Q3 2021 Chart Industries Inc Earnings Call

Good morning, and welcome to the chart Industries, Inc. 2021 third quarter results conference call all lines have been placed on mute to prevent background noise.

After the Speakers' remarks, there will be a question and answer.

The company's release and supplemental presentation was issued earlier. This morning. If you have not received the release you may access it by visiting charts website at Www Dot chart industries Dotcom, a telephone replay of today's broadcast will be available following the conclusion of the call until.

Saturday October 28 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.

Third earnings release and latest filings with the SEC.

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, Gigi good morning, everyone and thanks for joining us today for our third quarter 'twenty 'twenty.

Company's earnings call and update to 2022 outlook with me today is Joe Brinkmann of chart industrial gas veteran and now our CFO, who will take you through the quarterly results later in the call.

Today's discussion is two fold and similar to what you've heard I'm certain from other companies' first the near term macro challenges that we faced in the third quarter.

One is their impact on our quarter and what actions, we have and continued to take in order to manage through it and come out with a structurally higher margin profile amidst what we expect to be record setting years ahead and second the continued strong broad based order activity, we're seeing for which all indicators suggest underlying demand for our products will continue.

So starting on slide four of the supplemental deck that was released today.

Our third quarter 2021 orders of $350 million, demonstrating continued demand across the business and were significantly above our expectations coming into the quarter, which were around 300 million ish considering that we did not expect nor did we get any large liquefaction orders within.

In the third quarter.

The order level was 33% above the third quarter of 2020 and brings our year to date order levels, 53% higher than the first nine months of 2020. Additionally, specialty product orders grew over 100% this quarter versus the third quarter of 2020 and over 150%.

The year to date timeframe cryo.

Cryo tanks solutions has also shown impressive growth in these periods growing 35% for the quarter and 53% for the nine months.

Third quarter orders contributed to our fourth consecutive record backlog quarter with backlog now over $1 $1 billion stepping up our confidence in our 2022 outlook.

For those now seeing a trend to quarterly consistency at this higher level of order activity pointing to the left hand side of slide four which demonstrates what he believes our expected new normal quarterly order levels, what in pre Covid and pre clean energy times or 2016 through 2019 with an average of $238 million of orders a quarter.

As well as now consistently above 300 million a quarter.

A few additional items to note around our order activity in the quarter, we booked 60 orders in the third quarter that were greater than $1 million, each and 152 of those this year. The third quarter was our second one in a row with 60 orders greater than $1 million. We also had 21st in kind.

<unk> and orders of 65 new customers.

Year to date through the third quarter 2021, all of our specialty products categories orders have exceeded their respective full year 2020 order levels. So said differently in our first nine months of this year the specialty products orders.

All of those categories are above the fold.

So the 2020.

Q3 beverage orders were up 68% over Q3 of 2020, which is quick book and ship business and quoted with current material cost levels.

Section of this business that has not experienced the margin erosion from escalating material costs.

We are beginning to see somewhat of a recovery, albeit later than we had.

12 months aided in our traditional oil and gas markets inclusive of upstream and natural gas compression evidenced by air cooled heat exchangers, having the two highest months of orders.

In the year of 'twenty 'twenty 2021 excuse me in August and September in the third quarter of 2021, being the highest order quarter of the year.

For air cooled heat exchangers.

Another example of our products being agnostic to the molecule. So we're positioned to benefit as oil recovers, while the energy transition continues.

So now, let's turn to the details on the cost burdens and what actions have been taken to offset the expected continued drag from tire than anticipated cost on slides five and six.

While we expect the third quarter of 2021 was the bottom in terms of the negative margin impact from these cost challenges as some of our some of them have been completed completely mitigated while others persist and will gradually improve with offsetting actions taken we expect subsequent quarters margin improves yeah. We are also are tempering, our next quarter outlook.

Both for sales timing shifts as well as for the cost pressures.

Previously indicated that we anticipated that in the third quarter 2021 we would need to monitor what our material costs and availability were improving or getting worse and then respond quickly things did get worse in the quarter and despite the strong order and backlog growth supply chain labor and logistics issues.

Issues weighed on our results. We responded quickly with surcharges additional price increases and operational cost reductions yet none of our inquiry actions were immediately impactful to margins within the quarter itself.

We are currently projecting the timing of the backlog and pricing surcharges as well as normalized labor and operational efficiencies, resulting narrows.

Thereof to result in a stair step returned to typical margins with step one of the staircase starting in Q4 and continuing through to Q2, 2022 which is incorporated into our 2022 outlook.

Let's step back and get into the challenges and what we've done about them slide five real one shows how material costs continue.

To rapidly increase in the third quarter of 2021, increasing another 12% in stainless steel, 18% in aluminum and 24% in carbon steel from June 30 to September 30, we.

We implemented a broad price increase on July one it gives me the timing of our backlog in the in quarter cost increases we did not see much offset.

Continued tree. Additionally, we added a surcharge to all new orders starting in the middle of the third quarter 2021, and have already issued another price increase in October 2021, or.

Our project based work allows for current material pricing in bid validity. So all of those mutations have been updated as well.

The second row shows the supply chain disruptions.

Weather port congestion availability of drivers trucks containers materials, obviously, none of this is chart specific and our teams did work to minimize the sales timing shifts due to supply chain disruption. This further though the grab a safety stock where we could in turn impacting near term free cash flow.

Speaking of availability of drivers.

Rivers' in trucks, the third row shows and often less discussed but highly disruptive.

Don't anticipate a challenge that we faced from August 11th until October seven forced measure was issued to industrial gas customers, including us from our industrial gas supplier on nitrogen and argon allocations due to their need to respond to the resurgence.

<unk> of COVID-19 oxygen needs in particular in the United States, while we were in a privileged position to use one of our own cryogenic trucks from our leasing fleet and higher certified driver through our distribution network to deliver gas to keep our production running this disruption certainly added cost and inefficiencies to our operations on a positive note.

This force majeure had been lifted as of October 7th and allocations are currently back to normal.

Moving to slide six row, four we face the issues availability and cost of lever, including COVID-19 labor impacts.

We believe we have taken enough actions do not have the fourth quarter impacted by the labor challenges with the exception.

Of the direct labor hourly wage increase which is not temporary.

Put in place in the third quarter in response to our need to retain and hire a significant number of production team members.

We hired 372 people in the quarter and over 98% are still with us.

We will continue to incur the wage increases we also in the quarter.

<unk> utilized sign on incentives, which negatively impacted expenses, but are not embedded into the base pay.

The second lever challenge, which has dramatically improved in October to date with the resurgence of COVID-19 through our U S manufacturing facilities from August one to September 30th we had an average of three 7%.

Our production workforce of key facilities in the United States out with Covid by week.

Month to date in October we have had very few direct labor in the shops out.

This created additional operational inefficiencies changes to schedules and additional shifts with our direct labor covering different areas of the shop.

We had two of our production.

Actual facilities briefly disrupted by hurricane idle during the quarter with lost work time. These are temporary impacts had no ongoing or permanent damage or impact.

And finally, we anticipate and have planned for ongoing Chinese energy enforcement at our locations in China, we have numerous mitigation strategies in place as needed, but at this time, our China operation.

<unk> will have weekly powder supply as either five normal to restricted or for normal three restricted which if the current situation remains throughout the quarter will allow us to hit our Q4 midpoint, China forecast barring no further restrictions.

We've continually we've been continually responding to the material cost changes as well as the other.

Changes through price increases and surcharge you can see on slide 70 increases to material cost on the top half of the slide since the beginning of the year increases of 33%, 40% and 65% and stainless aluminum and carbon steel respectively. Our three main raw material categories.

The first 20 days in October.

Costume stabilization in carbon and stainless steel aluminum continues to increase in cost and decrease in availability given the situation with magnesium.

With that said and before I get into the necessary pricing and surcharges, we have put in place and the rationale for the differences between the approaches let me address our comfort level on safety stock as.

As you are aware.

We acquired since the beginning of the year, we've been adding safety stock, where it makes sense temporarily driving inventory balances higher than typical and thus impacting free cash flow get this strategic decision has allowed us to not have had any material deliveries for our customers. For example, we've locked in certain one and two year contracts securing.

But we have a 2022 with cost savings compared to current levels based on the timing of when we secured the inputs.

Regarding pricing, we do not anticipate material cost to increase as they did respectively from the end of Q2 to the end of Q3.

When we saw this.

<unk> surcharge effective mid quarter in addition to.

The first changes implemented July one and the re quoting of all material for open bids on projects with bid validity timing.

Even with these changes that was not enough to keep up with the rapidly accelerating cost.

Therefore, we have implemented another price increase into effect for all new orders, which will be both temporary and permanent depending.

The price product.

We've worked with and continue to work with our industrial gas customers that are under long term agreements to assist us with utilizing the material cost pricing mechanisms and those agreements more frequently considering these inflationary times persist.

A quarter that we lag in the adjustment mechanism just isn't effective in hyper inflationary times.

On the <unk> to our customers who have been fantastic to work with on this and support our long standing relationships. This mechanism will return to their regular schedule, whether quarterly or semi annually as macro conditions temper and a big thank you to each of them that have been working with us to ensure we are able to deliver their product as desired but do.

So without negative harm to our business and.

And a second thank you to those who are working with pre price increase backlog to appropriately support additional material pass through costs for certain existing orders in our backlog.

You will note that we have structured these increases in two different manners that's on purpose.

The first is that some of.

And we will remain at higher levels. After the cost situation tempers and returns to normal which would be a typical action on our part periodically to adjust pricing. The second is around surcharges, which are temporary albeit indefinitely temporary at this time. So we will have certain price stickiness, while being fair to our customers as they are working to be fair to us.

Our price I'm now going to hand, it over to Joe to take you through our structural cost actions in the third quarter results before I talk about our 2022 outlook.

Thanks, Jill slide eight shows certain organic structural costs and capacity actions, while you see on the slide captures two goals.

First to operationally reduce costs in the second.

To ensure we have the appropriate capacity.

Appropriate locations to meet our customers lead time demands.

On the left hand side of the page you can see a subset of our cost reduction actions taken are underway in the third quarter. This is certainly not a comprehensive list we have consolidated our Tulsa air cooler production.

Easily Texas manufacturing location.

Creating a flexible manufacturing facility in our Tulsa location.

Which is in various stages of starting up depending on the product line.

Adding the flexible lines in Tulsa, It gives us access to skilled talent and allows us to move bottleneck production from other locations.

Two our verbal or move a vacuum insulated pipe and sub assemblies from new Prego, Minnesota is complete and the associated benefits are anticipated to begin in the fourth quarter of 2021.

The same beasley location instead to house, our Houston repair and services business, which over the course of the next few months, we will consolidate from our Standalone.

For example, our site you can see some of the other efficiency moves underway on the slide both in the U S and in Europe. Lastly, we continue to refine our SG&A structure with specific position eliminations taken in the quarter.

On to slide nine third quarter 2021 sales of $328 3 million increase.

Increased over 20% over the third quarter of 2020 and organically 13, 4% as a reminder, the third quarter of 2020 included approximately $25 $6 million of venture Global Calcasieu pass sales in the second quarter 2021 had approximately $5 million, while the third quarter.

2021 had no associated big LNG revenue <unk>.

Excluding sales from the Big LNG project in the respective periods organic revenue increased 25, 2% in the third quarter of 2021, when compared to the third quarter of 2020, and 13, 6% year to date 2021 when compared.

Year to date 2023.

Third quarter 2021 sales included records and sequential quarterly growth in specialty products and crowd tank solutions.

<unk> sales increased 14, 7% sequentially from the second quarter of 2021, and 10% versus the same time last year, while specialty.

<unk> increased nine 5% sequentially from the second quarter of 2021, and 108, 8% from the third quarter of 2020 prepare.

Preparers service and leasing and specialty products comprised 49, 7% of our total net sales the second quarter and enroll at approximately 50%.

And compared to 34, 1% for the full year of 2020.

Our third quarter 2021, gross margin was negatively impacted by the cost Jill described.

<unk> gross margin as a percent of sales of 22, 8% included one time costs associated with facility startup costs integration.

Restructuring and facility consolidation when adjusted for the onetime costs adjusted gross margin as a percent of sales was 26, 5%, reflecting the cost burden, we experienced within the quarter from the rapidly increasing freight supply chain and material costs.

Adjusted gross margin as a percent of sales.

Sales is flat to the third quarter of 2020, when excluding big LNG and a sequential decline from the second quarter of 2021.

Challenges were less impactful to the adjusted gross margin as a percent of sales for specialty products and repair service and leasing specialty products adjusted gross margin as a percent of sales.

So over 37% consistent with the second quarter 2021, and indicative of the profile of that business. The specialty products business is predominantly either project based pricing with near term cost validity or product with faster book to ship time frames, capturing more current costs and our ongoing pricing.

Reising repair service and leasing adjusted gross margin as a percent of sales of 28, 7% included restructuring restructuring charges related to our decision to consolidate the Houston, Texas repair facility RSL adjusted gross margin was.

Sequential increase of 510 basis points.

In the second quarter of 2021, which had a low margin shipments from China backlog included in it.

The most.

Challenged gross margin and adjusted gross margin was in heat transfer systems, given the heavy material content in the segment loss production time and higher margin project based revenue recognition timing.

<unk> sequential second quarter, 2021% to third quarter SG&A increases are driven by the additions of la turbine and add edge.

Bill will talk about the next few quarters timing of cost offsets in larger project margin impacts in a moment.

Slide 10 shows our third quarter and year to date adjusted.

Non diluted earnings per share of <unk> 55.

And $2 <unk>, respectively, including any activity on our mark to market of our investments, which was a net positive impact in the third quarter as well as year to date adjustments earnings per share related to specific one time cost for restructuring.

<unk> severance costs startup facilities and production lines and other non repeating items.

We have not included add backs from negative production or efficiency impacts from the challenges you hear about today, given that our guide anticipates certain continuance of them as well as the timing around our expected offsets results.

Resulting from the structural actions you heard about.

In an effort to be more time sensitive to prepared remarks and Q&A. We have included segment specific details and first of a kind of new customer information in the appendix. Additionally, we frequently get the question of timing of the 10-Q filing we plan to file later today.

Okay.

Slide 10 does not mean that we will be giving quarterly guidance going forward, but rather we wanted to provide more specificity about the coming quarter by.

By way of background on how we thought about the fourth quarter. Our team has built in some additional contingency in our sales and earnings outlook for the fourth quarter compared to Hollywood normally.

Assuming that the supply chain shipping and freight challenges might not improve.

On Slide 10, you can see the walk from our prior approximated internal sales forecast to the low end of our prior outlook range for the third and fourth quarters and that's shown on row, one and the larger moving pieces in rows two through nine which are not wholly comprehensive the consol.

Guy just movements, including timing of heat transfer system projects and backlog and notices to proceed. These updates result in our updated low end of the sales range for the fourth quarter of 2021 of $370 million the range of $370 million to $390 million for the fourth quarter.

As mentioned this is entirely due to projected.

The revenue timing shifting to 2022, none of which is lost revenue our.

Our new guidance results in expected, 11% to 13% sales growth for the full year 2021 compared to 2020.

Slide 11 shows our current 2021 outlook, which takes into account the macro challenges presented earlier.

