Q4 2022 Chart Industries Inc Earnings Call
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
[music].
Okay.
Yeah.
Good morning, and welcome to the chart Industries, Inc, 2022 fourth quarter and full year results conference call. All lines have been placed on mute to prevent background noise.
The Speakers' remarks, there'll be a question and answer session. The companys release and supplemental presentation was issued earlier this morning.
You have not received the release you may access it by visiting <unk> website at Www Dot chart Industries' Dot com.
Phone replay of today's broadcast will be available following the conclusion of the call until Friday March 3rd 2023. 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 regarding forward looking statements and risk factors, including 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.
Chart Industries' CEO you may begin.
Thank you Justin and thanks, everybody for joining us. This morning with me today is Joe Brinkman, our CFO and together, we will walk through the presentation that was released this morning.
While the Dec has numerous updates that can be reviewed at your convenience. Our formal remarks today will focus on our 2023 outlook a record fourth quarter and full year 2022 result, the current operating environment numerous tailwind that both chart and held and are experiencing and its status on the closing of our pending <unk> acquisition.
Before we get into our 2022 adult and how they springboard us into our reiterated 2023 outlook note that everything included in the supplemental presentation and our formal remarks today relates to continuing operations we.
We have reached a preliminary settlement and the Pacific fertility clinic litigation matter related to our 2020 divestiture of our cryo bio business and as noted in the press release. This will be included in discontinued operations.
We are very pleased to put this episode from our prior divestiture behind us and resolve these 217 cases more specifics regarding the settlement will be included in our 10-K filing.
Starting on slide four we reiterate our chart Standalone outlook for 2023 for sales in the range of $2 one to $2 2 billion.
We are confident in this range given our strong visibility and further supported by the five items on the bottom of the slide first.
First it is not unusual for project revenue to shift between quarters, we anticipate realizing pushed fourth quarter of 2020 to revenue in 2023, but we did not increase our outlook for that timing shift.
Second our outlook does not include any additional mid or large project orders between now and the end of the first half of 2023, which could provide additional revenue in the second half of the year.
Third even though we are seeing end market improvement and H LNG vehicle tank sales our sales forecast for those H LNG tanks is flat with 2022.
Fourth as of the end of 2022, we had record backlog of $2 3 billion.
With approximately 60% of the full year 2023 sales outlook already in backlog higher than in prior years, and finally, we have existing capacity to deliver on our backlog and any potential new orders that could materialize throughout the year.
We are also reiterating our previous 2023 guidance associated with our prior adjusted non diluted earnings per share outlook.
It was a 2023 standalone full year equivalent adjusted EBITDA of $440 million to $480 million, which you see.
We will be using EBITDA as a financial metric going forward in light of adjustments costs and variable metrics and timing associated with the Howden acquisition, we will not provide Standalone chart adjusted earnings per diluted share for 2023. Following the close of the <unk> acquisition, we will provide updated combined company guidance for the calendar year 2023.
<unk> for sale adjusted diluted earnings per share EBITDA and adjusted free cash flow.
All of the current share count and interest information as of now is included in the supplemental presentation.
Our adjusted 2023 full year free cash flow is also reiterated in the range of $250 million to $300 million Inc.
Including our reiterated capital expenditure outlook of $60 to $65 million.
Effective in the results presented today for the fourth quarter of 2022, we are no longer adjusting inventory items for free cash flow.
Seasonally as in past years, our first quarter is typically our lowest quarter of the year and we expect that normal first quarter seasonality in 2023, given this and the timing of our backlog, we expect quarterly revenues gross margin and operating margins to continue to increase sequentially over the course of this year.
The work in the middle of this slide shows our backlog as of the end of 2022, that's available for 2023 sales recognition, giving us strong visibility to our year as well as book and ship for the year, which is consistent with prior years book and ship activity.
Moving to slide five this shows each of our segments and the anticipated standalone year over year 2023 full year growth.
We have the strongest backlog that we have ever had and that supports confidence and heat transfer systems specialty products and cryo tanks solutions outlook.
And repair service and leasing lifecycle, which is our field service group had the largest order month in December of 2022 and continued with a strong start to 2023 orders supporting strong first half 2023, RSL sales and margin.
One example is our recent field service order for $2 $6 million in the Middle East.
We've included a section in the deck on slide 10 through 16 that provide specifics for end market tailwind and their positive impact to chart and Howden and even more so to the combination of our companies together will not spend time on this call today on those detailed slides, but rather speak to an overview as shown on slide six.
Not only do we have a chart of our largest commercial pipeline for the next two years. We also have started in 2023 very strong from an order perspective with over $285 million of orders in January alone.
So let me give a few market condition updates by segment.
Related to HTS.
We have seen more orders recently related to cryo plants being built by midstream companies and we're seeing steady turnaround work and take him.
Fuel and renewable diesel activity continues with large air cool cooler demand.
And demand with our LNG customers continue that robust levels small scale and floating LNG continues to advance with several orders expected to be released in 2023, and we do also expect further big LNG activity. This year in our order book. This expectation is not only for process technology and equipment. It is also for more opportunities.
For nitrogen rejection unit studies and potential in our U implementation orders.
Related to specialty products and hydrogen we are seeing broader geographic penetration in places such as Korea, China, and Canada as well as additional sub segments, such as utility power generation like the energy vault order, we just received as well as marine activity and hydrogen picking up for storage and fuel systems.
Multiple government funding programs are incentivizing partnerships like the U S Department of energy hydrogen hub consortium, where we are also well positioned as is houghton for opportunities in production transportation and export projects.
We're seeing increasing interest with heavy duty fuel cell trucks.
Driving demand and active order activity for our hydrogen fuel station equipment with multiple customers.
And carbon capture and storage opportunities are growing in both size and quantity driven by expansion of brewery and wineries customers as well as expansion into newer segments, such as lime kilns biogas coffee and dry ice.
COC shortages globally are driving immediate demand and our customers are now looking to move from our large scale carbon capture feed or engineering studies to actual Ccs planned deployment, including our expectation for initial equipment orders in the near term.
There is also a helium shortage, which is driving a number of customers to move ahead with producing more volume, resulting in us seeing a heavy increase in quotation activities for our helium process technology.
Food and beverage demand is also continuing its steady increase in space exploration has kicked off 2023 with high demand levels, a strong funnel of projects and multiple million dollar plus orders.
Strengthen our water treatment business continues as our average opportunity size is increasing and we see significant chart water opportunities for growth ahead in international regions, where access to clean drinking water and wastewater treatment is now receiving government funding.
And for Cryo tanks solutions, primarily related to industrial gas our customers in this market have told us that they have all budgeted for a normal year over year growth in orders are in line with that so far in 2023.
