Good morning, and welcome to the Chart Industries, Inc. 2020 Fourth Quarter and Full Year Results Conference Call. 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 today's call until Thursday, February 25, 2021. The replay information is contained in the company's press release. Before we begin, the company would like to remind you that statements made during this call that are not historical 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 your speaker, Ms. Jillian Evanko, you may begin.

Thanks. And good morning, everyone. I will start right into the supplemental presentation that was released this morning starting on Slide 3. We officially began reporting in our new segmentation as shown here, which we believe is clear for shareholders to understand the key drivers of our growth and margin. Additionally, all discussion is around continuing operations as we closed on the divestiture of Cryo/Bio on October 1. So now let's get into the meat of our results and get going on explaining why we believe 2021 is set up to be a breakthrough year for our company. We set multiple records in 2020, which we'll share today and expect some of those to be beat in 2021. Moving to Slide 4, our focus over the past 2.5 years has been on executing our strategy to be the world leader in providing cryogenic process technology and equipment for the industrial gas and clean energy end markets. Our strategic focus areas have been on expanding our high growth, higher margin areas of the business, creating and penetrating repair service and aftermarket capabilities, incorporating geographic diversity into our manufacturing as well as our leadership, creating a broader customer base and stickier relationships with those customers through repair capabilities, as well as flexibility and targeted long-term agreements, and finally, delivering the cost structure of the organization. The focus on these actions will continue. And I'll share some progress from 2020, in the fourth quarter specifically today, as we walk through these results. We executed 33 long-term agreements in master supply agreements in 2020. This is extremely meaningful as historically we only had agreements with a handful of North American customers. Also meaningful is that of these 33 agreements for the first time ever, we have 14 repair and service long-term agreements and 10 agreements with customers outside of the United States. We have a broad-based and more consistent order activity. For example, we booked 80 orders greater than $1 million each in the fourth quarter, and had orders with 472 new customers in 2020, of which 109 were in specialty. In the first half of 2020, we took out over $60 million of annualized cost, by eliminating redundant layers in the order structure and also finding areas in the business where we could promote high potential talent. We're very pleased with our strategic investments completed in 2020. And those that we have executed to date so far this year, which you can see on the bottom of Slide 5. We approach these investments with two fundamentals. First, the investment brings access to customers and commercial projects that cannot be accessed without significant organic investment. And second, the investment brings access to regions or geographies for the respective products and applications that otherwise could not readily be accessed. As we have stated, we have a very unique offering that addresses the clean power, water, food, and industrial nexus. And one of our most recent projects, BlueInGreen, which was completed in early November has already generated synergies. Our water treatment orders for 2020 were a record and in the six weeks of ownership of BlueInGreen in Q4 we sold 10 water treatment orders totaling $4.1 million, $3.2 million of those having both Chart cryogenic equipment and BlueInGreen dissolution solutions. January 2021 started with three additional water treatment orders. As we shared when we announced the acquisition of BlueInGreen, we felt the non-U.S. markets will have great potential for the combination of BlueInGreen technology and our equipment. A case in point is the December win that we had, a contract in Brazil with the government water utility serving the state of São Paulo’s 46 million people. By way of background, Brazil ranks 112 out of 200 countries in sanitation. This project is in the center of the city, the first of its kind in a statewide environmental remediation plan to treat Brazil's polluted water bodies directly using a distributed network of oxygenation installations. The Worthington cryogenic and hydrogen trailer acquisition and also closed in the fourth quarter and came out of the gates strong, contributing to our hydrogen trailer record orders for the year. The fourth quarter was our highest order quarter in history for hydrogen trailers. And currently, there are 16 liquid hydrogen trailers in backlog in the U.S., and nearly a dozen gaseous hydrogen trailers in backlog in Europe. The completion of the SES acquisition for cryogenic carbon capture technology followed by early February investment in another carbon capture business has resulted in multiple new commercial opportunities. As I have previously said, we think carbon capture is on the brink of having a hydrogen-style breakout in terms of project activity. We're collaborating closely with our partners McPhy and HTEC on hydrogen opportunities, ranging from liquefaction, to fueling stations, to trailers. And currently we have over 20 projects that we are bidding on together with one or both of them. It isn't just our inorganic investments that contribute to our unique position in the clean power, water, food industrial nexus, as shown on Slide 6, that's commercializing each day more and more, it's also our organic R&D efforts that further differentiates us. 82% of our products have intellectual property associated with them. We continue to increase that percent through our organic new product development efforts, which I'll share with you today, the status on two key hydrogen product developments. But before we get into hydrogen, let's start with what is very exciting about our 2020 year and what sets us up for breakthrough 2021. On Slide 7, you can see our full year 2020 records for Chart as well as for each of the segments. While there are many accomplishments, including record gross margin and operating income, lowest SG&A as a percent of sales, highest adjusted earnings per share, the one that is most important to us as a company is safety. And we achieved our lowest total recordable incident rate and number of accidents in our history in 2020. Second half 2020 orders increased sequentially over the first half by 28% as you can see on the right-hand side of Slide 7. And flipping to Slide 8, you can see that each of our segments had second half order growth above 24%, when compared to the first half. The broad-based order activity contributed to our year-end record backlog of $810 million. On the right-hand side of Slide 8, you can see fourth quarter 2020 records. And I would point out that food & beverage was a super surprise, given the dramatic slowdown that occurred in the second quarter due to the global restaurant shutdowns from the pandemic. We saw specific fast-food chains and beverage companies move ahead with orders in December for their new builds and franchises. As we've mentioned previously, we continue to adapt to meet the medical oxygen equipment needs of our customers as they serve hospitals and nursing homes dealing with COVID-19. The fourth quarter was the highest order quarter of 2020 for medical oxygen-related equipment primarily driven by demand in Europe. And while not a record, the demand for trailers in the eastern hemisphere doubled in the second half of 2020 when compared to the first half of the year, which sets the second half of 2021 revenue on trailers up very well. Slide 9 shows you our near term addressable market size for Specialty Products is now $5.75 billion an increase of $1.25 billion in the last weeks. The increase was driven by three things. First, the inclusion of liquid hydrogen onboard vehicle tanks resulting from the status of our testing and prototype tank, commercial interest in our joint agreement with Ballard Power. Currently, we are discussing the use of these tanks with 14 different potential customers. Second, the addition of Cryo Technologies expanded hydrogen liquefaction capabilities and commercial pipeline, opens up a very broad liquefaction process market for which our combined content on these types of projects ranges from $15 million to $100 million each. Our combined content would be inclusive of the liquefier, storage, and trailer loading. And these estimates are for five to 60 tonne per day plants. Third, Cryo Technologies access to and experience in the helium market not only provides us content on large helium liquefaction projects, but also storage ISO containers and transport core charge equipment. So, we thought we'd share some data by each of the new segments with you starting on Slide 10 with Specialty Products. 