Good morning. And welcome to the Chart Industries, Inc. 2020 Third Quarter Conference Call. All lines have been placed on mute to prevent background noise. After the speakers’ remarks, there will be a question-and-answer session. The company’s supplemental presentation was issued earlier this morning. If you have not received the release, you may access it by visiting Chart’s website at www.chartindustries.com. A telephone replay of today’s broadcast will be available following the conclusion of the call until Thursday, October 29, 2020. The replay information is contained in the company’s press release. Before we begin, the company would like to remind you that statements made during this call that are not historical in fact are forward-looking statements. Please refer to the information regarding forward-looking statements and risk factors included in the company’s earnings release and latest filings with the SEC. The company undertakes no obligation to update publicly or revise any forward-looking statement. I would now like to turn the conference call over to Jill Evanko, Chart Industries’ CEO.

Thank you, Andrew. Good morning and thank you everyone for joining our call today. Here with me is Scott Merkle, our Chief Accounting Officer. We will discuss our third quarter results, the benefits of our recent announcements, and how our strong order book and backlog are setting us up for a successful 2021. I am very pleased with our performance in the third quarter, particularly in terms of order and bottom-line execution amidst active deals on both the buy and sell sides. It surprises me that some perceive mixed reactions to our quarterly performance, given the timing miss on revenue—but we exceeded expectations on EPS and achieved multiple record orders across varied applications, along with a robust start to October. I hope my insights today will clarify why we are very satisfied with our current standing. Over the last two and a half years, we have taken deliberate steps to reach our current position, focusing on our unique cryogenic engineering and product offerings within the clean energy space, specialty products, and repair and service, while enhancing customer loyalty through long-term agreements. We’ll review the supplemental deck released this morning as usual, and all figures in that deck and in the press release are from ongoing operations. For those inquiring about year-to-date results for the discontinued operations from the CryoBio sale, you can find that information on the last slide of the appendix. Starting on slide three, the blue power sources indicate where our current equipment is directly used, while the orange sections represent solar and wind, which are now part of our offerings along with other fuels through partnerships, particularly with green hydrogen provider McPhy. These collaborations will help us take part in more projects that combine these power sources. On slide four, I want to highlight a few significant steps in our transformation over the past couple of years and their importance concerning our recent announcements that position us as a pivotal player in the ESG and clean energy transition. This is essential in understanding our strategy, which will inform potential future investments and how they will build upon our foundation. So, what has changed in the last three years? Firstly, we have diversified our customer base with a lower concentration and broader end-market and geographic reach, partly due to our expansion through acquisitions like VRV and forming our global commercial team. Year-to-date in 2020, we’ve secured orders from 407 new customers, with 115 in specialty markets and more than half of these customers located outside North America. Secondly, we are deepening our relationships with customers through long-term agreements that cover our full range of products along with repair and service. This year alone, we’ve established 15 agreements, four letters of intent, and three memorandums of understanding, ranging from projects involving ExxonMobil LNG in India to equipment for Molson Breweries’ new production lines. Historically, we typically had no more than five agreements at any given time. Alongside these long-term agreements, we have also extended our repair and service footprint and our leasing fleet, providing customers with a one-stop shop that includes installation and refurbishment and offering flexibility in customer project leads that we could not have achieved without our rental program. Finally, through our strategic acquisitions, we have expanded our talent pool, retaining industry leaders like the Spada brothers, former VRV owners, and enhancing our skilled workforce in Alabama. Our recent sale of the CryoBio business for $320 million in cash marks the completion of divesting non-core product lines from our portfolio, and it will enable us to invest further in our high-growth, high-margin businesses. Acquiring Worthington’s cryogenic trailer and hydrogen trailer business, completed on October 13, is a major step we’ve desired for some time. This acquisition allows us to expand our hydrogen equipment product line for larger transports and provides key