So we included slide seven to show some of our 2023 year to date orders because it demonstrates not only these macro tailwind just described but also our continued broad based demand I won't go through everything here, but pointing out just a couple of these so far in 2023, including an order for LNG systems with Nissan heavy industries for 115.
Our floating LNG order for <unk> aluminum heat exchangers for $19 $5 million and additional Pos for our liquid hydrogen and oxygen trailers, plus a water purification system for Electrolyze our production.
We had very strong commercial movement in carbon capture as I. Just described the market tailwind both large and small with orders for fans for a major direct air capture project tanks in orchids for methane elimination, our first sale of earthly labs <unk> units to a beverage distributor and an expanded engineering work with.
<unk> in the Middle East.
We announced our definitive agreement to acquire Howden, a leading global provider of mission critical air and gas handling products and services on November nine 2022, with an anticipated closing date in the first half of 2023.
Moving to slide eight we completed our financing activities related to the transaction in December within our previously stated anticipated blended weighted average cost of debt range. We.
We have received clearances from all except two of our total required regulatory approvals pending receipt of these two remaining international regulatory approvals. We now anticipate that the transaction could close in the next five days and are optimistic based on information received as recently as this morning that it could close before the end of the first quarter two.
'twenty three.
As a reminder, for all of the slides that refer to how it and in this presentation, we're still pending those approvals before closing.
Both teams remain laser focused on execution and Howard in Lake chart continued to experience strong demand from numerous macro tailwind in their end markets in the fourth quarter of 2022 and into the first quarter of 2023.
Our previously shared pro forma 2023 for the combined business outlook remains unchanged our view for the 12 months pro forma adjusted 2023, EBITDA is approximately $1 billion inclusive of cost synergies.
And we continue to anticipate reaching our estimated pro forma net leverage ratio target in the high <unk> range by the end of 2024.
We reiterate our financial policy as previously laid out and included in the appendix of the deck.
We're currently pursuing divestitures of two product lines related to the combined business. While there can be no assurances of the completion of or proceeds from these activities. We continue to target completion of these within the next three to six months and continue to anticipate combined proceeds of approximately $500 million from these divestitures.
Slide nine is a slide that we have shared previously and are including today to reiterate our confidence in the combined business 2020 for outlook.
And the next section as I referred to earlier slides 10 through 16 are those detailed and market updates and the positive impact the nexus of clean and markets have on chart Howden and the combined offering.
For now let's move ahead to slide 18, Joe.
Thanks, Jill slides 18 through 20 or updates on our supply chain as well as our pricing strategies and actions on slide 18, you can see our top raw material inputs as well as the global container freight index.
Back to end of 2020 levels for aluminum carbon steel and freight while seamless dealers out of its peak range, but not back to pre COVID-19 levels.
Turning to slide 1919, while we are not yet seeing consistency in the input costs, we are seeing better availability from the supply chain as well as temporary costs and expect that to continue this year barring no unforeseen geopolitical events. We also expect the cost of energy to be more stable this year than in the prior two.
First of all a data from the left hand side of the slide is changing costs from January 31, 2022 to January 31 2023.
You can see decline in costs in all three the second column shows the variability within the 2022 year. So while cost is tempering, we're still more strategically source for our local and global supply base.
With the variability is still in play we continue to hold our pricing practices that we have deployed the past 24 months as well as continue to surgically increase price as shown on slide 20, we're also continuing to maintain our surcharge.
We have not seen this impact demand to date I will now hand, it back to Joe to cover the next section our fourth quarter and full year 2022 results.
Both the fourth quarter and full year 2022 records in multiple reported as well as adjusted metrics as you can see on slide 22, our full year set historical records in our reported backlog orders sales and EBITDA as well as adjusted EBITDA. Additionally, not shown here is our full year 2022 record reported gross profit.
And record reported operating income.
The bottom row of slide 22 shows fourth quarter of 2022 reported records, which include record backlog sales operating margin and EBITDA as well as the adjusted metrics for both operating margin and EBITDA.
We are pleased with all of these records.
Im also very pleased with the fact that each month in the fourth quarter of 2022 had both gross margin as a percent of sales and operating margin as a percent of sales sequentially increase with our exit rate from December our reported gross margin as a percent of sales of 31%.
Slide 23 shows that our records are broad based not just one part or segment of the business driving growth in each area for the full year. All four segments had record sales and three of the four segments posted record orders operating income and operating income as a percent of sales.
Moving on to Slide 24, we had our four highest order quarters in our history in 2020 to the.
The first three quarters of 2022 included Big LNG orders. The first time in our history, where we had multiple big LNG orders in a year.
Fourth quarter orders were $525 $9 million and did not include any big LNG. This.
This contributed to the full year 2022 order growth of 65, 9%.
Over the road vehicle tank orders, which were impacted by the higher natural gas price in Europe in 2022 declined 85% year over year and when excluding both big LNG in over the road tanks total orders were up 37% as shown on the last drove the table on slide 24.
And as mentioned previously on prior calls average orders per quarter for the five years of 2016 through 2020 were $251 million per quarter.
For 2021, and 2022 X Big LNG average orders per quarter were $479 million.
We expect our baseline quarterly orders to be approximately $350 million to $375 million and can increase in any given quarter from there depending on mid to large projects that get booked.
The bottom of slide 25 is important to point out remember that we have our H LNG vehicle tank for class eight heavy duty LNG trucks, and we introduced our liquid hydrogen onboard tank as well.
Prior to 2022, we sold the H LNG tanks to only a handful of customers. While the business was down last year, we still sold tanks to 16 different customers nine of whom were new and two customers that purchased the liquid hydrogen onboard tanks from us we believe our highly differentiated over the road tank offering will be a key part of our youth.
<unk> solution set for both LNG and hydrogen as our partners commercialize their <unk>.
Even with the decline in over the road vehicle tanks, we had record orders in 2022, both with and without Big LNG driven by a variety of small to mid sized projects in the $15 million to $50 million range as shown on slide 26.
These are the types of full solution projects that support less cyclicality as we book more of them.
In the fourth quarter of 2022, we book New Fortress energy is best for and fast five <unk>.
Projects as well as a $22 million pet Chem project and a large order with our key private space launch company.
We also received a letter of intent for a hydrogen liquefied from a longtime industrial gas customer, which is not yet booked into our backlog, but we do expect to book it in the first half of 2023.
We also currently have an active pipeline for 'twenty seven other hydrogen local fire opportunities.
Fourth quarter and full year 2022 were both records for sales slide 27 shows our 20% plus organic growth both for the full year as well as Q4 over Q4 2021 on the table marked a.
