Q1 2021 Chart Industries Inc Earnings Call
[music].
Good morning, and welcome to the chart industries incorporated 2021 first quarter conference call. All lines have been placed on mute to prevent background noise. After the Speakers' remarks, there will be a question and answer session to come from the company's supplemental presentation was issued earlier. This morning, if you have not.
The release, you may access it by visiting <unk> website, Www Dot chart industries Dot com a telephone replay of today's broadcast will be available. Following the conclusion of the call until Thursday April 29th 2021.
The replay information is contained in the company's press release before we begin the company would like to remind you that statements made during this call that are not historical in fact are forward looking statements. Please refer to the information regarding forward looking statements and risk factors included in the company's earnings release.
And latest filings with the S E C or SEC the company undertakes no obligation to update publicly or revise any forward looking statements.
I would now like to turn the conference call over to Jill Evanko chart industries CEO.
Thanks, Laura and good morning, everyone. I think is apropos that we're sharing our results here on Earth day, and the first day of the global climate Summit in particular, as we see heightened demand for our products for the clean energy Revolution. We're pleased to share with you our strong start to 2021 on slide three of the presentation that was really.
This morning, you can see our results compared to the first quarter of 2020, and 2019 and all metrics, except sales results were above our first quarter expectations and while I think slide three speaks for itself, let me point out a few things.
First if someone asked me to pick one metric that I think is the most indicative of our success to come in the next few years I always like to order well the drivers for 'twenty 'twenty. One indicate we are trending toward a great financial year. This is just the beginning of this decade, which I believe will show extensive growth that being from the combination of booming hydrogen growth LNG.
<unk> cost competitiveness in an effective energy transition tool the kickstarting of carbon capture any underlying premise of the increasing need for a hybrid a molecule as the industry recovers and investment is made in infrastructure.
Orders of $417 $2 million in Q1 were the highest in our history, excluding big LNG driven by broad based demand, including a recovery in certain end markets continued demand for our clean products supporting the macro trend of it.
And the combination of larger liquefaction orders for both LNG and hydrogen.
Additionally, we had 32 orders over $1 million each in the quarter.
This continued record level order activity contributed to record backlog with or without big LNG of 934 million. This is the second quarter in a row of record orders and backlog further setting up a very strong remainder of 2020 one.
Both reported and adjusted gross margin as a percentage of sales were the highest in four years with or without big LNG gross margins sequentially, increasing in both dollars and percentage of sale with reported gross margin as a percentage of sales of 29, 1% when adjusted for onetime costs 29, 9% up 140 basis points from a year ago and over five.
500 basis points from two years ago.
Demonstrates the increasing mix of our higher margin specialty and repair services and leasing businesses, which comprised 41, 1% of our total first quarter revenue the highest it has ever been as a point of reference our sell in specialty as a percentage of revenue for the full year 2020 was 34, 1%.
Gross margin was a key contributor to our adjusted diluting diluted earnings per share of 80 cents, even on lower than anticipated sales. This includes six cents from our investments.
This is a nearly 200% increase compared to the first quarter of 2020, reflecting continued operational execution across the segment.
Sales were slightly lower than expected in the first quarter.
Two specific timing shifts to the second quarter, and therefore are still within the year, specifically sales of $288 $5 million were impacted by revenue recognition being in April for shipped ISO containers and other products that were in transit at March 31, and $5 million of venture Global's Calcasieu pass project that shifted to the second quarter.
<unk> based on updated schedule alignment with the customer.
Also included on this slide are the comparisons to the first quarter of 2019, which had no COVID-19 challenges and also shows the positive financial impact the strategic changes to our portfolio of head on our order book topline and margin back.
Back to that one metric to look at for the explosive growth of the business. That's on the horizon orders when you remove big LNG orders increased over 34% since the first quarter of 2019.
Now moving to the segment specific starting with specialty on slide four.
The segment had record backlog orders and gross profit in the first quarter, along with record sales and H LNG vehicle tank food and beverage and water treatment.
Gross margin improved sequentially from the fourth quarter with favorable margin mix and candidate in the space related sales as well as improving operational execution in certain locations of our factories.
Everyone wants to talk hydrogen which had record orders in gross profit in the first quarter, we will get into details on income inside but to get you excited about that market. If you're not already let me give you an astounding data point in.
In addition to our hydrogen orders already in backlog, we were working with 214 hydrogen customers.
Mers under 54 of non disclosure agreements that the significant increase when you compare to one year ago. When we were in conversations with just over 30 customers and potential customers about hydrogen equipment and under four NDA is at that point in time.
You're all familiar with slide five in the first quarter, we continued to expand our investments our own portfolio and our commercial agreements to pull chart products through to more customers projects and geographies specifically related to specialty the bottom row shows our year to date activity and you've heard a lot about each of these throughout the quarter I'd point out that already each has brought up commercial.
<unk> and worse, so moving to slide six let's discuss how each of these has increased our specialty products addressable market.
As a reminder, the addressable market shown on slide six reflects our best internal estimates on a relatively near term next three to four year overall market opportunity with our existing processing equipment. It does not include new products in development unless indicated nor additional benefits from other potential commercial partnerships.
The acquisition of Cryo technologies increased our hydrogen addressable market in the near term the $800 million and added a $250 million helium liquefaction element to the market opportunity. This great combination of Cryo technologies and chart offers combined content for the very broad liquefaction process market.
Our content on these projects ranges from $15 million to $100 million each.
Similarly, the transfer a material investment in commercial Mou brings chart content to their unique hydrogen in acetylene process and expanded our total addressable market by 150 million, we'll talk more about hydrogen detailed on the next slide.
Well first don't forget the burgeoning carbon capture market, where our carbon and direct air capture process. Our extensive heat exchanger offering in our February 2021 investment into von <unk> offers the most unique combination in the market of process technology and equipment with low capex and high purity or $15 million investment savant.
It was for just under 10% brings.
It brings with it a commercial Mou as well as being alongside key ESG investors, such as tennis F. O G C I, Chevron Mitsui Suncor and others.
Proposed U S. Infrastructure plan also includes a focus on building C. C U S facilities and expanding the 45 few tax credits, which further supports our view that carbon capture is a high potential breakout market for our products and technologies, it's not only driven by the U S and Canada, who also recently upheld the national carbon tax, but also our global pipeline of various.
Page quoting activity for carbon and direct air capture ranging from the middle East to Norway to Mexico with over 80 projects in various stages of our commercial quotation pipeline compared to 'twenty only six months ago, we see this as a key market to the next decade.
Another strategic synergistic acquisition that touches on the clean resolution this time clean water with Blue and Green, which brought us water treatment technology and when combined with our tanks offers a full dissolution water treatment package. Since we completed the big acquisition in November of 2020.
$5 $5 million of orders, where we sold both blue and Green Technology and chart equipment together with.
With President Biden American jobs plan anticipated includes spending of over $100 billion toward the United States aging water systems, we anticipate the demand for this part of our Nexus of clean products and technologies to significantly accelerate.
Three of our specialty areas that have not received the same amount of attention is the world of cleaner and greener or Canada gas by rail and food and beverage. Each of these three have growing demand pun intended driven by a combination of macro and specific product tailwind.