Earlier as well as the actions taken to date and the timing with which they offset those challenges given current information.

We anticipate that gross margin as a percent of sales increases in the fourth quarter 2021 in each segment, except cryo tanks solutions for which the third quarter is reflective of the fourth quarter of margin and backlog and lagged due to.

<unk> refining.

RSL and specialty products segment gross margin as a percent of sales increases are expected to be driven by the product mix in backlog and price increase timing, while the anticipated slight increase in HTS margin is the result of larger project higher margin specific sales.

Associated full year two.

2021 non diluted adjusted EPS is expected to be in the range of approximately $2 75 to $3 10.

On approximately $35 5 million weighted average shares outstanding and this assumes a 19, 5% effective tax rate, which is an increase from our prior estimate of 18%.

We expect the third quarter of 2021 was.

The pregnant terms or the negative margin impact in subsequent quarters are sequentially improved in particular as a result of the specific projects with margin visibility that will have material revenue recognized the pricing and surcharges beginning to show in margins and generally higher volumes to assistant labor absorption.

Yet as mentioned already we need some contingency given the uncertainty.

Bob <unk>.

Moving to slide 13, our full year 2022 outlook generally we have good visibility to specific projects and anticipate a continuance of the broad based demand. We have seen this year record backlog spring 2022, and price increase impacts increase.

We are increasing our expected 2022 full year sales outlook to the range.

In the <unk> 7 billion to $1 $85 billion.

This revised guidance does not include any additional or new big LNG projects. Although we were very bullish and we expect three of the U S. Gulf Coast Big LNG projects that already a FERC approval to move to final investment decision in 2022, two of which we currently anticipate will hit our.

<unk> work in the first half of the year.

In a moment I will share these potential dollar amount for each of the big LNG projects and why our conviction has increased but to quickly walk you through the 2000 22022 sales buildup on slide 13.

<unk> shows our current backlog for scheduled 2022 shipments theres some backlog that goes out to 2002.

Our order book that has the potential to be shipped in 2022, but that's not included here.

Rows, two and three show typical book and shifts that would be expected to ship in 2022, given these assumed levels.

Gross four through six are specific small scale LNG projects that we had expected to be booked already but due to timing shifts.

<unk> is now expected in the coming six months and the associated anticipated 2022 revenue impacts and.

<unk> provides a view of 2022 potential revenue based on booking additional liquefaction projects early early in the year.

And lastly related to the anticipated impact from a full year of the AD edge in la turbine acquisitions.

Our net associated non diluted adjusted EPS is expected to be in the range of $5 25 to.

To $6 50 on.

On approximately $35 5 million weighted shares outstanding and this assumes a 19% effective tax rate and again does not include any big LNG.

With our current backlog visibility, we expect more linear typical sales by.

During the year compared to this year, where we had a distinct second half sequential increase <unk>.

Included in this thinking is that we anticipate the first half of 2022 includes a continued drag from the challenges. We are currently experiencing along with incremental offsets from the positive impact actions already taken to date.

Now, let's step back.

By quarter and talk about the continued broad based demand. So the tale of two cities as being the second portion of what's happening in the business.

This continued broad based demand supports our conviction with of our strategy as well as our future outlook.

We are differentiated by our molecule agnostic processes and equipment and we believe the energy transition.

<unk> will be a hybrid of solutions, all of which will benefit from as well as benefiting from any recovery or rebound in traditional oil and gas. So we've captured the three big tailwind buckets of what we believe will drive behavior of the next decade on slide 15, with the overarching trend being a public and private sector working toward more sustainable options.

The International Energy agency in their roadmap to net zero indicates at today's climate pledges would result in only 20% of the emissions reductions by 2030 that are necessary to put the world on a path towards net zero by 2050. Another way to think of this is that if we don't start now even if you did everything in full force later this decade.

Good it would be impossible for the world to catch up to accomplish these targets. Additionally.

Additionally, 90 countries have announced zero targets that 78% of global GDP.

82% of the world's GDP now falls under <unk> regulation in 32 countries have government backed hydrogen strategies. If you compare this to one.

Year ago. The increases in these numbers is substantial and shows the evolution of the global mindset towards sustainability.

Increasing pragmatism also toward how we get there, while ensuring energy resiliency and consistency as renewables grow in scale and infrastructure.

<unk> gas is a key part of that the.

So on slide 16 is important.

This goes to the immediate needs of energy without interruption and disruption as well as bringing power in some case for the first time to populations in locations, such as South Africa and India.

Combination of the need for consistent energy and a desire for cleaner and greener answers.

Both benefit us.

So moving on to slide 16 around our inorganic activity that we've done over the last 12 months and how it positions us well with our full menu of clean process technologies and associated equipment I won't spend much time on the slides up to say that our portfolio across the nexus of clean clean power clean water clean food and clean industrials as well established without.

Third Reed for further inorganic activity our customers can choose from a broad set of processes and equipment again, all of which is molecule agnostic and technology agnostic. So they can choose a full solution or pick a component from our offering as a result of the inorganic additions over the past year completed at what we view as very reasonable valuations.

Now well positioned.

The need for this transition having.

Having a full solution set is beginning to contribute to and expected to continue to grow our higher margin specialty products businesses. Additionally.

Additionally, our inorganic businesses are on track with our integration activity and we expect less deal related and integration related costs in 2022.

The acquisitions, we have done.

<unk> shown on slide 17, there substantially contributing to our backlog and will begin to flow through the P&L in a meaningful manner in 2022.

The four acquisitions completed between October of 2020 and June of 2021 have a total purchase price of $105 million for all four and have pulled in over 175.

Over $10 of orders since their respective deal close dates.

Additionally, on the bottom left portion of the slide you can see some of the other synergies from these combinations and I pointed out in particular, the combination of Blue and Green at Edge and chart into chart water has gained a lot of early traction and what I believe to be as I said previously our most underappreciated.

$5 million portion of specialty for growth in the years ahead, which is water treatment for.

For example at edge posted its best month of orders of 2021 in September which was our first month of ownership and treatment as a service for water treatment and industrial applications grew by 62% since we acquired Blue and Green last November.

Appreciate slide 18 shows our hydrogen activity, which continues to surpass our expectations as to the consistency of the strength of the order book, even without any liquefy our orders in the quarter.

We booked approximately $200 million of hydrogen related orders this year, so far in nine months.

We posted record record hydrogen sales gross profit and operating.

Operating profit in the third quarter, which in combination with our release of our commercially ready liquid onboard vehicle tank and this quarter's introduction of our <unk>.

Tsi, there's a thousand bar tsi look at hydrogen pump gives us confidence.

And potentially allows us to increase our near term addressable market for hydrogen in the coming.

<unk> months last quarters, and this is a small but important piece of information because it shows the level of traction compared to where we were just 12 months ago.

One of the bullets on the slide is delivering now because we are a unique way to play hydrogen profitably now as well as not being wholly dependent as hydrogen as the only winner.

And the energy transition.

This is further supported by our current quotations on approximately $1 billion of potential hydrogen processing equipment work to over 325 customers and potential customers.

With over $500 million of that pipeline expected to have decision points between now and the end of the third quarter of 2022.

The pipeline includes trailer quotations for over 115 units for customers around the world, including Europe, North America, Korea, and Australia, approximately 30, fueling stations and dozens of liquefaction opportunities, including six that we anticipate may be awarded within the next six months.

We also booked $9 $7 million liquid hydrogen.

Tank order in China in the third quarter of 2021, and we started the fourth quarter off with a 30 ton per day hydrogen liquefaction engineering order in the U S as well as in order for confidential project in Korea.

These examples show that our geographic disbursement of hydrogen order activity has become much broader over the past few months.

Which is not just a positive for our business going forward. It is also a positive indicator for the global acceptance of hydrogen.

Regarding hydrogen trailers, we booked over 60 of them in the past 12 months and we shipped seven in the month of September and example of our capacity expansion towards exiting this year at a run rate of 52 trailers, a year and we continue to work toward doubling.

Net capacity in 2022.

More and more of our customers are honing in on liquid hydrogen is the answer for heavy duty transportation ranging from trucks to train to plains.

An example is Stokes based technologies purchased their hydrogen run taken in the quarter.

Another example is our partnership with highs on motors for 1000 mile heavy duty class eight truck.

Using that recently introduced liquid hydrogen onboard tank.

Slide 19 shows third quarter carbon capture activity and I view this quarter as a catalyst for expectations of increasing activity in commercialized Cc U S activity in the near term last.

Last year I had indicated that I thought carbon capture by year behind hydrogen in terms of its commercial.

<unk>, which turned out to be more like 18 months behind the hydrogen given various market developments, but this quarter's activities, which included our partnerships with Teco 2030, <unk> and FL Smith's hitting on key markets that carbon capture will be a critical part of their decarbonization efforts included marine cement industrial and power.

Were also notified recently of a $5 million U S Department of Energy funding award for Ses's cryogenic carbon capture technology to design build commission and operate our process at Central Plains cement company, which is a wholly owned subsidiary of Eagle materials and doing this at their cement plant in Missouri.

The project will scale, our CCC system.

<unk> to a capacity of 30 tonnes per day, while also demonstrating the system captures more than 95% of the cotwo from from the flu <unk> slipstream and produces a liquid cotwo team that is more than 95% pure we expect the <unk> actually be above 99%.

And also meaningful in the quarter with an actual booking of an engineering order for a carbon.

Carbon capture offering from a publicly traded industrial manufacturing company producing materials for the heavy construction industry.

As well as one.

Engineering order for <unk> with <unk> in the Middle East.

Both of these engineering work orders are expected to move to full carbon capture and storage project orders.

Within the coming 12 months.

And finally, our Ics carbon capture technologies was recognized by researches and Exxon as the most competitive carbon capture solution with a determination that the cost to produce cement and capture cotwo using our CCC technology is 24% higher than producing cement.

With you to capture while other carbon capture technologies range from a 38% increase to 134% increase in the cost of producing cement and capturing <unk> versus producing cement and not capturing cotwo.

So the ultimate takeaway here in this discussion is at 2030 carbon emission reduction goals cannot be accomplished.

<unk> with note carbon capture and storage so stay tuned as this market continues to grow.

An important topic and we discussed this briefly on our second quarter earnings call, but I'm going to spend a little more time on the details around LNG, because our bullishness on impending big LNG notices to proceed has increased again.

In the past few weeks and a subset of our commercial pipeline of potential orders related to LNG project work.

As you can see on slide 20 is also increasing.

As a reminder, we think of our LNG business in three buckets, the first infrastructure, including over the road trucks fueling stations transport ISO containers LNG by rail.

Bliss with a second small scale in utility scale projects and the third Big LNG, which we don't include in our guidance or outlook, but we have approximately $1 billion of potential bookings on the horizon over the next year as these projects move ahead to final investment decision.

So LNG is kind of at the nice edge in the market with tightness of the supply demand balance shifting trends.

A shorter off take contracts to an acceleration of long term offtake agreements in particular, we're seeing that on the U S Gulf Coast export terminal projects.

We anticipate three big LNG U S. Gulf Coast export terminal project to proceed to FID in 2022, and as I said earlier with expectations for two to three progressing to orders for.

But in the first half of the year. None of these projects again have been booked into backlog at this point and none of them are included in our 2000 2012.

We conservatively anticipate venture Global's Plaquemines phase, one, which is 10 million tons per annum.

To.

Move ahead to FID in the first half and note I said.

For us that we anticipate.

We also anticipate that this project will include over $135 million of chart content and.

And in the third quarter, Vg and the Polish oil and gas company finalized an agreement under with under which <unk> will purchase an additional 2 million tons from venture global for 20 years.

<unk> driftwood.

This would project phase, one, which is 11 million tons per annum, and which we anticipate will include over $350 million of chart content.

They signed sale and purchase agreements with shell in the third quarter, resulting in the completion of LNG sales for the first two plants and intend to proceed to construction in early 2022.

And Cheniere, whose corpus Christi.

Conservative project, which we anticipate will include over $375 million of chart content announced last week that ENN LNG has agreed to purchase approximately <unk> 9 million tonnes per annum of LNG and engineers words marks another milestone in our efforts to contract our LNG capacity on a long term basis in anticipation of.

Stages Christi stage, three which we expect will occur next year.

The second category of LNG small scale with <unk> in hand for projects not yet booked that were a primary piece.

Around our thinking of 2022 and you saw that in the work these projects or for Eagle Jacksonville in Florida and the utility.

<unk> project in New England, the New England project is awaiting approval from the city Council.

The Council has had it on its agenda over the past few months meeting, but they run out of time at these meetings, which is which is incredible in and of itself.

But we're hopeful that it will be approved at the Council meeting this afternoon and.

And we expect notice to proceed imminently thereafter.

A quarter.

And finally in the infrastructure category, we continue to see growth, even coming off of records for LNG vehicle tanks, ISO containers and other associated equipment at the end of September we were awarded a $19 million purchase order for a series of LNG by rail tender cars. Our second of this magnitude in as many years.

<unk> third quarter 2021, LNG over the road vehicle tank orders continued very strong over $33 million, bringing year to date 2021 orders to approximately $105 million higher than any full year in our history and.

And included new customer orders in Poland and India.

Indicating wider acceptance of LNG as a fuel during the energy transition.

Finally, we were awarded an engineering study for U S ship owner as part of a planned conversion to LNG fuel gas propulsion of two American vessels in the coming quarters.

As of September 32021, our net leverage ratio was $2 9 million on October 18 2021.

We closed on a refinance which improves terms as capacity spreads maturity of our instruments and reduces costs as shown on the left side left hand side of slide 2022 sorry 'twenty two.

This $1 billion sustainably links revolver increases our borrowing capacity.

<unk> on the revolver from 83 million to $430 million eliminated 50 basis point floor on U S. Dollar borrowing saving approximately $2 $3 million annually occurring current borrowing levels and removes the cash hoarding provision from COVID-19 related restrictions for the first time in our history, we met the criteria for.

And included in our debt instrument, a sustainability linked to offering with the associated further cost savings tied directly to our achievement of greenhouse gas intensity reduction target over the next five years.

The offering was committed at 150% of our targeted $1 billion by 100% of.

<unk> Bank group.

To conclude you can see on slide 23, some of the recognition of our ESG actions, including this quarter being named the emission reduction champion organization of the year by gas deck as well as being a finalist in the gas Tech awards category of organization championing.

<unk> diversity and inclusion also last month, we were named finalist and as an S&P Global Platts Energy awards for corporate social responsibility.

Both Julian and I wanted to take a moment amidst the challenging macroeconomic environment to thank our team members for staying focused executing quickly on a variety.

Our exit cost offset actions and continuing to generate increasing interest and demand and our unique portfolio of sustainable solutions and molecule agnostic offerings with that I will turn it over to Gigi to open it up for questions.

As a reminder to ask a question you will need to press star.

And on your telephone.

Draw your question press the pound key please standby, while we compile the Q&A roster.

Our first question comes from the line of Ben Nolan from Stifel. Your line is now open.

Yes, Thanks, Hi, Jill.

Then.

To combine two into your quick and then turn it over first should be a quick one on the Corpus Christi stage three.

Is that number bigger than it used to be in terms of it youre content seems like it is just curious if there was some extra content that was may be sold into that.

But but then the other question is a little bit more thematic.

In that.

Obviously, it was a little bit of a challenging quarter. There were some things that you didn't expect that.