Even with the 4% foreign exchange headwinds, we grew 22, 4% for the full year.
Section B on slide 27 shows the 22, 4% year over year sales growth and similar to orders the decline in sales in our short book and ship over there a vehicle tank sales was 79%.
Excluding that our sales for 2022 would have been an increase of 33, 5% compared to the full year 2021, which was previously our highest sales year in our history.
Table see walks through the fourth quarter of 2022 foreign exchange headwind to sales and specific timing shifts of revenue into 2023.
None of this is lost business and as mentioned earlier contributes to our confidence in our reiterated sales outlook range of $2, one to $2 2 billion for the full year.
Hey box on the right hand side of slide 27 shows that these record sales both in the fourth quarter and the full year 2022 were broadly supported across multiple end markets and multiple products water space and carbon capture each grew over 100%, while hydrogen air coolers Breeze and HTS systems, each grew more than 47%.
Record reported operating income as a percent of sales for the fourth quarter 2022 of 13, 6% is higher than any period. Adjusted as you can see on slide 28 and record adjusted operating income as a percent of sales of 17% was supported by the sequential increase in reported gross margin in <unk>.
Operating margin in each of the three months of the quarter.
Slide 29 shows our record fourth quarter of 2022, EBITDA of $102 1 million or 23, 1% as a percent of sales.
When adjusted for onetime items related to the gain for the revaluation of our investment in Savant <unk>. Following its sale of securities to additional investors, including Chevron share based compensation and nonrecurring costs reflected in adjusted operating income adjusted EBITDA for the fourth quarter of 2022 was $97 5 million or 22 one.
Percent of sales.
Reported fourth quarter 2022, non diluted earnings per share was <unk> 42 as shown on slide 30, when adjusted for onetime items, primarily related to housing deal related costs financing other integration costs and the gain I just described as well as our mark to market of our inorganic investments.
Fourth quarter adjusted non diluted EPS was $1 67.
Full year 2022 reported non diluted EPS of $2 21 is a historical record as is our adjusted non diluted EPS for the full year of $4 69.
Slide 31 shows the fourth quarter to fourth quarter 'twenty, one to 'twenty, two and full year comparisons of adjusted EPS.
The meaningful increase in both of these periods is driven by segment operational performance and the result, which is offset in part by tax and interest.
Similarly, slide 32 shows the Q3 'twenty two to Q4 'twenty two sequential adjusted EPS walk.
Sequential operation improvements continued while tax was a sequential headwind.
Slide 33 shows the fourth quarter of 2022 net cash provided by operating activities of $30 5 million and.
And Capex of 26 <unk>.
Capital expenditures in the fourth quarter 22 included acceleration of the installation of our brazing furnace and production line are cold box rooftop expansion and putting more leasing fleet assets into service demand for our quarters and cold boxes continues at record levels. Both both for LNG applications of all sizes oil and gas application.
<unk> as well as our specialty products full solution offerings for hydrogen water and carbon capture.
Also continued to see strong commercial activity for our standard leasing fleet, which is primarily mobile transports and ISO containers.
When adjusted for housing related costs financing costs and income adjustments adjusted free cash flow for the fourth quarter was $71 5 million.
Pointing to the right hand side of slide 33, we did not adjust for the fourth quarter's negative foreign exchange headwind the accelerated capacity capital just described and for specific customer receivables that came in early January versus our expectation into the fourth quarter.
Slide 35 through 40 provide more segment details and opportunities ahead, starting on slide 35. This is our regular LNG opportunity outlook and I point out and Rogue one and two we have a new international opportunity that arose since our last update and in row, three our potential opportunity set has grown.
As a result of the international additional potential project as well as potential expanded scope on others in the pipeline, including four heavy hydrocarbon removal systems or NR use as I described earlier.
We booked multiple small including scale projects in the fourth quarter and we also anticipate all sizes of LNG projects demand to continue into 2023.
We do expect additional big LNG orders in the year, although we have not included any of those in our outlook and we anticipate.
One in the first half of 2023.
And although we don't show a table of SaaS for hydrogen it's another end market, where our commercial pipeline is growing including being in various stages of conversations with 786 potential and actual hydrogen customers with over 180 projects that we reasonably anticipate can move to order stage in the next three years.
In 2022, we executed 30 individual memoranda of understanding with partners and on Slide 36, you can see the end market split further supporting broad based growth ahead.
None of these were expect executed in the fourth quarter 'twenty, two including with we saw on <unk> Raven for Ccs and hydrogen and hydrogen extra water treatment solutions.
<unk> already received orders from 13 of these partners to date and so far in 2023, we have executed three new agreements with additional partners, including Nicola for hydrogen offering an mou with <unk> for high flow reverse osmosis in water treatment and with <unk> to incorporate chart equipment into their small scale.
Hydrogen liquefaction system.
Our first of kind orders are a differentiator for us you've heard me talk about that previously and in 2022, we added 89 of these to the order book.
168 over the past two years you can see a few of the fourth quarter first of all kinds on slide 37, including an award from Guyana water incorporated for two projects to support the water infrastructure initiatives in Guyana.
We also added 327, new customers in 2022.
And that's shown on slide 38.
<unk> 327, where fourth quarter 2022 orders from new customers, including energy volt.
An order from the Army, Massachusetts for the first ever for sort of water treatment solution and the state of Massachusetts, and a pre feed study order for Ses cryogenic carbon capture technology for Carlos and a European funding source Walloon region in alignment industry, an industry that we anticipate will quickly begin to implement carbon <unk>.
<unk> utilization and storage solutions.
We've already seen repeat orders from.
119 of our new customers that we booked in 2021 in 2022.
Sure, China, which was primarily reflected in our cloud <unk> solution segment continues to set records as they did in 2021 and surpassing many of those in 2022 as you can see in slide 39.
2022 reported an adjusted operating income as a percent of sales for chart Jana doubled compared to 2021, we booked our highest number of ISO containers in our history in the year and did all of this very safely with no accidents in the entire year also we are seeing increasing demand in particular in LNG and industrial gas and.
In the first weeks of 2023.
Also our repair service and leasing segment is gaining steam where strong demand coming out of December and into January for field service as well as continuing to expand our leasing fleet, which continues to provide our customers optionality and certain standard standard equipment that we have in the fleet. We have signed 465 new leases in 2022.
<unk>, which is shown on slide 40, we're also pleased to announce our three year Master service agreement with <unk> for LNG vehicle fueling station maintenance and monitoring and expect that we can leverage holden's aftermarket service and repair capabilities to expand these aerosol growth drivers even further.