2019 included a large fourth quarter order for LNG by rail at $22 million, making the order comparable more challenging. But what I would point out to you is that we saw a 55% increase in fourth quarter 2020 sales when compared to fourth quarter 2019 sales. So, we're starting to see that strong order activity hitting the shipments. And while less impactful in 2020, cannabis and space exploration are smaller specialty areas, both with the unique position utilizing our existing equipment. We work with major space launch companies, including receiving a $1.4 million order from one on the last day of the year. And we're pleased with our ongoing hydrogen tank deliveries for the Indian Space Research Organization. In terms of cannabis, we saw an increase in both alcohol and cannabis equipment demand as the lockdowns eased. With federal cannabis legalization gaining steam, this is another area where our specialty market could go from very niche and embryonic to larger production scale. Okay, you've waited 11 slides for hydrogen, the topic that continues to be the hottest one in the clean energy portion of our specialty markets. Recently, there was an article titled The Hydrogen Economy Is No Longer A Pipe Dream, which I thought was appropriate. The Atlantic Council hosted the fifth World Energy Forum in late January, and shared a survey of global energy leaders. When asked which carbon-free energy technologies will see the greatest increase in investment in 2021, 31% said hydrogen, followed by battery storage at 23%. These statistics prompted the think tank conducting the study to suggest that 2021 might be the year of hydrogen. For us, 2020 was the start of the decade of hydrogen, as evidenced by our backlog of $39 million, which is all expected to ship this year. Looking ahead to 2021, we're excited about many things of hydrogen including our start to the year in hydrogen orders, which is in line with our expectations. That includes a variety of equipment sold such as tanks, upgrades to gas hydrogen trailers already on order, as well as lifecycle installation services. The Secretary General of the China Standard Committee has released the drafting group’s proposal for public comments, a major milestone toward our expected April final approved liquid hydrogen bulk tank group code. This is a significant differentiator for our equipment to be built for and used in the hydrogen economy in China. We, along with 10 other companies, launched Hydrogen Forward a few weeks ago. As you know, Chart and our Hydrogen Forward partner companies, including Air Liquid, Anglo American, Bloom Energy, CF Industries, Cummins, Hyundai, Linde, McDermott, Shell, and Toyota are united under a shared belief in the environmental and economic benefits of hydrogen technologies. With all this excitement, we sometimes forget that one of our greatest progresses over the last quarter is our organic product development activities for hydrogen equipment. Our liquid hydrogen onboard vehicle tank prototype has been built and tested. And we're excited about having it as an option for our heavy-duty transportation customers, both existing ones and new potentials. On the left-hand side of the slide, you can see a rendering of our hydrogen test facility in Minnesota. We chose to include only a rendering because actual photos have too much confidential information surrounding the components that we design and build. We're collaborating with industry partners as we advance safety and innovation at this facility. Figuring prominently in that effort is demonstrating our one-of-a-kind liquid hydrogen pumping system. We've still got a few hurdles to get through before being fully production ready, but it will be this year. While there are too many other areas of the business for which we're developing solutions for our customers, and helping new customers achieve their ESG targets, on the left-hand side in Slide 12, you can see examples of our recent projects. And we had a whopping 31 folks in the quarter. We're very excited to partner with Pepsi to upgrade their CO2 capacity at one of their United States facilities, that's via our lifecycle team. Additionally, our dosing technology is used regularly in nitro beverages, such as Starbucks Nitro coffee in a can. And we're now seeing applications for dosing for oxygen water. We're collaborating with a company called O2 on their unique oxygen water, a functional hydration and recovery drink that makes clean, sustainable products. Thanks to their CEO, Dave Colina, for sending our team some of these tasty, low-calorie, high-energy drinks. You can see me trying it in the picture on the bottom left. A variety of applications with a subset of our 65 new customers in the fourth quarter are shown on the right-hand side of the slide. It's fun to see our equipment being used in nitro beer, canned wine, bottled egg alternatives, squeezable dips, and for ocular research. Moving on to Slide 13, for the full year Repair, Service & Leasing was 13.5% of our total revenue. We expect this percent to significantly grow in 2021, driven by our expanded leasing capabilities, our 14 recently executed repair and service agreements, and business rebounding, which has a nice aftermarket component to it. Our South Carolina greenfield location is set to begin repairs in the second quarter of 2021. Next Thursday, we'll hold a Building Dedication Ceremony as the final beam is placed on the building. We look forward to welcoming our customers to the site in May. I would point out the fourth quarter record RSL gross margin. This was driven by more installation and repair work from the Lifecycle team, which typically has high margin work as well as a fantastic December in ORCA upgrades from our repair and service team in Minnesota. Our investment in expanding our leasing fleet for standard products in particular ISO containers and mobile equipment has gained traction since we started investing in the leasing fleet expansion in May of last year. Leasing, led by Lisa Dole, who runs our global leasing team and her leadership team, also known internally as the ladies of leasing, had the new equipment built and leased before each piece was even completed. A few points of reference for you. From the first to the third quarter of 2020, we had 25 new leases signed. In the fourth quarter, there were 28 new leases signed compared to six in the fourth quarter of 2019, which brings a total of 53 leases signed for the year. This compares to 18 new leases signed in 2019. In January of 2021, we quoted 78 new leases with 28 different customers. The group is off to a great start with 37 new leases already signed only six weeks into 2021. Moving to Slide 14 in our Cryo Tank segment. We saw growth in orders and expanded gross margins as our Chinese business executed the best it has in our history posting record operating income. Additionally, while we saw a recovery in the traditional industrial gas aspects of the business in the fourth quarter, purchasing from the majors was not yet back to pre-COVID levels. Specifically, gas major purchasing in the Eastern hemisphere contributed to the highest order quarter in history for D&S products in the East. However, Q4 did not fully compensate for the lower order intake in the previous three quarters. So the full year of 2020 was still below 2019 in that region by 6.2%. Additionally, trailer orders were part of our COVID fluid situation in the second quarter of 2020. We saw a significant increase in the fourth quarter in all trailer activity and 2021 is off to a strong start in this area with 114 trailers ordered year-to-date as of yesterday, compared to an average of 84 trailers per quarter last year. Said differently, our highest order quarter for trailers in 2020 was Q3 with 115 trailers ordered. And we're already at 114 year-to-date. Slide 15 is our last segment to cover and certainly contains the most ups and downs in 2020 ranging from $98 million of revenue from the VG Calcasieu Pass project to a sudden and deep drop off of air-cooled heat exchanger orders after the start of COVID and the OPEC situation to ending the year with a significant air cooler order of $70 million for application, as well as a $30 million VRV shell and tube heat exchanger order for processing facilities in the Eastern hemisphere. We are pleased to see the increasing activity in the carbon capture market. With the addition of SES carbon capture technology, our commercial pipeline continues to grow. As one of our team members said, our commercial pipeline is actually off the chart right now for carbon capture opportunities. We now have well over 50 potential customers that we're working with on various project quoting stages. A significant percentage of the total carbon capture plant cost, regardless of whether the process is post-combustion carbon capture or direct air carbon capture is equipment that we offer with air-cooled heat exchangers representing approximately 50% of total equipment cost or 20% to 25% of total project costs in aiming processes. With the recent rise in LNG prices as seen on the left-hand side of Slide 16 in particular in JKM and the winter weather in Asia and just this week in Texas, there is a growing need for LNG supply after a hiatus of new export terminal construction. We expect this pricing trend to continue and in turn more big and small-scale LNG projects to move to FID in 2021. You can see on the upper right-hand chart, three big LNG projects that have the potential to be ready to roll this year. Venture Global’s Calcasieu Pass project is tracking on schedule and our equipment revenue on this project is expected to conclude in the first quarter of 2021. VG's CEO recently indicated that the first phase of Plaquemines, with 10 million tons per annum is expected to have necessary sales completed by mid-year and is also expected to reach FID this year. As a reminder, our equipment for the first phase totaled approximately $125 million. This project is not included in our 2021 guidance. Our small and utility scale LNG pipeline is very robust with 24 potential projects in our bidding pipeline that could go in 2021 totaling approximately $150 million with a few shown on the bottom right-hand side of Slide 16. Don't forget all of the infrastructure being built globally, ranging from fueling stations to over the road trucking to storage to ISOs. Just one example of LNG's continued cost competitiveness and scalability was December's announcement that the Central Indian government plans to create gas infrastructure in India with an investment of $60 billion over the next four years, inclusive of LNG terminals. Finally, it's worth noting that LNG is also getting greener. In addition to our hydrogen development initiatives, Chart continues to develop energy transition solutions that lower emissions from LNG facilities. Many of our LNG and traditional IOC customers are thinking about how to make their facilities other-molecule ready. This ranges from gas stations being able to handle other molecules completely or hybrids of mixed molecules to setting up terminals that are 100% LNG now but can be switched all at once or gradually to other gases. Our equipment and processes are well-suited to be able to adapt to these changing requirements. This past year, Chart completed a design study with Total in conjunction with Siemens to evaluate technologies to reduce CO2 per ton of LNG. The study compared Chart’s IPSMR, and IPSMR plus designs with direct gas turbine drives and electric drive with combined cycle power plants. The IPSMR plus configuration with electric drives and combined cycle power plant significantly improved overall plant efficiency and reduced CO2 emissions, providing our customers with efficient and cleaner options to choose from. I'll now hand it over to Scott to discuss our financials.