Just under a month ago legislation was passed to legalize recreational marijuana in New York State New York is a 15 state along with the district of Columbia have legalized candidates for recreational use and 43% of the U S population now live in states, where recreational marijuana is legal we expect continued increasing demand as public Paul.
<unk> in the United States Directionally supports the botanical market and as candidates producers and packagers and scale to their manufacturing.
We supply this market through the same distributors that service restaurants, and convenience stores and many of these distributors are expanding their businesses to meet the increasing demand in the first quarter. We saw an increase in orders for Orca C. O two delivery trucks, which is a leading indicator of the growth our customers expect in this particular market.
The gas by rail market is one that we've been prepared force since 2014 with a very unique offering and while it has definitely had fits and starts.
This market gained traction both in the U S and Europe in the first quarter, we booked a 10 argon railcar order our equipment was used in LNG.
In Europe, and we shipped the first LNG by rail tender car for the $22 million order Thats in our backlog from December 31 2019.
Our customers have indicated that rail is going to continue to gain traction and we expect to make a dent in our 200 million dollar addressable market. As these are typically ordered in groups versus individual orders, making each multimillion dollar order levels.
Food and beverage is one of our more consistent market within specialty but also was one of the hardest hit by Covid last year, we saw recovery in the fourth quarter of 2020 and that recovery continued into the first part of 2021 with new restaurant openings picking up for example, we received food and Bev orders from National accounts, including Chipotle Yum brands.
Jack in the box Kwik trip the other kwik trip Buffalo Wild wings, Jimmy John's Regal cinemas and Cinemark all in the first quarter also once a day in April our beverage daily order rate is tracking higher than any month since February of 2020.
One of the questions I regularly get asked is what are our hydrogen addressable market as shown on slide seven could be significantly are considerably larger than the next five to 10 years. The answer is yes, and each day, there is more and more confidence that hydrogen will be a key part of the clean energy destination.
So what will drive us to increase our market size. There's two broad buckets. The first is continued public sector investment and let me give you. Some recent anecdotes that support. This in addition to all the stats we shared a couple of months back on our year end earnings call.
Last month, the Tokyo Olympic Torch started it's 121 day relay and many of the legs will be hydrogen powered Japan is using this opportunity to raise awareness about hydrogen as a cleaner power fuel as well as Japan's initiatives to use it as its future Green energy source.
Industry coalitions will continue to accelerate hydrogen and this past quarter. We were one of 11 founding member companies of hydrogen forward as well as co leading with reliance industries, the India hydrogen alliance promote hydrogen as a fuel and complement renewables in that geography.
On April 9th.
The White House released its fiscal year 2022 budget preview. This supports increased funding to advance carbon reduction and mitigation and sectors and applications that are difficult to decarbonize, including the industrial sector with technologies and methods such as carbon capture and storage hydrogen and direct air capture these were all specifically called out.
That previous.
Our recent market analysis was completed by emerging research. They concluded that the global liquid hydrogen market is forecasted to be worth over $50 billion by 2027, driven by exponential growth in demand for electric vehicles to reduce emission levels as well as the rising use of liquid hydrogen in manufacturer.
Things, such as OLED display and semiconductor manufacturing.
To remind you we're the only company that had been designing manufacturing.
Liquid hydrogen products that we offer for over 50 years.
So the second driver of a potential increase to our total addressable market is our own organic and inorganic investments, we're well into the testing and near commercial readiness for liquid hydrogen onboard vehicle tank, which we intend to release to market in the third quarter of this year at the AC TX though.
We haven't included in the current $2 $3 billion Tam any expanded scope for are in development and hydrogen pump nor any potential processor equipment content on projects that maybe the opportunities through our cornerstone investment in the five T hydrogen fund, which is expected to launch in early 2022.
And as you know we've been an active participant in the Chinese group code for liquid hydrogen storage tanks, a lengthy process. We expect the final code and approval this quarter.
Just last week, the Secretary General initiated the group code work for liquid hydrogen mobile equipment in China and invited us to participate in the code preparation led by the China Standards Committee, we're excited to be a part of this and add the certifications and capabilities for hydrogen mobile equipment to our Chinese manufacturing offering.
But before we increase the hydrogen market size for chart, we want to show you the progress against our current Tam, which you can see on the right hand side of slide seven not even a year into the hydrogen media, we have already booked over $100 million of orders and perhaps the two most meaningful things on this page are the orders by quarter table in the bottom right hand corner from Q3 2010.
Q4, 2020, the orders more than doubled and free.
2020 to Q1, 2021 hydrogen orders more than tripled in each of these is off a sequentially higher based on the left.
The second meaningful thing is the breadth of the types of orders to date, ranging from hydrogen storage tanks to fueling station equipment to liquid and gaseous hydrogen trailers to local flyers to marine fuel applications.
Alright, So slide eight is one of my favorite ones that we do each quarter in part because saying focus orders makes me smile and more importantly, because it shows the continued evolution of the business and penetrating a variety of applications that are existing product offering is used and we continue to see strong demand for new and unique first of a kind <unk>.
<unk> not just from our existing customers, but also from our new customers of which we had 105 in the first quarter 72 of those new customers where customers outside of North America.
We have also included meaningful existing customers and products in the middle column of the slide because he showed the stickiness of our existing customers coming to us for new innovative solutions like Chick Fil a switching to a larger tend to accommodate their growing seo to knees or one of our industrial gas major customers ordering 10, argon railcars that I referenced earlier.
Bangor was a good example of how we're beginning to see the further penetration and growth in the cannabis market and Cal start is an exciting win for us in March Cal start received a grant award from the California Energy Commission to develop an actionable hydrogen fuel cell powered tugboat design that will be ready for construction and implementation of the port of Los Angeles.
<unk>, which is called high that involves us and other consortium partners, including Ballard power together, our teams will develop a pathway to decarbonize, the marine sector by identifying and addressing challenges related to producing delivering transferring of storing liquid hydrogen.
Zero emission tugboats I won't run through the others that you can read about them on this slide.
Slide nine is our second high growth segment repair servicing leasing or ourself, we continue to organically grow our RSL business, both through capital investments and a larger leasing fleet and strategic repair locations. This.
This is returning to US immediately with 44, new leases signed in the first quarter of 2021 compared to five new leases signed in the first quarter of 2020.
Additionally February was our first month with leasing revenue greater than $1 million and this grew an additional 250% sequentially from February to March.
Ourselves set to have an extraordinary and record second quarter 2021, due to the timing of some of the shipments that I mentioned around sales moving from first quarter to the second quarter beyond leasing the repair and service business continues to gain traction in Europe within service and maintenance long term agreement with gas them for their LNG fueling station network in Finland.
And in Sweden.
The first quarter of 2021 more accurately accurately represents a typical quarter for ourselves from an order and gross margin as a percentage of sales when compared to the fourth quarter of 2020, which had an unusually high level quick turn repairs and installations.
We're currently accepting customer equipment at our new Greenfield repair and services, That's Carolina, and we anticipate beginning with terrorists in June at that site.
Slide 10 moves into our more traditional business cryo tanks solutions or Cts record cryo take solutions backlog of $245 $8 million as of the end of March is up just under 11% over the fourth quarter record orders and sales in Cts mobile equipment in the first quarter 2020 one.