In the section starting on slide 42 will provide a few updates about housing housing is privately held and we still have the pending approvals I spoke of ahead of closing so the information here is focus on the combination of the businesses and what they're experiencing in the market, which similar to chart is very broad based demand as you can see on slide 42 patent complements our.
<unk> solution offering offering <unk> filling in mission critical equipment into the portfolio, adding more options for our customers and our existing end markets and adding end markets and geographies that our sustainability oriented for which the chart offering can immediately be utilized via <unk> relationships.
Aftermarket service and repair, which is resilient through a cycle will be over 30% of the combined business revenues.
And that 30% is also 42% gross margin in the combined business.
Post close we will continue to report on our four current external reporting segments that you can see on slide 43, you can see on this slide also how naturally having fits into our segmentation and add balance to RSL compared to the other segments.
Slide 44, it appears that we have shown previously and have included again is it exemplifies the access that Houghton provides to us in these high growth specialty end markets driven by sustainability Cotwo and energy.
Resilient tailwind.
Our specialty total addressable market size increases meaningfully with the addition of Houghton as shown on slide 45, the near term Tam shown here for the coming three years are unchanged from what we showed in our investor deck on January 5th withheld and more than doubling our near term specialty Tam the new information on slide 45 is our anticipated CAGR.
<unk> for the longer term Tam by end market category.
And like chart housing continues to see strong market demand for their solutions and products with numerous wins across a variety of nexus of clean application.
Slide 46 shows four of these recent wins, including diaphragm compressors for a tour of powers Niagara Hydrogen center in Canada.
As well as supplying a hydrogen compression solution for shell's Holland hydrogen in one facility in Rotterdam, which when complete will be Europe's largest renewable hydrogen plant.
In other markets, how do we will install a ventilation optimization system for goldfield, South deep gold mine to support a safe working environment and reducing the mine's energy consumption.
There are numerous other recent wins, which can be found on their website.
Similar to chart, how and partners in the industry.
Recent Mou executed by Howard and in the first months of 2023 include with Porsche and Hydro Ixia as shown on slide 47.
You can read the details on each both of which are oriented to providing solutions for customers to reduce their carbon emissions with four ship focused on the marine industry and hydro axion hydrogen mobility.
We anticipate that both of these partnerships amongst others can leverage charts capabilities in marine and hydrogen post close of the acquisition.
And now I'll hand, it back to brinkman to close out our prepared remarks.
To reiterate what Jill said earlier, both chart and holding teams are focused on delivering our commitments and together we continue to not only be confident in our ability to deliver year, one cost and commercial synergies. Our teams have also had the opportunity to identify more synergy potential.
We are not adjusting our outlook for the us.
Great visibility and action ability, which not only provides confidence to the original figures.
It adds further upside potential. Some examples of these are shown on slide 48, including numerous additional offices and other site consolidation and overlapping locations, resulting in $25 million plus in potential synergies.
Ability for holding China to utilize our pressure vessel for compression skids are digital MVP X ray all of which adds efficiencies as well as reducing outside spend.
You can also see the commercial opportunities are growing including with customers in sustainable fuels in marine that are working on E. Methanol looking for total solution process optimization and a reliable partner for all critical components that have approached us to discuss partnering.
And then the final section of our prepared remarks, Jon I want to thank our one chart team members for their execution of a record year not just in the multiple record financial metrics numerous certifications as shown on slide 50, but in our ongoing ESG efforts, which include having our lowest safety incident rate in our history and over 75%.
One of our sites with no accidents in a year or more and as our 5100 amazing team members that continue to drive our profitable growth and do so with our herd of innovation.
We congratulate Andrea Adam and Rashid up for winning our 2022 global innovation contest with their amazing ideas as shown on slide 51.
It is these and many other innovations that result in our industry leadership position as you can see on slide 52, we want to congratulate both chart and Howden team for being named finalists for the hygiene technology of the year Award and the 2023 hydrogen future awards, which recognizes companies for their exceptional performance innovative design and contra.
<unk> to the growth and development of the hydrogen industry.
<unk> 53, and 54 layout some of the activities and accomplishments of both chart and Howden in ESG, both internally and for our respective customers towards annual sustainability report will be released in April of 2023, and we are reiterating our commitment to reducing our carbon intensity of 30% by 2030 compare.
<unk> 2020 baseline as well as pledging carbon neutrality by 2050 inclusive of depending how would an acquisition.
Now Justin please open it up for Q&A.
And thank you.
As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster and we please ask that you limit yourself to one question and one follow up again, we ask that you limit yourself to one question and one follow up.
One moment for our first question.
Okay.
And our first question comes from Chase Mulvehill from Bank of America. Your line is now open.
Hey, good morning.
Let's see I guess the first question.
If we just think about the.
2023 order outlook.
Obviously, you gave a lot of positive commentary there Jill <unk>.
Appreciate all the color.
2022 was obviously an exceptional year for orders.
So maybe if you could kind of give us I mean, you gave us some kind of high level comments that maybe puts and takes from a high level what might be up what might be down.
Daniel do you think it's possible to hold orders flat I know that might be.
A big ask because 22 orders were really strong.
But do you think that you would be able to is there is it possible to kind of hold orders flat when we look at 2023.
Yes, Thanks, Jason and also happy birthday to you Jason.
Alright.
Starting with 2022 as you mentioned it wasn't exceptional order year with for our four highest order quarters in our history all being in 2022.
With that said, we've provided the $627 million of Big LNG orders My commentary, let me start there on big LNG is that we do expect to be released and book more than one big LNG order in 2022.
Don't think in total that it will be $620 million, but it certainly is expected to be in the hundreds of millions of dollars sizes for the big LNG.
Orders that we expect this year.
And then when you go ex big LNG across the board as you mentioned in your question R. R.
Our end markets are just hitting on all cylinders right now and so I don't want.
Folks to get too far out over their skis, hence why we tried to give kind of that level of baseline of the $3 50 to $3 75, a quarter, but we are seeing more and more activity in these small scale and mid scale projects of the 15% to $50 million range.
Provided the $285 million of January month, purposely so that folks can try to hone in on how they see the first quarter shaping up.
We don't we don't expect.
Any of our non big LNG end market in 2023 from an order book perspective.
To decline.
With that said.
Thank you.
Indicated the H LNG vehicle tank that we forecasted that as flat, we're starting to see some end market improvements. There. So that's probably one of the ones that I'd model is a slower grower and.
Our traditional oil and gas and energy business.
We've seen an uptick in activity in the last six months or so.
The year has started out.
Strong as well in that order book that.
