation of the combined business and the order book because they see the value between the two. So customers are excited about the combination and they see the uniqueness of having our cryogenic stationary equipment that in almost all cases in the full solution requires rotating equipment with it. And this combination, there isn't any other company that has that combination of stationary and rotating equipment for these types of applications together.

And thank you. And one moment for our next question.

And our next question comes from Scott Gruber from Citi. Your line is now open.

And our next question comes from Mark Bianche from Cowan. Your line is now open.

Hey, thank you. I guess I wanted to try to unpack the pro forma outlook a little bit, and then the other question I had was just kind of on the net debt progression. Um, so on the pro forma outlook for a billion dollars, am I thinking about it the right way? I mean, it seems obvious, but I just want to confirm that we're talking about the EBITDA guidance that you gave for standalone chart, um, full run rate of the synergies. So 175 million there. And then the, what looks like the, the Howden trailing 12 that we got when you first announced the deal of like 340 million bucks. Is that, am I interpreting that correctly?

You are, Mark. Thanks for the question. Yeah, you're kind of right down the fairway on that. We've got maybe Howden a little bit higher than that, but call it good. You're directionally right on it.

Okay. Okay, great. If I were just to try to estimate the synergies that will actually be contributing to to the calendar 2023, I mean, it obviously depends on what time the deal closes, but if we assume 45 days, like you said, what would that number look like? I was getting to something that's like 30 to 50 million bucks on my end, but I don't know if you'd care to correct that.

Yeah, and that's something that we will give very specific guidance once we close, so that it's extremely clear. I don't have any issue in talking about, you know, we've already identified about $20-plus million of kind of month-one annualized synergies that come out. And then, you know, that is from a gross perspective on the first six months or so, we've got about an annualized $70 million, but you've got to net some cost with that. So, you know, you'd be more than safe in the $50 million range.

Okay. And that, yeah, but that's not an annualized number. We're talking about actually like what would flow through the P and L in terms of realization, right?

Correct.

Okay, cool. And then the other one was just on, you know, the net debt progression. So you'll be 4.2 at the time of the close. And, you know, there's a lot of, a lot of noise with the free cash as, as you've discussed. So maybe just to, to think about the cash progression in a different way, Where would you think that that 4.2 exits 2023?

Let me make sure I answer what you want me to answer here is how do we think of, assuming we close in the next 30 to 45 days, what would we see coming out of calendar year 2023 for our net leverage ratio? Am I understanding correctly?

Yeah, I mean, I'm asking about it more on an absolute net dollars of net debt basis. That's sort of how I was curious to hear you respond. But if you're prepared to respond on net leverage, that works too.

Yeah, I mean, so we put out in the, I think it's in the January 5th deck as well, the progression of what we'd see kind of coming out of 2024, which is in that high twos range. We still see that, and I know I'm not answering your 2023. We'd have to do some specific math on that. But I think realistically, if I were back at the enveloping, how we see the year's cash progress and available for debt pay down, we'd be exiting 2023 somewhere in that kind of low fours range.

Got it. Got it. Okay. Thanks, Jill. I'll turn it back.

Thanks, Mark. Appreciate it.

And thank you. And one moment for our next question. And our next question comes from from Raymond James. Your line is now open.

Thanks for taking the question. Two questions about Europe. You know, we're hearing more and more about this Green Deal industrial plan to support clean tech manufacturing inside the European Union. And, you know, very timely, of course, with Howden, can you just run through the specific products that you're going to be manufacturing in the EU that potentially would qualify for some of the subsidies?

Yeah, absolutely. Thanks, Pavel, for the question and for pointing out that opportunity set because we seem to generally discuss the U.S. IRA mostly and the EU Green Deal industrial plan is similar in terms of what we expect to drive more commercial opportunity within the region and how manufacturers numerous of their products within the EU as we do for chart and compressors, a variety of compressors including the diaphragm and piston compressors that go into these clean applications, inclusive of hydrogen, as well as the steam turbine offering and the SANS offering. I think the Howden SANS offering is certainly, in our opinion, a market leader for applications like CCUS in particular, and there's going to be a great opportunity to do that as well. That's just to name a few. In addition to that, I don't want to dismiss the answer without talking to their digital uptime offering as well as the VentSim digital offering that they have because we see those as being tied really closely to the EU Green Deal applications and the ability to monitor and the ability to implement those in addition to the OEM equipment. So great opportunity ahead, and we haven't sized it yet because we want to see some of the specifics of the deal itself, but I think that you're going to see tailwinds similar to what we see in the potential commercial pipeline from the IRA in that region.