But really nobody expected that had an impact here, but given your.

Yeah.

22, just trying to get a sense of what the wiggle room is there an end.

Do you feel like there's if things.

Things inevitably do sort of don't go exactly according to plan, if there's enough room.

In your numbers such that it's already accounted for.

Alright, Thanks, Dan So let me pull up the first answer around the Corpus Christi stage, three and the number is bigger than it was previously.

<unk>.

And I would say also that this is the first time, which increases my confidence.

Room level that the respective operators of the three projects that I described on big LNG, all we're comfortable with us putting our level of anticipated content out into the public domain. So that's that's a positive.

And then directly answering your question there there's been.

Some always in the way that these projects work ongoing work in the background between the a b C and D operators and chart around structures, what things are going to look like what pieces go together. So there's scope changes with respect to that which benefited us as well as simply.

The comment around re quoting and re pricing given the changes in the macro.

Environment. So those two were the drivers of the increasing content on that particular project.

And then with respect to the 2022 question.

The low end of the guide.

Builds in that wiggle room that you are describing and the way that we think about this is.

Sales being more evenly spread across the year and you still have that drag on margin in the first quarter.

It gets better in the second quarter, and we have good visibility around.

Does that backlog that we have already flows out and where we get confidence that low end of the range and we built a little bit of that wiggle room in that first half margin in our thinking again, we don't guide quarterly so if somebody will ask me that question, but.

We think about that is as we went through the.

The wave of our backlog.

In the first half of 2022, the most substantial portions of our backlog are in specialty products and cryo tank solutions and specialty we see more resiliency around that ongoing margin level.

A detailed and then also as Franklin just commented you know piece pieces and parts of our specialty that are quicker in terms of book and ship and has kept up with the pricing slash cost.

And then on the cryo tanks solutions in that backlog in the first half.

We also have.

<unk> majority of that in EMEA, which has.

Tighter mechanism of passing that price through so those two things give us a good view towards the first half, but the way I would think about the year is much more evenly spread than 2021 has been.

With.

The next step up in margin from Q.

Q4 to Q1, Q1 to Q2 and at a comfort level at the low end of that range.

Okay I appreciate it thanks Joe.

Yes.

Thank you as a reminder to ask a question you will need to press star.

On your telephone shell withdraw your question press the pound key.

So you please limit yourself to one question and one follow up question.

Our next question comes from the line of John Walsh from Credit Suisse. Your line is now open.

Hi, good morning.

Hey, John.

Hey, Walt.

Welcome to Joe as well.

Sure Mike.

Great.

My first question, Joe is really I mean, obviously the orders better than expected.

What can you call out that we so that.

One I have confidence that those orders are going to translate into the profit we kind of all expect it will whether it be your 80 20 actions I know with Big LNG, you had Ips EMR that made the margins higher anything that you could give us to kind of that.

We called it points around there would be helpful.

Yes, definitely and I think that the starting point being on the midsized projects, which are.

More in that $5 million to $50 million range, we're seeing more and more of that activity happening.

Coming in through the order book.

Little bit projects, we have very good visibility to the margins tend to require more of our full solution offering which is at higher typically at higher margins, because we're providing the technology as well as the equipment.

On the other side of Av.

Defense around the cost reduction activities.

<unk> and the ongoing efficiencies.

We have hundreds.

Hundreds of projects underway around that but it's really easy to capture it in the 80 20 around the activities that we're doing on automation in certain shops as well as looking at the ability to make.

Product in the right locations and so we were well underway on that and what I mean by that is there are certain locations that pieces and parts of our answers and our products are higher value content and then there's others that we can turn through like a skid as an example, and do that in a more cost effective facility until were.

Well down the path on doing that still room to optimize that as well ahead and so we have additional optimization and cost reduction operational actions that are underway that give us a little more headroom on.

The way, we think about <unk>.

Margin as well.

Great and then.

I'll ask the question of I'm curious the answer but.

One of your.

I guess customers.

<unk> had announced their intention to acquire a competitor of yours.

Particularly on the industrial gas side I also believe on the cryogenic side ECT.

Just wondering how youre thinking about industry consolidation.

I'm.

Just there's obviously only a few players out there. Some of these are very niche technologies, but would just love to get your thoughts on.

On what that might mean going forward from a market perspective.

Definitely yes.

Interesting of late we've seen a lot of interest in the industry, which was anticipated and again.

It makes me feel good about the valley.

Valuations that we paid for the pieces and parts that we've added over the last 12.

In months.

The specific.

T acquisition announcements from plug power.

I'm going to address it in two fold first is that.

<unk> continues to be a good partner to chart, a great customer, we do a lot with them across the value chain of providing lift.

Faction facilities.

And processes to the equipment side so.

It wasn't a surprise to us that they would look for the ability to have given their amount of increasing need and forecasted increases to the trailer side, we want to have that hydrogen trailer capability.

Fortunately in house they've.

<unk> indicated to us even as of the announcement date of the acquisition that they intend to continue to purchase equipment from us as well as the liquefaction being a key part of that.

Relationship we view the we view the acquisition actually as a positive.

Two implication to us the reason we view it that way is on the industrial gas side of the house.

Where we think probably we will prioritize hydrogen trailers in this particular business for themselves given their forecast and in turn we have over 90%.

Capability 100 in 15, plus trailers that were currently quoting on.

With different customers than them. So if you think about that as well as the industrial gas.

Regular liquid oxygen nitrogen argon trailers, we anticipate that there.

There <unk>.

Customers are going to look for.

Alternative sources as well and that's a positive to our business. So net net we congratulate plug on that we're thankful and appreciative of the ongoing relationship with them and we anticipate that there'll be key part of that.

Alright liquefaction business as.

As well in the near term.

Great I appreciate the detailed responses I'll pass it along.

Thanks, Sean.

Thank you. Our next question comes from the line of Marc Bianchi from Cowen. Your line is now open.

Hey, thanks.

Wanted to talk about.

About the order outlook here I know, you've got the guidance there and how.

Orders that you expect to book flow into the revenue outlook, but we don't see it that way when you report so.

What kind of quarterly order report number should we expect for fourth quarter, and then what would be embedded in.

And the guidance for 'twenty two.

Yes, so what we've.

Implied here for the fourth quarter would be <unk>.

System to the third so at that $350 million level.

And then into 2020 to the range of the guide implies a 300 to 300.

Third 25 million low end order activity and a kind of 375 to 400 per quarter at the high end. So when you think about kind of that that range is.

The high end is going to be achieved when you have a quarter, where you get a liquefaction project or.

<unk>, a small scale terminal project something like that so that's the key delta between the $3 25 in the $3 75 to 400 is the.

Yes.

More difficult to predict kind of middle sized projects.

And then just related to that.

Got the $200 million of hydrogen orders so far this year.

There's going to be some more in fourth quarter, what does that number look like in 'twenty two based on I mean, obviously you've laid out.

Some opportunity there, but just if you risk adjust it.

Yeah, Okay. So I'd answer it two fold in particular on the risks.

Adjusted we've seen just.

Oh.

Astounding amount of hydrogen order activity that was.

It was beyond what I had anticipated in terms of its consistency throughout the year. This year, we had it kind of it was so.

So new at the end of last year to being commercialized as an industry that it was hard to predict weather quarters, we're going to be.

And they have been.

Way more consistent than I had expected so.

I would very comfortably say that next year's hydrogen.

Order activity would be up.

Somewhere in that 40% to 50% type of.

Range.

It could be considerably higher than that but I'm not going to go there right now because that really is dependent on how these liquefaction plant projects progress.

The fact that we have six.

That we anticipate will move to decision and award in the next nine months that we're currently quoting on.

<unk>.

Meaningful difference to kind of how it's been earlier this year, but it's still a new industry in terms of how it.

Commercial behavior is so I'd be I'd be comfortable risk adjusted at that 40% up year over year.

Okay, that's great Joe if I could just sneak one more in on the.

So it looks like you dropped the free cash flow guidance that we had previously for this year.

I'm curious what the thought processes with that and how should we think about free cash flow I mean, we could kind of get an inference from what the EPS guidance implies maybe it's like 40 to 50 million Bucks in the fourth quarter and $2 20 to $2 60 in 'twenty two.

Maybe if you could comment on on that and if there's any other stuff we should be considering.

Yeah Yeah.

Good point on I should have addressed that we dropped that outlook simply because of the uncertainty around the material side and availability of the material side. So we've had to kind of make a grab at safety stock where it.

Even is able to be grabbed.

At higher levels than I had anticipated previously so that was.

Made it more difficult because we view this inventory grabbing as something that's temporary but hard to tell with fourth quarter is but I can say is that the fourth quarter.

What you just described I think is pretty darn accurate.

There is a couple of things I'd point out there's a $20 million.

Inbound receivable that.

What had been anticipated to come the end of September and moved to the fourth quarter as a as an inbound cash payment.

Payment.

So that's something that will.

Benefit Q4 that we didn't call out specifically.

And then there's also just around these larger project timings, which will more primarily impact 2022 from a benefit to free cash flow because we have <unk>.

Yes.

Essentially better free cash flow off of these projects.

Projects like the NSE SaaS project or the part of the local buyers or the helium local fire for.

The Russian oil and gas customer so the the profile will improve with the more activity that we have.

You'll be getting that kind of mid project size range.

Thank you were.

Number you just implied for 2022 is certainly within the.

The.

The bands of how we're thinking about it.

We intend to come back around and provide what that will look like in 2022.

And come out of this year, we think we'll have a better ability to to give you an accurate number on that.

So sorry for the long winded answer Mark I, just wanted to give you some detail on our thinking.

It was very helpful. Thanks, so much I'll turn it back.

Thank you.

Thank you. Our next question comes from the line of Ian Macpherson.

From Piper Sandler Your line is now open.

Yeah.

Yeah. Thanks, good morning.

Joe I was going to ask on that free cash flow as well.

That's helpful.

And then revisiting the stair step margin recovery point.

A point that you made earlier.

We were previously.

I sort of low <unk> gross margin on an enterprise level for next year, certainly buy it by the middle of next year and now I guess, we walk up from Q3 to two higher destination is that still based on.

The.

<unk>.

Initiatives that you have underway for recapturing.

Icing inefficiencies as low Thirty's consolidated gross margin still the right destination to think about to get to your guidance for next year.

It is yes.

It's interesting we actually think to answer your question by the way good morning.

We actually are kind of bantered about how much specificity did we want to provide around kind of how that first half second half gross margin as a percent of sales works.

But you're absolutely still landing at the same place I don't see I don't see a ton of.

Drama.

<unk> between the first half second half, but it kind of work your way up to that we're still thinking on the full year in that low Thirty's I think 35% to 31, depending on how things flow out.

Kind of think in 27 and a half to 29.

He's coming into the year are starting to starting the year I should say coming into because that would imply that for the fourth quarter.

Great. Thanks, My other ones were answered I'll pass it over thank you.

Thank you.

Thank you. Our next question comes from the line of Eric Stine from Craig Hallum. Your line is now.

Hi, Joe Hi, Joe.

Okay.

Hey, so maybe just on the acquisition outlook in your commentary in the release.

You talk about that in 2022, you expect less deal related costs.

I mean is that commentary more related to just the wind down of costs associated.

<unk> with acquisitions, you've done or is that a.

Bit of a way of signaling that maybe in 2022 things quiet down a little bit on the M&A front.

It's a way of signaling that we.

We have what we.

I felt like we needed to get to round out.

Our full solution portfolio in the areas of our strategy and future growth.

Expectations.

And we had indicated I would say maybe it maybe it was September October of 2020, we had indicated we saw kind of the 12 month window, where we thought that.

Valuations would be reasonable and through our relationships that we can bring in the pieces and parts and that's kind of proving itself out to be true. We've looked at some deals recently that would be more opportunistic and.

Felt that.

Given the discipline around our investment approach and philosophy that is it.

It wasn't the right time to to go after those so we're signaling that there's less.

That we need to have we feel really good about where we're positioned and our jumping off point right now to achieve what we've got in the coming decade.

But that doesn't mean that we wouldn't be opportunistic.

If something came along and we felt like it would be a nice addition to the portfolio.

More on the near term to your question, Yes, there is.

We have always stated that we would have liked to over the course of time in full owned H Tech and earthly labs and those are the.

Two of our minority investments that we would we feel like we would have a lot of synergies by bringing them ultimately in house.

I think those you know over the course of time, that's still in our thinking.

It's just at what point or the owner is ready to do that as well as what is the structure.

A deal like that.

We also have different.

Thinking around the utilization of <unk>.

G T O S equity slash cash and so on but the upshot and.

<unk> shorter answer is less M&A on the horizon for us given.

How we feel about what we currently have to achieve our strategy.

Got it no that's great color.

Thanks for that and maybe just one quick one on strong carbon capture I know.

The commentary that its what 18 months behind but you've been.

<unk> been positively surprised just by the order activity I mean is that.

Is this still something where you think I mean is it any chance that you start to see some some results in 2022 or is it still more of a.

One of the reasons why you think this is a you expect revenues to be at record levels in each of the next four years.

Both.

That I think that we will start to see.

A one day to the type of more meaningful carbon capture project into the order book in 2022, but it's more about that.

'twenty three 'twenty four 'twenty five or I think it has meaningful impact to us.

So my commercial guys tell me that are working on this particular factory to specialty.

There is an enormous amount of activity happening and clothing happening.

It's kind of staggered and maybe the best way to describe it is it staggered on Theres precinct.

Work then there is engineering work and then there is the decision point that we're going to pull the trigger to full construction on a carbon capture project most of what we're in right now is bucket one or two.

So I think in 22, you'll see a couple a couple of few of these go to two bucket three.

Are you seeing that.

And the order book, but more more midterm.

Okay. Thanks, a lot.

Thanks, Eric.

Thank you. Our next question comes from the line of Rob Brown from Lake Street. Your line is now open.

Good morning, Joe.

Yep.

Yeah.

I understood the bullishness on the demand environment or the order environment.

Seeing as you increase prices any any weakening there or how much room do you have on pricing or whats your risk sort of view on where the pricing.

We went back to your order rates.

We have.

Dean.

Less noise in response to the pricing.

Than what I would've anticipated meaning.

It's been kind of the broadly we need to have this conversation and that's been accepted.

And I think that's because we're not yes, we're not individually out in left field.

We're going in doing this this is the environment that industry is operating in right now.

And that's also in our thinking is from a long term relationship perspective, that's why we're doing some of this as price increases that we intend to keep after things temper and some of it is.

<unk> truly hyper inflationary response on the surcharges and that seems to be pretty well accepted but what we're also finding is those who are saying I can't I can't take your price change or your surcharge, we're saying we don't want your work and there is still enough.

Just work coming in to sustain the order levels that youre that youre seeing so far this year.

Okay.

Okay, Okay great.

And then on the.

Pure service and leasing businesses.

Sort of a dynamic.

A dynamic pricing environment here.

Cause people to do more in that business or does that drive that business up or is there any connection there.

Certainly that is what we're hearing is that those who are saying I'm. Good on original equipment for now I'm going to pull some things.

<unk> back into service that I already own.

That is what we're hearing.

See it but that's what we're getting feedback from.

In particular customers on the tank side.

Well as we.

We had been seeing that on the air cooler side, yet now we're seeing.