That is probably the one other market I'd point out that does has some variability around what you see in Nat gas pricing and the price of oil driving customers' capex behavior. So.
All in all.
We would expect ex big LNG, the order book to be up this year.
And thank you and one moment our next question.
Okay.
And our next question comes from Eric Stine from Craig Hallum.
Your line is now open.
Okay.
Eric Your line is open.
Okay.
Okay, one moment please.
One moment for our next question.
And our next question comes from Sam Burwell from Jefferies. Your line is open.
Okay.
Hey, good morning Jill.
Hey, I just wanted to ask another one on the big LNG side I. Appreciate the color that you gave around that at this point, but.
The the projects at least in the U S that are probably most likely to.
Near term, our all of the more traditional larger scale train variety and not modular train projects. So I was wondering if he does that imply that you guys are confident that you can win market share.
More of that type of LNG project.
I mean I was just curious for color on your outlook for winning new big LNG projects going forward that might potentially be different from the stuff that you've done for generic venture global.
Sure Sam Thanks for the question and let.
Let me start let me step back and start with a broader LNG big LNG comment in that we have both the Ips EMR <unk> process technologies as well as equipment. So we can sell that as a package with the process or the equipment that goes into like you described the larger scale variety of that.
It doesn't use the mid scale process technology that we offer so we are bullish on existing customers that we have doing expansions.
Or new new builds so I won't go into specific customer names, but <unk>.
Certainly more more than one of our existing customers is.
Giving signals that they're going to do more more projects ahead, and then on the large scale that don't use Ics EMR process technology, we do anticipate content that ranges from air cooled heat exchangers to pre treatment, which could use a <unk> aluminum heat exchanger and cold boxes.
Well to stand in a variety of different.
Associated vacuum insulated pipe et cetera.
All of that said and equipment style only order for those types of projects can range from $50 million to a couple hundred million dollars per projects. It depends on the size et cetera.
So all in all we have a pretty broad opportunity set on the big LNG ranging from just equipment.
Through to the process technology.
Okay understood.
Follow up on hydrogen.
No no orders in the quarter, although still called one out Thats eminent and then year to date. It looks like you did close to $65 million of orders curious of those that you call out on slide seven.
Aside from the South Korea, one that's obviously, where all of those in the U S. Just trying to gauge how how is the IRS had been digested by customers. Thus far are they still trying to work through all the nuances before the.
Or fully underwrite a project and then send an order into you guys.
Do you expect that one fits better digested, that's hydrogen orders can accelerate and become more consistent quarter to quarter as we move forward.
Yes, So let me take the I'll take your question in two parts. The first is year to date and this is as of.
A couple of nights ago, we were about $69 million in hydrogen related orders and then.
Just last night I think we are close to finalizing a $6 million to $7 million additional hydrogen order on top of that.
In terms of the second part of your question on the geographies and then the IRA and how that's impacting.
We're seeing obviously like you said, the South Korea, when I put that on the slide in particular, because that's an interesting one where.
We're actually providing that solution and building that out of the chart, China, we can build that tank in the U S in India as well as in China. So we're seeing a nice ability to geographically hit these end markets in a cost effective way on where we build what.
We're seeing.
That's definitely the largest percent of our orders in 2022 for hydrogen and to start 2023, our North American I say North American versus the USD as Canada has been pretty active as well.
The IRA I would say.
Is <unk>.
Definitely generating an active commercial pipeline with respect to hydrogen water and <unk> I think it's showing up in our order book to date more so NCC U S than it is in hydrogen.
But that we would expect to.
See that.
Accelerate in 2023 in particular as <unk>.
Customers that are.
Not your traditional hydrogen users like your industrial gas guys, but more of the hydrogen specific customers digest, how the credit system and the stimulus funds work, whether you can stack. The credits if you do multiple different combinations of <unk> and hydrogen together as an example.
As well as the ire S.
Requirements and how that works with the IRS.
The last thing I would add to that answer Sam is that.
We are well positioned in particular.
Our hydrogen in the United States with our <unk> aluminum heat exchanger manufacturing being we're the only company in the world that manufacturers raised in.
The United States.
And the IRI allows for additional benefit for customers that purchase made in America.
Equipment. So that's it that's a nice backdrop tailwind on the IRR as well.
And thank you and one moment our next question.
And our next question comes from Martin Malloy from Johnson Rice <unk> Company. Your line is now open.
Good morning.
Hi, Marty.
Hi.
To ask about it's been a couple of months as to how an acquisition was announced could you maybe talk about.
Your degree of confidence in how it may have.
Improved or changed in terms of.
The cost synergies as well as the commercial synergies and then wanted to try to get an idea of the degree to which the commercial synergies have been incorporated into the slides four and eight and the expectations there.
Yes, Thanks, Marty and I can tell you we as a team combined team at chart as well as the Howden team.
Are so excited about this combination and I have even as you are well aware super convicted when we announced this on the strategic merits and the financial merits of this transaction I mean, I have even more conviction if thats possible coming out of the last couple of months around the commercial and the cost synergies in the combination.
<unk> of this full solution offering we've had customers various customers from both businesses come talk to us about hey, what can we do with you together because together you offer a true full solution to address things like methanol as an example for our marine customers we've had.
Numerous marine customers that want to work with us on partnering for for a cleaner and greener solutions as an example.
But I also have had the opportunity and our entire executive staff is has the opportunity to work together with the Howden team and identify further commercial and cost synergies and Joe BR here. He kind of led the charge on that so let me let him respond in detail, yes, just just to add to that I had the opportunity.
To spend time with the.
The chart and Holden procurement synergy team earlier this week in Glasgow, Scotland.
And review the opportunity funnel for our procurement synergies I was very pleased to see that.
It exceeds what we have guided thus far at least from an opportunity pipeline.
So very optimistic on our ability to hit that target from an execution standpoint also reviewed.
Some of the facility consolidation synergies that I mentioned in there.
Prepared remarks.
And that that's looking very attractive so.
All steam all steam ahead here on synergies.
Other thing I would add Maury the other two things I would add.
Our that we did not increase the number.
We've put out there compared to what we announced in November but it gives us more and more confidence in delivering the numbers that we've committed to in our first year of ownership and we laid out on one of the early slides in the supplemental presentation.
Our anticipated that first month of immediate annualized savings and then our view on the first six months.
We have direct line of sight on the actions associated with those synergies so super excited and also as I commented opt.
Optimistic that we get this deal closed here before the end of the first quarter.
Great and for my.
Follow up question wanted to ask about the input costs on slide 18, and maybe you could just talk a little bit about what that means for you all both in terms of.
Margins.
Project Economics for your customers and then also maybe working capital.
