Chart Industries, Inc. · NYSE:GTLS
Chart Industries — Q1 2023 Earnings Presentation
54 slides from Chart Industries's earnings presentation, Apr 28, 2023
Slide 1: First Quarter 2023 Earnings
Chart Industries, Inc. FIRST QUARTER 2023 EARNINGS APRIL 28, 2023
Slide 2: Forward Looking Statements (1/2)
Forward Looking Statements (1/2) CERTAIN STAT EMENTS M ADE IN THIS INVESTOR PRESENTAT ION ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVAT E SECURITIES LIT IGAT ION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS INCLUDE STAT EMENTS CONCERNING CHART ’S BUSINESS PLANS, INCLUDING STAT EM
Slide 3: Forward Looking Statements (2/2)
Forward Looking Statements (2/2) THIS PRESENTAT ION CONTAINS FIRST QUART ER 2023 NON-GAAP FINANCIAL INFORMAT ION, INCLUDING ADJUSTED NON- DILUT ED EPS, NORMALIZED BASIC EPS, “NET INCOME, ADJUST ED”, FREE CASH FLOW, ADJUST ED FREE CASH FLOW, EBIT DA, ADJUST ED EBIT DA, ADJUST ED OPERAT ING INCOME, AN
Slide 4: Executed to Date On-Schedule and to Targets
Executed to Date On-Schedule and to Targets # Action What we said in November 2022 As of April 10, 2023 Status 1 Financing Did not expect to close into the Completed long term financing in Completed bridge and would seek to limit December 2022; Oversubscribed amount of KPS Capital Partners Closed wi
Slide 5: First Quarter 2023
FIRST QUARTER 2023
Slide 6: First Quarter 2023 Results
First Quarter 2023 Results Chart Q1 2023 plus Howden stub period (March 17 – March 31, 2023) $ millions, except per share amounts Q1 2023 Chart + Q1 2022 GTLS Comments (all related to Q1 2023 Chart Howden Stub Change Consolidated Standalone including Howden Stub period results) Period unless noted:
Slide 7: Q1 2023 Records
Q1 2023 Records "✔" indicates a record for combined business; "green ✔" indicates a record Chart standalone in the segment as well as with the combined Q1 for Chart standalone Orders Net Sales Backlog results: Cryo Tank Solutions ✔ Storage Equipment • Heat Transfer Systems Engineered Tanks & Systems
Slide 8: Q1 2022 v Q1 2023 Metrics
Q1 2022 v Q1 2023 Metrics $600 28.6% 30.0% $600 13.5% $550 $550 12.0% 28.2% $500 $538 $500 $538 $450 26.1% $450 25.0% 8.6% $400 $400 6.7% 7.0% 23.6% $350 $350 5.7% $354 $354 $300 $300 $250 20.0% $250 2.0% Q1'22 Q1'23 Q1'22 Q1'23 Sales ($M) Gross Margin % Adj Gross Margin % Sales ($M) Op Margin % Adj
Slide 9: Example New Build Order Wins Q1 2023
Example New Build Order Wins Q1 2023 Big LNG Received the purchase order for air Adicomp, Italy Dieffenbacher Energy GmbH, Rail Cars cooled heat exchangers, BAHX and A total of 22 compressors sold in Q1 Austria Received a large purchase order for ethylene tank for the Sempra 2023 to this customer fo
Slide 10: Repair, Service, Leasing (RSL) Q1 2023 Key Wins
Repair, Service, Leasing (RSL) Q1 2023 Key Wins Q1 2023 New Example Howden Q1 2023 Howden LTSA and LTSAs Framework Agreements executed = 23: Arcelor-Mittal Africa Q1 2023 Chart key RSL wins • Axial fans = 6 New 3-year LTSA for their steel • Blowers = 7 plant near Sasolburg, South Africa • Big LNG fa
Slide 11: Agreements / MOUs Now Include Chart AND Howden
23 Agreements / MOUs Now Include Chart AND Howden Category Chart Howden Q1 2023 # of partnerships # of expanded # of new Total # of Chart + Total expanded to both partnerships to both partnerships Howden expanded Chart & Howden as Chart & Howden (April including both Chart partnerships as of of Apri
Slide 12: Macro Tailwinds Continue Globally (Examples 1/2)
Macro Tailwinds Continue Globally (Examples 1/2) # End Market Recent Activity Date of News Chart Impact 1 Water Environmental Protection Agency (EPA) March 2023 • Utilities picking up activity with Treatment proposed first ever national standard to numerous budgetary quotes out address PFAS contamin
Slide 13: Macro Tailwinds Continue Globally (Examples 2/2)
Macro Tailwinds Continue Globally (Examples 2/2) # End Market Recent Activity Date of Chart Impact News 4 CCUS The UK Chancellor of the Exchequer, announced March • Strong UK position with customers via that the next budget will include a £20 billion ($25 2023 Howden billion) investment program for
Slide 14: Chart End Market Trends