manufacturing capacity in a strategic location. Previously, competition with Worthington hindered this deal, but once we shifted our product focus, completing the acquisition became manageable. In just the first week of ownership, we've already received commitments for $9 million in hydrogen trailer orders. We continue to see strong free cash flow, which has been applied to debt reduction. As we anticipate, the fourth quarter’s free cash flow generation should be the highest for 2020, with total expected free cash flow for the year estimated between $120 million and $140 million on a continuing basis. The third quarter’s free cash flow was lower than the second quarter primarily due to accounts receivable collections slowing, especially as September saw significantly higher collections than July and August. For instance, we collected over $12 million from one customer in early October, and additional amounts from others. We closed the CryoBio sale on October 1st, and the proceeds were used to pay down debt. As indicated on the pro forma net leverage ratio as of September 30th, it was 1.75, projected to be 1.98 after our recent investments. Notably, we maintain $120 million in cash on our balance sheet, enabling us to invest in target markets, products, and technologies. Beyond debt reduction and the Worthington acquisition, we invested in McPhy, a specialized company focused on zero carbon hydrogen production and distribution. This investment has also led to a commercial MOU, providing access to new projects and customers. We are already engaging in discussions for five new projects as a direct result of these investments. Several have asked about potential acquisitions. We have three near-term acquisitions we are exploring, all related to our specialty products or markets, each under $30 million. Additionally, we issued $6.4 million and $2.4 million in hydrogen trailer orders this past week, and received a $2 million purchase order for hydrogen trailers from our facility in Germany. Our recent hydrogen investments have drawn attention to our extensive European hydrogen capabilities. We are currently in discussions with 74 different hydrogen customers, with 29 NDAs signed, up from four at the start of the year. This morning, we announced our participation in the U.S. Department of Energy’s H2@Scale Texas project, which aims to demonstrate renewable hydrogen as a cost-effective fuel for various applications, including fuel cell electric vehicles. We’re collaborating with partners across the hydrogen value chain, which will further expand our commercial reach in this rapidly growing market. Our enhanced agreements with customers highlight the variation of our product offerings, including ten new agreements this quarter, among them a significant MOU for a hydrogen project in Asia. We also completed five long-term agreements in Europe, including two for multi-year LNG fueling station builds and services. Despite challenges faced by our air-cooled heat exchanger business this year, we’re committed to being the leading supplier of air coolers for diverse applications. In Q3, we signed a global supply agreement for air-cooled heat exchangers with Flint Hills. On slide eight, we highlight the increasing demand for water treatment, especially desalination, driven by regulatory pressures and rising environmental concerns. Year-to-date, we’ve received $10.3 million in water treatment orders, compared to $6 million for all of 2019. In Q3, we secured contracts for six facilities, including a significant design project in Texas and equipment for a large wastewater treatment plant in Egypt. We have seen a notable rise in demand for carbon dioxide-related products in the last quarter, largely due to supply disruptions and high demand from sectors like beverages and cannabis, resulting in a significant increase in orders for our small bulk liquid CO2 tanks. We’re also witnessing new opportunities in clean energy transitions, exemplified by a three-year exclusive supply agreement for ISTOR’s liquid air energy system, designed to leverage energy during off-peak hours. This expands our footprint into the expanding space industry, evidenced by contracts for various space exploration projects, including partnerships with NASA-related entities. In conclusion, we’ve achieved record backlog levels in both distribution and storage, along with a 19% increase compared to the same quarter in 2019. This is anchored in organic investments and record orders across sectors such as water treatment and hydrogen, along with a notable rise in demand for LNG re-gas and ISO containers. The LNG market continues to grow, especially with India's plans to increase the share of gas in their energy mix significantly by 2030. While there are no additional large LNG projects currently in our plans, we've received an early engineering release for a significant LNG terminal. Medical oxygen-related orders have also seen an uptick due to ongoing needs, particularly in response to the pandemic. Overall, we are experiencing a strong start to October, with significant new orders already, including over $1 million each. Now Merk can share the financial specifics for the quarter.