Thanks, Jill. I'm going to pass on the singing. The increasing mix of higher-margin aspects of the business and maintaining discipline in our streamlined cost structure, reflected in the $60 million of annualized costs that were reduced from the business in the first half of 2020, contributed to full-year reported EPS of $2.22 as shown on Slide 17. When adjusted for one-time costs, full-year 2020 adjusted EPS of $2.73 was a record. Full-year EPS benefited significantly from the fourth quarter adjusted diluted EPS of $1.27 resulting from broad-based execution across the business, including record operating income. Note that we closed on our McPhy investment of 30 million euros for 4.59% ownership at an accompanying commercial memorandum of understanding on October 15, 2020. In the fourth quarter, that investment contributed $0.36 to after-tax earnings per share. When excluding this investment gain, our adjusted fourth quarter EPS was $0.91. Our restructuring in our 2021 outlook is for the consolidation of our Tulsa, Oklahoma air-cooled heat exchangers into our 260-acre Beasley, Texas location, which is partially complete and is expected to conclude by mid-year. Additionally, we are keeping our 500,000 square foot Tulsa manufacturing facility to create additional capacity for certain high-demand product lines. Moving to Slide 18. We thought you would like the straightforward summary of our quarter and full-year financials compared to that same period in 2019. I won't belabor this slide, but we are very proud of the year-over-year increases, particularly in margin and cash, especially in light of the 4% decline in sales compared to the prior year. We also are encouraged by our record-low SG&A as a percent of sales of 15.1% for 2020. Slide 19 shows our continued disciplined approach to our balance sheet. We continue to prioritize the use of our strong free cash flow generation for debt pay down, organic investments, and strategic inorganic investments. Our view of maintaining our net leverage ratio at two or below is unchanged. The sale of the Cryo business closed in the fourth quarter of 2020 for $320 million of cash. After posting our second highest net cash provided by operating activities from continuing operations and free cash flow in our history during the fourth quarter of 2020, our net leverage ratio as of December 31 was 1.59 or 1.71 when excluding the mark-to-market benefit of McPhy. Pro forma December 31 net leverage ratio for our Svante carbon capture investment in our acquisition of Cryo Technologies was 1.88 or 2.02 when excluding the mark-to-market benefit of McPhy. The growth in free cash flow, as a percent of sales is indicative of the cost structure changes in the business, working capital management, and our improving margin profile. Back to you, Jill.