Yes. So we're as we commented on slide 18, we are pleased with the availability of our main material input costs as well as.
The trend we've seen in the tempering of those three and we.
The way we built the forecast is.
Assuming that and where we sit today is where the input costs continue to be for the year. So additional tempering.
It would be it would be a positive.
In addition to that as Brinkman mentioned in our prepared remarks.
Our holding price and we do intend to address specific surgical price increases further as we get through 2023, and we've already done some of that in January of this year.
Joe anything you want to add on sourcing.
Just as.
As we've talked about on slide 18.
Definitely seeing more stability.
On the main input costs, primarily in the metals there.
And.
Unforeseen.
Events in the World.
Just that but right now, we're seeing stability and better availability, which is which is reinforcing our.
Our pricing approach and our margin improvement that we've already.
You can take hold here and we will continue to take hold.
Then just from a going back to the previous synergy comments.
Significant in sourcing opportunities.
Related to the <unk> acquisition that are going to generate.
Additional material cost.
Material cost out moving forward through these and sourcing synergies so.
Other positive for us and all of that ties to the back end of your question of working capital opportunity ahead. So we've had inflated inventory levels in 'twenty, one and 2022.
We have good line of sight of not needing to keep those inflated levels in 2023, and driving driving inventory reduction as well as applying the best practices at Howden has had in improving their working capital as a percent of sales.
Two two the chart working capital business. So all in all the setup for 2023, we have good visibility to the input costs good visibility to the demand in the sale.
So we feel confident in being able to deliver the outlook that we've provided.
And thank you and one moment for a follow up question.
And our next question comes from Chase Mulvehill from Bank of America. Your line is now open.
Thanks for letting me come back to NGL apologies I'm not sure what happened but.
As my follow up real quick.
I just wanted to ask on margins I mean, obviously, we can back into the margin number for 'twenty, three which is a pretty solid strong released 21, 5% at the midpoint for EBITDA margins. So what's implied in your guidance.
Can I ask specifically on specialty product margins.
In the fourth quarter, they took a step down but if I look at the last few fourth quarters.
I don't know if there is some seasonality in that.
But really is really kind of the question on <unk>, three and specialty product margins, how should we be thinking about margins in 'twenty three for specialty products.
Yes, Thanks, Jason I don't know what happened either I promise you, adding that.
It Didnt Dumpy I'll just tell you there.
But no youre absolutely right in your implied 21, 5% midpoint on EBITDA and we feel really good about it I mean, we are just thrilled with.
Sure.
The sequential margin went in the fourth quarter and being driven by the operational side of the business versus below the line items. So all of that as a positive setup.
With that said on the specialty you are correct first of all Q4 tends to be that way, which is driven by the book and ship element of the specialty business, but.
But the reality in this particular Q4, if you compared.
Two the prior Q4 of 'twenty one the biggest driver was H LNG volume change, which the margins are nice on that.
But if you looked at it in absolute Q.
Q4 of 2022, we had a we had just under $10 million of revenue that was associated with <unk>.
First of a kind project that actually came in inside the quarter.
And we had taken that at lower margins, because we see an incredible business opportunity ahead with that particular customer so thats reflected in the fourth quarter as well as.
There were two hydrogen liquid fire Rev. Rec items that pushed out from Q4 into 2023 that would have helped that would've been at higher margins than what we had before.
So on specialty.
And we forecast the H LNG as I commented flat in 2003 to 2022.
For the full year you were at.
Gary.
4% to 35, and a half and call it 30% to 35% for the full year specialty gross margin.
Okay.
And thank you and one moment our next question.
And our next question comes from Eric Stine from Craig Hallum. Your line is now open.
Hi, Joe Hi, Joe.
Okay.
Okay.
I guess I don't have to take it personally that my my line went dead as well, so hopefully I don't double up on questions here, but.
So maybe I mean, obviously strong orders in fourth quarter and you gave the January number.
Is there any way to quantify.
Whether actual or from a high level, what that number would look like with <unk>.
Given the additional content.
Yes.
Thanks, Eric.
We don't know what happened technically, but apologies and you did not ask a repeat question. So good question.
And.
As you said, we're very pleased with $526 million of orders without any big LNG in the fourth quarter. So.
We purposely wanted to direct both to ensure they understood that.
It's not a sequential Q2 to Q3 to Q4 is not actually a bad thing in terms of how the orders rolled out in 2022.
Four of our four highest order quarters in our history, where in that year. So I'll just take the first part of your question to reiterate that five 6% in a quarter is pretty darn good.
With that said the real question you are asking on what could what could it look like with Houghton.
I'm unable at this point to give you what their fourth quarter orders were but I am able to say that yes.
We're seeing very very similar trends in the business and.
The strength related to.
The end markets that I've described.
Fair, a very fair combination would be to take to double it to double ours.
That would be the right down the fairway.
In terms of how you look ahead to the two the one plus one together now additional content.
From the combination thereof, we've sized year, one commercial topline opportunity at $150 million, but the way that I would think about.
Additional solutions that order book is probably an incremental 20% to 30% on a full solution offering of of order size that we would get.
Okay.
Got it very very helpful on that interim Gilson my follow up just curious.
Youre getting close but.
Any thoughts on early reception to the deal either from existing customers or some of the new customers that you've identified return.
Yes, we have had exceptionally positive reception from existing customers, both Howard and Anne chart as well as had some opportunities for new customers. Obviously were like you said in that we're in that period between signing close where we continue to operate as individuals businesses and on our.
One and OE can immediately out of the gate take advantage of the one global commercial organization that we will continue to deploy in the combined business and.
It's pretty for me, it's pretty neat to see the two companies and the people working together and the ideas that have been generated between the two of them and the ideas are endless when you start looking at U S water and hydrogen.
So I'm I'm bullish that we're going to see where it come out of the gate strong not just on the synergy side, but just seeing some of these customers.
I think our new customer metric will grow in 2023 compared to 2022 meaningfully given the combination and then for our sales team that hopefully is listening.
They actually committed to.
Sure.
Without us having to push on them committed to exceptional increase.
Expectation of the combined business and the order book because they see they see the value between the two so customers are excited about the combination and they see the uniqueness of having our our cryogenic stationary equipment that in almost all cases and the full solution requires rotating equipment with it and this combination there isn't any other <unk>.
That has that combination of stationary and rotating equipment for these types of applications together.
Okay.
Thank you.
One moment for our next question.
And our next question comes from Scott Gruber from Citi. Your line is now open.
And Scott your line may be on mute please UN mute.
And one moment our next question.
And our next question comes from Marc Bianchi from Cowen. Your line is now open.
Okay.
Hey, Thank you.