This increasing backlog and with record trailer orders in the quarter. Both in units and dollars. We are increasing our cts sales outlook for the full year 2021.
Strong first quarter 2021, Orca unit orders are a leading indicator for continued strong premise sales throughout the remainder of the year.
And we have other activity, which we consider a bellwether sign of manufacturing recovery that is directly linked to laser cutting for production.
Industrial gas major customer activity as well as independent distributor activity was the strongest it has been since pre COVID-19 levels. This past quarter, one of our top five industrial gas major customers order. The most in any month in their history with us in March 2021, and we expect as more COVID-19 restrictions are lifted that our IND.
Shale gas customers activity increases.
Q1 was a very strong quarter for independent industrial gas customers as well for example, one of the independents place more orders with us in the first quarter of 2021 than in all of last year.
Our China business also contributed to our strong first quarter with record backlog and record sales as well as continuing to improve positive operating profit you can see some of the accomplishments at the top of slide 11, I used to say cautiously optimistic about the China business and characterize the earnings.
A few thousand dollars well based on current developments Sheri and her team has put me in a position that I would say optimistic about continued and increasing strength in the China business, coupled with much higher than thousands of operating income.
Additionally, global ISO container demand continued at heightened levels as the new year started we booked orders for 121, ISO containers in the quarter and shipped 99 units.
We expect demand to further increase in the remainder of the year.
Slide 12 shows heat transfer first quarter metrics with year over year order increase of 15% driven by the start of air cooled heat exchanger and pet Chem market recovery.
But more impactful was our first LNG liquefaction order this year for new fortress Energy's first LNG project. There are numerous small scale LNG potential orders on the horizon. The chart on the bottom right hand side of Slide 12 shows 10 of these potential projects that are currently not in our backlog, we anticipate a subset of these.
Move forward to orders with either S. I D or notices to proceed in the remainder of 2021.
Note that these are geographically diverse and that is another indicator that LNG remains a part of this global energy transition.
This is especially true in countries and regions working to move from coal and diesel to a cost effect is available.
Ready now answer which LNG is.
Also many LNG operators are implementing various carbon monitoring and reduction actions, which we're working with them to design flexibility into their facilities into dress cleaner options over the coming decades.
Our HCS equipment is being sought after for applications ranging from carbon capture solutions to biogas, even the traditionalists or exploring going green with upgrades and retrofits trending toward heat recovery geothermal applications in green diesel projects, we booked two green diesel projects with traditional hydrocarbon customers in the first.
Order.
And while we have not included the Big LNG chart on this slide really guys. It's only due to space constraints of the slide like don't read anything into that because we still arent changing our perspective that we expect at least one big LNG order in the coming nine months as you're well aware of the phase ones of projects, we have already been named on specifically venture Global's.
Plaquemines Cheniere Corpus Christi stage, III intolerance Driftwood project total over $750 million of potential pending chart orders.
And speaking of Big LNG.
The decline in venture Global Calcasieu pass revenue as expected from Q4 to Q1 was the driver of lower heat transfer systems gross margin as a percentage of sales when you exclude that big LNG gross margin as a percentage of sales was up sequentially from Q4 and Q1.
To reiterate you're no longer relying on one or two big projects happening our margin profile and growth depending on that so Merck is going to tell us about that now on slide 13. Thanks Joe.
Strength in gross margin coupled with our SG&A cost control resulted in reported diluted earnings per share of <unk> 63.
10, five times higher than the first quarter of 2020.
When adjusted for one time cost primarily related to inorganic transactions and new facility startup cost shown online one adjusted EPS was <unk> 80.
196% when compared to one year ago.
Excuse me.
This includes six cents of earnings from the Mark to market this quarter remarks strategic investments.
The Damned if you do damned. If you don't fly is back on page 14. This is our walk from 2012 sales to our current low end of the sales guide for 2021 full year.
Our current full year 2021 sales outlook is $1 36 to 1.41 billion.
Up from our prior guidance of 1.32 to 138 billion. The prior walk to the low end of the range is included in the appendix of the presentation on slide 19, if you need that for reference the highlighted yellow boxes or what has changed since our prior outlook.
Starting at the top with the specific project box for heat transfer system. This number is built up differently than last time.
Obviously, we had $47 million, which was based on two anticipated small scale LNG projects. Now. This includes the 2021 portion of expected revenue for New fortress Energy's first LNG project as well as current year expected sales for our petrochemical project that's already.
Additionally, we have included one small scale LNG project that we would expect to be booked in the second quarter and result in approximately $10 million of second half revenues.
This morning, we are.
Executed a letter of intent for the supply of technology and equipment packages for confidential liquefaction project in the northeast United States. The award, which is valued in excess of $20 million for US includes innovative and environmentally conscious design aspects. The project is subject to final regulatory approvals and final investment decision, which are expected in the coming.
Weeks beyond that there are no additional small scale LNG or other specific projects built into the low end of our guide, although we do expect more to come into the order book This year as I mentioned on the HTS slide, but these would primarily benefit a little bit late in the year and then 2022 revenues.
The next change is an increase from zero year over year growth in mobile equipment to an increase of 4% driven by the first quarter trailer order activity that I talked about on Cts. We hadn't previously included any growth due to two specific mobile equipment sales in 2020 that arent repeating but to start to this year has given us confidence to increase this which will be reflected in the second half.
A 2021 revenue.
Third we have increased our hydrogen outlook based on the actual backlog as of the end of the first quarter 2021.
Specialty products in particular hydrogen are still on the newer into customer behavior. So we did not build a significant amount of second quarter orders into the outlook at the low end note that we do include $30 million Technologies' revenue in the full year forecast. This was based on our first half 2021 unexpected helium liquefaction order well it is.
On a busy morning.
There's also this morning, we received the letter of intent for Cryo technologies helium liquefaction large scale helium plant for one of the largest independent oil and gas producers in Russia. The scope of our supply for the minimum 5 million liter per year helium plant includes equipment commissioning and startup and the order is expected to be greater than $40 million in keeping with our.
Our strategy to be clear, we do not have construction responsibility on this particular project.
And finally last few highlights on slide relate to each LNG over the road vehicle tanks as I said on our year end earnings call. It's H LNG order levels continued as they were in the second half of 2020 that number would growth and so now that reflects that and the eliminations is simply accounting around where what is made in our respective manufacturing locations.
Do remember that full year 2021 sales include $21 million from Calcasieu pass revenue of which there's only $5 million remaining in backlog.
As well as the 30 that I just touched on for Cryo technologies, There's no additional big LNG revenue included in our outlook and this year, we expect the first half of 2020, one to be lower than the second half from a sales perspective based on the lead time of our backlog, which brings us to the rest of our full year 2021 guide on slide 15.
Jill just just told you about the sales guidance.
Anticipated associated full year non diluted adjusted earnings per share to be approximately $3.
Two $4 15 on 35 5 million weighted average shares outstanding.
From our previous estimate of $3 50 to $4 per share our assumed effective tax rate is 18% for the full year of 2021.
One of the questions that is top of mind for many companies, including US is around material price increases, while we have seen price increases in nickel and stainless steel we have strong protections in our customer agreements for material pass through.
In some cases these are immediate.
And in other cases, there is a three to six month delay we expect second half gross margins reflect the pass throughs and this will positively impact Cts in particular.