Thanks, Scott. A version of Slide 20 was apparently a prior fan favorite, so we brought it back, even though this was a hard decision. This particular walk provides 2020 by major category of the low end of our 2020 sales range. Yes, it could go to the high end and the midpoint to just show us that the low end is extremely realistic based on our backlog and typical order levels. I debated giving you an approximate number versus a range, but felt that the range captured more of the opportunity available to us to get to the high end. The top end of our new range is $1.3 billion. So what would shape your thinking on where in the range you want to be? First, accelerations throughout the second half of the year in 2020 in order activity. We built some conservatism into our low end with the thought process that those levels might temper. We have not seen that tempering yet. Second, specialty products, in particular hydrogen, are still on the newer end of customer behavior. So we did not build a significant amount of first half orders into the outlook. Obviously, this could be significantly higher than the organic growth shown on this slide with just a few drop-in orders in Q1 or Q2. Third, if LNG order levels continue as they did in the second half of 2020, that figure is considerably conservative. One last data point is that if liquefaction projects, regardless of molecule, come into the order book early enough in the year, we would recognize meaningful revenue later in the year. Full year 2021 sales includes $21 million from Calcasieu Pass revenue in the first quarter of 2021, as well as $30 million of 2021 revenue from the acquisition of Cryo Technologies. There is no additional big LNG revenue included in our outlook although we do believe new orders will be received during the year, which would be additive to our guidance. It is important to note that our pre-COVID-19 typical year would have low first and fourth quarters with the second and third typically the highest quarters in the year. This year, we expect the first half to be lower than the second half based on the lead time of our backlog. We expect the first quarter of 2021 to be sequentially down when compared to the fourth quarter of 2020 but up when compared to the first quarter of 2020. So that brings us to the rest of our guide on Slide 21. We anticipate full year non-diluted adjusted earnings per share to be approximately $3.50 to $4 on 35.5 million weighted average shares, up from our previous estimate of $3.10 to $3.45. Our assumed effective tax rate is 18% for the full year of 2021. We expect capital expenditure to be in the $40 million to $50 million range driven by organic investments in our high growth areas, inclusive of expanding product capabilities in our Teddy Trailer and Tank facility, completion of our repair and service facility in South Carolina, R&D new product development for hydrogen, and continued targeted lease fleet expansion. Even with these additional CapEx investments, we have increased our free cash flow guidance to $190 million to $220 million reflecting a 14% to 16% of sales range. Finally, on Slide 22, the appropriate place to conclude today's prepared remarks is our unique position to not only focus on our own ESG scorecard, but also help our customers to achieve theirs. You can see the continued growth in our customers' movements toward accomplishing their ESG targets through the utilization of Chart equipment, including over a 100% increase in water treated in the U.S. when compared to the prior year and a greater than 100% increase in reduction of diesel using heavy-duty over-the-road trucks as a result of our equipment and processes. As we released in December this year 2021, our incentive targets for everyone on the executive team include a portion related to our Chart carbon emissions reduction target for the year, making it personal and measuring it are keys to success in achieving it. Finally, before we open it up for Q&A, we have an open issue that's not included in our results, which was brought up last night by our external audit firm regarding the air exchanger training as of October 1, 2020, which is our test date for impairment, ironically chosen by the auditors to avoid last-minute subjective issues. The training has a full book value of $55 million, although the discussion is around $12 million of that. To give you a little more color on this, everyone involved, including Deloitte, agrees that the carbon capture market is taking off and going to be very active over the next decade. We hired another big four firm to prepare the impairment analysis of the trade name, which includes challenging the inputs and reviewing the results. They included the carbon capture potential in their conclusion, which was no impairment. The outstanding debate at this point is what exactly could have been known about projects for the next 10 years exactly on the October 1 date and how it is in the spreadsheets if it was known or not at that date. So you get the idea that this is a technical accounting item, and the outcome will be included in our 10-K filing, which we expect to file within the next few days. If the resolution of this is different from our team's position, earnings per share would be correspondingly reduced. However, adjusted earnings per diluted share would be unchanged from what has been reported as it would be a one-time non-cash, non-operational item. Regardless of the outcome, you've heard what we think of the potential growth of the carbon capture market, where our air coolers are very well positioned. With that, I'll now turn it over to Twanda to open it up for questions.