Thanks, Jill. Sales of $273 million were down 19.2% when compared to the third quarter of 2019, entirely driven by E&C FinFans. Excluding FinFans the rest of the business’ sales were up 11.1% year-over-year, with D&S East up 20.9%. Year-to-date 2020 sales are down only 3.3% from 2019 year-to-date or down 4.9% organically, which reflects the diversification of our business. As we frequently discussed, most of our changes on sales are movements between quarters versus lost volume. We had over $22 million of expected sales in the third quarter related to specific projects shift due to customer delivery timing, with the majority of that shifting into the first half of 2021. The breakdown is $12 million in E&C Cryo, $4 million in E&C FinFans and $6.5 million in D&S East. The rest of the shortfall was around the recovery related to beverage equipment, where it occurred later in the third quarter than we expected, but when it did, it recovered in a bigger bang for the buck way than we expected and in turn will have a positive impact on the fourth quarter of 2020. Even with certain shipments being pushed out, we were able to deliver reported gross margin as a percent of sales of 28.8% and when normalized for restructuring cost was 29.7%, bringing our year-to-date normalized gross margin as a percent of sales to 29.2%. We expect the fourth quarter gross margin as a percent of sales to be the highest of the year. Gross Margin combined with our continued cost improvements in SG&A resulted in reported diluted earnings per share of $0.43 and adjusted diluted earnings per share of $0.63 with the adjustments related to the restructuring for our Tulsa to Texas facility consolidation in E&C FinFans and deal related costs. Reported and adjusted diluted EPS were both the highest of 2020. SG&A of $41.1 million in the third quarter of 2020 was $38.4 million when normalized for one-time expenses. Year-to-date, we have taken out over $66 million of annualized cost, with associated restructuring charges of just over $12 million. This cost out is reflected in our positive trends in both gross margin and SG&A and has resulted in our year-to-date record low normalized SG&A as a percent of sales of 14.8%. Full year 2020 sales are expected to be approximately $1.8 billion, inclusive about $23 million of Venture Global Calcasieu Pass revenue in the fourth quarter. We anticipate full year diluted adjusted earnings per share to be approximately $2.25 on 35.3 million weighted average shares outstanding. Our assumed effective tax rate is 19% for the full year 2020. On to slide 13. Our sales range for 2021 is unchanged from prior at $1.25 billion to $1.325 billion. In keeping with our new tradition of giving an approximate number, we would share approximately $1.28 billion for revenue, with associated adjusted diluted earnings per share of $3 to $3.40 cents on 35.3 million weighted average shares outstanding. Adjusted EPS is increased from our previous estimate to $2.90 to $3.25 per share. You can see the puts and takes on a bridge on this slide and I am excited to continue to see the year unfold with many upside opportunities that are not included in our 2021 outlook. We also continue to expect strong free cash flow in the 14% to 15% of sales range. With that, I will now turn it over to the operator to open up for questions.

Thank you. Our first question comes from the line of James West with Evercore ISI.

Hey. Good morning, Jill.

Hey, James.

I want to first discuss your core industrial gas business. If we examine the economic indicators, consumer spending and housing are significantly driving this recovery, resulting in a pronounced V-shaped economic rebound. Major chemical and industrial gas companies are poised to benefit greatly from this, as they are early cycle beneficiaries. I'm interested in your discussions with companies like Linde and their product offerings. What insights do they share about their current business condition, which I believe is experiencing a positive recovery? Additionally, how much will this contribute to your core business, aside from the other favorable developments in hydrogen, LNG, and so on?

Yes. Very much in line with what you just stated is the feedback that we are getting. But let me just step back, we still haven’t seen a full recovery to pre-COVID activity levels on the order side with those industrial gas majors and that’s primarily related to continue travel restrictions for the field installation folks.

Right.

Which is actually very positive setting us up for Q4 and 2021. So coupling that return to the field with this consumer and housing strength on the recovery, we see upside potential to our base forecast that we have with the industrial gas guys. We also are hearing that the fourth quarter will be very strong. In some cases, these customers are actually telling us that it is going to be stronger than the third quarter, which obviously was recovered fairly well. The other element on the industrial gas players are independent distributors that play in pockets where business may be too small for a major to take or they have a particular product category that they are focusing on. And we have seen…

Right.

… independent distributors really come out very strong around the food and beverage side of the business and there’s a lot of coating activity with those guys, too. So we stand to benefit both from the majors, as well as from the independent as we head into next year.

Okay. Okay. Great. And then with respect to hydrogen, obviously, you have taken pretty strong moves on the hydrogen side and partnerships, it seems to me that what’s going on behind the scenes is even stronger than what we might be seeing the public announcements here from various hydrogen committees and Boards, et cetera and then some of the players in the space. Is that a fair statement to make and did that suggests that the hydrogen narrative here which, obviously, we need public policy to kind of move this along, but if that seems to be there is that those hydrogen business taking off faster than perhaps we or you would have expected, say, three months to six months ago?