Seeing a reversal with oil prices, where they are in this kind of dipping the toe in the water toward compression in midstream upstream.

Starting to recover so more so on the tank side.

Okay.

Okay. Thank you I'll turn it over.

Thanks, Rob.

Thank you. Our next question comes from the line of Zach Schreiber from <unk>. Your line is now open.

Our questions have been asked and answered it I'll follow up offline. Thank you.

Thank you.

Thank you. Our next question comes from the line of Conor and were now from Morgan Stanley. Your line is now open.

Yes, thanks, good morning all.

Hey, Connor.

I wanted to return to the 2022 outlook here.

I think we've kind of a purchased a couple of different ways, but I. Appreciate this isn't how you laid it out in the slides. So just high level answers would be appreciated, but basically if I look at the fourth quarter.

That seems like a pretty clean base I don't think you have a lot of really big discrete projects that you've talked about in that number. So it kind of gets you to about a $1 $5 billion revenue run rate.

So basically what I'm trying to understand is.

In the guidance how much do you have in just outright discrete projects that get you.

Order higher level, how much pricing are you expecting to realize and then how much sort of volume is underlying the remainder there.

Just appreciate any context, you can provide on that thanks.

Sure, Yes, no totally makes sense.

I'll follow your question so.

Specific projects there.

Uh huh.

Let's see we've got the existing ones in backlog before that we've spoken about before which will have somewhere in the total.

Impact on.

60 to 70 ish, let's say in 2022.

<unk>.

And then you'd have.

There's a few more on the small scale side was.

Combined add up to in total.

Over $55 million.

Which the Rev. Rec, we've only incorporated a portion of that in there, but the specific project timing is.

The largest bucket of those three buckets that youre describing.

There is an element of <unk>.

Volume around the book and ship business that we anticipate is <unk>.

Consistent to the order levels that we've seen in the last couple of quarters and then the pricing.

We've put in.

So.

Fair enough to disclose specifics around the pricing in terms of what we did July what we did mid quarter and what was done in October but you could.

Safely put out kind of a 10% around there.

Okay got it that's helpful context.

And then more on the cost side. So obviously.

You've had some relatively large restructuring costs.

You call out some other.

I'm curious what seem to be supply chain related costs. I was wondering if you could clarify what that latter bucket is basically what why you're calling it out where you think it.

Sort of nonrecurring and what the outlook is for those different.

Those buckets does not recurring costs are just going to sort of mitigate as we move through the next few quarters here.

Yeah, we anticipate that all of the add back buckets mitigate as we move into 2022.

And yes, it can take deal.

Deal and restructuring, it's really my response to Eric Steins, a question around there is less M&A on our horizon.

And we also are.

Every one of our acquisitions to date is.

Under various stages of its integration but.

<unk> will be coming out of that in the first half of 2022. So we expect that that's the reason for less in 2022.

Around the other costs, we have the restructurings, we had startup costs around facility greenfields around.

The.

Tulsa to easily as well as from other locations into Tulsa, we have consolidations of product lines.

In Europe over to from Italy to France from Czech Republic to Italy.

Other activities in India that are adding capacity et cetera.

So those are at very again at various stages of completion I would expect that bucket.

Mitigates closer.

<unk> mitigates that.

But that doesn't go away in its entirety in 2022, but certainly mitigates bye.

Bye.

The middle of the year, because a lot of those projects have a completion date of Q4 and Q1 Q4 2021 in Q1 2022.

And then you have specific one time around if we have severance for people if we had a specific structure.

Okay.

Particular sign on to get someone to come joined the company. It seems like that that would be in that bucket, but we don't expect we don't forecast an enormous amount of that going forward and.

Other than that that's those are kind of the broad brushes on those.

Oh, Okay got it thanks for the color I'll turn it back here.

Thank you.

Thank you. Our next question comes from the line of J B Lowe from Citi. Your line is now open.

Yeah.

Hey, guys good morning.

Just a couple of quick ones.

The carbon capture engineering orders.

But you've got.

This quarter are those on projects that you would expect it to perhaps.

And your previous expectation, that's been able to actually book of equipment orders this year or sometime next year or are those are.

Are those different projects.

No those are a subset of the same project.

<unk>.

And we still expect to.

Anticipate to book, our equipment orders associated with those couple.

Certainly in 2022.

But there's also a few dozen other ones that are in stages that we arent really allowed to talk about.

Yeah.

Sustain a subset of those to move.

Move ahead, probably later in the year of 2022, Q order stage. So no no revenue impact in 'twenty two from those but certainly order book impact.

Okay and is that the typical kind of cadence that you get the engineering side piece.

That's before you get an actual equipment order or are we going to hear about the engineering things before.

Shipment orders on an ongoing basis or should we just expect it to.

Here about actual bookings, but sometimes the first time, we hear about these graduates.

Yeah, Youre going to hear about the engineering orders first.

Because in.

Okay. So two fold you'll hear about the engineering or a first in both larger liquefaction projects for hydrogen as well as for carbon capture because that's that's truly a meaningful indicator in industry of a project getting to the serious point so.

First an important decision point for the operator, and that's why those typically we would typically disclose that because it gives you.

Better line of sight to the higher probability equipment orders, but that's gonna be typical.

Got you okay.

My other question was on.

What's going on in China.

So that's now in terms of power curtailments how.

How much revenue.

Well first quick question is is any revenue that you are missing from China was that also pushed into 2022 and what's the magnitude of that specifically for China.

Yeah, It's it's de Minimis.

In terms of the push and.

You think about our China business gosh, it used to be like kind of $80 million to $90 million a year and I think this year, we're tracking to over 100.

<unk>.

Our fourth quarter forecast there is in the.

For external sales and remember we do enter co sales from that Chinese facility too.

But external tells us kind of $30 million to $40 million in in our fourth quarter forecast.

We use the midpoint of that at the kind of 35, Mark and assuming that we can keep this four days on regular power in three DS disrupted power.

Ideally like we had last week five and two.

Then.

Our.

The Lady runs our Chinese business is just incredible she's got it so under control that yes sure. She can tell you. If it's something is going to move by the $100000 revenue Mark.

So it was really about a half million dollars.

A timing shift from Q3 to Q4 in that business and its de Minimis from 'twenty one to 'twenty two.

Okay last question just is on again on the 22 revenue bridge you have about 40%.

Your expected revenue is gonna be book and ship is that typical for you guys is that higher than normal.

Normal lower than normal.

That would be pretty typical I think what I would say, it's higher than normal in that is the amount of.

Activity in the pipeline that that 40% probability is being applied to them and so if you were kind of risk adjust.

Justin that that's what would I take that to the low end of.

The guide.

The lower end alright, great.

Okay. Thanks, Jamie.

Thank you. Our next question comes from the line of work Liptak from Seaport. Your line is now open.

Hi.

Thanks, Good morning, guys.

Hey, good morning, Paul.

A lot of detail so I wanted to try and ask one from 50000 feet.

The oil and gas prices around the world have been going up and just generally how does that impact charge business now.

This is this is this good for your customer.

Does this slow orders as visit accelerated and I'm thinking about hydrogen carbon capture and then.

The traditional packaged gas or traditional energy customers.

Sure.

Well, if we can have a long conversation about this one so let me pause.

Buck it off.

On the gas side on the high natural gas pricing.

That has.

We're watching that very carefully over the last couple of months to see if it had a.

A delay impact on any of the kind of the LNG.

Infrastructure ordering activity.

That has not been the case.

Our LNG infrastructure kind of risk.

That's in our thinking is for anybody who's doing the <unk>.

That's a commercial truck and that has chip shortages that would be more impactful than what we're seeing on anybody's response to changing their demand forecast because of.

At gas prices.

In terms of the oil part of the question.

It's a little more complex and what I say by that is if a few years ago, you'd say where oil price goes that's going to drive activity.

What used to be at $80 oil you would see quite.

Net of activity, we're not seeing that same trend right now.

And.

So I'm I'm more tempered on the way that that higher oil price impacts our traditional customers ordering activity I think a little bit of that is they're not gonna speculatively build anymore and a little bit.

That is.

Impacted by the view toward how do I become clean.

Cleaner, how do I participate more in the energy transition.

Temper that.

The oil price drives a ton of.

Response in that sector, but certainly we're seeing a slight.

Quite a bit in activity there.

Can go into more detail on any particular area that you'd like on that well.

Yes.

Okay, No I think that's good I'll leave it at that thank you.

Thank you.

Thank you. Our next question comes from the line of Craig Shere from Tuohy Brothers.

<unk> Your line is now open.

Good morning, Thanks for fitting me in.

Hey, Craig.

Just a big picture question I mean honestly, it's a little concerning at this level, but you'd even temporarily have to worry about.

And something talent.

Yeah.

Recovered her side.

Given the enormous growth you have ahead of you over the next three to five years imagine labor markets, Although your euro outlook, certainly brightened with an infrastructure bill.

We use for venture Global's, cheniere or some others.

But that's only going to tighten.

The labor market that much further.

I know that in response to part of John's question, you alluded to increased automation.

But I just wonder if to really fulfill.

The promise of your specialty products opportunities.

Are there really enough.

From leaders in welders out there sure he is.

Or do you really have to at some point increasingly pay up for talent and poach people or can you really automate this way.

So I would target the answer not to the engineers.

<unk> side.

We've had an enormous amount of success in bringing engineers into the business in particular as you described driven by the variety of different applications in markets that we play in and the engineer.

Engineers in cryogenic, particularly love these types of acquisition.

And just things that are unique that we have on the process side. So that's not that's not been an issue for us and we're also seeing a trend of engineers, leaving kind of there.

Industry long longer term roles, and saying, Hey, I want to go into something that that has the potential for.

For this much higher growth than the GDP style.

Year over year.

No.

Target my comments more around the manufacturing and the welding side, which was where my commentary was on wage increases.

I don't think we're alone in.

D.

Application need to increase wages to retain talent, that's something that we've seen across the board on industry and actually on average.

We are still average on that side of things.

Which is something that's important.

Also have an incredible.

For.

Set of talent in our welding base that.

Teaches incoming folks that don't have the welding background, how to well to our specifications and criteria whether that take.

Meg type of welding and we have beefed up that program through our welding Council.

Over the course of the last nine to 12 months, where the welding council actually moves people between facilities and trained them. So that we have the flexibility to move them. We saw that in the third quarter, where we had less work in our new Iberia, Louisiana facility and we had about 50 people that.

Between our Minnesota facility as well as our Teddy trailer facility to help out where we had higher demand. So that's another piece of the puzzle automd.

Automation is a part of this and that but that's always been a part of this has always been a part of our thinking has always been part of our ongoing productivity strategy, but at the end of.

Mood Theres some real specialized.

That we make that requires specialized talent and we also have customers on the big LNG side that are taken venture global we these are repetitive cold boxes, and heat exchangers and part of the value to them as they get a standard repeated.

The data product and so we keep the same team that work on those particular projects together.

The the answer is far.

Far more nuance than I can give you in a two minute quick summary, but those are the high points.

Great. Thank you.

Thank you. Our next question comes from the line of Ben rationale from Coker <unk> Palmer. Your line is now open.

Hey, good morning, how are you doing.

Hey, good morning, Doug Good how are you. Good so maybe if I just think about LNG and you laid out this cheap projects, but one of your equipment.

Equipment, you guys talked about 100 250 M. P. P. A.

A few years.

Can you just help us scream like if we think about that kind of opportunity over the next few years, how should we think about your market share or what the potential opportunity could be for you.

Yeah, we think about it in terms of the specific.

Projects that we have been.

I guess I don't know what the right term is awarded but not yet booked and and then work it from there around how we build up our opportunity set and I think what we're seeing in how I answered. The question is yes. There is.

Eight to 10 globe.

Civic pride projects that.

They've gotten to the point, where we think they're going to move ahead over the coming few years and that is a much smaller number than what you had pre COVID-19 you had a lot of projects at various different stages and trying to grab pieces and parts of that.

Whatever your M Tpa forecasted.

Global has had been a good thing for the industry because I think it's really honed in on those who are going to move to construction.

Of those eight to 10, we would have content on.

About seven.

70% of those projects, but at very varying different dollar content levels. We used to talk about these three U S Gulf coast.

So.

I would actually say I'd call. It four because I think plaquemines phase to the other 10 million tonnes per annum is not that far behind.

But we choose to talk about those because we have much better line of sight to the activity around them as well as to the dollar amount of our content our anticipated content.

<unk> primarily why.

But there are certainly additional potential chart content beyond what we talked what we specifically called out on those if thats helpful.

That's helpful.

And maybe switching topics on inflation.

Could you remind us if I think about a hydrogen plant how much is your revenue.

So that's the entity.

And then trying to think about how what kind of inflation have you seen on those kind of opportunities.

Sure so a hydrogen liquefaction plant for us.

And it depends on the size so they're at the low end, it's gonna be like a 10 ton.

Per day, we see mostly in the quoting activities into 15 ton per day, but we're starting to see more activity on the 30 ton per day, the larger ones just like the Engineering Award we won with Salisbury for the U S utility.

So on the 15 ton per day those can range.

<unk> from $25 million to $15 million of chart content again, it just really depends on kind of what the location is where is it et cetera, but a conservative average number to use for those is going to be in the low thirties.

Per project.

There.

Again.

These are less inflationary sensitive because we quote with very narrow bid validity on the on the project in whole inclusive of material and so that's that gives them a little bit more resilience than our standard product that's just.

Ordered as a component.

<unk>.

The bigger projects like a 30 ton per day can it can be somewhere between 45 and $65 million of content is.

Pretty safe assumption to use on those.

I guess, where I was going with it was if I think about inflation and all of this green hydrogen project cost inflation.

<unk> not specifically to you because as you said.

But the risk is pretty low for you guys, but just trying to think about inflation if any.

That you have seen any impact from just kind of inflation on those project conversations.

We have not to date seen that impact.

On those conversations not to say that it won't happen but.

We've actually seen an increase in.

The conversations timelines to what their forecasted award.

Dates are and I'm not sure if that's a function of we're going to do it regardless and move it ahead or if that's just.

It's a function of getting more.

Validity in the hydrogen industry as a whole but haven't seen yet.

Inflationary impact on timing of those.

That's very helpful. Thanks for taking the question.

Thank you.

Thank you our next question.

Comes from the line of adding more data from Goldman Sachs. Your line is now open.

Hey, Jerry.

Got it.

I know that you spoke to some of the supply chain disruptions are there, but could you help us understand could you expand on the actions taken through the supply chain disruption that you highlight on slide five.

Specifically around the optionality around localization and the safety stock that and what that all of that helps you with the margin of the company through for Q1 'twenty two.

Yes, so specifically to the safety stock and I would I would comment that this is the current.

[noise] area of that is on aluminum.

That's the that's the biggest concern on availability.

And where we're able to lock those down we we do we do so and we've done that kind of over the last six months to try to keep costs in.

In line with the current cost.

<unk> <unk> versus <unk>.

You're seeing potentially further increases on the localization of the suppliers that cuts down on the increased freight costs. The increased container cost et cetera. If you look at just in the third quarter alone.

Container cost and this is a macro market not.

Figure not a chart specific figure, but container cost using the container freight index.

In the quarter itself increased 34% and so we would be basically eliminating sending things overseas eliminating the potential for delays.