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

Hey, good morning, Jill.

Hey, James.

So you've had a flurry of investments, of transactions, M&A in the last couple of months. It seems to me that most of these are companies you know well. They weren't sourced by bankers. I mean, you did them yourself and so integration shouldn't be a concern, but I'd love to hear just your thoughts on the integration of these businesses. And if we – if I'm correct in that this is going to be fairly seamless, even though it is kind of your M&A.

Yes. And thanks, James, for pointing out the fact that we've done these without using bankers as an often underappreciated element of these transactions and the relationships we have in the market. We are very familiar with all of the companies that we've either invested in or acquired. The integration assumption you're making is justified given 20 plus years of working together, whether with BlueInGreen or Cryo Technologies. We've acted as if we're one, when we go to customers and have a supplier-customer relationship. So there's not much heavy lifting around the integrations and we continue to ensure that the engineering teams work together, which they already have even pre-deal.

Okay. Okay, great. And then via unrelated follow-up for me, if we look at the specialty markets of carbon capture, hydrogen, and water treatment, the key three that are on the green or sustainability spectrum here, what do you see as the cadence of which ones are going to hit your P&L first? Which ones are coming later, or are they all coming at the same time? And how do you think about managing that growth?

Well, certainly hydrogen continues to be active. So as I commented, we built a little bit of conservatism into our thinking purely because it only became so active really starting in May of last year. We wanted to ensure we didn't get too ahead of ourselves. Somebody asked the question of, I thought you guys were going to be at $55 million of revenue, which was realistic based on growth. I think hydrogen will continue to step up. I think it will become much more active on the liquefaction side, especially on these heavy-duty transport activities ramping up between now and 2024. Carbon capture, I almost view it as being about 12 months behind, and its evolution feels like it's about 12 months behind where hydrogen is. We're starting to see quite a bit of that activity, like the 50 potential customers on carbon capture, but just like early last year where hydrogen customers were sorting through, they’re figuring out their priorities. I anticipate that carbon capture is going to get rolling quickly, especially as incentives around it evolve. A lot of our customers' conversations are around integrating hydrogen-ready LNG terminals with associated carbon capture. So, this interlinkage concept is starting to happen, and the water market is just more consistent. My opening remark about that Brazilian water treatment project is meaningful because these governments in places with untreated water are starting to think of this as an important step in campaigns and platforms. We’re really pleased to be first in the door on that Brazil project because it has the potential to lead to further opportunities.

Right. Okay, great. Thanks, Jill.

Thanks, James.

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

Hey, morning, Jill.

Hey.

Well, thank you for that Slide 20, I was a big fan of previous versions of that.

Thank you for liking it.

I wanted to touch on just the air cooler and fans business. I know that 2020 was kind of a tough year for that business, but only a 3% rebound in 2021. I was kind of wondering if you could walk us through the moving parts of that?

Sure. We’re going to wait and see. We're starting to see considerable recovery, and again, this is at the low end, as a reminder here. A portion of that business is in the aftermarket. So it’s in the RSL bucket, which you can see drilling at 10%. On the very bottom section, that $70 million order we expect to be in the fourth quarter from a revenue perspective. Overall, we are starting to see that business rebound, and like I answered James' question around the carbon capture opportunities are starting to become more real. We don't have any carbon capture built into this particular outlook at the low end. That certainly has the potential to have one of these projects, our content, if it's equipment alone is somewhere between $6 million and $10 million, if it's equipment and process between $15 million and $20 million on demonstration projects. I believe we'll surpass the figures on this page for air coolers. But again, we’re trying to give you a sense of how we're waiting to see some of that mid to higher end of our range roll out. To be frank, if order levels continue like the second half was in 2020, it's not a hard target to hit at the higher end.

Got you. Okay. Makes sense. My other one was just on the LNG market. We talked about one or two projects going ahead on the small scale, on the large scale, Plaquemines being one. Have conversations shifted on projects, beyond those first couple that you guys have better line of sight to just given everything that's happening in the market? And what kind of timing are you guys thinking about for incremental projects that could potentially come after those?

Yes. I'm going to split my answer between big LNG and small scale LNG. Small scale LNG has accelerated in terms of conversations and the speed with which operators want to proceed from start to finish. What used to be considered an 18 to 24-month project from order to first gas is now can you get it done in 18 months? We view this as a positive for our business as once the decision is made, it's a quicker book and ship. There’s also a shifting dynamic on the small-scale side regarding how to prepare terminals for other molecules, enabling replication. On the big LNG side, we haven't really seen a shift since last year’s slowdown. We didn't see many conversations around these projects until around December and at the beginning of this year. The conversations have picked up dramatically, particularly on engineering and making sure we're ready to go when the signal is given. The next set of projects involves a smaller group of operators, focusing on long-term relationships and learning from past experiences. They're primarily working on efficiency improvements, where processes play a role.

