- Net Cash from Operating Activities: $200.7 million in Q3 2024.
- Free Cash Flow: $174.6 million after $26 million of CapEx spend.
- Net Leverage Ratio: 3.04 as of September 30, 2024.
- Orders: Increased 5.4% compared to Q3 2023, totaling $1.17 billion.
- Sales: $1.06 billion, a 22.4% increase compared to Q3 2023.
- Gross Margin: 34.1%, an increase of 350 basis points.
- Adjusted Operating Income: $235.9 million, with an adjusted operating margin of 22.2%.
- Adjusted EBITDA: $260.7 million, representing 24.5% of sales.
- Adjusted EPS: $2.18, impacted by foreign exchange and tax rate changes.
- Year-to-Date Sales Increase: 19.6% compared to the same period in 2023.
- Segment Sales Growth: All segments reported sales growth year-to-date through September 30.
- HTS Orders: $424.7 million, a 151% increase compared to Q3 2023.
- CTS Sales: $162.5 million, a 4.6% increase compared to Q3 2023.
- Specialty Products Sales: $283 million, a 25.9% increase compared to Q3 2023.
- RSL Sales: $360.5 million, a 36% increase compared to Q3 2023.
- 2024 Sales Outlook: $4.2 billion to $4.3 billion.
- 2024 Adjusted EBITDA Outlook: $1.015 billion to $1.045 billion.
- 2024 Adjusted Diluted EPS Outlook: Approximately $9.
- 2025 Sales Outlook: $4.65 billion to $4.85 billion.
- 2025 Adjusted EBITDA Outlook: $1.175 billion to $1.225 billion.
- 2025 Adjusted Diluted EPS Outlook: $12 to $13.
Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chart Industries Inc (GTLS, Financial) reported a significant increase in sales, with a 22.4% rise compared to Q3 2023, reaching $1.06 billion.
- The company achieved a record adjusted EBITDA of $260.7 million, representing 24.5% of sales.
- Chart Industries Inc (GTLS) successfully reduced its net leverage ratio to 3.04, showing progress towards its target range of 2 to 2.5.
- The company surpassed its original year three target of $250 million in annualized cost synergies, achieving this ahead of schedule.
- Strong backlog coverage for 2025, with 61% of the 9/30 backlog scheduled to convert in the next 12 months, providing confidence in future revenue streams.
Negative Points
- The company faced a negative EPS impact of $0.15 due to foreign exchange fluctuations and an unexpected tax rate increase.
- Orders for the Cryo Tank Solutions segment decreased by 17.5% compared to Q3 2023, primarily due to a lack of repeat large orders.
- Specialty products orders decreased by approximately 49% compared to Q3 2023, attributed to timing issues with larger hydrogen-related orders.
- The company experienced operational inefficiencies and startup challenges at its new Teddy 2 facility, impacting specialty product margins.
- There is a structural concern in the China industrial gas market, which could affect future demand in that region.
Q & A Highlights
Q: Can you explain the thought process behind the 2025 guidance, particularly regarding backlog coverage and new orders?
A: Jillian Evanko, CEO: We've incorporated learnings from 2024 into our 2025 outlook, feeling confident due to strong backlog coverage. Approximately 61% of our backlog is scheduled to convert in the next 12 months. The higher end of the range depends on backlog conversion and new orders, with good visibility on larger orders in the coming months. Joseph Brinkman, CFO, added that understanding revenue movement between quarters has been factored into the forecast.
Q: How does the $23 billion pipeline and $2 billion in commitments relate to recent order performance, and what is the outlook for orders in Q4 and early 2025?
A: Jillian Evanko, CEO: Demand remains strong across most markets except China. The $23 billion pipeline includes recent additions like the Exxon Rovuma LNG project. Of the $1.95 billion in commitments, $1.5 billion is HTS-related, and $450 million is specialty. Specialty weakness in Q3 was due to timing, not structural issues. We expect a book-to-bill ratio of one or greater in Q4.
Q: Can you discuss the expected sales uplift in Q4 and how it breaks down by segment?
A: Jillian Evanko, CEO: Historically, Q4 sees a 10-15% sequential increase. We expect strength in HTS and Specialty, with CTS remaining consistent. RSL had strong quarters due to field service work and equipment sales, but Q1 2025 is expected to be the lowest quarter, consistent with historical trends.
Q: What is the outlook for RSL segment growth and digital offerings over the next few years?
A: Jillian Evanko, CEO: RSL has shown strong performance, with 34-35% of revenue from aftermarket sales. We see significant potential in penetrating the installed base and expanding digital offerings. Currently, uptake is concentrated in Howden legacy assets, but we aim to increase customer engagement and aftermarket sales.
Q: How is Chart Industries managing the transition to a more project-oriented business model post-Howden acquisition?
A: Jillian Evanko, CEO: We've established a One Chart global commercial, engineering, and project management team to improve project execution and cash flow. This involves aligning milestones with customer contracts and ensuring operational discipline. The focus is on sustainable cash generation and improving throughput.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