Absolutely. It’s a fair statement that you are making and you are probably not even making it strong enough to what’s happening, yeah.

Oh! Potentially perfect.

Because there is so much activity and while the governments and the public sector play a part in it, you would be surprised at how much the private sector is making investments as well. A lot of the reason we don’t elaborate upon it further is that these companies making these investments and working are looking to have a competitive advantage as they do…

Right.

… first projects in whether it’s marine or transporter fuel. Yeah, I will just give you an example. We are working with a potential customer on cooling for warehousing and cooling device, that type of activity, where the real long-term answer to achieve these decarbonization goals for companies that have put a 2030 or 2050 target out is going to have to move toward hydrogen. And in a warehouse case, it’s going to have to be liquid hydrogen, because of the capacity to store it.

Sure. These customers, I know you mentioned kind of the smaller customers and my goodness, but I mean, I think, some of the other customers are not small. I mean, we are talking server farms for Microsoft and in places like Amazon for the cloud computing capabilities and others. I mean, some of the people that we have talked to in the last couple of weeks are major, major drivers of the economy that seem to be also moving the liquid hydrogen. Is that a fair statement to me?

Another fair statement. The names you just named are absolutely looking to move in that direction and you could list dozens and dozens more that are of that caliber and that size and magnitude.

Sure. Walmart is there, yeah.

There you go. Exactly. I mean or you look at it. On the other side of the coin, you have the Shells of the world and Total, they are also making…

Okay.

… investments in this area. So you have got multiple industries coming at this at the same time and working to achieve this network. So it’s way bigger than I would have even said three months ago.

Right. Okay. Perfect. Thanks, Jill.

Thank you.

Thank you. And our next question comes from the line of Walter Liptak with Seaport.

Hi, there. Thanks. Good morning. Good quarter.

Thanks, Walt. Good morning.

Good morning. I wanted to ask about the hydrogen aspect for a moment. The order intake for the Teddy Trailers seems to indicate that there was a quarter's worth of orders placed in just a few weeks. Is that correct? I believe you mentioned a projected revenue range of $15 million to $20 million after the orders were received for the Teddy Trailers. Should we reconsider that and possibly increase the number of trailers or the anticipated revenue from those trailers over the next year?

Yes. It’s accurate to say, the first couple of weeks is equivalent to what a typical quarter historically has been. So that’s off to a really good start. And I can elaborate on that that the coating activity behind that is substantial. So it’s not like those were the only orders on the horizon and it’s going to go dry. We have a great opportunity to leverage the manufacturing capacity in the Teddy Trailer location and we intend to be able to do that very quickly here. The historical high number of trailers that were done in that facility was nine and we are looking to do 20 in 2021. So we are going to see how this quarter orders rollout beyond this first kind of $10 million in the first couple of weeks and that would be the point where we would consider revising that $15 million to $20 million for 2021. There’s also a couple of additional capabilities in that facility that we are going to build upon and we are looking to increase in the fourth quarter, which could add-on capabilities for different equipment that goes along with the trailer. So we will see how that ramps up in Q4 along with the order book and potentially increase that coming February.

Okay. Great. Thanks for that. And then the fueling stations, I wonder if you could give us some color on the fueling station growth, maybe the geographic regions and the applications for those fueling stations?

Yes. Let's separate hydrogen fueling stations from the total. The 56 stations I mentioned for the year-to-date are primarily related to LNG or LCNG. These stations are distributed across China, Southeast Asia, and Northwest Europe, with approximately equal numbers in Northwest Europe and China. Some of the orders from China are intended for export to other Southeast Asian regions. There is a broad demand across various customer bases and countries in Northwest Europe, but recently, there has been a stronger focus on Germany.

Okay. Great. All right. Thank you. I will get back in queue.

Thanks, Walt.

Thank you. And our next question comes from the line of Eric Stine with Craig-Hallum.

Hi, Jill. Hi, Scott.

Hey, Eric.

Hi, Eric.