Chart End Market Trends # End Market Recent Activity Trend 1 Aftermarket, • Penetration of Howden and Chart installed base plus competitors’ installed base service, repair • Increasing demand for site services and LTSA supporting growth in parts orders • More brownfield retrofits occurring 2 Big LNG
Slide 15: Strength in Backlog Supports Strong 2023
Strength in Backlog Supports Strong 2023 • Chart • Record backlog at 3/31/2023 • Approximately 60% of 2023 revenue outlook was in backlog as of 12/31/2022 • Chart’s revenue mix is ~65% to 70% project and ~30% to 35% book and ship • Howden • Record backlog at 3/31/2023 • Howden’s revenue mix is ~48%
Slide 16: Industry Input Costs
Industry Input Costs GTLS:Sources: GAS TO LIQUID LMESYSTEMS® (Aluminum), MEPS (Carbon and Stainless Steel), Freightos © 2023 Chart Industries, Inc. Confidential and Proprietary 16
Slide 17: Chart Pricing (including Howden)
Chart Pricing (including Howden) GTLS Four Main Pricing Pricing Actions Taken From Q1 2021 2023 Anticipated Pricing Approaches through Q1 2023 Approaches • Chart: Americas & Global 9 base price increases + • January 1, 2023 revised tier 1 Standard Product surcharges (+ targeted Q1 2023 additionals)
Slide 18: Certifications: A Continued Differentiator
Certifications: A Continued Differentiator Successful recertification of Howden Germany AFM locations in ISO 45001, 14001 and SCC (all EHS) Howden UK achieved renewal of Avetta Quality certification, which is a pre-requisite for service work in UK on waste-water plants ISO 14001 for VRV Ornago
Slide 19: Segment Information
SEGMENT INFORMATION
Slide 20: Segmentation
Segmentation O ne Ch ar t G l o b al C o m m e r c i a l Tea m O ne Ch ar t G l o b al E n g i n ee r i n g Te am O n e Ch ar t G l o b al P r o d u c ts – O p e r at i o n s – Af te r m a r k e t H e a t Tr a n s f e r S y s t e m s Specialty Products R e p a i r, S e r v i c e & L e a s i n g C r
Slide 21: Segment Information
Segment Information Sales ($M, except %) Q1 ‘23 Q1 ‘22 % Chg PY Specialty Products 127.3 107.5 + 18.4% Specialty Products gross profit Q1 2023 headwinds: Cryo Tank Solutions 127.2 118.1 + 7.7% Repair, Service, Leasing 120.1 49.3 + 143.6% • HLNG low volume carrying cost Heat Transfer Systems 167.5 79
Slide 22: Heat Transfer Systems: LNG Opportunities for GTLS
Heat Transfer Systems: LNG Opportunities for GTLS Pre Feb 24, April 29, July 29, October 28, February 24, April 10, April 27, 2022 GTLS 2022 2022 2022 GTLS 2023 GTLS 2023 GTLS 2023 GTLS GTLS GTLS BigLNG 1 Number of reasonably possible 10 22 24 24 25 (excludes 24 (excludes 24 (excludes projects to mo
Slide 23: Specialty Products: Hydrogen and CCUS Opportunities
Specialty Products: Hydrogen and CCUS Opportunities 12/31/2022 Current (4/27/2023) % Change GTLS Chart and Howden standalone Hydrogen 1 Number of customers and potential customers 786 1,091 +38.8% 2 # of LH2 Liquefier opportunities 27 55 +103.7% [90%+with Howden potential content] 3 % growth in afte
Slide 24: Specialty Products: Food & Beverage and CCUS
Specialty Products: Food & Beverage and CCUS • Q1 2023 food & beverage and CCUS orders Food & Beverage, CCUS increased 30.9% and 36.9% when compared and water cross-selling to Q1 2022 and Q4 2022, respectively case study: • Q1 2023 customers include: City Brewery began as a food & beverage Chart c
Slide 25: Specialty Products: Large Scale CCUS
Specialty Products: Large Scale CCUS • Q1 2023 Chart and Howden stub period example CCUS wins include: • Direct air capture ACHX for large international oil company customer ($2.8 million) • Howden CCUS equipment provided to major EPC in support of leading international oil company, operating in Wes
Slide 26: Specialty Products: Mine Safety & Emission Reduction
Specialty Products: Mine Safety & Emission Reduction • Q1 2023 (full quarter) for Mining Safety with orders worth $55 million with new build up over 80% and aftermarket up 46% compared to the first quarter 2022 • EHS Clean air requirements driving demand for mine cooling & ventilation solutions • To
Slide 27: Specialty Products: Water Treatment
Specialty Products: Water Treatment Q1 2023 April 2023 Key Successes Howden Wastewater Treatment Win • First quarter Q1 2023 (including Howden stub period) • Howden chosen to supply Southeast Wastewater water treatment new build orders were up 34.6% Treatment Plant in Houston, Texas (USA) with turbo
