Chart Industries, Inc. (GTLS) Earnings

Management highlights

- Overall Q2 2026 Performance * Delivered adjusted EBITDA of $1.23 billion, exceeding the high end of guidance, with adjusted EPS of $0.64, up 2% year-over-year. Adjusted EBITDA margin expanded 70 basis points year-over-year to a record 18.3%. Generated $1.1 billion in free cash flow driven by strong collections and improved working capital performance. * Secured broad-based key awards across core end markets: $2.6 billion in Power Systems orders (including 2.7 GW of generation capacity for data centers, 1.3 GW for Dynamis, and a framework for up to 1.8 GW with Kodiak Gas Services); $1.8 billion in LNG equipment orders for Venture Global, Golar, and Cheniere; multiple large compression awards for Middle East gas development; and key upstream awards for Petrobras, Equinor, and new subsea projects in Angola and Brunei. - Chart Industries Acquisition * Recently closed the acquisition of Chart Industries, which adds differentiated capabilities in thermal management, air/gas handling, and carbon capture, complementing existing technology and expanding addressable markets including data centers, space, geothermal, and industrial gases. * Chart will operate as Baker Hughes' third reporting segment to preserve operational and commercial focus. Management is executing a two-phase 180-day integration plan prioritizing customer continuity, employee retention, early cost synergy capture, and cross-selling opportunity development, with full delivery of $325 million in annualized cost synergies targeted by year 3. * Identified nearly 300 synergy initiatives across SG&A optimization, supply chain efficiency, and manufacturing footprint optimization, plus meaningful commercial synergies from cross-selling and expanded integrated solutions across existing and new end markets. - Market & Strategic Positioning * Long-term demand drivers remain intact: energy security is a top global priority, and AI-driven data center expansion is creating a multi-year power generation growth cycle, with projected 18% annual growth in data center power demand through 2030. * Management maintains a long-term positive outlook for LNG, projecting installed nameplate capacity approaching 800 MTPA by 2030 and 950 MTPA by 2035, underpinned by energy security needs and growing emerging market demand. * Is expanding gas turbine and generator capacity to meet strong Power Systems demand; when fully online by 2029, the expanded capacity will support up to $5 billion in annual Power Systems revenue, a 3-4x increase over 2025 levels. Raised the Horizon 2 IET orders target to exceed $45 billion.

Guidance

- Third Quarter 2026 Guidance (excluding Chart, which will receive guidance ahead of Q3 earnings): * Total company revenue expected to be ~$6.87 billion, adjusted EBITDA expected to be ~$1.205 billion. * IET expected to deliver ~$3.32 billion in revenue and ~$660 million in EBITDA, with solid year-over-year EBITDA growth partially offset by modest Middle East-related headwinds and inflationary pressures. * OFSE expected to deliver ~$3.55 billion in revenue and ~$625 million in EBITDA, with stable Middle East activity and modest sequential growth across most other regions. - Full Year 2026 Guidance (excluding Chart): * Total company revenue and adjusted EBITDA are now expected to modestly exceed prior guidance, reaching $27.35 billion in revenue and $4.85 billion in adjusted EBITDA. * Raised full year IET orders guidance to $17.5 billion to $19.5 billion, which will mark the second consecutive year of record orders. Maintained the full year IET revenue guidance midpoint at $13.5 billion, and modestly increased EBITDA guidance midpoint to $2.725 billion. * Raised OFSE full year guidance to $13.85 billion in revenue and $2.425 billion in EBITDA, an improvement from prior expectations that EBITDA would trend toward the low end of the original range. - Balance Sheet Guidance * Following the Chart acquisition, net leverage will increase temporarily, but management expects to return to a 1x to 1.5x net debt to adjusted EBITDA ratio within 24 months, supported by free cash flow generation, synergy realization, and proceeds from the upcoming Waygate divestiture.

Segment performance

Following the closing of the Chart Industries acquisition, Baker Hughes now has three operating segments, with Chart performance not yet disclosed in this quarter's report. 1. Industrial & Energy Technology (IET): Orders doubled year-over-year to a record $7.1 billion, with a 2.2x book-to-bill ratio driving record-to-record portfolio (RPO) up 19% to $37.1 billion. Revenue was $3.3 billion, flat year-over-year (a 2% headwind from the PSI divestiture and SPC joint venture). EBITDA increased 16% year-over-year to $678 million, with an EBITDA margin of 20.6%, up 280 basis points year-over-year. IET contributed 48.3% of total company revenue and 55.1% of total adjusted EBITDA this quarter. 2. Oilfield Services & Equipment (OFSE): Revenue was $3.45 billion, a 7% sequential increase, and exceeded guidance. Excluding the SPC impact, SSPS orders increased 29% year-over-year to $667 million. EBITDA was $605 million, exceeding guidance, with an EBITDA margin of 17.5%, up 10 basis points sequentially. OFSE contributed 50.2% of total company revenue and 49.2% of total adjusted EBITDA this quarter.