And by keeping what we're seeing is the current cost state level versus further degradation.

Got it thanks, I'll turn it over.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating.

You may now disconnect.

[music].

Yeah.

[music].

[music].

Yeah.

[music].

Good morning, and welcome to the chart Industries, Inc, 2023rd quarter results 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. The company's release and supplemental presentation was issued earlier. This morning. If you have not received the release you may access it by visiting charts website at Www Dot chart industries.

<unk> Dot com a telephone replay of today's broadcast will be available. Following the conclusion of the call until Thursday October 28 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.

For 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 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'.

Our full wheel.

Thanks, Gigi good morning, everyone and thanks for joining us today for our third quarter 2021 earnings call and update to 2022 outlook with me today is Joe Brinkmann of chart industrial gas veteran and now our CFO, who will take you through the quarterly results later in the call.

Today's discussion is two fold.

Similar to what you've heard I'm certain from other companies' first the near term macro challenges that we faced in the third quarter their impact on our quarter and what actions, we have and continued to take in order to manage through it and come out with a structurally higher margin profile amidst what we expect to be record setting years ahead and second the continued strong.

C based order activity, we're seeing for which all indicators suggest underlying demand for our products will continue.

So starting on slide four of the supplemental deck that was released today.

Our third quarter 2021 orders of $350 million, demonstrating continued demand across the business and were significantly above our expectations coming into the quarter.

But which were around 300 million ish considering that we did not expect nor did we get any large liquefaction orders within the third quarter.

This quarter's order level was 33% above the third quarter of 2020 and brings our year to date order levels, 53% higher than the first nine months of 2020. Additionally, specialty.

<unk> orders grew over 100% this quarter versus the third quarter of 2020 and over 150% for the year to date Timeframes.

Routing solutions has also shown impressive growth in these periods growing 35% for the quarter and 53% for the nine months.

Third quarter orders contributed to our fourth consecutive record backlog.

She'll be prouder with backlog now over $1 1 billion.

Stepping up our confidence in our 2022 outlook as well as now seeing a trend of quarterly consistency at this higher level of order activity pointing to the left hand side of slide four which demonstrates what we believes our expected new normal quarterly order levels, what in pre COVID-19 and pre clean.

<unk> times or 2016 through 2019 with an average of $238 million of orders a quarter is now consistently above $300 million a quarter.

A few additional items to note around our order activity in the quarter, we booked 60 orders in the third quarter that were greater than $1 million, each and 152 of those this year.

The third quarter was our second one in a row with 60 orders greater than $1 million. We also had 21st in kind in orders of 65 new customers.

Year to date through the third quarter of 2021, all of our specialty products categories orders have exceeded their respective full year 2020 order levels, So said differently in our firm.

First nine months of this year those specialty products orders all of those categories are above the full 12 months of 2020.

Q3 beverage orders were up 68% over Q3 of 2020, which is quick book and ship business and quoted with current material cost levels. So a section of this business that has not experienced.

The margin erosion from escalating material costs.

We are beginning to see somewhat of a recovery, albeit later than we had anticipated and our traditional oil and gas markets inclusive of upstream and natural gas compression.

Evidenced by air cooled heat exchangers, having the two highest months of orders.

In the year of 2020.

<unk> 2021 excuse me in August and September in the third quarter of 2021, being the highest order quarter of the year for air cooled heat exchangers.

Another example of our products being agnostic to the molecule. So we're positioned to benefit as oil recovers, while the energy transition continues.

So now, let's turn to the details on our cost burdens and what actions.

Actions have been taken to offset the expected continued drag from higher than anticipated costs on slide five and six.

While we expect the third quarter of 2021 was the bottom in terms of the negative margin impact from these cost challenges as some of them. Some of them have been completed completely mitigated, while others persist and will gradually improve with offsetting actions.

Actions taken we expect subsequent quarters margin improves yet we are also are tempering, our next quarter outlook, both for sales timing shifts as well as for the cost structures. We previously indicated that we anticipated that in the third quarter 2021, we would need to monitor what our material costs and availability were improving or getting worse and then.

Respond quickly things did get worse in the quarter and despite the strong order and backlog growth supply chain labor and logistics issues weighed on our results. We responded quickly with surcharges additional price increases and operational cost reductions yet none of our in quarter actions were immediately impactful to margins within the quarter itself.

We are currently.

The timing of backlog and pricing surcharges as well as normalized labor and operational efficiencies, resulting narrow to result in a stairstep returned to typical margins with step one of the staircase starting in Q4 and continuing through to Q2 2022, which is incorporated into our 2022 outlook.

Project, let's step back and get into the challenges and what we've done about them slide five real one shows how material costs continued to rapidly increase in the third quarter of 2021, increasing another 12% in stainless steel, 18% in aluminum and 24% in carbon steel from June 30 to September 30, we.

We implemented abroad.

On July one it given the timing of our backlog any inquiry cost increases we do not see much offset in Q3.

Additionally, we added a surcharge to all new orders starting in the middle of the third quarter of 2021 and have already issued another price increase in October 2021.

Our project based work allows for current material pricing in bid.

Pricing for <unk>. So all of those mutations have been updated as well.

The second row shows the supply chain disruptions, whether port congestion availability of drivers trucks containers materials. Obviously, none of this is chart specific and our teams did work to minimize the sales timing shifts due to supply chain disruption. This further though.

The level of safety stock, where we could in turn impacting near term free cash flow.

Speaking of availability of drivers and trucks, the third row shows and often less discussed but highly disruptive unanticipated.

One anticipated challenge that we faced from August 11th until October seven forced measure was issued to industrial gas customers.

So the risks from our industrial gas supplier on nitrogen and argon allocations due to their need to respond to the resurgence of COVID-19 oxygen needs in particular in the United States.

We were in a privileged position to use one of our own cryogenic trucks from our leasing fleet and higher certified driver through our distribution network to deliver gas to keep our.

Our production running this disruption certainly added cost and inefficiencies to our operations on a positive note. This force measure has been lifted as of October 7th and allocations are currently back to normal.

Moving to slide six row, four we face the issues availability and cost of labor, including COVID-19 labor impacts.

<unk>, we believe we have taken enough actions do not have the fourth quarter impacted by the labor challenges with the exception of the direct labor hourly wage increase which is not temporary and put in place in the third quarter in response to our need to retain and hire a significant number of production team members.

We hired 372 people in the quarter and over.

98% are still with us while we will continue to incur the wage increases we also in the quarter utilize sign on incentives, which negatively impacted expenses that are not embedded into the base pay.

The second lever challenge, which has dramatically improved in October to date was the resurgence of COVID-19 through our U S manufacturing.

Touring facilities from August one to September 30, we had an average of three 7% of our production workforce of key facilities in the United States out with Covid by week.

Month to date in October we have had very few direct labor in these shops out.

This created additional operational inefficiencies changes to schedule.

Manufacturing and additional shifts with our direct labor covering different areas of the shop.

We had two of our production facilities briefly disrupted by Hurricane Ida during the quarter with lost work time. These are temporary impacts had no ongoing or permanent damage or impact.

And finally, we anticipate and have planned for ongoing Chinese energy enforcement at our locations.

Casual Anna we have numerous mitigation strategies in place as needed but at this time, our China operations will have weekly powder supply is either five normal to restricted or for normal three restricted which if the current situation remains throughout the quarter will allow us to hit our Q4 midpoint, China forecast barring no further restrictions.

Actions.

We're continually we've been continually responding some material cost changes as well as the other cost changes through price increases and surcharge you can see on slide 70 increases to material cost on the top half of the slide since the beginning of the year increases of 33%, 40% and 65% and stainless.

And gentlemen, carbon steel respectively, our three main raw material categories.

The first 20 days in October we have seen stabilization in carbon and stainless steel aluminum continues to increase in costs and decrease in availability given the situation with magnesium.

With that said and before I get into the necessary pricing and surcharges, we've put in place.

Luna rationale for the differences between the approaches let me address our comfort level on safety stock as.

As you are aware aware since the beginning of the year, we've been adding safety stock, where it makes sense temporarily driving inventory balances higher than typical and thus impacting free cash flow.

This strategic decision has allowed us to not have had any material.

And the deliveries for our customers for example, we've locked in certain one and two year contracts securing the first half of 2022 with cost savings compared to current levels based on the timing of when we secure the inputs.

Regarding pricing, we do not anticipate material cost to increase as they did respectively from the end of Q2 to.

Q3.

When we saw this we implemented a surcharge effective mid quarter. In addition to the pricing changes implemented July one and the re quoting of all material for open bids on projects with bid validity timing.

Even with these changes that was not enough to keep up with the rapidly accelerating cost.

Therefore.

And have implemented another price increase into effect for all new orders, which will be both temporary and permanent depending on the product.

We've worked with and continue to work with our industrial gas customers that are under long term agreements to assist us with utilizing the material cost pricing mechanisms and those agreements more frequently considering these inflationary times persist.

Before we were a quarter that we lag in the adjustment mechanism just isn't effective in hyper inflationary times.

And to our customers who have been fantastic to work with on this and support our longstanding relationships. This mechanism will return to their regular schedule, whether quarterly or semi annually as macro conditions.

<unk>.

A big thank you to each of them that have been working with us to ensure we are able to deliver their product as desired, but do so without negative harm to our business.

And a second thank you to those who are working with pre price increase backlog to appropriately support additional material pass through costs for certain existing orders in our backlog.

Temporary you will note that we have structured these increases in two different manners, that's on purpose the.

The first is that some of our pricing will remain at higher levels. After the cost situation tempers and returns to normal which would be a typical action on our part periodically to adjust pricing. The second is around surcharges, which are temporary albeit indefinitely temporary it.

So we will have certain price stickiness, while being fair to our customers as they are working to be fair to us.

I'm now going to hand, it over to Joe to take you through our structural cost actions in the third quarter results before I talk about our 2022 outlook.

Thanks Joel.

It shows certain organic structural costs and capacity.

At this times, what you see on the slide captures two goals prefers to operationally reduced costs from the second to ensure we have the appropriate capacity.

Appropriate locations to meet our customers lead time demands on the left hand side of the page you can see a subset of our cost reduction actions taken are underway.

In the third quarter. This is certainly not a comprehensive list we have consolidated our Tulsa air cooler production to our Beasley, Texas manufacturing location, creating a flexible manufacturing facility in our Tulsa location.

Which is in various stages of starting up depending on the product line.

Adding the flexible lines in Tulsa.

<unk> gives us access to skilled talent and allows us to move bottleneck production from other locations for example, or move a vacuum insulated pipe and sub assemblies from new pregnant of soda is complete and the associated benefits are anticipated to begin in the fourth quarter of 2021.

The same beasley location.

How's, our Houston repair and services business, which over the course of the next few months will consolidated from our Standalone Huston repair site you can see some of the other efficiency moves underway on the slide both in the U S and in Europe. Lastly, we continue to refine our SG&A structure with specific position eliminations taken in the quarter.

<unk> onto slide nine third quarter 2021 sales of $328 3 million increased over 20% over the third quarter of 2020 and organically 13, 4% as a reminder, the third quarter of 2020 included approximately $25 $6 million of venture global Calcasieu.

Sales in the second quarter 2021 had approximately $5 million, while the third quarter of 2021 had no associated big LNG revenue.

Excluding sales from the Big LNG project in the respective periods organic revenue increased 25, 2% in the third quarter of 2021 when compared.

We are past the third quarter of 2020, and 13, 6% year to date 2021, when compared to year to date 2020.

Third quarter 2021 sales included records in sequential quarterly growth in specialty products and cryogenic solutions.

<unk> sales increased 14, 7% sequentially.

From the second quarter of 2021, and 10% versus the same time last year, while specialty products increased nine 5% sequentially from the second quarter of 2021, and 108, 8% from the third quarter of 2020.

Preparers service and leasing and specialty products comprised 49, 7%.

Compared to our total net sales for the second quarter and our role at approximately 50% and compared to 34, 1% for the full year of 2020.

Our third quarter 2021, gross margin was negatively impacted by the cost Jill described.

Reported gross margin as a percent of sales of 20.

<unk> of one 8% included one time costs associated with facility startup costs integration.

Structuring and facility consolidation when adjusted for the onetime costs adjusted gross margin as a percent of sales was 26, 5%, reflecting the cost burden, we experienced within the quarter from the.

To fully increasing freight supply chain and material costs.

Adjusted gross margin as a percent of sales is flat to the third quarter of 2020.

Excluding big LNG and a sequential decline from the second quarter of 2021.

Challenges were less impactful to the adjusted gross margin as a percent of sales for specialty.

Products and repair service and losing specialty products adjusted gross margin as a percent of sales was just over 37% consistent with the second quarter 2021, and indicative of the profile of that business. The specialty products business is predominantly either project based pricing with near term cost validity.

IDT or product with faster book to ship time frames, capturing more current costs and our ongoing pricing.

Service and leasing adjusted gross margin as a percent of sales of 28, 7% included restructuring restructuring charges related to our decision to consolidated the Houston, Texas repair.

Fair facility.

<unk> adjusted gross margin was a sequential increase of 510 basis points from the second quarter of 2021, which had a low margin shipments from China backlog included in it.

The most.

Challenge gross margin and adjusted gross margin was in heat transfer systems given the.

Heavy material content in the segment loss production time, and higher margin project based revenue recognition timing.

Sequential second quarter, 2021% to third quarter SG&A increases are driven by the additions of la turbine an adage.

Joe will talk about the next few quarters timing of.

It offsets in larger project margin impacts in a moment.

Slide 10 shows our third quarter and year to date adjusted non diluted earnings per share of <unk> 55.

And $2 <unk>, respectively, including any activity on our mark to market of our investments, which was a net positive impact.

Costs in the third quarter as well as year to date adjustments earnings per share related to specific onetime costs for restructuring severance costs startup facilities and production lines and other non repeating items we.

We have not included add backs from negative production or efficiency impacts from the challenges.

Impact today, given that our guide anticipates certain continuance of them as well as the timing around our expected offsets, resulting from the structural actions you heard about.

In an effort to be more time sensitive to prepared remarks and Q&A. We have included segment specific details and first of a kind of new customer information.

You hear it in the appendix. Additionally, we frequently get the question of timing of the 10-Q filing we plan to file later today.

Slide 10 does not mean that we will be giving quarterly guidance going forward, but rather we wanted to provide more specificity about the coming quarter.

By way of background on how we thought about the fourth.

Quarter, our team has built in some additional contingency in the sales and earnings outlook for the fourth quarter compared to Hollywood normally guide assuming that the supply chain shipping and freight challenges might not improve.

On Slide 10, you can see the walk from our prior approximated internal sales forecast to the low end of our prior outlook range for.

For the third and fourth quarters, and Thats shown on row, one and the larger moving pieces and rose to three nine which are not wholly comprehensive the consolidate the largest movements, including timing of heat transfer system projects and backlog and notices to proceed. These updates result in our updated low end of the sales range for the fourth quarter of 2021 of 300.

$70 million the range of $370 million to $390 million for the fourth quarter. As mentioned this is entirely due to projected revenue timing shifting to 2022, none of which is lost revenue our.

Our new guidance results in expected, 11% to 13% sales growth for the full year 2021 compared to 2020.

