Good morning, and welcome to the Chart Industries, Inc. 2022 Third Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. The company's release and supplemental presentation was issued earlier this morning and can be accessed by visiting Chart’s website at www.chartindustries.com. A replay of today's broadcast will be available following the conclusion of the call and can also be accessed through the Investor Relations section of the company's website. 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 statements. I would now like to turn the conference call over to Jill Evanko, Chart Industries CEO. You may begin.

Thank you, Kevin, and thank you all for joining us today for our third quarter 2022 earnings call. We're very excited to share with you today what we believe to be a momentous third quarter, not only due to the number of records that we set, but also due to our high confidence in our strong outlook for 2023, which includes anticipated growth of over 25% in sales and over 50% in earnings per share. The numerous records in the third quarter include all-time record backlog, sales, reported gross margin, reported operating income, reported non-diluted EPS and adjusted non-diluted EPS. While orders of $729 million is not a record, it is our second highest in history and second consecutive quarter of commitments above $700 million. With me on the call today is our CFO, Joe Brinkman. As usual, we will reference that supplemental deck that was included with the press release and can be found on our website under the Investor Relations section. Let's kick-off on slide four of the presentation, with the slide many of you have become familiar with, our Nexus of Clean full solution offering. Process technology and equipment for clean power, clean water, clean food and clean industrial applications. This offering is becoming more pertinent to the global environment, in particular, as you look at current challenges and opportunities in macro and geopolitical conditions as shown on slide five. The three main categories shown on the left-hand side of the slide, which are in no particular order, are expected to remain a tailwind to our business for the coming decade. LNG as a pragmatic and available energy source as countries around the world seek energy independence and security, CO2 shortages and the continued focus on sustainability, both in the public and private sector, furthered by the adoption of the US Inflation Reduction Act or the IRA in mid-August. We'll spend some time throughout today's discussion on these topics and how they are manifesting themselves in our order book, as well as why we expect them to drive continued double-digit growth in our sales this decade. These tailwinds are also starting to coalesce together; for example, we have been talking all year about CO2 shortages driving demand in our Earthly Labs offering, which sells for immediate access to beverage-grade 99.9% purity CO2 captured in the process of beverage-making and now we're seeing the IRA bring together more demand on the small scale, as well as the larger scale CCUS needs, which covers both macro tailwinds two and three on this page. More examples of that shortly. Hydrogen is one of the markets and applications that is and will continue to benefit from the macro trends just described. I'm not going to walk you through all the data points on slide six. In summary, in one year the difference in direct hydrogen investment announced is up 50% and projects that are or will be under construction in the next eight years are up over 134%. Many countries have adopted national hydrogen strategies, including the UAE recently announcing that they've engaged to work on one. We continue to see growth and more consistency in hydrogen demand for our products and solutions over the past two years than what we had originally anticipated. With third quarter 2022 hydrogen-related orders of $102.4 million, bringing our third quarter year-to-date 2022 above our full year 2021 hydrogen orders of $282 million. In the third quarter we received a purchase order for hydrogen liquefaction facility with associated water treatment for our project in West Texas with Clean Energy Holdings. They’ve also signed a letter of intent with us, which is not booked as an order or in our backlog yet for processing equipment for the additional three phases of their project with the same content as the first phase reach. This is another indicator that this trend in hydrogen is not slowing down. Also in the quarter, we received a $6.2 million order for hydrogen systems and equipment from a European shipyard who is working closely with a large European cruise line on a hydrogen powered vessel. A $5.8 million order for two of the first transportable fuel stations for hydrogen fuel-cell trucks. And liquid hydrogen tank orders for a major industrial gas customers liquefaction plants in Europe. Importantly, this is another example of the global adoption of liquid hydrogen. Historically, Europe was predominantly focused on gaseous hydrogen and now we are seeing this movement more towards liquid for certain applications. While not yet booked, we also received a letter of intent from one of our industrial gas customers for a hydrogen liquefaction plant which we expect can move to order in 2023. Our hydrogen sales of $118.7 million this year-to-date through September has been supported by our Theodore, Alabama trailer