Slide 28: Cost and Commercial Synergies
COST AND COMMERCIAL SYNERGIES
Slide 29: Cost Synergies Overview
Cost Synergies Overview Expected Annual Cost Synergies ~40%: Outside Sourcing for Product Build and Insourcing ($M) Volume leverage at 2x size Insource Howden compressors on select projects Insource select third party manufacturing processes ~40%: Optimization and Resource Rationalization ~$25
Slide 30: Commercial Synergies
Commercial Synergies Expected Commercial Synergies (Revenue) Existing Manufacturing Location Utilization to Gain Access to Customer Projects ($M) Fabricate cold boxes in Southeast Asia (2 locations); valuable for FLNG and non-US opportunities ~$350 Access to the marine market and customers Bunke
Slide 31: First 6 Weeks of Howden Ownership: Synergy Achievement
First 6 Weeks of Howden Ownership: Synergy Achievement (March 17, 2023 to April 27, 2023) # Category Description Synergy orders Annualized cost Original (Revenue) savings achieved annualized year- achieved to date to date one target $ millions $ millions $ millions 1 Cost Sourcing $20.4 $70 2 Cost O
Slide 32: Cost Synergy Targets & Achievements Since Acquiring Howden (1/5)
Cost Synergy Targets & Achievements Since Acquiring Howden (from March 17, 2023 to April 27, 2023) (1/5) Additional synergies # Category Description Status Actual Achieved Actual Achieved Total Achieved March 17-April April 11-April to Date (as of 10, 2023 27, 2023 April 27, 2023) 1 Sourcing Total y
Slide 33: Cost Synergy Targets & Achievements Since Acquiring Howden (3/5)
Cost Synergy Targets & Achievements Since Acquiring Howden (3/5) (from March 17, 2023 to April 27, 2023) Additional synergies # Category Description Status Actual Achieved Actual Achieved Total Achieved to March 17-April 10, April 11-April 27, Date (as of April 2023 2023 27, 2023) 1 Optimization, To
Slide 34: Cost Synergy Targets & Achievements Since Acquiring Howden (4/5)
Cost Synergy Targets & Achievements Since Acquiring Howden (4/5) (from March 17, 2023 to April 27, 2023) Additional synergies # Category Description Status Actual Achieved Actual Achieved Total Achieved to March 17-April April 11-April 27, Date (as of April 10, 2023 2023 27, 2023) 13 Optimization, C
Slide 35: Cost Synergy Targets & Achievements Since Acquiring Howden (5/5)
Cost Synergy Targets & Achievements Since Acquiring Howden (from March 17, 2023 to April 27, 2023) (5/5) Additional synergies # Category Description Status Actual Achieved Actual Achieved Total Achieved to All figures are annualized millions $ March 17-April April 11-April 27, Date (as of April 10,
Slide 36: Commercial Synergies Targets & Achievements (1/2)
Commercial Synergies Targets & Achievements Since Acquiring Howden (from March 17, 2023 to April 27, 2023) (1/2) # Synergy Description Status Actual Actual Total Achieved Achieved Achieved to March 17- April 11-April Date (as of April 10, 2023 27, 2023 April 27, 2023) 1 Total year 1 commercial syner
Slide 37: Commercial Synergies Targets & Achievements (2/2)
Commercial Synergies Targets & Achievements Since Acquiring Howden (from March 17, 2023 to April 27, 2023) (2/2) # Synergy Description Status Actual Actual Total Achieved Achieved Achieved to March 17- April 11- Date (as of Additional synergies April 10, April 27, April 27, 2023 2023 2023) 11 Will i
Slide 38: Commercial and Cost Synergy Case Study: Hydrogen
Commercial and Cost Synergy Case Study: Hydrogen Chart’s hydrogen liquefaction Chart’s hydrogen liquefaction With Howden, Chart now can customer has a customer that is customer has liquefier on order provide hydrogen compression to going to do gaseous hydrogen with Chart in 2022 the gaseous refuelin
Slide 39: Other Integration Accomplishments Achieved to Date
Other Integration Accomplishments Achieved to Date March 17, 2023 to April 10, 2023 (as shown in 4-11-2023 IR Update) • Talent Programs • Added two high potential Howden team members to the Emerging Leaders Program • Cost avoidance / delivery improvements • Leverage a Chart specific senior level sup
Slide 40: Other Integration Accomplishments Achieved to Date