Hey. I'd like to discuss LNG and the vehicle. I appreciate the detailed information about the overall business. I'm particularly interested in the geographic expansion you mentioned, including South America, Russia, and Japan, as well as various applications like buses. How should we approach this in relation to the two long-term supply agreements you currently have in Europe? Will you be able to manage that from your VRV location in Europe, or will you require a new facility or another part of your business to handle it?

I will begin by addressing the latter part of your question. We now have production capabilities in both our facility in Georgia, U.S. and our VRV facility in Italy. The combined capacity of these two facilities is roughly equivalent to $200 million worth of HLNG vehicle tanks annually. Last year, we produced about $65 million. We anticipated that during the peak of COVID, our production might drop to between $45 million and $50 million, but it seems we will return to similar levels as in 2019 and potentially grow from there. We have two long-term agreements tied to sole source supply agreements for this specific product, and some of these partners are also exploring equipment for different regions. Historically focused on Europe, they are now placing orders for areas like Brazil and South America. This enables us to manufacture closer to where the product will be used and allows us to consider the specific type of tank they require, as some customers have more proprietary designs than others. In terms of diversification, there's been significant activity in the past three to six months, particularly in Russia involving mine haul trucks. In Southeast Asia, notably Japan, we have been pursuing this market for about seven years, and we feel we are approaching a tipping point with a significant auto order received in the third quarter. If the trials are successful, this will create additional business that is not currently reflected in our forecast for next year. Lastly, there is considerable coating activity happening in Poland, with potential orders in the millions of dollars, specifically related to buses.

Got it. Okay. Very helpful. Maybe just turning to the overall business and the pipeline. I’d love to hear your thoughts on how the outlook has improved given the significant recovery in the JKM Index and the pricing that would support many projects.

I would like to express our satisfaction with having managed to separate our core business from the potential benefits of large LNG, and we prefer to keep that upside opportunity distinct. Nonetheless, I share your perspective on the positive recovery in the JKM pricing recently, which is encouraging for upcoming projects. The three projects we typically mention are Plaquemines, Cheniere Corpus Stage 3, and Tellurian and Driftwood. Our opinion on these has not changed; we believe that at least phase 1 will reach FID sometime in 2021. To clarify for everyone, this means minimal revenue impact for 2021, but significant revenue contributions in 2022, 2023, and 2024. Additionally, we have noticed increased commercial activity in other projects that we haven't focused on as much. The early engineering released for natural gas pre-treatment we received in the third quarter pertains to a different large LNG project, not one of the three previously mentioned. Furthermore, we see potential for a substantial air-cooled heat exchanger order related to one of these projects in the next three to six months, and I believe we are well-prepared for that opportunity.

Okay. Thanks a lot.

Thank you.

Thank you. And our next question comes from the line of Conner Lynagh with Morgan Stanley.

Yeah. Thanks a lot. Good morning.

Hey, Con.

I was wondering if you could elaborate somewhat on the acquisition opportunities you were discussing, appreciate you don’t want to get too in the weeds here. But I was wondering if you could maybe just discuss, what some of the markets that you are focused on, and maybe additionally, what would this look like, should we think of this as something like the trailer capacity acquisition or it’s sort of a plug and play capacity expansion? Is it more of a technology acquisition or would you additionally consider something like the McPhy structure?

These acquisitions would be complete purchases, differing from the McPhy structure. They pertain to process technology as well as equipment and engineering capabilities. This aligns with our goal to expand our product range, particularly regarding the specialty products we’ve mentioned previously. It’s important to emphasize that while we are still pursuing hydrogen opportunities, these acquisitions involve some tied to hydrogen, some to various specialty products, and one related to a high-growth market we've highlighted in recent earnings calls. Without getting into too much detail, we are very familiar with all three businesses, having collaborated with them, whether on current projects or through a supply and customer relationship in both directions. These are well-known businesses for us and they represent natural fits. Two of them are somewhat akin to precise, while one is in the 20 to 30 range. There are different stages of progress among them, with two expected to reach fruition sooner, which is why we anticipate a timeline of three to six months. Therefore, it’s likely we could finalize two by around January and perhaps the third in the first quarter.