and tank shop, which we affectionately call Teddy trailers and tanks. You may recall we purchased Teddy in October of 2020 for a $10 million purchase price. At the time, the most trailers produced in that facility was nine in a year and now we can produce more than one a week. By way of comparison, year-to-date 2021 through September Teddy Trailer sales were $5.2 million and this year for that same period they are $41.75 million. Some of this might be attributable to the Inflation Reduction Act which that hydrogen CCUS and water and further motion. The IRA includes $300 billion in spending for energy and climate change with multiple areas of the IRA directly supporting investments being made by our customers in those same areas. We believe that the IRA will drive more projects to happen sooner, which in turn increases our opportunities in the near-term and this decade across our Nexus of Clean. You can see some statistics supporting this on slide seven. We've touched on hydrogen order activity already, but worth noting that as of the end of the third quarter we had a pipeline of 658 hydrogen customers and potential customers, sequentially up 20% compared to the end of the second quarter and up 83% compared to the end of 2021. Our water treatment business was already growing, setting new records throughout 2022 and while we can attribute some new inbound inquiries to the IRA, we think that the international trends in the adoption of water treatment are a key driver to our year-to-date commercial pipeline additions of $131 million. The area that we believe will be most swiftly and positively impacted by the IRA is carbon capture. We've seen a meaningful increase and inbound interest in our CCUS offerings since the IRA was approved compared to before it, including a pipeline of 363 customers and potential customers, up over 142% compared to the end of 2021. New inbound opportunities in our small-scale Earthly Labs business totaled $9.2 million in the 75 days following the IRA announcement, compared to new opportunities in the 60 days prior to the IRA for $5.56 million. In the third quarter we also booked orders for our SES cryogenic carbon capture solutions with a customer in Saudi Arabia, as well as with the European Energy Infrastructure Company. The most interesting changes for CCUS since IRA was passed isn't the anecdote that I have shared with some of you throughout the quarter, so we had more inbound inquiries in the first 24 hours after the IRA was announced than we have ever had in any 24-hour period. The pre-IRA leads for CCUS or about 17.5 per month on average and post IRA leads are now 32.4 per month. As a result of continued and consistent order activity as well as the IRA that I just described, adding more certainty to this decade's opportunities, we're increasing our specialty products' total addressable market as shown on slide eight in the near-term by approximately $2 billion and to $49.3 billion through 2030. Also note that in addition to the areas discussed under the IRA impact we are increasing our 2030 TAM for gas by rail and space exploration applications. We're uniquely positioned in gas by rail for a variety of molecules. Additionally, we're in multiple discussions with existing and new potential customers about using not just our tender cars rail, but also we have work underway with customers on the onboard liquid hydrogen tank for utilization in not just heavy-duty commercial vehicles, but also in locomotives. The private space exploration trend continues to become a global market. As you're aware, we're expanding our Teddy Alabama site for supersize tanks and are the only company in the world that can build 1,500 cubic meter cryogenic storage tanks. You can see the build in each one of the slides in the appendix if you're interested. So moving to slide nine, this shows each of our three quarters this year and the orders that comprise over $2 billion of commitments in the first nine months of the year. We received full notice to proceed on the remaining 12 cold box systems for the Venture Global Plaquemines Phase 2 project in the third quarter for $91.8 million, which brings year-to-date Big LNG-related orders to over $620 million. This marks three consecutive quarters that we have booked Big LNG work, the first time this has happened in our history, as well as an indicator that LNG is going to be less cyclical across the coming years than in prior cycles. Our commercial pipeline of potential orders overall currently in discussion for order placement in the next two years or 24 months is greater than $9.5 billion. So far in the month of October, demand continued across the business with 17 orders through two days ago this past Wednesday, each greater than $1 million, with a very wide range, ranging from space exploration to re-gas, to refurbishment of the cold box, multiple air coolers, LNG fueling station, a large bulk tank order, just to name a few. It's also noteworthy that our Doser business had its biggest month of the year in October in terms of orders and we still have a few more days to go this month. With over $2 million in orders in the first nine months of 2022 and five of our last seven quarters setting order records, average quarterly orders excluding Big LNG in 2021 and 2022 are over $470 million as you can see on the right-hand side of slide 10. This compares to an average of $250 million per quarter from 2016 to 