I guess I wanted to try to unpack the.
Pro forma outlook, a little bit and then the.
The other question I had was just kind of on the net debt progression.
So on the pro forma outlook for $1 billion am I thinking about it the right way I mean, it seems obvious but I just want to confirm that we're talking about the EBITDA guidance that you gave for Standalone chart.
Full run rate of the synergies to $175 million there and then.
It looks like the Howden trailing 12 that we got when you first announced the deal with like 340 million Bucks is that.
Am I interpreting that correctly.
Mark. Thanks, Thanks for the question, yes, you're kind of right down the fairway on that.
We've got maybe having a little bit higher than that but.
Call it good Youre directionally right on it.
Okay, Okay great.
You.
If I were to just to try to estimate the synergies that will actually be contributing to the calendar 2023, I mean, it obviously depends on what time the deal closes but.
If we assume 45 days like you said.
What would that number look like I was getting to something thats like 30% to 50 million Bucks on my head, but I don't know if you if you'd care to correct that.
Yes.
It's something that we will we will give very specific guidance. Once we close so that it's extremely clear, but I don't have any issue in talking about we've already identified about 20 plus million dollars of kind of month, one annualized synergies that come out and then.
And that is from a growth perspective.
In the first six months or so.
Got about.
Annualized 70 million, but you got a net some cost with that so.
I'd be more than facing in to $50 million range.
Okay.
But thats not an annualized number we're talking about actually like what would flow through the P&L in terms of realization right.
Correct.
Okay Cool and then the other one was just on the net debt progression. So youll be four two at the time of the close and Theres a lot of a lot of noise with the free cash.
As <unk> discussed so maybe just to think about the cash progression in a different way.
Where would you think that that four to exit 2023.
Let me make sure I answer what you want me to answer here is.
How do we think of.
Assuming we close in the next 30 to 45 days.
What would we see coming out of calendar year 2023 for our net leverage ratio and my am I understanding correctly.
I'm asking about it more on an absolute net dollars of net debt basis, that's sort of how I was curious to hear your respond but if you are prepared to respond on net leverage that works too.
Yeah. So.
We've put out in the.
And the January 5th deck as well.
Regression of what we'd see kind of coming out of 2024, which is in that high twos range.
We still see that and I know I'm not answering your 2023, we'd have to do some specific math on that but I think realistically if I were a back of the envelope thing how we see the year's cash progress.
And available for debt Paydown.
The exiting 2023.
Somewhere in that kind of four low fours range.
Got it got it okay. Thanks, Jeff I'll turn it back.
Thanks, Mark appreciate it.
Thank you.
One moment for our next question.
And our next question comes from Jim <unk> from Raymond James Your line is now open.
Thanks for taking the question.
Two questions about Europe .
Hearing more and more about this green deal industrial plan to support clean Tech manufacturing inside the European Union and very timely of course with Howard and can you.
Just run through the specific.
Products that youre going to be manufacturing in the EU that potentially would qualify for some of the subsidies.
Yeah, absolutely. Thanks for the question then for pointing out that.
Opportunity set because we seem to generally discuss the U S IRS, mostly in the EU Green deal industrial plan.
Is similar in terms of what we expect to drive more commercial opportunity within the region.
Howden manufacturers numerous of their products in within the EU as we do for chart and compression compressors, a variety of compressors, including the diaphragm and piston compressors that go into these clean applications inclusive of hydrogen.
As well as the steam turbine offering in the sand offering I think.
And sand offering is certainly in our opinion a market leader for applications like <unk> in particular, and there is going to be a great opportunity to do that as well that's just to name a few.
In addition to that.
Don't want to.
Dismissed the answer without talking to there.
<unk> digital uptime offering as well as the events in digital offering that they have because we see those as being tied to really closely to the EU green deal applications.
Applications and the ability to monitor and the ability to.
To implement those in addition to the OEM equipment, so great opportunity ahead, and we haven't sized it yet.
As we want to see some of the specifics of the deal itself, but I think that youre going to see tailwind similar to what we see in the potential commercial pipeline from the IRR in that region.
Okay and following up on Europe specific to Howard.
Presumably you'll be going through some kind of facility consolidations that thats fair enough.
Have you started your dialogue with the works councils the.
Labor.
<unk>.
And if so how how is that dialogue progressing.
Yes, I can't go into specifics prevail on that.
I can tell you that we've had we have daily dialogue.
With the Howden team as well as with <unk>.
Weekly regular touch points with Kps capital partners, who have been very supportive in what we can work on between signing and closing. So we think we're in a good position to come out of the gate.
<unk> to achieve the synergies as well as to take advantage of the opposite effect, which is take advantage of the folks that are super key talent in that we see doubling our engineering workforce as an example on day, one and taking advantage of where these key resources are located so it.
Both parts of your question.
Not just from synergy achievement, and having dialogues with the right personnel within <unk> that stuff is happening, but I can't go into specifics about works Council.
Understood. Thank you very much.
Thanks for that.
And thank you and one moment for our next question.
And our next question comes from Craig Shere from Tuohy Brothers. Your line is now open.
Good morning, Thanks for taking the questions.
Hey, Greg.
So just a follow up on Sam's LNG technology question.
I was frankly, a little surprised.
Cheniere opted for a larger scale legacy technology train design savings.
Expansion PRC filings pre filing and the explanation seem to be along the lines.
I guess the larger trains may draw less on grid power that may have a higher exposure to coal generation.
And I guess I was that was a twist.
Ever thinking about before and maybe you could elaborate on the.
Differences between technologies in terms of power usage and drawing on the grid the availability of internal generation and how that all to play out well everybody is trying to improve their carbon footprint.
Yes, thanks for the question Craig.
As I commented to Stan's question, we do anticipate having content across all of these size projects, whether its equipment or process technology.
In terms of you have to kind of look at the total energy consumption and also look at you are using.
E Motor drives as an example, or or gas is theres a lot of technical components to that answer.
And I also I also would say that.
So.
They can all be effective and they can all have a.
A variety of different construct that solve for those types of issues and challenges.
So I'd have to get you our technical Guy to get you a really good answer on that which we're happy to do offline.
But with that said.
Both technology in conjunction with the different equipment that powers. It can.
Can be and is as effective when it comes to reducing the carbon emission footprint.
Again, you got to really Peel the onion back on that answer do you have a heavy hydrocarbon removal system do you have an <unk> in place what's your gas composition, where is it coming from.
Are you using an electric motor drives so.
Lots of questions that you that you would have to really get into the construct of the facility. I also think that there is.