Got it. That’s helpful. Maybe to pivot here, FinFans was sort of the one of the weaker spots within the quarter. Can you help us think through sort of how derisked the revenues or margins are on that segment? Certainly, energy’s had a tough time for a while now and that’s a big market there. But can you just discuss how much of your backlog at this point is from a better market that seems unlikely going forward or is more reflective of the current run rate? And how should we think about sort of how much is more just book and ship versus converting on some longer cycle stuff?

This business primarily revolves around booking and shipping rather than the opposite. There are a few projects, like the $3.8 million one, that shifted from the third quarter to either the fourth quarter or the first quarter. However, mostly, we book and ship products within a timeframe of two to five months, depending on the specific product. There's also a regular revenue stream from the repair segment, mainly focusing on fans rather than air coolers. I've assessed the overall theme of the business, and I believe we are currently operating at a low point. I don't anticipate any significant further decline at this stage, though there are some positive indicators. However, I want to be careful not to create unrealistic expectations for a quicker recovery than I anticipate, which I believe will start around mid-2021. Regarding margins, I think the performance we saw in the third quarter will largely continue, with some improvements as we finalize the Tulsa to Texas consolidation. We initiated that process in mid-July, so we haven't fully completed the move yet. We expect it to be finished by the end of the first quarter of 2021, which should lead to some quicker returns and benefits in both the fourth and first quarters. From our outlook, I believe there's more potential for upside than downside. But I'm very cautious in sharing that because, while there's a lot of quotation activity, translating that into actual orders depends more on the midstream and upstream markets, with several packagers vying for the same projects as they become available. I do think this situation will improve as we enter next year and some of this shutdown activity returns to normal, but for now, we are still at a low level.

All right. Appreciate it. I will turn it back.

Thanks.

Thank you. And our next question comes from the line of J.B. Lowe with Citi.

Yeah. Good morning, Jill. Hi, Scott.

Hey, J.B.

J.B. how are you doing?

I am good. Just looking at the bridge between 2020 and 2021, it’s one of the businesses we haven’t talked about yet. That being small scale LNG and pet chem. I am just wondering, how much of that business is already booked as backlog and you are just going to be converting the revenue over 2021. And then the outlook for each of those businesses is for 2022, is that something that could grow even further in 2022 or more of a steady state and any help on the small scale LNG side and the pet chem side would be great?

Yes. So we currently have three projects already booked, which equates to just about $35 million to $40 million on that line. There’s also one that we have the LOI for and we are waiting for notice to proceed, which is another $35 million. And additional one that our view is it does get across the finish line in the fourth quarter, which would be somewhere in that $20 million to $25 million range. On top of that there’s multiple other ones in the pipeline. But those are really the ones that I believe are kind of over that 90% mark of getting to the finish line. As you look at 2022 and beyond, I think that there’s actually a stair-step up in 2022 in this particular line. For two reasons, there are quite a few pet chem projects that got put on hold because of COVID that they aren’t going away timing around them and that’s not only in North America, but also in places like the Middle East and in Saudi. Coupling that with the small scale activity that we are seeing in some more of the remote regions like Vietnam and other areas of Southeast Asia. I think that there’s a nice build of import terminals, re-gas and small scale export that you see for utilities. So I am viewing ‘22 as considerably better than ‘21 and what you see here.

My other question was about the timing issues regarding certain projects that are moving from the third quarter to the fourth quarter and then being postponed until next year. There is some concern you addressed earlier about how timelines are shifting. Is there anything specific regarding these shifts that we should view as a normal aspect of the business, or are they related to a particular project that has been delayed until next year?

It’s both. So our business does have projects that move in and out between quarters. We always kind of have commented that to us, six months is meaningless. Unfortunately, to some people that’s meaningful. We really look at it as, have we lost to competition and we feel like we are gaining market share certainly across the businesses with the exception of air coolers, where there is no market share to gain. So to clarify that. So there’s a little bit of a fundamental nature to our business. Like for us $25 million on 300 is, that’s a plus or minus type of thing in our internal discussions, but I realize it’s harder for people to understand. There is also specifics to what shifted this time and we, Merk walk through a couple examples of those. The D&S shifts are really related to customers that we are getting back to work from COVID and couldn’t accept the shipments. So that’s a shorter term type of problem. The larger pet chem projects was around the operators looking at when they wanted to take delivery. So frankly, I think that’s a timing shift, given some of the economic conditions versus if the project had an execution problem, but rather, hey, we want to buy a little bit of time before we need to take delivery of this.