2020. At the end of the second quarter, I reminded you that we're not going to hit $470 million or more every single quarter, but we do anticipate continuing to book each quarter at a much higher level than our pre-2021 historical average. We are definitely pleased to be multiple historical records this quarter and this trend continued as you can see on slide 12. As I mentioned at the outset of the call, Q3 was an all-time record backlog, sales, reported gross margin, reported operating income, reported non-diluted EPS and adjusted non-diluted EPS quarter. There were numerous other records across the business segments and individual sites, too many to name, but I'm going to touch on a few including the fact that our Sri City, India team posted record sales. Our VRV team, which you may recall we purchased via an acquisition at the end of 2018, hit their best-ever gross profit, gross margin, operating profit and operating margin, and the parts repair and service piece of RSL did the same. It's also worth pointing out that our reported operating margin as a percent of sales of 10.1% has already been achieved three other times this past decade. We'll discuss that more in a moment. An important and critical part of our business is our number one priority of safety. We achieved our lowest safety total recordable incident rate in Q3 and I am proud to share that 79% of our sites have had no safety incidents in the trailing 12-month period. On slide 13, you can see our third quarter results with the green box denoting historical highs. Our third quarter 2022 orders were the second highest in our history, with all of our top three historical record quarters occurring in 2022. This contributed to our eight consecutive quarters of record backlog of $2.254 billion. Backlog is now 100% higher than one year ago. Both Heat Transfer Systems and Specialty had record backlogs as of the end of the third quarter. Not only is it the first time we have surpassed $2 billion in backlog, the composition of our backlog is very rich, which gives us further confidence in the growth outlook we're presenting for 2023 and beyond. As shown on slide 14, reported gross profit was an all-time record and that translated into 25.4% reported gross margin as a percent of sales. When adjusted for unusual items it was 27.3% and in line with our anticipated sequential margin improvement to exit the fourth quarter 2022 at 30% gross margin as a percent of sales or more. We also continue to face headwinds in the macro environment, but we do not add back to adjusted gross margin, adjusted operating margin or adjusted EPS. Those you can see listed on the side of slide 14. I'll get into segment gross margin specifics in a moment, but as a tee-up three of our four segments reported gross margin as a percent of sales increased by more than 170 basis points sequentially compared to the second quarter 2022 with HTS increasing over 700 bps. The third quarter 2022 was only the fourth time in the past decade that we had reported operating income as a percent of sales of 10.1% or more and adjusted operating income as a percent of sales of 12.6% as shown on slide 15. Reported operating income of 10.1% was the highest since the third quarter of 2020 as well. All of these activities roll into our record reported EPS and record adjusted EPS of $1.15 and $1.49, respectively, shown on slide 16. We reduced the add-back shown by our mark-to-market benefit, as well as our restructuring release in RSL net of cost, as we concluded restructuring activities in that segment. The third quarter of 2022 was our last quarter for integration-related costs from our acquisition of AdEdge Water Technology's, as well as LA Turbine as each hit their one year anniversary in the Chart family. We did not add back the negative impact to sales or EPS from currency headwinds or FX rate changes and we do anticipate that these will continue to be variable in the coming quarters. We estimate the third quarter 2022 impact from foreign exchange rate changes was approximately net negative $0.06 to EPS when you're netting translation and transaction. I won't spend time on slide 17, it’s included as a video of the progress we have made operationally across the past year. The left-hand side is our reported EPS walk from Q3 2021 to Q3 2022 and the right-hand side is our adjusted, both reflecting continued progress in operational margin improvement execution. The next section of our presentation provides an update on operating activities that support our sequential margin increases, as well as continuing to meet the ongoing demand across the business with targeted capacity expansion. Starting on slide 19, the top row and bottom left graph relate to our main input material costs. You've seen these graphs previously and the good news is that input costs were similar to the second quarter of 2022, yet the backdrop is still continued geopolitical and inflationary uncertainty. Gas and energy prices are a key driver in component availability and cost, in particular in the EU and while recent prices have been declining they are still over five times the 2019 standard price. We have then continued to proactively fortify our supply-chain channels both globally and locally to reduce the associated risks. You can see examples of these commitments in our press release. The bottom right-hand graph on slide 19 shows the global freight index. You can see that while