The first quarter of 2021 free cash flow was negative $3 million after $11 5 million of capital expenditures. This was in line with our typical first quarter Fcs seasonality being the lowest quarter of the year. This year in particular, the first quarter FCS was impacted by the following three factors.
First the timing of the ISO container revenue recognition that shifted from Q1 to Q2, 2021, which will directly and positively impact Fcs in the second quarter of 2021.
Second strength in March 2021 orders for each LNG vehicle tanks and beverage equipment drove an increase in inventory in the first quarter 2021. These products typically have a four to eight week lead time and therefore at the end of the quarter inventory levels at this book to Bill timing.
And third the necessity to have material available for the on time delivery of our remainder of the year shipments and strong orders on longer lead time products such as trailers in railcars will continue to contribute to our anticipated strong second half 2021 SCR.
We.
FCS to sequentially increase each quarter this year, given the shipment forecast for the remainder of 2021.
And we are increasing our expected full year in 2021 free cash flow outlook to be between 200 $220 million Inc.
And this outlook is $40 million to $50 million of capital expenditures.
Which the details are on the right hand of the chart. These are all organic investments to expedite growth profitability and flexibility in strategic areas of the business.
Unchanged from our prior guidance.
As many of you are aware our business is also unique in how we approach ESG is showing in part on slide 16.
Not only are our ESG priorities embedded in our own culture. We also are positioned to help our customers achieve.
There is a sustainability targets in a number of different ways, whether that's through reducing the amount of plastic used in packaging to lowering greenhouse gas emissions by enabling the transition towards cleaner fuels.
Two weeks ago, we released our updated sustainability report, which included metrics from 2020 as well as certain go forward targets I'll just point out a few to encourage you to read the full report.
With safety as our highest priority our team members achieved our lowest total recordable incident rate in history in 2020.
Our culture, our culture of diversity and inclusion is supported by our global DNI Committee made up of more than 50 team members from around the world advancing community involvement education or training amongst many others.
We have set a target to reduce our carbon intensity, 30% by 2030 and have specific initiatives in place to help us meet this goal.
Last year, we made progress towards achieving our targets for reducing GHT intensity by almost 6% year over year.
In 2020 chart reduced scope, one and scope two emissions by eight five and eight 9%, respectively, while reducing total energy consumption by 15, 9%.
And so when you just jumping off point, we have introduced our carbon neutral target by 2050, as well as including an ESG component.
<unk> to our short term incentive targets for 2021 directly tying executive compensation with ESG goals.
And on the right hand, slide you will see a few need examples of measurable outcomes that we helped our customers comp accomplished contributing towards a greener and cleaner environment.
With that now I'll turn it over to norm to open it up for questions.
Thank you if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone EBIT question has been answered or you wish to remove yourself from the queue. Please press the pound key just a reminder, you are only allowed to ask one question and one follow up on your time. Thank you. Please standby, while we compile the Q&A Ross.
Sir.
Your first question comes from the line of Ian Mcpherson with Siemens Your line is open.
Good morning. Thanks.
Joe.
Obviously the.
The growth in specialty products speaks for itself its extraordinary.
Sure.
Good.
Then I wanted to probe into is this an RSL because.
You don't have the obvious growth comps in the first quarter with your orders or the sequential revenue growth that sort of.
Tilted towards your full year.
Walk.
So I wanted to ask for some more.
Color on what you expect with orders here in the second quarter and whether it's more of the.
Repair service or the leasing business that you expect to propel the growth.
From the beginning of the year to the latter part of the year, yes.
Yes, it's a combination of things on RSL and you'll go back to Q1 of 2020, there was a onetime repair order for a customer in Saudi but if you take that out and you look at where are we today. There's two big drivers on the first is around the leasing business and the order.
Of the leases that.
Two of the number of leases and the size of them that we've booked over the last two quarters really are going to start hitting through the revenue line in Q2, Q3, and Q4 and a portion of that was we didn't have the fleet. So we had actually customers lined up for the leases and we needed to build the fleet to fulfill those leases.
So that's incremental step up you'll see that move up in Q2, and then you'll see that was off significantly in Q3 and Q4, because a lot of those start ticking through on starting in July. The second piece is around the repair side of the business. So that's really a combination of two things one is the additional.
Pasadena and strategic location in South Carolina, which will start repairs in June and then the second is around the industrial.
<unk> gas customers have very specific products that they are currently taking out of their existing assets getting them repaired to put them back in and so we have pretty good line of sight to what that looks like I can't obviously give you details to customer specificity, but suffice it to say that the the increases in terms of the force.
Cash for those customers line out very well with the way that our guide looks.
That's perfect. Thanks Jill.
For a follow up question just for clarity sake, I was going to see if we could.
Net.
The bridge from your Q1, adjusted EPS to the new upwardly revised full year range, just what would be the adjusted Q1 earnings that's comparable apples to apples with the $3 65 to $4 15 for the full year.
Yeah, Ian I'm not sure.
Specifically understand the question on what the cash.
We're adjusting for tax rate in basic share count et cetera, with the full year range. So I just wanted to translate that to what the Q1 comparable EPS is.
Oh for <unk>. So we had we didn't adjust our attach rate or our share count in our guide compared to our actual so maybe that's a better one for us to take offline and I'll have Greg shoot you an email with that.
Yeah, I would say if I was back of the envelope thing it'll be 85 cents, but let's get you a specific answer on that no problem. Thanks, Joe. Thanks.
Thanks.
Your next question comes from the line of Eric Stine with Craig Hallum. Your line is open.
Hi, Scott.
Expired.
Thanks.
So maybe just touching on.
You called out the large the letter of intent.
Large scale helium.
Project and that's not an end market, we've necessarily heard a whole lot from or potentially a new end market. Just curious if you could talk about the pipeline there and maybe the geographic breakdown.
What you are talking about is that kind of the typical size for one of these projects.
Yes, it's and it's a really interesting market and frankly, we used to do it 40 years ago, and then we really didn't pursue it as part of our strategy and then through the cryo technologies deals where that capability came very naturally with their liquefaction technologies and helium is a really unique molecule.
In terms of the characteristics and.
The quality and price of it as well so when you find a helium rich location like this particular customer has that's something to take advantage of the project pipeline for US we size the addressable market as two of these a year.
And if we got two of these a year.
Tick right past that near term addressable market that we have for helium liquefaction.
The pipeline is it's not nearly as robust as what you see on the hydrogen side, although helium process can be used in hydrogen processing as well.
It's certainly a very very realistic.
Potential for us to get to a year on these and the project sizes are 25% to 50, it really depends on the particulars of the size. So this particular, one that we signed the LOI. This morning, we.
We particularly called it out as a minimum of five and that's because you could go up and you can get more efficiencies and so on and that can change the scope in the game and so that's also why we said it's a minimum of 40, because as the customer determines what sized plant they actually want that could scale up a little bit for <unk>.
As well.
And I guess second part of your question, which was geographies.
And it all or most of the helium liquefaction. We see is in unique regions of the world, but certainly helium liquefaction is used in other processes in the U S. But I'd say, it's about 70% non U S.
Got it that's helpful and maybe just the last one for me.
Just turning to the vehicle tanks, obviously very strong there in Europe.
You called out the new regulations in Austria, we know about the toll exemption.