Okay. And following up on Europe, specific to Howden, presumably you'll be going through some kind of facility consolidations, that sort of thing. Have you started your dialogue with the works councils, the labor organizations, and if so, how is that dialogue progressing?

Yeah, I can't go into specifics, Pavel, on that, but... I can tell you that we have daily dialogue with the Howden team, as well as with weekly regular touch points with KPS Capital partners who have been very supportive in what we can work on between signing and closing. So we think we're in a good position to come out of the gate strong to achieve the synergies, as well as to take advantage of the opposite effect, which is take advantage of the folks that are super key talent that we see doubling our engineering workforce as an example on day one and taking advantage of where these key resources are located. So it's both parts of your question, you know, is not just from synergy achievement and having dialogues with the right personnel within Howden. That stuff is happening, but I can't go into specifics about work councils.

Understood. Thank you very much.

Thanks, Babel.

And thank you. And one moment for our next question. And our next question comes from Craig Sheree from Tuhui Brothers. Your line is now open.

Morning. Thanks for taking the questions. Hey, Craig. So just a follow-up on Sam's LNG technology question. I was frankly a little surprised Chenier opted for larger scale legacy technology train design for saving expansion for refiling. And the explanation seemed to be along the lines that I guess the larger trains may draw less on grid power that may have a higher exposure to coal generation. And I guess that was That was a twist I wasn't ever thinking about before, and maybe you could elaborate on the differences between technologies in terms of power usage and drawing on the grid, availability of internal generation, and how that all could play out while everybody's trying to improve their carbon footprint.

Yeah, thanks for the question, Craig. And as I commented to Sam's question, we do anticipate having content across all of these size projects, whether it's equipment or process technology. In terms of, you have to kind of look at the total energy consumption and also look at, are you using e-motor drives as an example or gas? There's a lot of technical components to that answer. And I also would say that So they can all be effective, and they can all have a variety of different constructs that solve for those types of issues and challenges. So I'd have to get you our technical guide to get you a really good answer on that, which we're happy to do offline. But with that said, technology in conjunction with the different equipment that powers it can be and is as effective when it comes to reducing the carbon emission footprint. Again, you've got to really peel the onion back on that answer. Do you have a heavy hydrocarbon removal system? Do you have an NRU in place? What's your gas composition? Where is it coming from? Are you using an electric motor drive? So lots of questions that you'd have to really get into the construct of the facility. I also think that there's, you know, there's elements to these variety of operator strategies, whether it's speed to completion, you know, expansion from an existing facility that already has a technology in place and is working. So how do you, you know, changing that, what are the costs associated with doing so? I think there's a lot of economic factors that go into those decision points as well. With all of that said, you know, we feel like we're really well positioned with the operators and the EPCs on the projects that I think everyone in the public domain is well aware are moving ahead in the coming year and years and decade. And we really like our position on how we expect these orders to come into the order book over the coming years where it's It's not just a one and done type of activity in the big LNG space anymore.

Great. And then one on kind of a big picture with Howden, as you can probably understand from our recent report, we see a lot of synergies. We think there could be great upside. It's across the products, the specialty markets, geographic regions, integration, all sounds great. What I want to wrap my head around is business model. And what I mean by that is when we do the math, given such a large aftermarket business at Howden with very large margin, it seems the rest of their business is pretty low margin compared to not only, you know, Houghton's aftermarket, but the rest of Chart. And since their equipment sales seem to tee up their aftermarket, it almost sounds like a razor blade business model that is kind of different than what I always thought of Chart's historical approach. Am I thinking about that right? How does this sync?

Joe BR is going to answer that for you.

Yeah, just one thing I would add or would talk to that is, you know, just like we've seen on the chart side, the mix of our specialty products is higher margin than our more traditional industrial products. And, you know, we're seeing the same thing with the OEM part of the Howden business where their solutions for specialty markets is generating higher margin. And that has started to take hold and has very strong tailwinds to it moving forward. So we see margin improvement for specialty markets on their OEM equipment. And then, like you rightly pointed out, it all pulls through aftermarket down the road.

And what we like about the combination, as well as all the numerous things we've already said, is, to Joe's point, when you're selling products, a full solution project to renewable customers, that full solution is different than a component sale of OEM on the specialty side. And we love the ability to pull through the digital elements and the footprint of service and repair the opposite way through to the chart business that we didn't have as strong of a position as they do.