it's trending in the right direction, it’s still like material input costs above historical run-rate. We've now had two quarters in a row where net neutral on freight costs as a result of pass-through customers. However, a quick comparison, in 2021 we averaged about $1.4 million of additional cost on freight per quarter through the P&L. Despite the ongoing well-discussed supply-chain challenges, I would like to congratulate our global team members who continue to drive improvements in our shops; in this quarter, we had 12 of our manufacturing facilities with 100% on-time delivery. None of what I just mentioned is new in terms of operating in an uncertain environment, so we continue to look for ways to differentiate our business in the forming category shown on slide 20. First, pricing; we've completed multiple price increases over the past 15 months, including additional actions taken in the third quarter of 2022 and planned across the next six months. Second, cost-control is a fundamental operating principle in the business, and we continue to look for productivity and automation projects, which Joe will talk about in a moment. Third further collaborations and partnerships, in particular, in specialty products and finally building on Chart's specific differentiators, such as our ability to help our customers very early in their design phase for the first of a kind projects and being a first-mover on receiving certifications for equipment in places like Korea and China, which we believe will be an important differentiator as specialty markets move from regional to global across this decade. In the third quarter 2022, we executed eight MOUs, two of which included master supply agreements which you can see on the left-hand side of slide 21. Four related to carbon capture and CO2 equipment, two for hydrogen and one each for liquefaction and LNG, further demonstrating the breadth of our solution offering and penetration across the Nexus of Clean. One of the master supply agreements was for LNG equipment with Yanchange and Shell Petroleum, while another was with a major beverage company for carbon capture and storage technology and equipment. Our 79 new customers this quarter were across a broad reach of geographies; 43% North American, 37% Asia Pacific and approximately 20% in Europe and the Middle East. One of our favorite topics, first of a kind orders were 17 in the third quarter, also comprised of geographic and application breadth, which you can see on the right-hand side of slide 21. We kicked off our first feasibility study for carbon capture with biobased food ingredients with Bioveritas, we booked an order with Firefly for a space exploration application and we welcomed a new customer in Asia-Pacific for food and beverage equipment. Certifications globally and regionally in cryogenic equipment, as I commented, are a key differentiator. We received numerous new certifications shown in the middle of the page, and this included approvals for specific product lines in Australia, Canada and Korea. Now I'll turn it over to Joe Brinkman on some operational productivity and capacity expansions in place.

Thanks, Jill. Our ongoing organic productivity and automation projects are constantly in-flight with a few new examples to share this quarter shown on slide 22. These six projects are just a sample of the multiples we have underway and should give you a good sense of how they help with margin improvement as well as capacity in some cases. Take the middle top row, which in our Chart China facility the SAW welder was integrated into the other end of the original mig welder arm to achieve two welding processes for the same equipment, which significantly improves plant capacity and efficiency. By way of comment, these types of projects have enabled Chart China to consistently break records with the third quarter of 2022 being their highest gross margin and operating income quarter since 2014. Another example shown on slide 22 is in the bottom row middle, where we are implementing a bellows machine for automatic rotation of a vacuum insulated pipe during the welding process. This includes - this improves weld time by 68% and generates with one machine over $53,000 a year in savings. We are very excited to receive our brazing furnace after a year in the making into our Tulsa, Oklahoma flexible manufacturing facility in the quarter, which you can see an actual photo on slide 23. We will begin post-braze activity in the fourth quarter, which is right on schedule and supports more capacity for a variety of different end applications that use brazed aluminum heat exchangers, whether it be LNG, hydrogen, helium or CCUS. As a reminder for our expansion in Theodore, Alabama along Mobile Bay as shown on slide 24, we already have the space exploration order book to go through this expanded location, for which the build-out is progressing on our original timeline. And on slide 25 we have a similar situation in our Goch, Germany trailer facility, where we are expanding on our existing property and have a base-load order of $22 million that will be delivered out of the expanded location in 2024. We anticipate production will begin either in late third quarter of 2023 or early fourth quarter of 2023 in the expansion, which is also set to have a new area for service and repair. I'll now turn it back to Jill to quickly run through segment performance starting on slide 27.