In Germany, which has been driving that are there any other regulations you see out there in different parts of Europe.
Could it even accelerate the growth from where you've seen up to this point.
Actually outside of Europe is where we see a growth accelerator for the second half of this year from an order book standpoint in particular.
One customer in Japan that I think is going to move ahead on this honors. The all the mine haul type of trucks, which are in Russia, and the middle East and probably the most active for US has been on some of the LNG bus activity in terms of our quotation pipeline and others.
A lot of activity around that in South America. So some of that is regulation driven and others. It's just over the course of time. The customers are finally getting to the point, where we're going to do something and the real step for them to do it because it's available and it's cost effective.
Okay. Thank you very much.
Yes.
Yes.
Your next question comes from the line up of Rob Brown with Lake Street Capital. Your line is open.
Joe Good morning, Scott there Rob.
Question is really on the carbon capture market you talked about a pipeline expansion there could you give us some further color on the pipeline and when do you sort of see that turning to orders is that really more of a 2022.
Hi, Mike.
Well I hope my commercial carbon capture team is listening because I'm going to commit them to one of these projects being booked in 2021.
Which by the way is not in the low end of our guidance.
So I think that this is near term then and going to start happening although its definitely we're still at the demonstration scale type of project size, but if you take like I said, one day, where they already have a pipeline of orders that they're working on in projects that they're working on including larger scale carbon capture.
Work, it's just the construction and the pre work and all of that takes a few years to get to where that plant is going to be up and running.
The expanded pipeline has been dramatic so I think it's gotten the concept and the idea of carbon and direct air capture has gotten a lot more airtime over the last three months in particular and so that's drawing a variety of types of customers to look at this as part of this.
Or a total solution in many cases, what we're talking about with customers is how does this become part of an integrated solution and back to the the concepts of there's really three buckets of types of customers that are working on this one bucket is I've got to solve the carbon emission problem of my existing asked.
That I own because that's probably the biggest problem and people are now having to take action to start getting closer to these climate targets that they've put out the second bucket. Our pure play guys that are primarily focused on D. Aesir direct air capture and capture and then the third bucket are folks that are looking at how do I use it in a closed loop.
Nicole whether it's going to be on a really small scale for food and beverage or whether it's on a larger scale like the cement and concrete hearing what.
What I like about this market in particular is it similar to small scale LNG projects, where you get in early and you helped design the solution and the answer and there's two things that we're really good at in the design side, which are the combination of low low capex and high efficiency and in case of carbon capture.
Low capex and high purity so.
<unk> positioned to kind of replicate the approach the commercial approach that we've taken on small scale LNG.
Okay, Great and then on the leasing business, just coming back to that a little bit.
What do you see that growing into over time, and how much of an asset base.
Can that be for you.
Yeah. The the leasing business is definitely you know from an asset base perspective, right now our fleets about $10 million worth of assets that we have and we're continuing to build those assets out as I commented on the call is ahead of us.
In order so we get an order and then we build the fleet, we actually don't have a set of assets sitting around here that arent leased which is a unique position right now right. So we're kind of in that scale up position.
I think it's going to the answer the direct answer to your question is going to depend on how if this growth continues the way that we expect that number is going to grow <expletive>uming it's still standard equipment focused on mobiles and focused on icos et cetera. So that we can redeploy it.
But we've seen exceptional customer response, even more surprising that exceptional customer response, we thought it would be focused on the United States, but it's also been in Europe, and so we're going to continue to take advantage of this.
Particular aspect of the business and I just reiterate to everybody that these are long term leases. These are five 710 year leases they come with interest rates <expletive>ociated with them and they are on standard equipment.
We think that this business continues to grow very very quickly and this year you know, while we have forecasted.
<unk> forecasted the leasing piece of the business kind of in that 15% to 20% growth range.
From a sales perspective, the orders are going to be much more higher.
Higher growth than the sales are for this year.
Okay. Thank you I'll turn it over.
Your next question comes from the line of James West with Evercore ISI. Your line is open.
Good morning, Joe.
So with the hydrogen customer base, expanding so rapidly as it has this year.
All impressive numbers.
<unk> seen any trends.
What the hydrogen customers are going to be doing with the hydrogen is there more on the mobility side more on power storage or energy storage or.
Power source for renal Harvard's Decarbonize heavy industries.
Noticeable.
Yeah, we're seeing.
Power to mobility, and then as a power source and it's interesting because it's a pretty broad set of.
<unk>.
Types of applications that it's going to be used as a power source. The other thing that we're seeing is a pragmatism toward.
The different colors of hydrogen so it's now about hey, I need this fast I need to solve this and so let's figure out what that looks like versus let's design to the utmost green answer and that's going to take us a lot longer. So one of the behaviors that has changed over the last I'd say three to four months it has been.
As a matter of heck of a lot more so the demand is out there by the end users and the people providing the molecule need to produce it need to have the supply and transported there quickly and you see that in also in our hydrogen transport pipelines, it's only in backlog, but also in quotation.
Okay. Thanks.
Are you interested in the trend. So are they is it okay. Let's just get this done we're not worried about blue.
Great, but do they still have an intention to go green overtime.
Yes, absolutely and it's at various different types of projects and some of them are doing green now, but others are saying, let me get liquefaction started and in the case of our technology right. We can handle any color and so that's one of the relevant that a lot of these guys like thinking over the course of time have different composition.
Okay understood. Thank.
Thank you.
Your next question comes from the line of day below we'd see your line is open.
Hi, Joe Hi, Mark.
I have kind of a higher level question just on your <unk>.
Faction of equipment that you guys provided for hydrogen helium I guess for how long.
<unk> also.
I guess my question is what's kind of the competitive landscape for <unk>.
For those products.
I'm trying to get a sense of like obviously, we know we all know that.
The opportunity on the hydrogen helium side do you guys have I guess, what's the competitive landscape on that front.
You have a market share targets is that the right way to look at that at your outlook is.
Is there stuff about your equipment, that's proprietary that your competitors don't have.
Yes, I'm trying to get a sense of the competitive landscape.
Yes totally understood great great question and totally understand what you're getting at here and I can say that.
Where we sit today.
A very unique and differentiated process as well as set of equipment and it's very very hard to replicate or duplicate.
When we acquired Cryo technologies, most many of the times on liquefaction projects in particular hydrogen we would see them as our competitor in the bidding process in <unk>.
Terms of.
There are other companies out there that do liquefaction and some of them, even our customers as well, but it's hard to do it takes a long time to develop and you got to make sure. It works and that's something that.
A lot of times, our customers if they do decide to go with a competitor one of the very few end up coming back to us because the liquefaction process, regardless of what we're talking about one or LNG or hydrogen doesn't actually work to the specification the efficiency and the output that's there.
The other thing I'd point out is we are really unique in the equipment that we have that goes with the process and so you can always ive commented before you can choose the full menu the full solution or you can choose the ala carte menu and the pieces and parts, but the equipment itself and the many things that.
Equipment is also extremely differentiated and not easy to do if you just take the <unk> aluminum heat exchanger as one anecdote of many in our portfolio.
Theres four competitors in the world that can do a raise aluminum heat exchanger and we are the only ones that manufacturers than in North America and I could go on through the list right, but you kind of get a sense of that and where you know what what we're continuing to do is stay differentiated by our own R&D as well as the investments that we're making.