Risks & headwinds

- Ongoing conflict and disruptions in the Middle East create uncertainty for project timelines, local supply chains, and regional activity levels; material changes to current geopolitical conditions could lead to outcomes that differ from guidance, either positively or negatively. * Quarter-to-quarter free cash flow variability can occur from working capital movements tied to the timing of milestone payments and project progress on large orders. * Foreign exchange rate fluctuations and changes to trade policy represent additional sources of uncertainty for both IET and OFSE performance. * Longer-cycle IET orders have extended conversion timelines, with a meaningful portion of recent large order backlog not expected to convert to revenue until after 2027.

Analyst Q&A

• Q: Can you elaborate on Power Systems capacity expansion plans through 2029, including mix, pricing, revenue ramp, and CapEx requirements? /

  A: The $5 billion annualized revenue opportunity at full capacity represents a 3-4x increase over 2025 Power Systems revenue. Roughly half of the opportunity is gas turbines, 1/4 is generators, with the balance from other power products and solutions. CapEx will be phased between 2026 and 2028, with investments focused on leveraging existing manufacturing infrastructure rather than greenfield builds, resulting in payback periods under 2 years. The revenue ramp is gradual: first incremental capacity comes online in H1 2027, with gas turbine capacity doubling from 2026 levels by the end of 2028, and meaningful growth contribution coming from 2028 through 2030. Assumptions use 2025 average pricing, making the estimate grounded and leaving room for potential upside from pricing expansion.

• Q: What are the key near-term and underappreciated long-term commercial synergies from the Chart acquisition? /

  A: The clearest near-term opportunity is in data centers, where Baker Hughes' power generation and project execution capabilities pair with Chart's thermal management and cooling expertise to offer customers full integrated infrastructure solutions for AI-driven demand. The second key near-term opportunity is gas infrastructure, where the combined portfolio provides a full end-to-end solution across natural gas processing, liquefaction, and storage, and also extends to hydrogen, carbon capture, and other industrial gases. Underappreciated long-term opportunities include space (leveraging Chart's cryogenic capabilities and Baker Hughes' LNG and infrastructure expertise), geothermal (delivering integrated subsurface, power, and thermal management solutions), and mining (cross-selling digital and services solutions to Chart's existing installed base, and potentially extending OFSE capabilities into the market).

• Q: What drove OFSE's outperformance in Q2, and what is the outlook for the back half of 2026 outside of the Middle East? /

  A: Outperformance came from three factors: stronger-than-expected activity outside the Middle East across North America, Latin America, Asia, and Africa, with international OFS revenue up double digits sequentially; better-than-anticipated results in the Middle East, where product revenue outperformed expectations and partially offset softer service activity; and strong performance from the SSPS segment, where revenue rose 10% sequentially and margins recovered to the high teens. For the second half, management assumes Middle East activity will remain stable. North America onshore is expected to see a seasonal recovery in Q3, with less pronounced strength in Q4. International markets outside the Middle East are expected to see continued improvement in Q3, with typical North Sea seasonality in Q4 offsetting some product sales. Latin America, Africa, and Asia Pacific are expected to remain constructive, with SSPS contributing strong backlog conversion and stable margins.

• Q: What is driving the record IET orders this quarter, and what is the margin outlook for these new orders? /

  A: Record orders reflect broad-based strength across multiple end markets, not just one segment. Power Systems led with $2.6 billion in orders this quarter, with $2.2 billion of that from data center behind-the-meter power applications, and year-to-date Power Systems orders already exceed full-year 2025 volumes. Even excluding data centers, IET orders would match the prior quarterly record, with strong demand from gas infrastructure: LNG equipment orders hit $1.8 billion this quarter, and year-to-date LNG orders already exceed full-year 2025 volumes. GTS also delivered record upgrade orders as customers focus on extending existing asset life and improving efficiency. All new orders were secured under the company's disciplined commercial framework, and the current supply-demand environment supports strong pricing dynamics, which is expected to create a favorable margin tailwind for IET starting in 2027 as these orders convert to revenue.