Other Integration Accomplishments Achieved to Date April 11 to April 27, 2023 additions • Safety • Howden – Chennai (HIN - Chennai) surpassed 1 Million man-hours without any Lost time Incidents in April 2023 • Howden – Hosur (HIN -Hosur) surpassed 1.1 Million man-hours without any Lost time Incident
Slide 41: Balance Sheet and Debt Paydown
BALANCE SHEET AND DEBT PAYDOWN
Slide 42: Additional Cash for Debt Paydown
Additional Cash for Debt Paydown # Balance Sheet Activity Cash or RCF Expected Capacity completion date • These items are incremental to operating free cash flow 1 Divestment of a small product line in France Both Q2 2023 generated for debt paydown in 2 Exit from minority investment of Odin/Liberty
Slide 43: Net Leverage Profile
Net Leverage Profile Debt Covenant: Net Debt/ LTM Adjusted EBITDA(1) 6.0X Q1 2023 net leverage of 4.08X, ahead of 4.25X forecast from November 2022 4.5X Reiterate our financial policy that until we are within our target net leverage ratio range of 2- 4.08X 2.5X, we will: Not do any additional
Slide 44: 2023 Outlook, Reiterate 2024 EBITDA Outlook
2023 OUTLOOK REITERATE 2024 EBITDA OUTLOOK
Slide 45: Meaningful April 2023 Orders to Date
Meaningful April 2023 Orders to Date • Two year supply agreement signed for $5.3 million of EGR blowers for marine LNG market • LNG regas skid with European customer $4.8 million • So2 blower order $3.8 million • China HHEL $3.6 million • Howden recip compressors $3.3 million • South African Power c
Slide 46: 2023 Consolidated Chart Industries Outlook
2023 Consolidated Chart Industries Outlook Prior Guidance Consolidated Updated Guidance Consolidated $ millions except per share amounts Direction Chart (1) Chart Revenue $3,650-$3,800 $3,660 - $3,800 Adjusted EBITDA (2) $770-$810 $780 - $810 Cost Synergies in EBITDA $50-$60 $60+ Free cash flow (3,4
Slide 47: Reiterating Pro Forma Adjusted EBITDA 2023 and 2024
Reiterating Pro Forma Adjusted EBITDA 2023 and 2024 Combined Chart + Howden • Revenue growth led by energy transition markets and backlog conversion • Implied organic volume leverage of ~30% • Favorable mix driven by energy transition verticals • Cost synergies embedded in margin expansion and SG&A
Slide 48: Continue to Execute On-Schedule and to Targets
Continue to Execute On-Schedule and to Targets # Action What we said in November 2022 As of April 27, 2023 Status 1 Cost synergies, year $175 million $175 million Additional opportunities for 1 upside and buffer 2 Commercial $150 million $150 million with customer inbounds Additional opportunities s
Slide 49: Appendix
APPENDIX
Slide 50: Q1 2023 Addback Detail
Q1 2023 Addback Detail Q1 2023 gross amount Impact to Repeating in Main category Detailed Description (+ added to / (-) reduced operating Q2-Q4 2023? income) income • McPhy MTM Mark-to-Market of inorganic No, net income 1 • Stabilis MTM 2.6 Yes investments only • Minority investments, other (Liberty
Slide 51: First Quarter 2023 Adjusted EBITDA
First Quarter 2023 Adjusted EBITDA $ millions, except per share amounts Change v. Change v. Consolidated Q1 2023 Q1 2022 Q4 2022 PY PQ Net income from continuing ($13.9) $10.3 ($24.2) $17.4 ($31.3) operations Income tax expense, net (6.4) 2.1 (8.5) 11.9 (18.3) Interest expense, net 28.3 3.9 24.4 16.
Slide 52: First Quarter 2023 Adjusted EPS
First Quarter 2023 Adjusted EPS $ millions, except per share amounts Q1 2023 Diluted Q1 2023 Q1 2022 Change v Q322 Continuing Operations EPS Basic EPS Basic EPS Net income attributable to Chart Industries, Inc. (14.6) (14.6) 10.2 (24.8) Less: Mandatory convertible preferred stock dividend 6.8 6.8 -
Slide 53: First Quarter 2023 Free Cash Flow
First Quarter 2023 Free Cash Flow $ millions, consolidated, continuing ops Q1 2023 Act Adjustments Q1 ‘23 Adj. Net Income (14.4) (14.4) Operating income adjustments 24.8 24.8 Tax affect on operating income adjustments (5.8) (5.8) Non operating income adjustments 2.2 2.2 Tax affect on non operating i
Slide 54: First Quarter 2023 Adjustments
First Quarter 2023 Adjustments $ millions, except per share amounts Q1 2023, Q1 2023, Adjustments Continuing Operations Reported Adjusted Sales $537.9 - $537.9 Cost of sales 386.4 (2.1) 384.3 Gross profit 151.5 2.1 153.6 Selling, general, and administrative expenses 93.5 (22.6) 70.9 Amortization exp