Because individual components can be not can be replicated and you can have competition come in that way, but it's going to be really hard for somebody to come in and have everything from vacuum insulated place to liquid hydrogen storage tanks that certified to hydrogen transport to a fueling station to a pump to an onboard tank.
All the way through to liquefaction process and I think market share is correct I think that's the way to think about it. So we've done our best to size the market realistically in kind of the first half of this decade and then from there you know I would say if you wanted to say it at a global level and we would target 60 70.
Of that should be our our share and now there's pieces and parts that are going to move and there's always the danger of putting out that level of specificity, but the reality is with little competition, especially on that full service solution.
We should be we should be winning that high.
Okay. That's perfect. Thank you.
My other question was.
Coming back to China can you remind me did you guys used to have manufacturing footprint. There right I think that you have how do you emphasize.
China as a region because profit just weren't there I guess, what's changed we went into a little bit on the slide but like what's changed in terms of the profitability. How are you servicing that market today.
Oh, Wow that could take a long time to answer on the what's changed.
Okay.
We consolidated our manufacturing footprint, we now operate primarily out of one location in China, which is a large facility. So that gave us a lot of efficiencies of being in one state and the appropriate lay out.
The second thing is we did a lot of cost actions and review and frankly I think it was just a little bit ignored.
And now that there is attention to it that was a good thing, but I think most impactful is the management team that we have in place now we made a change early last year and the Lady that is running the business has a really good handle on the pieces and parts and after 19 years with chart in various different commercial and operational roles.
And that makes a heck of a heck of a difference leadership makes a big difference and I would say you haven't seen the end of the records coming out of China.
A key part of our portfolio for standard product.
Perfect Alright, thanks, guys I'll turn it back.
Jamie.
Next question comes from the line of commodity not with Morgan Stanley. Your line is open.
Thanks, Good morning, Hey.
Hey, Connor.
I wanted to stay on that market share topic, because it's been it's been a consistent point of.
Questions from investors so.
The numbers to optically our very high I'm wondering if you could maybe.
Just sort of define what your views.
Viewing as the addressable market excuse me that you are taking that share of basically the question is.
Yes.
Differently, how big is your content within an overall projects because I think there is maybe some discrepancy on how we're thinking about total addressable market versus how you guys are sort of defining in here.
So if youre talking about hydrogen specifically.
The answer is really wide answer to that if you're talking about.
With fashion project, our content is going to be a significant portion of the project itself, meaning you know 70% of the project. If you are talking about a storage tank that goes into a larger facility that's producing the molecule it's going to be a very small percent of the total and then if you.
Into a fueling station you're talking anywhere from 1.2 to two and a half million, but as a percentage of the total that's 25% of the cost of the fueling station. So it is a pretty you'd have to break it down into the eight bullets that are comprising our bottoms up addressable market, which we're happy to do.
We can do that with you on our call. This afternoon.
Yes, sure I mean, basically the point Im driving at is you we're not defining your share as 60% to 70% of that total project at 60%, 70% of that percentage of the product that you would be.
Correct you got it exactly.
Okay understood and then just just another common question that we get is.
With this type of growth you guys are looking at some of these specialty markets.
I guess, how would you frame for investors.
Capacity that you have to grow obviously.
A lot of this is sort of manufactured I guess, if you're growing more on some of the process solutions, it's a little bit less capacity intensive, but how would you frame the need to expand your capacity to meet that growing need.
So we're well underway on that already so we don't need to take on any additional capacity from a rooftop perspective and like you said the process side is really engineering, but the capacity from a manufacturing perspective, we had the addition of the Teddy trailer facility, which is now teddy trailers and tanks.
Down in Theodore Alabama in the fall through the Worthington on trailer acquisition, and then that gave US 300000 square feet by water, which makes a huge difference. When you were talking about these larger pieces of equipment and that's where we'll focus a lot of our overflow tank activity from Minnesota to Theodore.
And that's where we will primarily due to U S manufacturing for hydrogen transports.
What we did knowing that we had some of these other specialty areas that are.
Starting to kick off.
With our Tulsa manufacturing facility, which previously was air cooled heat exchangers, we consolidated the air cooled heat exchanger manufacturing down to Beasley, Texas and then we took that 500000 square foot facility that we have in Tulsa and we've we're in the process of setting up a variety of different lines, which internally we call.
Flex manufacturing and that'll give us quite a bit of flexibility around lead times in capacity and we're well underway already our first lines ticking down there and I'm not going to go into detail of what other product lines, because that's a competitive advantage on that we'll have there but we.
We don't need to add at this point, we don't need to add rooftop beyond the investments that we made in 2020 and the completion of the Trs the repair facility in South Carolina.
Got it I appreciate all the context there thanks.
Thanks, Laura.
Your next question comes from the lineup of Bell <unk> with Raymond James Your line is open.
Thanks for taking the question.
I hate to start with.
Kind of a dark topic by.
You guys have manufacturing and corporate <expletive>ets in India, which just hit 300000.
Daily infections.
How are you managing around that issue in terms of the work force.
Walk down risk.
Yeah and then.
And as you know very well much more than we do around kind of the weighted.
Seeing the next round of Covid infections, there's it's kind of rolling now and in India in particular.
We have always been deemed essential manufacturing we have taken some steps over the course of the last 12 months to ensure that we have a flexible work force. So we do use some contract labor as necessary.
Also had a group that works very close to the facility in the case, where we have individuals.
Individuals that need to quarantine, we have backups for each of those that are key positions. So we have not seen a direct negative impact in India to date, but as you can imagine each facility, we have a very very different.
Flexible answers to how we're handling that I'm, probably the location that we in the first quarter saw.
Infection challenges from the legal rules was in the Czech Republic. So there is an increased amount of requirements for COVID-19 testing for your employees.
Well as exposure in amount of time at home and staying home for X amount of time, if you had been exposed.
And I can say that the leadership team in.
DNS Easter historically, D&S east they've done an exceptional job of managing that ensuring that we have the available COVID-19 testing on a weekly basis and working from home where necessary.
Understood.
Follow up.
Kind of a housekeeping item in the guidance you talk about.
Share count of $35 5 million and I <expletive>ume that basic shares your fully diluted number.
Given where the stock is that I think includes the convert so that's one 5 million shares extra is that right.
Yes.
For <unk>, yes, you're in the raise there.
And then once you take the hedge off of that you take another two off of that for the hedge against the converts net.
That's still about three.
Additional.
Got it.
Will the fully diluted share count from Q1, basically continue to roll forward.
Yeah basically yes.
Okay very clear thank you.
Your next question comes from the line of Martin Malloy with Johnson Rice. Your line is open.
Good morning.
Hi, Marty.
Hi, I wanted to follow up on the earlier question about manufacturing capacity and with the order trends that you have and what you've outlined for your order outlook could.
Could you talk about utilization and absorption of fixed costs, and how that might impact margins and I'm just thinking back to.
Please.
Margin.
Outlook, where you talked about going from 11% to <unk>.
'twenty up to the high teens in 2023 is there.
Upside potential to that as the utilization increases.
Darn It Marty you had go there yes, yes. The answer is yes, and that's something that we think through and we know very well on a facility by facility basis, and we try to we try to also share some of that with our customers and the way that we price. So that we can win more and more orders, but it.