Perfect. Thanks so much.

Thank you.

Thank you. Our next question comes from the line of Craig Shere with Tuohy Brothers. Your line is open.

Good morning.

Hey, Craig.

Congrats on the great quarter.

Thanks much.

Can you provide a little more color around the sequentially declining specialty margins as a percent of sales, but sequentially rising margins at repair, service and leasing?

And are you referring to Q3 to Q4?

Correct.

Okay. In terms of the repair, service and leasing side, we had significant installation and repair work on heat exchangers. Those projects are quicker and require quite a bit of specialized skillset. Additionally, we had a really strong December on ORCA repairs. These further drive margin benefits. The specialty side varies considerably based on the types of products. It is largely product-specific. My response to James suggested that there is some movement — quarter-to-quarter variability.

So it sounds like the RSL higher margins are at least for now sustainable, but sequentially lower specialty margin might rebound and could go higher?

That's a fair statement.

How meaningful could a full industrial customer order recovery post-COVID be, and how much is really baked into 2021 guidance?

We gave an anecdote in my remarks about seeing a rebound from the industrial gas side in the fourth quarter. It had been very soft from Q1 to Q3, but even that strength didn't make up for the overall softness for the year. We've built in a fair recovery here, but not an overly aggressive recovery on the industrial gas side. I think that the first six weeks of the year have been active, but six weeks doesn’t yet make a trend, so we’ll just wait and see. Part of that depends on companies opening up their field service personnel to travel too.

Thanks. And lastly, on repair, service and leasing the traction is really impressive. I think, if I understood you correctly, there were 78 new leases recently signed. Can you share what the average duration is of those leases and what you think the segment's revenues could rise to over the next couple of years?

We quoted on 78 new ones in January. I think we have had 37 signed. This certainly has given our commercial team a lot of flexibility and our PRS and leasing team has done a great job. In terms of what could it be and what we've built in, we’re estimating 15% growth in our revenue — excluding air coolers and fans — after the aftermarket and netting it, we anticipate a 13% growth on that business on our internal plans. From a percent growth perspective, that's going to scale up from there certainly in 2022 and 2023. The lease durations range anywhere from five to 10 years, so these are long-term leases with full commitments, and have associated interest rates comparatively favorable than if someone were just going out to banks for loans.

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

Hi, good morning.

Hey, John.

I appreciate all that CapEx detail on Slide 21. And obviously, you have a lot of growth CapEx there, and some of these end markets are still accelerating. So just wanted to know if it was a fair assumption to think that the CapEx line could run a little hotter here, but you're still able to do that mid-teens kind of free cash flow margin on a go-forward basis, or however you guys are thinking about it?

That's exactly right, John. So we still think that even with this higher CapEx compared to our normal maintenance at 30 or sub-30, we'll still be able to achieve that free cash flow as a percent of sales, driven by the earnings profile, working capital management, and some of our supply chain opportunities around terms and inventory. So we're confident in that free cash flow figure.

Great. And then obviously, you highlighted it earlier. I think a couple of people have already touched on it, but the execution here around the long-term agreements is a pretty big step-up. Obviously, I know you've been incentivizing the organization, but maybe if you could just remind us how you've been incentivizing the organization, and if you think we should still think that there's kind of a step function change in front of us, or if the pace of long-term agreements should start to normalize at some point?

We still think that there's incrementally more long-term agreements and agreements with our customers to pursue. Our goal with the organization is to continue increasing that breadth and depth of those agreements — breadth being the number across multiple customers, as well as markets, and the depth featuring the types of products in the repair and service side. The organization has multiple types of incentive programs, with our commercial team structured and incentivized to pursue deeper customer relations and offer the flexibility that customers are looking for. But I believe that there will be a tipping point where we've hit kind of that customer standard for agreement. I can say it will not normalize in 2021. The continued expansion will occur, especially in new markets where we previously had no reach.

Great. Thank you very much.

Thank you.

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

Thank you. I was curious if you could share with us what gross margin, G&A, and D&A is embedded in the guidance here?

Certainly. So, from a — I'll start with the depreciation and amortization. I think we've got about $70 million embedded, which is split somewhere between $36 million to $38 million on depreciation and the rest being amortization. In terms of the gross margin, while we don't guide to gross margin, it's around the 30% mark as a whole for the company.

Okay. And general and administrative?

The G&A, you'd just have to back into that based on the numbers I gave you.

Okay.

I don't have it handy here.

Okay. Thanks for that. And I guess just thinking about the progression, so you said, I think I heard that first quarter would be down sequentially, but up year-over-year. And then, as we play out the rest of the year, as you get into second quarter, you've got Calcasieu rolling off. But perhaps some other tailwinds, I'm just kind of curious if potentially the second quarter could be lower than the first quarter? That's the first part of the question, then I have a follow-up.

Sure. We see actual incremental step up from Q1 to Q2, Q2 to Q3, and Q3 to Q4.

Okay. Okay, great. And then as you think about the composition of the backlog, that's driving the back half of the year, is there a reasonable starting point for the run rate in 2022, or what are the puts and takes as you think about that?