Okay. Great. Thanks, guys.

Thanks, J.B.

Thank you. And our next question comes from the line of Rob Brown with Lake Street Capital.

Good morning, Jill.

Hey, Rob.

Regarding your outlook, you mentioned that specialty products and services are expected to grow at around 10%, which is a great rate. How do you envision that growth trend developing over time? Do you think it will accelerate, especially with the advancements in hydrogen and your focus on services? I'm curious about the potential for sustainable growth in this area.

Yes, you really addressed the core issue, Rob. We've observed a significant increase in specialty products with order activity showing over 30% year-over-year and 17% quarter-over-quarter. I believe we are positioned well for 2021. However, there are various factors at play in other segments. We aim to give you a clear perspective on this. I anticipate that growth will be between 15% and 20% as the years progress. We've experienced a few quarters where specialty orders have been growing at rates of 20% to 30%, and we will soon reach a year of that as we end 2020, which provides us with better visibility on how this will impact revenue. There's potential for upside in 2021, and we expect growth to surpass 10% as we move into 2022 and 2023. Additionally, we haven't emphasized enough the growth in hydrogen and water treatment, which is significant. Moreover, there’s notable activity around HLNG vehicle tanks that suggests promising revenue growth in the coming years. After that, we expect HLNG vehicle tanks will integrate into our regular business, allowing us to adjust our specialty offerings to encompass new market opportunities. That's our perspective on this matter.

Thank you. Regarding small scale LNG, there's a significant amount already in the pipeline. Could you provide an update on what's happening in that area and what new developments might arise? Are we looking at ISO tanks, re-gas terminals, or what other types of projects are included at this stage?

So there’s two pipelines of activity that they coincide with each other. The LNG ISO containers have been very hot lately and we expect that will continue. I mean, you have seen the New Fortress news out there and they are a great customer of ours that relates to this growing trend towards small scale and that’s focused in North South America, the Caribbean. We are seeing that trend also start to happen in some of these new build locations, like the Indonesia, Myanmar, Vietnam, as well as in India. In 2021 that’s when we move to commercial production with ExxonMobil LNG and IOCL on the virtual pipeline, which our main product for that virtual pipeline is ISO containers. So as that particular project ramps up, there’s quite a bit of activity that will be related to that. On the terminal side and these obviously take a little bit longer to get from pre-FEED engineering to FID, because they are more of that upfront capital costs for full terminal, somewhere between $100 million and $140 million, with our portion somewhere between $10 million and $35 million. Yet, this is another area that we expect to continue to step up, especially as the network continues to get built out and especially as utilities make their decisions around how they are going to handle peak shaving. This is in the United States the hottest topic in the Northeast of the U.S. is where we are seeing the most activity and I think has breakthrough potential there. And then re-gas is primarily related to Southeast Asia where the pipeline of order activity is for us.

Okay. Great. Thank you. I will turn it over.

Thank you.

Thank you. And our next question comes from the line of Ben Nolan with Stifel.

Hey. Good morning, Jill, Scott.

Hey, Ben.

Hi, Ben.

I wanted to touch on something that you mentioned I think was in the press release about an order that you had for gaseous hydrogen?

Yes.

I assume that is pressurized, is that correct? Is that what how I should interpret that?

That’s correct. The orders were for gaseous hydrogen trailers or transports, and they are indeed pressurized.

I understand that you are primarily focused on cryogenic solutions, but I was interested in knowing how significant that business is. We've heard a lot about hydrogen growth, and the transportation aspect of cryogenic versus pressurized depends on the distance from the source of consumption. Could you elaborate on this and discuss how you are positioned beyond just the cryogenic side?