Definitely on is upside to what we've said previously if this continues to grow.
Grow at the levels, we're seeing right now.
Okay.
And then just on the CRO James.
Hydrogen pump I'm, sorry, if I missed this in the prepared remarks, but any update in terms of the testing there and.
Outlook for commercial introduction this year.
But we have kind of three things that we're developing organically on the hydrogen side on the first is the onboard vehicle tank and that one we're going to.
We're going to demonstrate that show that in August at the ACP. So that's moving on all cylinders ahead.
The second point of the day, the second is the liquid hydrogen pump.
That one that was really hard to do the team has done an exceptional job in very short period of time and it's in test phase right now.
So the goal would be to have that out in commercial production before the end of the year.
And then the third is the hydrogen test facility self up in Minnesota.
That's well underway the equipment is there.
Constructions, nearly complete and so our customer and we welcome our customers to come anytime onto that test facility.
Great. Thank you I'll turn it back thanks Marty.
Your next question comes from the line of Marc Bianchi with Cowen Your line is open.
Thank you.
I wanted to go back to surprise surprise hydrogen.
And talk about the order profile so.
Very very strong orders in the first quarter very strong improvement from fourth quarter, We know Theres a large plug award in there, but I'm curious how you see that developing over the course of the year.
Should we be building off of this first quarter level.
Could you achieve that first quarter type level at some point later in the year just how are you thinking about the progression.
So we're thinking about it exactly how you said it perfectly which is there were a couple of the liquefaction orders in that first quarter number.
But there's also 17 other liquefaction projects that we're currently bidding on so our teams kind of thinking of it in the.
Three to five range of for the remainder of the year of additional hydrogen liquefaction orders and they tend to be $25 million to $40 million each gen.
Generally speaking so how those roll out is harder to tell.
I would place a bet that we get.
Close in Q2, and then you see a strong Q3 on the order book side of the liquefaction. The other area. That's very strong in bidding and I think is going to come out of the gates from an order perspective in Q2 is the transport side.
Then we are just in.
Inundated with requests for hydrogen transport slots and given the lead times on those that people are locking in those slots as well so.
So I think what you can see you'd see a few of those liquefaction come in and then the regular run rate of that growing off of itself.
So you could easily see a multiple of <unk> 70 for the full year free to yeah.
I can't tell you our exact number because that would be getting into too low a level of forecast to share, but it's it's not it doesn't drop back to five or 10 or 20, each quarter, it's still yeah.
<unk> to growth.
Okay.
That's very helpful context.
Separately just.
Maybe dialing into second quarter, a little bit more I heard you on the RSL.
I'm going to have a really exceptional second quarter could you talk to the other segments just from a kind.
Kind of revenue trajectory.
And margin.
Trajectory just may be if you do you want to rank them or however, you want to just share with us some more detail on the second quarter progression.
For sure. So RSL you kind of got the sense that the top really benefit from some of the timing shift from Q1 to Q2 and the gross margins in that business kind of stayed in the mid thirty's.
On the cryo tank solution side, we see a step up from Q1 to Q2 in sales not a significant one so.
A little bit of a step up there and then you see a real significant step up Q2 to Q3.
On that side of things, we've got an increase in margin gross margin as a percentage of sales from Q1 to Q2 in that business.
And then on lets see he transfer side of things.
We haven't forecasted is flat on it might be a little bit down just given the.
Calcasieu p<expletive> the way, we had 15 ish in the first quarter and we got about five in the second quarter, <expletive>uming that goes according to the updated schedule.
Oh that one flat to a little bit down.
You'll see a step down on gross margin in that business based on just the composition of that Big LNG and then the specialty side on steps up and buy the most meaningful amount from Q1 to Q2 out of any of the four segments.
And we see the gross margin in the mid thirties as well in specialty that could be a little bit better to Marty's question. You know, we're we don't always thinking all of the absorption benefit but at that level of sales, we should be getting some.
Pick up from that perspective in specialty.
So overall I think.
We don't guide.
Mark but yeah.
And I think the consensus that's out there it wasn't we didn't have heartburn with it.
Now I'll, probably get updated a little bit from from our increase in guidance and we wouldn't have heartburn with that either.
Great. Thanks, so much Joe.
Your next question comes from the line of John Walsh with Credit Suisse. Your line is open.
Hi.
Jude for John Good morning, Hey.
Hey, good morning.
So the one question that we had.
Our own sort of your cost controls, obviously, you sort of called that out in your prepared remarks, but can you give us some more color about how you see sort of corporate costs come back for the balance of the year.
We have it flat for the rest of the year, there's a couple of offsets in that so in the first quarter you get.
And stock option change.
Changes in cost. There then you have as the year rolls out elements around the short term incentive accruals and the bonus plan. We have also built in some head count additions to both engineering and sales, but we get some offsets through as inventory rolls out you know some of those movements.
Two reserves and so on so generally speaking we've modeled the rest of the year from an SG&A perspective.
Pretty similar to the first quarter.
Yeah. Okay. Thank you that's very helpful.
And then the other question that I had was.
Just a point of clarification so for your <unk>.
Sales guidance revision.
It seems like it's mostly driven by.
Organic sort of.
Specific project driven it was not didn't have to do anything with M&A.
Specifically.
Correct, that's right specific project driven now some of those projects came the.
Quoting of those projects were being quoted by for example, both cryo technologies and chart.
So that in a tangential sort of way relates to M&A, but it didn't come with the backlog from the acquisition itself. So they were specific project wins.
By chart.
Okay.
Just to follow up these were like new projects. These are not like.
And upsizing of existing projects.
All new projects.
All of the first quarter.
Bookings were that were specific projects or new projects and the increase to the guide was from new projects.
Thank you very much I'll p<expletive> it over.
Thank you.
Your next question comes from the line of Greg Lewis with <unk>. Your line is open.
Realizing that caused around a little long here I just had a question around.
Especially our current oxygen clearly last year that was a nice.
A nice benefit.
No.
Just as we think about specialty.
Seems like if that's coming off of it actually looks even better than unexpected is there any kind of way to unpack that.
What that piece.
Piece of the business did last year around demand around COVID-19.
I'm, <expletive>uming I guess searches et cetera, but I'm, <expletive>uming that number's going to come way down this year does that kind of the right way to think about it.
Youre spot on on how Youre thinking about it and maybe just a little data point that might or might not help from Q4 to Q1 medical oxygen related orders were down $4 3 million sequentially.
And any idea of what it was for the full year.
And.
In terms of what we've done is we've modeled oxygen in our low end of the guide as keeping Q1 flat for the rest of the year.
You could kind of take that multiply by four you get close for the delta year over year.
Perfect. Thank you very much Joe.
Greg.
Your next question comes from the line of Chase Mulvehill with Bank of America. Your line is open.
Yeah.
Probably nobody's left on the call at this point, but I'll go ahead and ask a couple of questions, maybe Greg and I won't be last next Tom.
But I guess.
First if we could talk about heat transfer systems, and if I'm reading The chart right. I think you said 380 million of revenues for heat transfer in 2020 one at the low end.
If we kind of think about what that means for the quarterly cadence for the rest of the year that would mean more than $100 million of quarterly revenues.