Thanks, Joe. HTS had an outstanding third quarter, and we expect this strong performance to carry into the fourth quarter of 2022 and the entire year of 2023, supported by our record backlog, the ongoing recovery in the air cooler sector, our operational excellence, capacity expansion, and favorable market conditions for LNG. A few highlights from the third quarter for HTS include a 59% sequential increase in orders, excluding Big LNG, with 27 individual commitments exceeding $1 million each, indicating a diversified customer base. Our restructuring efforts are leading to improved capacity and execution, as evidenced by the sequential gains in gross and operating margins driven by our newer project mix. These projects range from larger LNG initiatives to smaller and floating LNG, along with more traditional medium-sized orders. This diverse mix will lead to varied revenue recognition timelines, creating a blend of longer-term revenue from Big LNG alongside quicker revenue for projects valued between $10 million and $40 million. We also want to highlight that the growth in the HTS segment and the improving margins are bolstered by our recent acquisitions of Cryo Technologies and Fronti Fabrications, which enhance our capacity to meet customer delivery timelines. Looking ahead, both the fourth quarter of 2022 and the full year of 2023 are promising for HTS, particularly with ongoing improvements in air cooler margins and the expected commencement of production at our expanded New Iberia, Louisiana facility in Q4. HTS will also significantly contribute to our strong cash flow outlook, with over $100 million in large cash milestone payments scheduled for the fourth quarter. The third quarter of 2022 marked our third consecutive quarter of booking Big LNG purchase orders totaling over $620 million for the year so far. We expect at least one more Big LNG project to be released in the next nine months, and the momentum is evident, not only in Big LNG but also in small-scale and floating LNG, as shown on slide 28. This decade is poised for substantial LNG activity, despite prior movements to FID. Slide 28 also illustrates the growing traction for IPSMR and midscale technology in the market. Notably, our Big LNG project pipeline remains steady at 24, with one new order added in the third quarter, reflected in our potential business volume. Additionally, row two highlights our international opportunities for IPSMR, as various international oil companies have now qualified our technology for potential projects. Lastly, our pipeline for categories below 5 million tons per annum is stronger than ever. We have also included slide 29, showcasing the rising interest in IPSMR related to smaller trains and validation we've received. Many inquiries about IPSMR differentiate it from other options, so we've summarized key advantages, including cost savings and production increases. The focus on our heavy hydrocarbon removal and nitrogen rejection technologies is growing, especially given the varying gas compositions. In the third quarter of 2022, we secured two orders for studies on these technologies for potential use in Big LNG projects. Moving to slide 30, sales in our specialty products segment were lower than expected due to timing shifts in revenue recognition for two projects. This shift negatively affected the gross margin percentage for specialty products, recorded at 31.6% for Q3, alongside continued low volume in our higher-margin HLNG vehicle tanks and a major customer freight revenue with minimal margin. Looking forward, we expect sequential growth in specialty products across all metrics, with several elements driving this, including our newly in-house water treatment operations and specific space and hydrogen project revenue set to be recognized in Q4 2022 after being deferred from Q3. While the CTS segment may not stand out brightly, we are pleased with its Q3 performance, marking a significant milestone for margin improvement in this area. Although sales declined sequentially from Q2 due to lower-margin backlog pulling and foreign exchange impacts, CTS orders rose 13% sequentially. This demand is evident in our record orders for 226 ISO containers in the quarter and our industrial gas customers predicting mid-single-digit growth for 2023. Q3 marked our first sequential increase in gross margin as a percentage of sales in a year for CTS, and we expect this trend to persist into Q4 and beyond. Slide 32 details the RSL segment's performance, posting record sales, gross profit, and operating income in Q3. The decline in sequential sales from Q2 to Q3 stemmed from the timing of international field service work shifting to Q4 due to visa requirements and a significant aftermarket sale in Q2. The future of RSL looks promising, bolstered by our enhanced European presence through CSC and strategic locations in the U.S. with LTA customers. We anticipate a robust Q4 2022, spurred by winter temperatures increasing field service work, heightened interest from European customers, particularly in trailer leases, and a strong order influx early in Q4 with quicker turnaround work expected as we progress into the first quarter of 2023. Looking at slide 34, our sales outlook for 2022 ranges from $1.65 billion to $1.70 billion, with adjusted non-diluted EPS projected between $5 and $5.25, assuming around 35.87 million weighted shares and a tax rate of approximately 17%. This revised sales guidance is influenced by currency fluctuations and the timing of specific project revenues, which is common in our business. We're pleased that our adjusted non-diluted EPS forecast remains at or above $5, reflecting