That is a very reasonable starting point for 2022. While we may be accused of being too conservative at the low end of the guide, the jumping off point from the second half of this year will be valuable in thinking about 2022.

Yes. Thanks a lot, Jill. Perfect.

Thanks, Marc.

Thank you. Our next question comes from the line of Pavel Molchanov with Raymond James. Your line is open.

Thanks for taking the question. Let's take a tour back in time to the middle of 2019, ancient history when you were talking about an upside case for earnings with large LNG projects. At the peak, you had said $3 annually is what it could add best-case scenario with everything materializing. Is that number still valid given everything that's changed in the last few years?

That number is still valid, yes. We think about it as, broadly speaking, $150 million of revenue on a big LNG project should translate into somewhere between $0.80 to $1 on the earning side. Of course, that depends on the project and the content — all factors that you must consider, but that's a decent proxy to use.

It’s helpful. A conceptual question about the Service segment. If you had an opportunity as a company to own and operate a carbon capture project and collect the Section 45Q tax credit in-house, would that be something that you would be open to doing?

We haven't had that opportunity to date, primarily because we've consistently positioned ourselves as the process and equipment supplier. But through our investment in Svante, that certainly is an avenue to participate in that. It's not something that we would be opposed to considering, given that the market is developing rapidly, with lots of creative ideas emerging.

Got it. Thanks very much.

Thanks.

Thank you. Our next question comes from the line of Connor Lynagh with Morgan Stanley. Your line is open.

Yes, thanks. We've done a fair bit on specialty markets. So, I just wanted to sort of step back to some of your core industrial customers. Overall, 2020 held up a lot better than we would have expected coming into lockdown. What I'm wondering is if you can characterize if there are pockets of your business that have outperformed and some pockets that have underperformed? Basically, if we start reopening the economy later this year, what does that look like in some of your core industrial businesses?

Yes, great point. Overall, the business has outperformed expectations since March or April of last year. I would say the general industrial gas side has the potential to outperform even what we built into our models, especially as travel restrictions ease and larger companies return to the field. We are seeing improvements in food and beverage with the recovery in beverages, as restaurant and stadium businesses reopen. Additionally, it appears that trailer orders are indicating optimism for recovery, as many of these orders require personnel to be on-site. The start of this year has seen promising activity in this area.

Okay, got it. If I were to look at your favorite Slide 20, basically what type of world are you envisioning for some of the lower growth segments? I'm thinking of Storage Equipment or Cryo Tank Solutions in general. What are you contemplating regarding first half versus second half performance? What kind of order activity would we need to see in the first half to validate or alter your view?

You're right, those are some of the most conservative segments. I would say the most conservative is air coolers, with the second being the Cryo Tank Solutions because of the industrial gas implications. We have a fairly even spread across the year, based on anticipated order timing. This implies marginal applied demand isn’t factored in. We’re in a wait-and-see mode, especially on the first quarter for results in this specific area. If we see first quarter figures outperform our estimates, that would be a point to revise these expectations, particularly due to short lead times in the Cryo Tank Solutions segment.

Okay, got it. I'll turn it back. Thank you.

Thank you.

Thank you. Our next question comes from the line of Rob Brown, with Lake Street Capital Markets. Your line is open.

Good morning, Jill. You've talked a little bit about the Leasing business. But what's really driving the growth there? Is that just your focus on it? Are you taking some share? Has the market shifted to a leasing model?

It's more our focus is on it. In fact, we've incorporated it into our model and strategy more robustly. We're seeing several opportunities that we could not previously explore and now feel well positioned to pursue.

Okay, great. And then just taking a step back, with a lot of changes in the business, what's sort of your current view on where you think operating margins can get to over time with the new mix and the new models that you've put in place?

Sure, our 2020 adjusted operating income as a percentage of sales was about 11%. We expect that to increase incrementally by 150 to 200 basis points per year over the next three years. High teens is what we've built into our internal three-year outlook.

Great, thank you. I'll turn it over. Thanks.

Thanks, Rob.

Thank you. Our next question comes from the line of Ben Nolan with Stifel. Your line is open.

Hey, Jillian.

Hey, Ben.

I want to start a little bit on the fueling stations. As we’ve discussed, it sounds like more interest is evolving around sort of multi-fuel stations where they can accommodate LNG, hydrogen, CNG, etc. I'm curious what that means from a Chart content perspective. Does that mean fewer stations but more Chart content, or are you seeing your content grow and in general, what should we think about that?

I think you'll see more stations, whether those are new stations or retrofitting of existing stations, and Chart content goes up. So, it's a positive scenario for us in both directions. The retrofit concept is interesting, as it will take time to execute. You are not going to see additional stations added right next to a diesel station. Folks that own these networks are thinking about utilizing existing sites and leveraging design to accommodate new functionality.

Okay, so obviously it lowers the barrier to entry and the absolute capital cost, so it should expedite the decision-making process beyond just kind of the purely economics.

Yes, correct.

And then as my follow-up, sort of completely unrelated, well, maybe somewhat related. But as it relates to the Ballard agreement that you guys announced, the memorandum of understanding, I'm trying to wrap my head around that a little bit. Is it really just to memorialize something that was already happening anyway? Or incrementally, what is different? What has changed? Does it at all preclude you guys from similar arrangements with other fuel cell providers? Any color there would be helpful.