Slide 11 shows our current 2021 outlook, which takes into account the macro challenges presented earlier as well as the actions taken to date and the timing with which they offset those challenges given current inflammation.

We anticipate that gross margin as a percent of sales increases in the fourth quarter 2021 in each.

Except cryo tank solutions for which the third quarter is reflective of the fourth quarter of margin and backlog and lagged due to the price timing.

RSL and specialty products segment gross margin as a percent of sales increases are expected to be driven by the product mix in backlog and price increase timing, while the anticipated slight increase in <unk>.

<unk> margin is the result of larger project higher margin specific sales.

Associated full year 2021, non diluted adjusted EPS is expected to be in the range of approximately $2 75 to $3 10.

Approximately $35 5 million weighted average shares outstanding and this assumes a 19 five.

Segment effective tax rate, which is an increase from our prior estimate of 18%.

We expect the third quarter of 2021 was the bottom in terms of the negative margin impact in subsequent quarters are sequentially improved in particular as a result of the specific projects with margin visibility that will have material revenue recognized the pricing and surcharges beginning to show in margins.

And generally higher volumes to assistant labor absorption.

As mentioned already we need some contingency given the uncertain environment.

Moving to slide 13, our full year 2022 outlook generally we have good visibility to specific projects and anticipated continuance of the broad based demand we have seen this year record backlog spring 2000.

22% and price increase impacts we are increasing our expected 2022 full year sales outlook to the range of $1 7 billion to $1 85 billion.

This revised guidance does not include any additional our new big LNG projects. Although we were very bullish and we expect three of the U S Gulf Coast Big LNG.

Projects that already have FERC approval to move to final investment decision in 2022, two of which we currently anticipate will hit our order book in the first half of the year.

In a moment I will share these potential dollar amount for each of the big LNG projects and why our conviction has increased but to quickly walk you through the 2000 22022 sales buildup on slide 13.

Well one shows our current backlog for scheduled 2022 shipments theres. Some backlog that goes out to 2023 that has the potential to be shipped in 2022, but that's not included here.

Rows, two and three show typical broken shifts that would be expected to ship in 2022, given these assumed levels.

Gross four through six are specific.

<unk> small scale LNG projects that we had expected to be booked already but due to timing shifts are now expected in the coming six months and the associated anticipated 2022 revenue impacts.

And rose seven provides a view of 2022 potential revenue based on booking additional liquefaction projects early early.

Specific.

And lastly, <unk> is the anticipated impact from a full year of the adage in la turbine acquisitions.

Associated non diluted adjusted EPS is expected to be in the range of $5 25 to.

To $6 50 on.

On approximately $35 5 million weighted shares outstanding and this assumes a 19% effective tax rate.

And again does not include any big LNG.

With our current backlog visibility, we expect more linear typical sales by quarter and the year compared to this year, where we had a distinct second half sequential increase.

Included in the thinking is that we.

Pate the first half of 2022 includes a continued drag from the challenges we are current.

Experiencing along with the incremental offsets from the positive impact of actions already taken to date.

Now, let's step back and talk about the continued broad based demand. So the tale of two cities as being the second portion of what's happening in the business.

This continued broad based demand supports our conviction with of our strategy.

Well as our future outlook.

We are differentiated by our molecule agnostic processes and equipment and we believe the energy transition will be a hybrid of solutions, all of which will benefit from as well as benefiting from any recovery or rebound in traditional oil and gas. So we've captured the three big tailwind buckets of what we believe will drive behaviors.

In the next decade on slide 15, with the overarching trend being a public and private sector working toward more sustainable options.

The International Energy agency in their roadmap to net zero indicates at today's climate pledges would result in only 20% of the emissions reductions by 2030 that are necessary to put the world on a path towards.

<unk> zero by 2050, another way to think of this is that if we don't start now even if you did everything in full force later this decade, it would be impossible for the world to catch up to accomplish these targets. Additionally.

Additionally, 90 countries have announced zero targets that 78% of global GDP.

82% of the world's GDP.

Towards Nae now falls under <unk> regulation in 32 countries have government backed hydrogen strategies. If you compare this to one year ago. The increases in these numbers is substantial and shows the evolution of the global mindset towards sustainability.

There is increasing pragmatism also toward how we get there while ensuring energy.

<unk> and consistency as renewables grow in scale and infrastructure.

Natural gas is a key part of that the third row on slide 16 is important.

This goes to the immediate needs of energy without interruption and disruption as well as bringing power in some case for the first time to populations in locations such as South al.

Resilient India.

The combination of the need for consistent energy and a desire for cleaner and greener answers will both benefit us.

So moving on to slide 16 around our inorganic activity that we've done over the last 12 months and how it's positioned us well with our full menu of clean process technologies and associated equipment I won't spend much time on this.

Africa I have to say that our portfolio across the nexus of clean clean power clean water clean food and clean industrials as well established without the need for further inorganic activity our customers can choose from our broad set of processes and equipment again, all of which is molecule agnostic and technology agnostic. So they can choose a full solution or pick a component from our offering.

As a result of the inorganic additions over the past year completed at what we view as very reasonable valuations. We are now well positioned for this transition.

Having a full solution set is beginning to contribute to and expected to continue to grow our higher margin specialty products businesses. Additionally.

Additionally, our inorganic businesses are on track with our integration.

Slide <unk>, and we expect less deal related and integration related costs in 2022.

The acquisitions, we have done over the past year are shown on slide 17, there substantially contributing to our backlog and will begin to flow through the P&L in a meaningful manner in 2022.

Before acquisitions completed between October of 2012.

Activity in June of 2021 have a total purchase price of $105 million for all four and have pulled in over $175 million of orders since their respective deal close dates. Additionally.

Additionally, on the bottom left portion of the slide you can see some of the other synergies from these combinations and I pointed out in particular, the combination of Blue and Green.

At edge and chart into chart water has gained a lot of early traction and what I believe to be as I said previously our most underappreciated portion of specialty for growth in the years ahead, which is water treatment.

For example at edge posted its best month of orders of 2021 in September which was our first month of ownership and treatment as a service.

For water treatment and industrial applications grew by 62% since we acquired Blue and Green last November.

Slide 18 shows our hydrogen activity, which continues to surpass our expectations as to the consistency of the strength of the order book, even without any liquefy our orders in the quarter.

We booked approximately 200.

Of hydrogen related orders this year, so far in nine months.

We posted record record hydrogen sales gross profit and operating profit in the third quarter, which in combination with our release of our commercially ready liquid onboard vehicle tank and this quarter's introduction of our tsi, there's a thousand bar tsi liquid hydrogen pump gives us content.

Yes.

And potentially allows us to increase our near term addressable market for hydrogen.

In the coming months last quarters, and this is a small but important piece of information because it shows the level of traction compared to where we were just 12 months ago.

One of the bullets on the slide is delivering now.

Constant because we are a unique way to play hydrogen profitably now as well as not being wholly dependent as hydrogen as the only winner in the energy transition.

This is further supported by our current quotations on approximately $1 billion of potential hydrogen processing equipment work to over 325 customers and potential customers.

Now over $500 million of that pipeline expected to have decision points between now and the end of the third quarter of 2022.

The pipeline includes trailer quotations for over 115 units for customers around the world, including Europe, North America, Korea, and Australia, approximately 30, fueling stations and dozens of liquefaction opportunities.

Putting six that we anticipate may be awarded within the next six months.

We also booked $9 $7 million liquid hydrogen storage tank order in China in the third quarter of 2021, and we started the fourth quarter off with a 30 ton per day hydrogen liquefaction engineering order in the U S as well as in order for confidential project in Korea.

Including these examples show that our geographic disbursement of hydrogen order activity has become much broader over the past few months, which is not just a positive for our business going forward. It is also a positive indicator for the global acceptance of hydrogen.

Regarding hydrogen trailers, we booked over 60 of them in the past 12 months and we shipped seven in the month of September.

An example of our capacity expansion towards exiting this year at a run rate of 52 trailers, a year and we continue to work toward doubling that capacity in 2022.

More and more of our customers are honing in on liquid hydrogen is the answer for heavy duty transportation ranging from trucks to train to plain good.

One example is Stokes based technologies.

The purchase of hydrogen run taken the quarter. Another example is our partnership with highs on motors for 1000 mile heavy duty class eight truck using that recently introduced liquid hydrogen onboard tank.

Slide 19 shows third quarter carbon capture activity and I view this quarter as a catalyst for expectations of increasing activity in commercialized.

<unk> activity in the near term.

Last year I had indicated that he thought carbon capture by year behind hydrogen in terms of its commercial activity, which turned out to be more like 18 months behind the hydrogen given various market developments.

But this quarter's activities, which included our partnerships with Teco 2030, <unk> and FL Smith's hitting on key markets there.

Capture will be a critical part of their de Carbonization efforts included marine cement industrial empower.

Were also notified recently over $5 million U S Department of Energy funding award for Ses's cryogenic carbon capture technology to design build commission and operate our process at Central Plains cement company, which as a whole.

Wholly owned subsidiary of Eagle materials and doing this at their cement plant in Missouri.

We will scale, our CCC system to a capacity of 30 tonnes per day, while also demonstrating the system captures more than 95% of the <unk> from from the flu <unk> slipstream and produces a liquid cotr stream that is more than 95% pure.

We expect the purity is actually be above 99%.

And also meaningful in the quarter was an actual booking of an engineering order for our carbon capture offering from a publicly traded industrial manufacturing company producing materials for the heavy construction industry.

As well as one.

Engineering order for <unk> with <unk> in the Middle East both.

These engineering work orders are expected to move to full carbon capture and storage project orders within the coming 12 months.

And finally, our SaaS carbon capture technologies was recognized by researchers at NIH and Exxon as the most competitive carbon capture solution with the determination that.

Both of them to produce cement and capture Cotwo using our CCC technology is 24% higher than producing cement with no seo to capture while other carbon capture technologies.

From a 38% increase to 134% increase in the cost of producing cement and capturing sidoti versus producing cement and not capturing.

The cardio too.

So the ultimate takeaway here in this discussion is at 2030 carbon emission reduction goals cannot be accomplished without carbon capture and storage. So stay tuned as this market continues to grow.

An important topic and we discussed this briefly on our second quarter earnings call, but I'm going to spend a little more time.

Turning to the details around LNG, because our bullishness on impending big LNG notices to proceed has increased again in the past few weeks and a subset of our commercial pipeline of potential orders related to LNG project work.

You can see on slide 20 is also increasing.

As a reminder, we think of our LNG business in <unk>.

And the first infrastructure, including over the road trucks fueling stations transport ISO containers LNG by rail the <unk>.

Small scale in utility scale projects and the third Big LNG, which we don't include in our guidance our outlook, but we have approximately $1 billion of potential bookings on the horizon over the next year as these projects move ahead to final.

Bucket and decision.

So LNG is kind of at the nice edge in the market with tightness of the supply demand balance shifting trend of shorter offtake contracts to an acceleration of long term offtake agreements in particular, we're seeing that on the U S. Gulf Coast export terminal projects we.

We anticipate three big LNG U S Gulf Coast export terminal project.

Project to proceed to FID in 2022, and as I said earlier with expectations for two to three progressing to orders for us in the first half of the year. None of these projects again have been booked into backlog at this point and none of them are included in our 2022 outlook.

We conservatively anticipate venture Global's Plaquemines phase one which.

Our <unk> tons per annum.

Two.

Move ahead to FID in the first half and note I said conservatively anticipate.

We also anticipate that this project will include over $135 million of chart content and.

And in the third quarter, Vg and the Polish oil and gas company finalized an agreement under with.

As 10, which <unk> will purchase an additional 2 million tons from venture global for 20 years.

<unk> Driftwood project Phase, one, which is 11 million tons per annum, and which we anticipate will include over $350 million of chart content.

They signed sale and purchase agreement with shell in the third quarter, resulting in the completion of LNG sales.

For the first two plants and intend to proceed to construction in early 2022.

And Cheniere, whose corpus Christi stage three project, which we anticipate will include over $375 million of chart content announced last week that ENN LNG has agreed to purchase approximately $2 9 million tonnes per annum of LNG and engineers words marks another.

Under well stone and our efforts to contract our LNG capacity on a long term basis in anticipation of the FID of Corpus Christi stage, three which we expect will occur next year.

The second category of LNG small scale with <unk> in hand for projects not yet booked that were a primary piece.

Around our thinking.

Of 2022, and you saw that in the work these projects or for Eagle Jacksonville in Florida, and a utility scale project in New England, The New England project is awaiting approval from the city Council.

The council has headed on its agenda over the past few months meeting, but they run out of time at these meetings, which is which is incredible in and.

That itself, but.

But we're hopeful that it will be approved at the Council meeting this afternoon.

And we expect notice to proceed imminently thereafter.

And finally in the infrastructure category, we continue to see growth, even coming off of records for LNG vehicle tanks, ISO containers and other associated equipment at the end of September we were awarded a <unk> 19.

$19 million purchase order for a series of LNG by rail tender cars, our second of this magnitude in as many years.

Third quarter 2021, LNG over the road vehicle tank orders continued very strong over $33 million, bringing year to date 2021 orders to approximately $105 million higher than any full year in our history.

And included new customer orders in Poland, and India, indicating.

Indicating wider acceptance of LNG as a fuel during the energy transition.

We were awarded an engineering study for U S ship owner as part of a planned conversion to LNG fueled guests propulsion of two American vessels in the coming quarters.

Okay.

September 32021, our net leverage ratio was 299 on October 18th of 2021, we closed on a refinance which improves terms as capacity spreads maturity of our instruments and reduces costs as shown on the left side left hand side of slide 22.

Sorry, 'twenty two.

This $1 billion sustainably lengths revolver increases our borrowing capacity on our revolver from 83 million to $430 million eliminated 50 basis point floor on U S dollar borrowings saving approximately $2 3 million.

Annually occurring currently.

Two hauling levels and removes the cash hoarding provision from Covid related restrictions for the first time in our history, we met the criteria for and included in our debt instrument, a sustainability linked to offering with the associated further cost savings tied directly to our achievement of greenhouse gas intensity reduction target over the next.

Next five years.

The offering was committed at 150% of our targeted $1 billion by 100% of our existing Bank group.

To conclude you can see on slide 23, some of the recognition of our ESG actions, including this quarter being named the emission reduction champion organization of.

Current borrower by gas deck as well as being a finalist in the gastric awards category of organization championing diversity and inclusion also last month, we remain finalists and as an S&P Global Platts Energy awards for corporate social responsibility.

Both Joe and I wanted to take a moment.

The year, the challenging macroeconomic environment to thank our team members for staying focused executing quickly on a variety of cost offset actions and continuing to generate increasing interest and demand and our unique portfolio of sustainable solutions and molecule agnostic offerings with that I will turn it over.

Amid digi to open it up for questions.

As a reminder to ask a question you will need to press star one on your telephone. So withdraw your question press the pound key please standby, while we compile the Q&A roster.

Our first question comes from the line of Ben Nolan.

Over to Jean Paul Your line is now open.

Yeah, Thanks, Hey, Jr.

And then.

Combine two into your quick and then turn it over first.

First should be a quick one on the Corpus Christi stage three.

Is that number bigger than it used to be in terms of it.

From content it.

It seems like it is just curious if there is.

Some extra content that was may be sold into that.

But then the.

The other question is a little bit more thematic.

In that.