Yes. And it also to all the comments that you just made on top of that, it’s also regional in terms of preference. So we see much more liquid which is cryogenic in the States in particular. In Europe, it’s still very much gaseous and that’s where these particular trailers are for and our being made. Our capabilities for gaseous hydrogen transports is out of our Goch, Germany facility or GOFA facility and we do all kinds of trailers out of that facility. So, again, agnostic to the molecule, agnostic to the use and we have plenty of capacity in that particular facility to continue to do that. It’s our intention that we have that capability as well in the United States and we also do trailers out of our India facility, and we do some transports out of our China facility. So we are well-positioned regionally, because obviously, these are not something you are going to ship on the water. These are going to be made close to where they are going to be used. In terms of the size of that business, it’s fairly small right now, the majority of our hydrogen, I’d say, 75/25 split of liquid to gaseous is the current state of our hydrogen activity.

Okay. No. That’s helpful. I appreciate it. And then the follow-up, I was just curious, given sort of how you have seen the ramp up in the leasing business, but also new order flow and everything else? Has there been any change in the way you are thinking or aspiring to get to with respect to recurring revenue and the mix of revenue or is it playing out the way that you thought that it would?

There has been no change in our thinking on that and it’s stepping along as we thought it would. The recent agreements and the agreements are setting us up to continue to move toward that target.

Thanks for taking the question. Back to M&A, one of the capabilities vis-à-vis recurring revenue that you guys have not historically focused on is software of various kinds. But of course, anything related to the energy transition SaaS is getting more and more attention. And I am curious if you would be open to bringing some software capabilities in-house through an M&A deal?

Yes. Absolutely. And darn it, Pavel you are like a mind reader on this stuff. One of the three that we are talking about does have that capability for a specific product category.

Okay. Got it. Hydrogen and specifically electrolyzers as part of the European climate law, which still pending, not final yet. But supposedly 30 gigawatts of electrolyzers by 2030 is going to be the target. From your perspective, would you be interested in getting into electrolysis in a direct sense or would you just kind of limit yourself to storage and the more ancillary parts of hydrogen?

We will stay focused on the equipment. But a lot of that equipment can be used in the electrolysis process itself. In terms of owning the molecule, that’s not something that is in our strategy, not for the least of which is we are not experts at it. And then the second quick follow-on to that is, we have great customers that are really good at that and we make our money on the equipment that goes into that. So we will definitely see a commercial benefit for especially in the U.S., you reference, but that will be for equipment at those locations.

Hi. Good morning.

Good morning.

Hey, John.

I wanted to talk a little bit about the cash flow, so you called out some timing, when we look at your running, I think, the $83 million year-to-date is the correct number to use. As I look to Q4, which is usually always a good cash quarter for you and the range you have out there? Is there anything we should be aware of as we think about it, because it would seem like, that range is definitely very achievable at least as we look at it?

We share your thoughts, John, and you're right that Q4 is usually a strong cash quarter. We believe this Q4 will surpass typical performances due to the timing of our sales as we navigate through the pandemic. Additionally, there's ongoing cash collection activity that I briefly mentioned. We increased our inventory at the onset of COVID in March and April, and we are still seeing that inventory decrease. This is further influenced by the timing of our HLNG vehicle tank orders. We had a substantial order at the end of June, followed by larger orders at the end of the third quarter, which will also be fulfilled in Q4. These factors combined create a scenario that is more favorable than a typical Q4.

Got you. That’s helpful. And then, maybe just a finer point around some of the opportunity here with the balance sheet, I mean, if we go back to the last Analyst Day, you talked about a target leverage sub-two turns. Obviously, you have changed the portfolio since then. Is that still where you are comfortable or it sounds like there’s some things here that maybe we could flex up and come back down to that level or do you think you can actually run a little bit higher now that you have remixed the portfolio?

We could maintain a higher leverage, but we don't have a desire to do so. Achieving a leverage below two is certainly feasible with the cash we consistently generate, even with the investments we're making. If we were to invest $20 million and leverage that up to $205 million, it would likely drop back under $2 million within a month. Our preference is to stay in that lower leverage range, keeping cash on hand, and we are not restricted from continuing to invest in our planned projects. Overall, we are quite satisfied with the current state of our balance sheet.

Thank you.

Thanks, Marc.

Thank you. And with that, I will now turn the call back over to CEO, Jill Evanko for closing remarks.

Thanks everybody for joining us today and a big thank you to our Chart team members who continue to impress me each day with their efforts to make this company even better. We will talk to you very soon. Thanks, Andrew. Good-bye.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating and you may now disconnect.