It does not preclude us from working with others, nor does it prevent us from selling our equipment directly to any end user, either with them or directly. The market is evolving regarding how they’re thinking about what to do for heavy-duty transport in hydrogen. There are some players that will want a liquid hydrogen onboard tank, while others need a more holistic solution. The partnership with Ballard offers customers both options, whether they are going for a component solution or a more integrated solution. We had held back on addressing the addressable market size until we saw this moving toward becoming more commercial. Based on the readiness of our tanks and the utilization of the tank with Ballard’s offerings, and then what we’re seeing with customers — that’s why we felt now is the time to signal the market opportunity. You're noticing a range of partnerships emerging in the hydrogen economy, and we’re all working towards creating more cost-competitive options.

Okay, that's great. Thanks.

Thank you.

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

Hi, thanks. Good quarter. And thanks for taking my question. I want to ask about the McPhy gain in the quarter. Just to understand a little bit about the accounting of how that happened? Is that like a reoccurring thing?

So, the McPhy gain is a mark-to-market on our investment. The movement in their share price from the start of our investment till the end of the quarter will mark-to-market every quarter. So whatever direction it goes, we chose to share that because some folks have an estimate embedded in their outlook for the impact of McPhy, and some folks don't. We wanted to be clear about each individual's approach. We're excited about the continued benefit from the relationship with McPhy from a mark-to-market perspective and also from the commercial opportunities we are working on together.

Okay, got it. So the 2021 EPS guidance excludes any future gains from McPhy?

That is correct.

Okay, great. And then I just wanted to ask about the hydrogen business. I thought I heard you say in a comment that you're at a run rate now of $55 million, but I want to understand the guidance. With the acquisition in there, what is the revenue run rate that you're at right now? And then as the market continues to evolve in 2021, I think, I heard that could be a conservative number. I wonder if you could provide some more details.

Yes, you were definitely hearing that the outlook is conservatively built, and expected figures on Slide 20. We have built in on the existing backlog as of year-end, which is $39 million, plus the drop in first half orders of about $5 million, plus $30 million for Cryo Technologies in the year. That's how you get to this conservative estimate. In terms of the run rate, we cannot provide one yet; it’s still too early given the recent order activity. The interest and customer discussions around hydrogen equipment are high. And that's why we're indicating $55 million is realistically manageable.

Okay, all right. Thanks very much.

Thank you.

Thank you. Our next question comes from the line of Ian Macpherson with Simmons. Your line is open.

Hi.

Hi, Ian.

Good morning. Thanks for taking the question here. So, you’re below your leverage threshold, and you should generate a couple of hundred million of free cash this year. What does your pipeline look like for additional bolt-on acquisitions? I would presume that we would see a deceleration from the past six months, but I don't want to put those words in your mouth. Are there still interesting targets out there? If not, just a few words on capital deployment looking forward? Thanks.

Yes, there certainly are more interesting targets out there. There are not as many available in a shorter timeframe compared to the previous months, which, as you’re aware, you can’t time investments and acquisitions perfectly. Nevertheless, we foresee appealing additional equipment to attach onto our portfolio if and when it does become available. We also think about it on the organic side. The deployment capital follows our CapEx outlook and organic investments, as we feel it’s easier and quicker to develop this ourselves. So, those are two ways we’re thinking about capital deployment. Of course, we continue to expect to generate mid-teens free cash flow this year and plan to utilize it taking down our debt profile.

Perfectly clear. Thanks, Jillian. That's it for me. Thank you.

Thanks, Ian. Have a great day.

Thank you. Our next question comes from the line of Chase Mulvehill with Bank of America. Your line is open.

Hey, thanks for squeezing me in. I guess first, I want to talk about gross profit margins. I think in the quarter, they're a little bit light versus kind of expectations. I mean, obviously, repair, service and leasing were strong, but the other segments came in a little light. So maybe could you first talk about if there are some issues or some puts and takes to kind of what happened on the margin side in the fourth quarter? And then how should we — you said 30% margins or I kind of assumed in your 2021 guidance, which how should we think about those stepping up? Do they step up closer to 30% in the first quarter, or does it gradually kind of step up throughout the year?

Certainly, Chase. We’re glad you could attend. In response to your question, there were two primary drivers on that side—product mix, particularly in Specialty, as well as the timing in heat exchange projects. I would expect the performance should improve going forward, aiming close to the 30% margin for the full year 2021. We’re targeting a recovery to about 29% for Q1 based on our projections.

Got it. All right, that's very helpful. The other follow-up I had was around carbon capture, in just carbon capture opportunities on LNG projects. And obviously, you've detailed three LNG projects that could potentially happen this year in your slide deck. Could you talk about the opportunities around carbon capture on those projects? Are those customers looking at carbon capture alternatives for these projects or are there other projects outside of the ones that you've listed here?

All of the LNG players are contemplating going greener with their LNG. However, they aren't thinking about it the same way. For instance, on the projects listed, we have multiple conversations occurring. Smaller scale and utility scale LNG takes more emphasis on carbon capture. Those projects are moving quicker as they are more standardized. That is where enthusiasm lies. The midscale and baseload operators, in contrast, need to address getting from construction to exporting gas. The industry understands that incorporating carbon capture into larger LNG terminals is easier at the onset. In summary, you'll see the focus on smaller utility-scale projects come to the forefront.

I got it. Makes sense. I appreciate the color.

Thank you.

Thank you. Our next question comes from the line of Greg Lewis with BTIG. Your line is open.

Check to see if you're on mute. Greg, are you there?

I have no response from him. I'm showing no further questions in the queue. I will now turn the call back over to Jillian for closing remarks.

Hey, fantastic. Thank you to everyone for listening today. We're excited about our increased outlook for 2021. I look forward to talking to you all very soon. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.