Obviously, it was a little bit of a challenging quarter. There were some things that you didn't expect that.

Sure.

Really nobody expected that had an impact here, but given your.

'twenty two just trying to get a sense of.

What the wiggle room is there in.

Do you feel like there's if things.

Yes.

Inevitably do sort of don't go exactly according to plan if there is enough room.

In your numbers such that it's already accounted for.

Alright, Thanks, Dan So let me pull up the first answer around the Corpus Christi stage, three and the number is bigger than.

It was previously and and I would say also that this is the first time, which increases my confidence level that the respective operators of the three projects that I described on big LNG.

We're comfortable with us putting our level of anticipated content.

Out into the public domain, so that's a positive.

And then directly answering your question there has been some always in the way that these projects work ongoing work in the background between EPC and the operators and chart around structures, what things are going to look like what pieces.

<unk> go together. So there is scope changes with respect to that which benefited us as well as simply the comment around re quoting and re pricing given the changes in.

The macro environment. So those two were the drivers of the increasing content on that particular project.

<unk>.

And then with respect to the 2022 question.

The low end of the guide builds in that Wiggle room that you are describing and the way that we think about this is.

Sales being more evenly spread across the year and you still have that drag on.

On margin in the first quarter.

Get better in the second quarter, and we have good visibility around the way those that backlog that we have already flows out and where we get confidence that low end of the range and we've built a little bit of that wiggle room in that first half margin in <unk>.

Our thinking.

Thinking again, we don't guide quarterly so somebody will ask me that question, but.

The way that we think about that is as we were.

Went through the details of our backlog.

In the first half of 2022 their most substantial portions of our backlog are in specialty products and cryo.

Oh tank solutions.

And in specialty we see more resiliency around that ongoing margin level and then also as brakeman just commented piece pieces and parts of our specialty that are quicker in terms of book and ship and have kept up with the pricing slash cost.

Flag.

And then on the Cryo tank solutions in that backlog in the first half.

Also have the majority of that in EMEA, which has.

Tighter mechanism of passing that price through so those two things give us a good view towards the first half but.

<unk> I would think about the year is much more evenly spread than 2021 has been.

With a step up in margin from.

Q4 to Q1, Q1 to Q2 and at a comfort level at the low end of that range.

Okay I appreciate it thanks Joe.

The way expense.

Thank you as a reminder, task a question you will need to press star one on your telephone to withdraw your question press the pound key.

So you please limit yourself to one question and one follow up question.

Our next question comes from the line of John Walsh.

Credit Suisse. Your line is now open.

Hi, good morning.

Hey, John.

Hey, Walt.

Welcome to Joe as well.

Thanks, Mike.

Great.

My first question Jill is really I mean, obviously the orders.

Better than expected.

What can you call out that we so that we can have confidence that those orders are going to translate into the profit we kind of all expect it will whether it be your 80 20 actions I know with Big LNG you had.

<unk> Ips EMR that made the margins higher anything that you could give us to kind of that little bullet points around there would be helpful.

Yes, definitely and I think the starting point being on the midsized projects, which are.

More in that five.

Had a $50 million range, we're seeing more and more of that activity happening and coming in through the order book and those projects. We have very good visibility to the margins tend to require more of our full solution offering which is at higher typically at higher margins, because we're providing the technology.

Five of the equipment.

On the other side of that.

Defense around the cost reduction activities and the ongoing efficiencies we have.

Hundreds of projects underway around that but it's really you can capture it in the $80 20 around the activities that we're doing on automate.

As well in certain shops, as well as looking at the ability to make product in the right locations and so we were well underway on that and what I mean by that is there are certain locations that pieces and parts of our answers and our products are higher value content and then there's others that we can.

Insurance through like a skid as an example, and do that in a more cost effective facility and so we're well down the path on doing that still room to optimize that as well ahead and so we've we have additional optimization and cost reduction operational.

<unk> actions that are underway that give us a little more headroom on.

The way, we think about margin as well.

Great and then.

I'll ask the question of I'm curious the answer but.

One of your.

I guess.

Customers.

<unk> had announced their intention to acquire a competitor of yours, particularly on the industrial gas side I also believe on the cryogenic side E C T J.

Just wondering how youre thinking about industry consolidation.

Just there's obviously only.

A few.

Players out there. Some of these are very niche technologies, but would just love to get your thoughts on what that might mean going forward from a market perspective.

Definitely and yeah, it's interesting of lately seen a lot of interest in the industry, which was anticipated and again.

Cut makes me feel good about the valuations.

Valuations that we paid for the pieces and parts that we've added over the last 12 to 14 months.

The specific acte acquisition announcement from plug power.

I'm going to address it in two fold first is that plug continues to be a good.

Good partner to chart, a great customer, we do a lot with them across the value chain of providing liquefaction facilities.

<unk> processes to the equipment side. So it wasn't a surprise to us that they would look for the ability to have given their amount.

Mount of increasing need and forecasted increases to the trailer side wanted to have that hydrogen trailer capability in house.

Indicating to us even as of the announcement date of the acquisition that they intend to continue to purchase equipment from us as well as liquefaction being.

Part of that.

Relationship we view the we view the acquisition actually as a positive to implication to US. The reason we view it that way is on the industrial gas side of the house, where we think <unk> will prioritize hydrogen trailers in this particular business.

And keep for themselves given their forecast and in turn we have over 90% of the 100 in 15 plus trailers that were currently quoting on.

With different customers than them. So if you think about that as well as the industrial gas regular.

<unk> oxygen liquid nitrogen argon trailers, we anticipate that there <unk> <unk> customers are going to look for.

Alternative sources as well and that's a positive to our business. So net net we congratulate plug on that we're thankful and appreciative.

Appreciate the ongoing relationship with them and we anticipate that there'll be key part of that.

Our liquefaction business as well in the near term.

Great I appreciate the detailed responses I'll pass it along.

Thanks, Sean.

Yeah.

Thank you. Our next question comes from the line.

Illiquid Marc Bianchi from Cowen Your line is now open.

Hey, thanks.

I wanted to talk about the order outlook here.

You've got the guidance there and how.

Orders that you expect to book flow into the revenue outlook, but we don't see it that way when you report so.

What kind of quarterly order report number should we expect for fourth quarter then.

What would be embedded in the guidance for 'twenty two.

Yes, so what we.

<unk> here for the fourth quarter would be consistent to the third so at that $350 million level.

And then into 2020 to the range of the guide implies a $300 million to $325 million low end order activity and a kind of 375 to 400 per quarter at the high end. So when you think about kind of that that range.

It's the high end is going to be achieved when you have a quarter, where you get a liquefaction project or a small scale terminal project something like that so that that's the key delta between the $3 25 in the $3 75 to 400 is the.

More difficult.

<unk> to predict kind of middle sized projects.

And then just related to that.

Got the $200 million of hydrogen orders so far this year.

There's going to be some more in fourth quarter, where does that number look like in 'twenty two based on I mean, obviously you've laid out.

Some opportunity there, but just.

Just if you risk adjust it.

Yeah, Okay. So I'd answer it two fold in particular on the risk adjusted we've seen just.

Oh, yes.

Founding amount of hydrogen order activity that would.

Beyond what I had anticipated.

Painted in terms of its consistency throughout the year. This year, we had it kind of it was so new at the end of last year to being commercialized as an industry that it was hard to predict weather quarters, we're going to be consistent and they have been.

Way more consistent than I had expected.

So.

I would very comfortably say that next year's hydrogen order activity would be up somewhere in that 40% to 50% type of.

Range.

It could be considerably higher than that but I'm not going to go there.

Right now because that really is dependent on how these liquefaction plant projects progress. The fact that we have six that.

But we anticipate we will move to decision and award in the next nine months that we're currently quoting on.

<unk>.

Meaningful difference.

I don't know how it's been earlier this year, but it's still a new industry in terms of how it's commercial behavior is so I'd be I'd be comfortable risk adjusted at that 40% up year over year.

Okay.

Great Joe if I could just sneak one more in on the.

So it looks like you dropped the free cash flow guidance that we had previously for this year and I'm curious what the thought processes with that and how should we think about free cash flow I mean, we could kind of get an inference from what the EPS guidance implies maybe it's like 40 to 50 million Bucks in the fourth quarter and $2 20 to $2 60.

<unk> and 'twenty two.

Maybe if you could comment on on that and if there's any other stuff we should be considering.

Yeah, no and.

Good point on I should have addressed that we dropped that outlook simply because of the uncertainty around the material side and.

Availability of the material side, so we had to.

Make a grab at safety stock, where it even is able to be grabbed at higher levels than I had anticipated previously so that was.

Made it more difficult because we view this inventory.

Seeing as something that's temporary but hard to tell with fourth quarter is what I can say is that the fourth quarter. What you. Just described I think is pretty darn accurate.

A couple of things I'd point out there's a $20 million.

Inbound receivable that.

What had been anticipated to come the end of September and moved to the fourth quarter as a as an inbound cash payment.

So that's something that will.

Benefit Q4 that we didn't call out specifically.

And then there's also just around these larger project timing.

<unk>, which will more primarily impact 2022 from a benefit to free cash flow because we have you would get.

Essentially better free cash flow off of these <unk>.

Projects like the NFS SaaS project or the puzzle local buyers or the helium local fire for the Russian oil and gas.

<unk> customer so the the profile will improve with the more activity that we have in that kind of mid project size range I think your.

Number you just implied for 2022 is certainly within.

The.

The bands of how we're.

We're thinking about it.

We intend to come back around and provide what that will look like in 2022.

As we come out of this year, we think we'll have a better ability to to give you an accurate number on that so.

So sorry for the long winded answer Mark I, just wanted to give you some detail on our thinking.

It was very helpful. Thanks, so much.

Perfect.

Thank you.

Thank you. Our next question comes from the line of Ian Macpherson from Piper Sandler. Your line is now open.

Yes, thanks, good morning.

Joe I was going to ask on that free cash flow as well.

Helpful.

Short term and then revisiting the stair step margin recovery.

A point that you made earlier we were previously.

I'm sort of low <unk> gross margin on an enterprise level for next year certainly by by the Middle of next year and now I guess, we walk.

Walk up from Q3 to two higher destination is that still based on.

The.

The initiatives that you have underway for recapturing.

Pricing and efficiencies as low <unk> consolidated gross margin still the right destination to think about to get to your guidance for.

Sure.

It is yes.

It's interesting we actually think to answer the question by the way good morning.

Actually I kind of bantered about how much specificity did we want to provide around kind of how that first half second half gross margin as a percent of sales works.

But you are.

Next we still landing at the same place I don't see I don't see a ton of.

Drama between the first half second half, but you can kind of work your way up to that we're still thinking on the full year in that low Thirty's I think 35% to 31.

Depending on how things flow out.

Kind of think in 27, 5% to 29.

Coming into the year.

Sorry, starting the year I should say coming into because that would imply that for the fourth quarter.

Great. Thanks, My other ones were answered I'll pass it over thank you. Thank.

Absolutely.

Thank you. Our next question comes from the line of Eric Stine from Craig Hallum. Your line is now open.

Hi, Joe Hi, Joe.

Hey, Hey, so maybe just on the acquisition outlook in your commentary in the release.

Talk about that in 2022, you expect.

Less deal related costs.

I mean is is that commentary more related to just the wind down of costs associated with acquisitions, you've done or is that a bit of a way of signaling that maybe in 2022 things quiet down a little bit on the M&A front.

It's a way of.

Signaling that we.

We have what we.

Felt like we needed to get to round out our full solution portfolio in the areas of our strategy and future growth.

Expectations.

And we had indicated I would say.

Maybe it was September October of 2020, we had indicated we saw kind of this 12 month window, where we thought that valuations would be reasonable and through our relationships that we can bring in the pieces and parts.

Kind of proving itself out to be true we've looked at some deals recently that would be more opportunistic.

Yes.

Felt that.

Given the discipline around our investment approach and philosophy that is it wasn't the right time to to.

After those so we're signaling that there's less.

That we need to have we feel really good about where we're positioned and our jumping off point right now too.

And what we've got in the coming decade.

But that doesn't mean that we wouldn't be opportunistic if something came along and we felt like it would be a nice addition to the portfolio.

More on the near term to your question. There is we we have always stated that we would have.

Like to over the course of time in full owned H Tech and earthly labs and those are the two of our minority investments that we would we feel like we would have a lot of synergies by bringing them ultimately in house.

I think those you know over the course of time, that's still in our thinking.

It's just at what point or the owner is ready to do that as well as what is the structure of a deal like that.

We also have different thinking around the utilization of <unk>.

G Tls equity slash cash and so on but the.

But and.

Wastewater answer is less M&A.

On the horizon for us given.

How we feel about what we currently have to achieve our strategy.

Got it no that's great color.

Thanks for that and maybe just one quick one on strong carbon capture I know.

The.

Upshot Metairie that it's what 18 months behind but you've been you've been positively surprised just by the order activity. I mean is that is this still something where you think I mean is it any chance that you start to see some some results in 2022 or is it still more of a one of the reasons why you think this is a.

You expect revenues to be at record levels in each of the next four years.

Both so I think that we will start to see <unk> to the type of more meaningful carbon capture project into the order book in 2022, but.

But it's more about that.

'twenty three 'twenty four 'twenty five or I think it has meaningful impact to us.

My commercial guys tell me that are working on this particular facet of specialty.

There's an enormous amount of activity happening and quoting.

It's happening.

It's kind of staggered and maybe the best way to describe it is it staggered on Theres pre feed work then there's engineering work and then there's the decision point that we're going to pull the trigger to full construction on a carbon capture project most of what we're in right now is.

Clothing bucket, one or two.

And so I think in 22, you'll see a few couple of a couple of few of these go to two bucket three.

And the order book, but more more midterm.

Okay. Thanks, a lot.

Thanks, Eric.

Thank you our next.

Question comes from the line of Rob Brown from Lake Street. Your line is now open.

Good morning, Joe.

Yep.

I understand the bullishness on the demand environment of the order environment are you seeing as you increase prices any any weakening there or how much room do you have on pricing.

What's your risks.

On the pricing.

We're going back to your roots.

We have.

Dean.

Less noise in response to the pricing.

<unk> than what I would've anticipated meaning.

It's been kind of the broader.

We need to have this conversation and that's been accepted.

And I think that's because we're not yes, we're not individually out in left field kind of going in doing. This this is the.

Environment that industry is operating in right now.

That's also in our thinking is from a long term really.

Lee perspective, that's why we're doing some of this as price increases that we intend to keep after things temper and some of it is just truly hyper inflationary response on the surcharges.

And that seems to be pretty well accepted but what we're also finding is those who.

You are saying I can't I can't take your price change or your surcharge, we're saying we don't want to work and there is still enough work coming into sustained the order levels that youre that youre seeing so far this year.

Okay.

Okay, Okay great.

And then are you.

Pure service and leasing business, there's sort of a dining.

A dynamic pricing environment here.

Cause people to do more in that business or does that drive that business or is there any connection there.

Okay.

Yes.

Certainly that is what we're hearing.

But those who are saying I'm good on original equipment for now I'm Gonna Pulsar.

Pull some things back into service that I already own.

That is what we're hearing we've yet to see it but that's what we're getting feedback from.

In particular.

Customers on the tank side.

As well as.