And thank you. And one moment for our next question. And our next question comes from Rob Brown from Lake Street Capital. Your line is now open.

Hi, Joe and Jo. Can I get some more color on the hydrogen liquefaction kind of project pipeline you talked about? Quite strong, I think, 27 projects in the pipeline. What's sort of a project size and what are the sort of dependencies of those moving forward?

Yeah, thanks for the question. Thanks for picking up on that stat because it is a pretty strong pipeline and I think it's going to grow. You know, we don't necessarily talk about it every quarter of what that pipeline looks like, but what's nice about the current construct of those discussions is that they're with a variety, a really widespread set of customers and ranging from utilities as an example to industrial gas folks to pure play hydrogen operators. So we like the variety of the end markets these customers are in. The size of these plants is starting to get larger. So what we would have talked about in 2021 and really for the most part in 2022 was 15 ton per days and started to see 30 ton per days. Now we're seeing 30 ton per day, 32 ton per day, even folks that are saying, okay, I want to do a 90 ton per day, which may be a construct of 330s as an example, but the size of these projects is getting larger on an absolute basis, which in turn gives us more content opportunity because as the project gets larger, obviously there's more that goes into that. And The other thing I would say that I want to see develop more is a standard size and a standard package. And our teams, our engineering teams, are working on that right now because I do think that will facilitate expediting decision-making with customers versus everybody starting from their own idea of what the plant should look like. So I think there's a great opportunity as well to accelerate the order book over the coming years with respect to a standard plant size.

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

Thank you, Rob.

And thank you. And one moment for our next question.

And our next question comes from Walter Liptack from Seaport Research. Your line is now open.

Hey, thanks. Good morning, guys. Hey, Walt. I wanted to ask two quick ones that, you know, one, there was some revenue that pushed from the fourth quarter into 2023. I wonder if you can just give us some color on, you know, how much and why and things like that. And then second, on the gross margin, you guys called out this up in December. And I wonder if you could just clarify why that step-up happened, and are we going to see that follow through into the first quarter?

Absolutely. Thanks for the two questions. Let me start with your first. So in the supplemental presentation on, I think it was kind of in the late 20s, page number-wise, We had a chart that described some of the revenue that moved from Q4 into Q1. There were kind of three main drivers on that, and one of them is there were three specific liquefier projects that are percent of completion revenue, and they had components that we had expected to receive in Q1 in Q4, really in the month of December, that didn't come in from our supply chain in time to be able to recognize that revenue. That was the largest bucket of the shift, and those projects are well underway, so certainly will be in 2023. And then the second category was around timing of field service job deployment. What that really relates to is when we have a U.S. field service crew that has to go international, the customer helps with the timing around when they want them at the plant for resolution and their corresponding employees and team members can be there. And these are typically Middle East locations. So if we get an order for a field service project, it really does depend on when in the quarter that order comes in and when the customer wants the team there. So in this particular case of the timing shift, the order came later in the quarter and then you had the holiday timeframe. And so that shifted out into 2023. That customer has our team deployed, I believe that's in, it's certainly in the first half of this year. And then the third was a customer that we expected a repair project of meaningful size, and that customer chose to go with a replacement unit instead of the field service repair. So again, not lost business if we get a replacement unit order, but that would certainly shift the timing out of the fourth quarter. So that's the sale timing part of your question. And then with respect to growth margin in our exit rate from December, first of all, typically in our quarters, the back half of the quarter is heavier on revenue and shipments. I don't think that's really a chart phenomenon. I think it's probably just a phenomenon in operations as a whole. But we had specific... project revenue that was recognized in December that was at higher margins. And we do expect that trend to continue. I want to reiterate what I said in my prepared remarks that our first quarter in basically every year in our history, with the exception of one, is always seasonally our lowest for just metrics as a whole. We don't expect anything different if you looked at 2023 by quarter. But I am confident that as the year progresses, you'll see continued margin improvement, and Q1 will be our lowest quarter of the year based on what we see today and how backlog rolls out and where we see FX.

Thank you. And I am showing no further questions. I would now like to turn the call back over to Jill Ivanko for closing remarks.

Thanks, Justin. And as Joe Brinkman said, I want to take just a moment and thank our OneChart Global team members for an incredible 2022, a record fourth quarter, and their execution to start 23 and deliver the commitments that we've laid out today. Thank you, Justin.

This concludes today's conference call. Thank you for participating. You may now disconnect.