There is elements to these variety of operators strategy, whether it's Steve to completion expansion from an existing facility that already has a technology in place and is working so how do you you're changing that what are what are the costs associated with doing so I think theres a lot of there is a lot.
Of economic factors that go into those decision points as well with all of that said, we feel like we're really well positioned with <unk>.
The operators and the EPC is on the projects that I think everyone. In the public domain is well aware are moving ahead in the coming year and years and decade, and we really like our position on.
How we expect these orders to come into the order book over the coming years, where it is not just a one and done type of activity in the big LNG space anymore.
Okay.
Great.
And then one on a kind of a big picture with Houghton.
As.
You can probably understand from our recent report.
We see a lot of synergies, we think there could be great upside.
Across the products the specialty markets.
Geographic regions integration all sounds great.
What I want to wrap my head around this business model.
What I mean by that is when we do the math.
Given such a large aftermarket.
Business of Howard.
With very large margin.
It seems the rest of their business.
It's pretty low margin compared to not only houghton's aftermarket book, but the rest of the chart.
Since.
Equipment sales seem to tee up their aftermarket it almost sounds like a razor razorblade business model that is kind of different than what I always thought of charts historical approach.
Am I thinking about that right how does the sink.
Okay.
Joe Joe VR is going to answer that for you just just one thing I would add.
Our would talk to that is just like we've seen on the chart side the mix of our specialty products is higher margin than our more traditional industrial products and we're seeing the same thing with the OEM part of the Howden business.
Where the where they are there solutions for specialty markets is generating higher margin.
And that is starting to take hold and it has.
Very strong tailwind to it going forward. So we see we see margin improvement for specialty markets on their OEM equipment, and then like you rightly pointed out.
It all pulls through aftermarket down the road.
And what we like about the combination as well as all the numerous things. We've already said is to Joe's point, when youre selling a full solution project to renewable customers.
Is that full solution is different than a component sale of OEM on the specialty side, and we love the ability to pull through the digital elements and the footprint of the service and repair the opposite way through to the chart business that we didn't have as strong of a position as they do.
Okay.
Thank you and one moment our next question.
And our next question comes from Rob Brown from Lake Street Capital. Your line is now open.
Hi, Joe Joe.
Hey, Robert.
Can you give some more color on the hydrogen liquefaction project pipeline, you talked about quite stronger than 2007.
Projects in the pipeline with sort of a project size.
And what are the sort of the dependencies of those going forward.
Yes, thanks for the question and thanks for picking up on that stat.
It is a pretty strong pipeline.
I think it's going to grow we don't necessarily talk about it every quarter of what that pipeline looks like but what what's nice about the current construct of those discussions is that there with a variety of renewing widespread set of customers and <unk>.
Arranging from utilities as an example to industrial gas flows to pure play of hydrogen.
Operators, so we like the the variety of the <unk>.
End markets. These customers are in.
The size of these plants is starting to get larger so what we would have talked about in 2021.
Really for the most part in 2022 was 15 ton per days and starting to see 30 tonnes per day now we're seeing a 30 ton per day 32 ton per day is even folks that are saying, okay. I want to do a 90 ton per day, which may be a construct of three <unk> as an example, but the size of these projects is.
Getting larger on an absolute basis, which in turn gives us more content opportunity.
Because as the project gets larger obviously theres more.
Where that goes into that and.
The other thing I would say that I want to see develop more.
Is that a standard our standard size in our standard package in our teams. Our engineering teams are working on that right now.
I do think that will facilitate expediting decision, making with customers versus everybody starting from there.
One idea of what the.
Plant should look like so I think theres, a great opportunity as well to <unk>.
<unk> the order book over the coming years with respect to a standard plant site.
Great. Thank you I'll turn it over.
Thanks, Rob.
And thank you.
And one moment for our next question.
And our next question comes from Walter Liptak from Seaport Research. Your line is now open.
Hey, Thanks, good morning, guys.
Well.
Wanted to two quick ones.
Yes.
One there was some revenue that pushed from the fourth quarter 2023, I'm wondering if you can just give us some color on how much.
Why and things like that.
And.
And then second on the gross margin.
You guys called out.
In December .
I Wonder if you could just clarify why that's happened.
Are we going to see that follows through into the first quarter.
Absolutely. Thanks for the two questions. Let me start with your first so on in the supplemental presentation.
On I think it was kind of in the late twenties page number wise, we had a we had a chart that describes some of the revenue that moved from Q4 into Q1.
There were three main drivers on that and one of them is there were.
Three specific liquefy our project debt.
Our percentage of completion revenue and they had components that we had expected to receive in.
In Q4 really in the month of December that didn't come in from our supply chain in time to be able to recognize that revenue that was the largest bucket of the shift and those projects are well underway. So certainly will be in 2023.
And then the second category was around timing of field service job deployment.
That really relates to is when we have a U S field service through that.
Has to go international the customer helps with the timing around when they want them at the plant for resolution and their.
A corresponding employees and team members and can be there and these are typically middle east.
Locations. So if we get an order for a field service project. It really does depend on when in the quarter that order comes in and when the customer wants the team there. So in this particular case of the timing shift.
Order came later in the quarter and then you had the holiday timeframe.
So that shifted out into 2023 that customer has our team.
Deployed I believe that's in it.
Certainly in the first half of this year and then the third.
Was eight.
Customer that we expected a repair project of meaningful size and that customer of Mueller chose to go with a replacement unit instead of.
The field service repair so again not not loss business, if we get a replacement unit order but.
That would certainly shift the timing out of the fourth quarter.
So that's the that's the sale timing.
Part of your question and then with respect to gross margin in our exit rate from December is.
First of all typically in our quarters.
The back half of the quarter is heavier on revenue and.
And shipments.
I don't think Thats really a chart phenomenon anything thats, probably just a phenomenon and operations as a whole.
But we had.
Specific to <unk>.
<unk> revenue that was recognized in December that was at higher margins.
And we do expect that trend to continue.
Want to reiterate what I said in my prepared remarks that our first quarter in basically every year in our history with the exception of one is always seasonally our lowest for.
Metrics as a whole we don't expect anything different if you looked at 2023 and by quarter.
But I am confident that as the year progresses, Youll see continued margin improvement and Q1.
It will be our lowest quarter of the year based on what we see today and how backlog rolls out.
And where we see FX.
Thank you and I'm showing no further questions I would now like to turn the call back over to Jill Evanko for closing remarks.
Yes.
Justin and as Joe Brinkman said I want to take just a moment and thank our one charter global team members for an incredible 2022, a record fourth quarter and.
Their execution to start 2003 and deliver the commitments that we've laid out today.
Thank you Justin.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
[music].
Yes.
Okay.
Yeah.