We had been seeing that on the air cooler side, yet now we're seeing a reversal with oil prices, where they are in this kind of dipping the toe in the water toward compression in midstream upstream.

Starting to recover.

More so on the tank side.

Okay.

Okay. Thank you I'll turn it over.

Sure.

Thank you. Our next question comes from the line of Zach Schreiber from <unk>. Your line is now open.

Our questions have been asked and answered I'll follow up offline. Thank you.

Thank you.

Thank you. Our next question comes from the line of Conor We're now from Morgan Stanley. Your line is now open.

Yes, thanks, good morning all.

Hey, Carter.

I wanted to return to the 2022.

Look here.

I think we've kind of a purchase.

So all different ways, but I. Appreciate this isn't how you laid it out in the slides. So just high level answers would be appreciated, but basically if I look at fourth quarter that seems like a pretty clean base. I don't think you have a lot of really big discrete projects that you've talked about in that number so that kind of gets you to about a $1 $5 billion revenue run.

Run rate.

So basically what I'm trying to understand is.

In the guidance how much do you have and just outright discrete projects that get you to that higher level. How much pricing are you expecting to realize and then how much sort of volume is underlying the remainder there.

Just appreciate any context you.

You can provide on that.

Sure Yeah totally makes sense I follow your question.

So.

Specific projects there.

There's.

Let's see we've got the existing ones in backlog before that we've spoken about before which will have somewhere in the total.

<unk>.

Impact them.

60 to 70 ish, let's say in 2022.

Then you'd have.

Few more on the small scale side was.

Combined add up to in total.

Over 55.

Dollars of which the Rev. Rec, we've only incorporated a portion of that in there, but the specific project timing is the largest bucket of those three buckets that you're describing.

There is an element of.

Volume around the book and ship business.

<unk> that we anticipate is consistent to the order levels that we've seen in the last couple of quarters and then the pricing.

Which we've put in we would prefer not to disclose specifics around the pricing in terms of what we did July what we did.

$5 million mid quarter, and what was done in October but you could.

Safely put out kind of a 10% around there.

Okay got it that's helpful context.

More on the cost side, so obviously.

You've had some relatively large restructure.

Structuring costs, and then I think you call out some other.

I'm curious what seemed to be supply chain related costs. I was wondering if you could clarify what that latter bucket is basically what why you are calling it out why you think it's sort of nonrecurring and what the outlook is for those different.

Those buckets, because nonrecurring costs are just going to sort of mitigate as we move through the next.

Few quarters here.

Yes, we anticipate that all of the add back bucket mitigate as we move into 2022.

And yes, if you take deal and restructuring it's really my response to to Eric Stine question around there is less M&A.

On our horizon.

And we also are.

Every one of our acquisitions to date is.

Under various stages of integration, but we will be coming out of that.

In the first half of 2022, so we expect that that's the reason for less in 2020.

Around the other costs, we have the restructurings, we have startup costs around facility greenfields around.

The movements from Tulsa to easily as well as from other locations into Tulsa, we have consolidations of product lines.

Going to Europe over to from Italy to France from Czech Republic, Italy.

Other activities in India that are adding capacity et cetera. So those are at very again at various stages of completion I would expect that bucket MIT.

Mitigate closer.

<unk> mitigates that.

But that doesn't go away in its entirety in 2022, but certainly mitigate bye.

That by the middle of the year, because a lot of those projects have a completion date of Q4 and Q1 Q4 2021 in Q1 2000.

Two.

And then you have specific one time around if we have severance for people if we had a specific.

Structure.

Particular sign on to get someone to come joined the company. It seems like that that would be in that bucket.

But we don't expect we don't forecast an enormous amount of that going forward.

And.

Other than that you know that those are kind of the broad brushes on those.

Okay got it thanks for the color I'll turn it back here.

Thank you.

Thank you our next question.

22 of the line of J B Lowe from Citi. Your line is now open.

Yeah.

Hey, guys good morning.

Just a couple of quick ones.

The carbon capture engineering orders that you got.

This quarter are those on projects that you would expect it to perhaps in your previous.

Our expectation has been able to actually book of equipment orders this year or sometime next year or are those are are.

Are those different projects.

No those are a subset of the same projects.

And we still expect to.

Anticipate to book equipment orders.

It's associated with those couple.

Certainly in 2022.

But there's also a few dozen other ones that are in stages that we arent really allowed to talk about that we would anticipate a subset of those to move.

Move ahead, probably later in the year of 2022 to.

New order stage, so no no revenue impact in 'twenty, two from those but certainly order book impact.

Okay and is that the typical kind of cadence that you get the engineering side piece first before you get an actual equipment order are we going to hear about the engineering things before the equipment orders on an ongoing basis.

Can we just expect it.

To hear about actual bookings that sometimes the first time, we hear about these projects.

Yeah, Youre going to hear about the engineering orders first because in okay. So two fold you'll hear about the engineering orders.

First in both larger liquefaction.

There are some projects for hydrogen as well as for carbon capture because that.

That's truly a meaningful indicator in industry of a project getting to the serious point. So that's an important decision point for the operator and that's why those typically what we would typically disclose that because it gives you.

Factual better line of sight to the higher probability equipment orders, but that's going to be typical.

Got you okay.

My other question was on.

What's going on in China, right now in terms of power curtailments.

How much revenue.

Well first quick question is is any revenue.

Missing from China was that also pushed into 2022 and what's the magnitude of that specifically for China.

Yeah, It's it's de Minimis.

In terms of the push and you think about our China business.

It used to be like kind of $80 million to $90 million a year and I think this year we're tracking.

That you are over 100.

Sure.

Our fourth quarter forecast there is in for external sales and remember we do enter co sales from that Chinese facility too, but external tells us kind of $30 million to $40 million in in our fourth quarter forecast.

We use the midpoint.

Tracking of that at the kind of 35, Mark and assuming that we can keep this four days on regular power in three DS disrupted power or ideally like we had last week five and two.

Then.

Our.

The Lady runs our Chinese.

Midpoint incredible she's got it so under control that you show. The she can tell you is that something is going to move by the $100000 revenue Mark.

So it was really about a half million dollars a timing shift from Q3 to Q4 in that business.

And then as from 'twenty, one to talk to you.

Okay.

Businesses.

Last question just is on again on the 22 revenue bridge you have about 40%.

Your expected revenue is gonna be book and ship is that typical for you guys is that higher than normal lower than normal.

That would be pretty typical I think what what I would say it's higher than normal.

And that is the amount of <unk>.

Activity in the pipeline that that 40% probability is being applied to.

And so if you were kind of risk adjusting that that's what would I take that to the low end.

Of the guide.

The lower end.

Okay. Thanks, Jamie.

Thank you. Our next question comes from the line of work Liptak from Seaport. Your line is now open.

Hi, Thanks, Good morning, guys.

Hey, good morning, Paul.

A lot of detail.

Wanted to try and ask one from 50000 feet.

The oil and gas prices around the world have been going up and just generally how does that impact charge business now.

This is this good for your customers and bad does this slow orders or does it accelerate it and I'm thinking about hydrogen carbon capture and then.

The traditional packaged gas or traditional energy customers.

Sure.

Well, if we can have a long conversation about this one so let me put it off.

On the gas side on the high natural gas pricing.

That has we were watching that very carefully.

Really over the last couple of months to see if it had a.

A delay impact on any of the kind of the LNG.

Infrastructure ordering activity.

That has not been the case, our LNG infrastructure kind of risk.

That's in our thinking is for anybody who's.

Who's doing the class eight commercial truck and that has chip shortages that would be more impactful than what we're seeing on anybody's response to changing their demand forecast because of Nat gas prices.

In terms of the oil part of the question.

It's a little more complex and.

When I say by that is you know a few years ago, you'd say where oil price goes that's going to drive activity in it.

It used to be at 80 Bucks oil you would see quite a bit of activity, we're not seeing that same trend right now and.

So I'm I'm more tempered on the the way that.

And higher oil price impacts our traditional customers ordering activity I think a little bit of that is they're not going to speculatively build anymore and a little bit of that is.

Impacted by the view toward how do I become.

Or how do I participate more in the energy transition.

At that.

Tempered that.

The oil price drives a ton of it.

Response in that sector, but certainly we're seeing a slight recovery in activity there.

I can go into more detail on any particular area that you'd like on that well.

Okay.

I think that's good I'll leave it at that thank you.

Thank you.

Yeah.

Thank you. Our next question comes from the line of Craig Shere from Tuohy Brothers. Your line is now open.

Good morning, Thanks for fitting me in.

Hey, Craig.

Just the.

Big Picture question, I mean honestly, it's a little concerning at this level, but you'd even temporarily have to worry about you know and something talent.

From a labor side.

Given the enormous growth you have ahead of you over the next three to five years imagine labor markets.

So although your your outlook certainly brightened with an infrastructure bill.

Do you use for venture Global's, cheniere or some others.

But that's only been a tightening labor market that much further.

I know that in response to part of John's question, you alluded to increased automation.

But I just wonder if to really fulfill.

The promise of your specialty products opportunities.

Are there really enough engineers and welders out there sure yet.

Or do you really have to at some point increasingly pay.

Pay up for talent and poach people or can you really automate this way.

So I would target the answer not to the engineers side, we've had an enormous amount of success in bringing engineers into the business in particular as you described.

<unk> driven by the variety of different applications in markets that we play in and the engineers in cryogenic, particularly love. These types of applications that are unique that we have on the process side. So that's not that's not been an issue for us and we're also seeing a trend.

Trend of engineers, leaving kind of there.

Industry long longer term roles, and saying, Hey, I want to go into something that that has the potential for this much higher growth than the GDP style year over year.

So I'd target my comments.

And more around the manufacturing and the welding side, which was where my commentary was on wage increases.

I don't think we're alone in the.

Need to increase wages to retain talent, that's something that we've seen across the board on industry.

And actually on average we are we are still average on that side of things.

Which is something that's important we also have an incredible.

Set of talent in our welding base that.

Teaches incoming books that.

That don't have the welding background, how to well to our specifications and criteria whether that's yeah.

Meg type of welding and we have beefed up that program through our welding Council.

Over the course of the last nine to 12 months, where the welding council actually moves people between facilities and trained them. So.

So that we have the flexibility to move them, we saw that in the third quarter, where we had less work in our new Iberia, Louisiana facility and we had about 50 people that move.

Moved between our Minnesota facility as well as our Teddy trailer facility to help out where we had higher demand. So that's another.

The other piece of the puzzle automation.

Automation is a part of this and that but that's always been a part of this has always been a part of our thinking has always been part of our ongoing productivity strategy, but at the end of the day there is some real specialized.

Product that we make that requires specialized talent and we also have customers on.

LNG side that are take venture global we these are repetitive cold boxes, and heat exchangers and part of the value to them as they get a standard repeated.

Product and so we keep the same team that work on those particular projects together. So there is the the answer as far.

On the big are more nuanced than I can give you in.

Two minute quick summary, but those are the high points.

Great. Thank you.

Thank you. Our next question comes from the line of Ben rationale from Coker <unk> Palmer. Your line is now open.

Hey, good.

How're you doing.

Hey, good morning, Doug Good how are you.

Good.

Maybe if I just think about LNG and you laid out this cheap projects, but one of your equipment you guys talked about 100 250 M. P. P. A.

A few years.

Can you just help us scream like if we think about the.

That kind of opportunity over the next few years, how should we think about your market share or what the potential opportunity could be for you.

Yeah, we think about it in terms of the specific projects that we have been.

I guess I don't know what the right term is awarded but not yet booked.

And.

And then work it from there around how we build up our opportunity set and I think what we're seeing in how I answer. The question is yes. There is eight to 10 global product.

<unk> that.

Have gotten to the point, where we think they're going to move ahead over the coming few years.

That is a much smaller number than what you had pre COVID-19 you had a lot of projects at various different stages and trying to grab pieces and parts of that.

Whenever you're in PPA forecasted so that's been a good thing for the industry because I think it's really honed in on those who are going to move to construction.

Of those eight to 10, we would have.

Have content on.

About.

70% of those projects, but at very varying different dollar content levels. We used to talk about these three U S. Gulf coast projects, and I would actually say I'd call. It four because I think plaquemines phase to the other 10 million tonnes per annum is not that far behind.

Behind.

We choose to talk about those because we have much better line of sight to the activity around them as well as to the dollar amount of our content our anticipated content. So that's really why.

But there are certainly additional potential chart content beyond what we talked what we specifically called out on those.

That's helpful.

That's helpful.

And maybe switching topics on inflation so if.

Could you remind us if I think about a hydrogen plant how much is your revenue opportunity.

And then trying to think about what kind of inflation have you seen on those kind of.

<unk> opportunities.

Sure so a hydrogen liquefaction plant for us.

And it depends on the size so they're at the low end, it's going to be like a 10 ton per day, we see mostly in the quoting activities into 15 ton per day, but we're starting to see more activity on the 30.

The larger ones just like the Engineering award, we won with Salisbury for the U S utility.

So on the 15 ton per day, those can range from $25 million to $15 million of chart content again, it just really depends on.

What the location is where that et cetera, but.

A conservative average number to use for those is going to be in the low thirties.

Per project.

There.

Again these are less.

Inflationary sensitive because we quote with very narrow bid validity on the.

On kind of object in whole inclusive of material and so that's that gives them a little bit more resilience than our standard product that's just.

Ordered as a component.

<unk>.

Bigger projects like a 30 ton per day can it can be somewhere between 45 and $65 million of content.

Is a pretty safe assumption to use on those.

I guess, where I was going with it was if I think about inflation and all of this green hydrogen project cost inflation, not specifically to you because as you said that.

But the risk is pretty low for you guys, but just trying to think about inflation.

If that's it.

That you have seen any impact from just kind of inflation on those project conversations.

We have not to date seen that impact on those conversations not to say that it won't happen but.

We've actually seen an increase in.

The conversations timelines to what their forecasted award.

Dates are and I'm not sure if that's a function of we're going to do it regardless and move it ahead or if that's just a function of getting more.

Validity in the hydrogen industry as a whole but haven't.

<unk> seen yet.

Inflationary impact on timing of those.

That's very helpful. Thanks for taking the question. Thank.

Thank you.

Thank you. Our next question comes from the line of adding more data from Goldman Sachs. Your line is now open.

Hey, Jerry.

Yes.

I know you spoke to some of the supply chain disruptions are there, but could you help us understand could you expand on the actions taken to the supply chain disruption that you highlight on slide five.

Particularly around the Optionality around localization members here feedstock and what about all that.

That helps you with the margin did properties through <unk> and 'twenty two.

Yes, so specifically to the safety stock and I would I would comment that this is the current area of that is on aluminum because that's the that's the biggest concern on availability.

And where.

Where we're able to lock those down we do we do so and we've done that kind of over the last six months to try to keep costs in.

In line with the current cost environment versus.

You're seeing potentially further increases on the localization of the suppliers that put down.

Down on the increased freight costs, the increased container cost et cetera, if you look at.

Just in the third quarter alone.

<unk> cost and this is a macro market not figure not a church specific figure, but container cost using the container freight index.

In the quarter itself increased 34% and so we would be basically eliminating sending things overseas eliminating the potential for delays.

And keeping what we're seeing is the current cost state.

Level versus further degradation.

Got it thanks, I'll turn it over.

Thank you.

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