Chart Industries, Inc. Q4 FY2024 earnings call

Key Points

• In Q4 2024, net cash from operating activities was $281.5 million, free cash flow was $261 million, full-year free cash flow was $388 million. Year-end 2024 net leverage ratio was 2.8. Orders in Q4 2024 were $1.55 billion, up 29.4% vs Q4 2023 pro forma, full-year 2024 orders were $5 billion, up 13% y-o-y. Sales in Q4 2024 were $1.11 billion, up 10.8% excluding FX. Operating income in Q4 2024 was $188.3 million, adjusted for unusual items was $243.4 million. Adjusted EBITDA in Q4 2024 was $283.6 million.

Order Examples

• Phase one of Woodside, Louisiana LNG received in Dec 2024. NRU award from Energy Transfer. Partnership with Bloom Energy. $26 million order from African power utility. Space exploration end market orders in Q4 2024 were $28.4 million, and ~$60 million in Q1 2025. Q1 2025 orders included $35 million mining award, multi-million dollar tanks order for Asia Pacific chip manufacturing site, etc.

2025 Outlook

• Strong backlog including Woodside LNG phase one and recent orders supports 2025 guidance. Foreign exchange could have ~2% negative impact on sales. Second half of 2025 expected to be higher than first half. First quarter typically lowest and a use of cash. Tariffs' impact is unclear but company is positioned well capacity-wise.

Cryo Tank Solutions (CTS)

• Fourth quarter 2024 orders: $138.5 million, down 11.9% vs Q4 2023, mainly due to softer European industrial gas demand. Fourth quarter sales: $150 million, down 26.4% vs Q4 2023. Reported gross profit margin 24.4% in Q4, up 210 basis points y-o-y. Full-year 2024 gross margin for CTS increased 140 basis points.

Heat Transfer Systems (HTS)

• Fourth quarter 2024 orders: $536 million, up over 66% vs Q4 2023, driven by Woodside Louisiana LNG phase one and other HTS growth. Excluding Woodside order, HTS orders still grew in Q4 2024. Sales: $288.8 million, up 14.2% vs Q4 2023. Gross profit margin 31.8% in Q4 2024, the highest for the year.

Specialty Products

• Fourth quarter 2024 orders: $509 million, up 27.7% vs Q4 2023, driven by orders in carbon capture, energy recovery, infrastructure, and space exploration. Sales: $317 million, up 47.7% vs Q4 2023. Reported gross profit margin 27.4% in Q4 2024, down 120 basis points vs Q4 2023, but up 110 basis points sequentially from Q3 2024. Full-year specialty products gross margin would have been ~29% if not for specific inefficiencies in 2024.

Repair Service and Leasing (RSL)

• Fourth quarter 2024 orders: $369 million, up 14.2% vs Q4 2023. Sales: $351 million, up 4% vs Q4 2023. Full-year 2024 RSL order book grew 10.5% y-o-y, sales grew 19.2% y-o-y. RSL now accounts for approximately one-third of the business and is expected to grow in the high single-digit to 10% range.

Guidance

• 2025 guidance is based on strong backlog as of Dec 31, 2024, including Woodside LNG phase one and recent Q1 orders. Foreign exchange could have ~2% negative impact on sales. Second half of 2025 expected to be higher than first half. First quarter is typically the lowest quarter and a use of cash. Tariffs' impact is not explicitly in guidance but company believes it falls within EBITDA range and is well-positioned to mitigate impacts through flexible manufacturing and supply chain.

Risks

• Uncertainty around tariffs: Little clarity on breadth, specificity, and duration of tariff actions, which could impact business. Supply chain disruptions: Previous tariffs and supply chain challenges in 2021 pose potential risks to operations.

Q: Sarah Akers asked about the 2025 guide and how to think about the four segments.

A: Jill Evanko responded that RSL is expected to grow high single-digit to 10%, HTS is expected to grow with LNG tailwind, CTS is expected to have mid-single digit growth, and specialty backlog conversion is a key driver.

Q: Ben Nolan asked about CTS, specifically if the improvement in Q1 is from China and China exposure.

A: Jill Evanko said Q1 for CTS is going well, China is not a dependent supply chain source as the company has other sources and is agile in response to market conditions.

Q: Scott Gruber asked about aftermarket growth outlook and IPSMR technology.

A: Jill Evanko said RSL has strong visibility to pipeline and multiple activities to achieve growth, and on IPSMR technology, it's customer specific with focus on not going upside down on working capital.

Q: Manav Gupta asked about data center market discussions and DeepSpeak announcement.

A: Jill Evanko said data center discussions are consistent with hyperscalers looking for power and heat rejection solutions, and a data center commercial team member has been hired.

Q: Mark Bianchi asked about LNG orders and Teddy 2 cost.

A: Jill Evanko said LNG orders have variability in timing, and the Teddy 2 cost impact was a full-year inefficiency not expected to repeat, and specialty products gross margin would have been ~29% without it.

Q: Arun Jayaram asked about the quality of bookings and customer commitments not in backlog.

A: Jill Evanko said strong Q4 bookings had above-average margin, and the $2 billion of commitments include larger LNG projects, carbon capture, hydrogen-related projects, etc., with variable timings.

Q: Eric Stein asked about customer commitments and comparison to past.

A: Jill Evanko said commitments are not exposed to federal US government decision-making much, and the commitment funnel has increased or stayed flat compared to past.

Q: Rob Brown asked about gross margin expansion and LTA penetration.

A: Joe Brinkman said mid-thirties gross margin is the medium-term target, and on LTA penetration, there's opportunity to penetrate other products and aftermarket service repair aspects in major and independent industrial gas customers.

Q: Sherif Elmaghrabi asked about LNG projects and tariffs.

A: Jill Evanko said capacity is well-positioned, pipeline is growing, and tariffs' impact is unclear but company is prepared.

Q: Doug Becker asked about CTS outlook and order conversion.

A: Jill Evanko said CTS forecast doesn't rely on small independents alone, and general demand profile and first couple months of 2025 support growth, and Joe Brinkman added on industrial gas CapEx cycles.

Q: Caitlyn Donovan asked about hydrogen end market and 45V rules.

A: Jill Evanko said hydrogen market is global, saw strong year in Europe, 45V clarification is a catalyst, and high single-digit to 10% CAGR from now to 2030 is achievable.