You did 69 million in one queue. So pretty strong increase can you just kind of bridge the gap between the 60 odd million.
Greater than $100 million.
Quarterly revenue.
For HTS for the rest of the year.
Yeah, and it's heavily weighted to Q3 and Q4 and that's driven by the specific projects that we have in here. So the SaaS LNG project revenue won't start on that project until Q3, and then couple that with the small scale project that we announced LOI for that will be later in the year that revenue start.
And then finally, the pet Chem project.
It will begin in a little bit in late Q2 revenue returning and then the rest of that being through Q3 and Q4. So you have.
Low first half and then a significant step up to Q3, and Q4 with Q3 and Q4 being very similar to each other.
Okay, Alright makes sense.
And then can we transition over to specialty products.
And talk about the order outlook for the remainder of the year, obviously, you've got a lot of total wins.
For this segment.
But if we strip out the new fortress order.
First quarter the run rate looks like it's about 100 million give or take some.
Can we think about that as a minimum level of quarterly orders for this segment for the remainder of the year and then if we think about that order rate and what it means for backlog, maybe just speak a little bit to the growth that you think that specialty products could have from a topline perspective in 2022.
Yeah, I think I'd use a threshold level per quarter for specialty X. The liquefaction of 90, but you know you're talking you're talking rounding at that point and yeah, I think that the exponential level of growth potential in specialty is highly significant.
We have 54% built in the low end of our guide from a revenue perspective and that really doesn't <expletive>ume any.
Additional incremental liquefaction orders from our hydrogen perspective or multiples on the trailer side.
So the the opportunity set for specialty and this is multi year one two and this isn't just going to be kind of a flash in 'twenty. One and then goes away is.
Certainly well above what I was saying last year of double digit I.
I guess my my handbag kind of came out on that one but now we're nowhere tuck in 30 plus percent growth in this business.
Okay perfect.
I appreciate the time thank.
Thank you.
Your next question comes from the line of Ben Nolan with Stifel. Your line is open.
Thanks C J.
Youre not last forever.
I wanted to follow up on on the Tam really bit the whole specialty dam sort of getting back to what chase was talking about.
As you look to really the $6 billion ish.
Of Tami and without maybe getting granular.
Moving to hydrogen or whatever but when you look at that and that's the addressable market. What do you think through 2023, I guess is how that thought of what do you think is realistic and you were talking about 30 plus percent growth for next year, but or just in general of that $6 billion if thing.
Go your way I mean, how much of that translates to chart six.
Yes, I mean, that's the that's the the Jillian question that's out there and it's it's speculative obviously, but.
I think given our differentiated position in particular on liquefaction and then in these little.
What I think is probably most underappreciated about that just about 6 billion is some of these little air pocket trait, where we start to win carbon in direct air capture water treatment ramps up you know these the gas by rail there's just a lot of other pieces and parts, where the percent of our share is going to be bigger.
And then something else as an example, so you know realistically I think we should be 30% to 35% of that in the next few years.
It's not you know and I can handle the break it down but that's that's not an unrealistic figure.
We're seeing in the market right now.
Awesome.
I know if you can you give me a straight answer appreciate that Joe.
The other.
The other thing I wanted to ask a little bit is as it relates to maybe some of the small scale LNG.
We saw that.
Like established guys came out and just crushed it this quarter and I think there's a whole lot going on about.
Especially in the wake of their free and taxes that everybody.
Trying to sort out backup.
Backup energy needs.
Maybe talk to.
How that's playing out in terms of the.
The potential and.
Yeah.
How meaningful is that to you guys in terms of what it could be versus maybe what it was at the beginning of the year.
And $1.
Perspective.
Yeah, it's definitely it's definitely there so.
So for example, there's one back up.
After the whole, Texas fiasco, there's one potential back up projects and it hasn't been determined that its actually going to go but if it does you know it would be our equipment on it and you're talking about.
Just that project alone could be $50 million for chart content and that's on the LNG side of things and.
And so it's it's real.
The question is how long does it last night I see people get over it I mean, it's like people forget the hurricane a year later forget.
This or do you do does legislature stick with it et cetera.
From the beginning of the year till now our small scale pipeline has easily grown $150 million from our quoted quoting pipeline potential and I think the more you see like the fast LNG go in this new creative side of LNG I think that number is going to exponentially grow this year I mean, it it's amazing how many customer.
Conversations were having on the small scale side for LNG.
Alright, that's that's fantastic appreciate Ya.
Thanks Ben.
Your next question comes from the line of Craig Shere with toll brothers. Your line is open.
Good morning, Thanks for taking the questions.
Yes.
We're hearing more and more about renewable natural gas and LNG transport opportunities even in the U S. Does this represent an opportunity for chart or his charts IP advantage, mostly geared towards LNG truck tanks, primarily in Europe.
Well in an ancillary way, we benefit from it and I think the way that you see that is even in the comments that we made around booking two kind of green diesel on projects and they were more suited toward heavy duty and above when you were talking about the transport side.
But the pieces and parts that go into the stations that are going to be necessary.
Some of the electric electricity, that's going to be needed and he's going to need backup that that was the last guy. So there's all kinds of.
Elements of our componentry that will benefit from that even if not direct CMG or natural gas renewable impacts from a p<expletive>enger vehicle perspective.
Great.
On a bigger picture question.
Jill chart seems to be becoming a victim of its own success.
Frankly, it's just not easy the model of 105, new customer orders for somebody to outside North America in 'twenty, one first of a kind.
And obviously this is one of the reasons. These calls go extra long.
And I surmise this will only be more difficult over the next one to two years as a small skilled truck tanks fueling stations and distributed LNG orders combined with fulfillment of your specialty products Tam to spur an ever increasing array of commercial loans.
Yeah.
This issue is only compounded by expanding mark to market equity investment portfolio.
I realize this question is probably years early with.
But how do you think about long term share value creation, I ultimately breaking off disparate pieces of the company and when the time is right.
You expect or would eventually be robust demand less industrial company demand for select chart Crown jewels. In addition to the potential shareholder spin offs.
Well I think that was the potentially the most thoughtful entire day. So far so yes, I think everything you just said is spot on.
I'd have to have my board here with me to give you a very specific answer of how we might think about that.
Getting into any level of detail, but I certainly see it and I do think to your to your comment it's a little bit early but I don't think it's I think it's in a decade right, where you start seeing the potential for monetization of <expletive>ets of the business, but that's not something that we're thinking about right now our focus is to continue to grow in <unk>.
You said.
It's taken on a lot of pieces of the business and that's a beautiful place to be when you have multiple levers to pull and the high growth and higher margin aspects of the business is becoming an increasingly higher portion of your mix of revenue. So our focus is to continue to grow return to our shareholders through our earnings.
And you know as these markets evolve I think were strategically very well positioned with the portfolio. We have today and will be even more so because we continue to add to that portfolio as the decade rolls out.
Thank you.
Okay. There are no further questions at this time I would now like to turn the call back over to the presenters for closing remarks.
Thanks to everybody who joined in specifically thank you to all of our chart team members, both old and new to our family for your hard work to continue to accelerate the business. So let's go get Q2, thanks, guys have a great.
This concludes today's call today's conference. Thank you for your participation and have a wonderful day you may all disconnect.
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