our Q3 performance and expected continued margin enhancements in Q4. Anticipated free cash flow for the full year stands at approximately $175 million, driven by significant milestone payments in HTS and expected inventory reductions as Q4 is anticipated to be our peak sales quarter. Our net leverage for Q3 2022 is 2.92 times, marking the first time we're below three since Q2 2021. On slide 35, we express a high level of confidence looking ahead to 2023, estimating sales between $2.1 billion and $2.2 billion that will only account for Big LNG projects already in backlog as of the end of September 2022. Adjusted non-diluted EPS is expected in the range of $7.50 to $8.50, again assuming 35.87 million weighted shares and a 19% tax rate. We project associated free cash flow for 2023 to be in the range of $250 million to $300 million. I want to emphasize the transition from backlog to projected revenue outlined in the table on slide 35. Our sales outlook of $2.1 billion to $2.2 billion does not consider any new mid-size or large projects that may enter our order book before mid-2023, which could add an estimated $50 million to $75 million in revenue for the year. Before we move to Q&A, I want to take a moment to express gratitude to our global team members for embodying our core themes: prioritizing safety, customer focus, strong work ethic, and community contribution. Kudos to our entire team for achieving our lowest ever TRIR in Q3, being recognized as a Women's Business Collaborative Company of Purpose, and for being finalists in three categories for the 2022 S&P Global Energy Awards. Lastly, I would like to personally thank our Welding Council team for their dedicated efforts in supporting our cryogenic certifications and performance. Kevin, please open it up for Q&A.

Our first question comes from Eric Stine with Craig Hallum. Your line is open.

Hey, Jill and Joe.

Hi, good morning.

Good morning. My first question is about the Big LNG pipeline of $5.7 billion that was mentioned in the release. I'm interested in your thoughts on that. You have several projects at play, and it's clear that not all of them will proceed. However, you are anticipating a longer cycle than in the past, coupled with a sense of urgency due to the current macro environment. As you consider this, do you believe these projects will gradually progress over this longer timeframe, or will they be more front-end loaded? How are you approaching this moving forward?

Definitely it looks different than it ever did in the history of LNG and that's evidenced by the fact that we booked Big LNG orders in each of the first third quarters of this year, which shows that earnings are marching towards certainty on FID across a variety of projects. I would anticipate that it does continue across a longer period of time and stair-step its way versus being completely front-end loaded. To give you a little color on kind of our expectations on these projects and timing on FID. While we haven't included it in our 2023 outlook, we do anticipate that we should get released in late Q1, early Q2 on an equipment-related order for a separate project that's not currently in backlog. We're also working, as I commented, on two particular potential NRUs which are add-ons to existing facilities or to projects that are moving to FID. An NRU content for us is somewhere between $75 million and $90 million per NRU add-on. I'd anticipate that just given the changes in gas composition and the needs for NRU or HHCs that we'd see an order sometime in 2023 related to that. We also anticipate seeing an IPSMR international order and that could be either small-scale or it could be a larger project in the upcoming year. Lastly, I'd say that there are multiple projects that have come into the pipeline that even ones that weren't considered on hiatus or deceased before this year, there's new projects starting to come into the pipeline for customers that currently have existing projects that are moving to FID or about to move to FID. We like that continuation of the utilization of the same equipment, the same design and that really adds to this look across the coming decade of more consistency for these larger projects.

That's great color. Thank you. And then maybe just on floating LNG. I mean, can you talk a little bit about that, obviously, when it's Big LNG, I know you recognize that, you get them on a six-month lag and when you recognize it over two to three years when it's floating, just given the potential size of those projects, little bit lower in terms of dollar amount or actually it could be quite a bit lower. I mean, how do you think that those or how should we think about those flowing from project award to then starting to recognize? And how long you would recognize that?

The floating projects are intriguing. Generally, these floaters typically result in revenue recognition within a year or up to 24 months, depending on the project's size and structure. For instance, the NFEs Fast projects usually fall within a 12-month timeframe for delivery. Other projects, which require more design work, may extend to around 18 months. However, projects tend to deliver revenue recognition comparatively faster within the 18 to 24-month range than larger scale projects. We appreciate the mix of floating and small-scale projects alongside the Big LNG initiatives because it provides various strategic options. It’s akin to layering icing on a cake; each layer builds upon the previous one. Our backlog continues to expand, and we are witnessing an increase in projects valued between $10 million to $50 million, along with a few larger projects valued between $200 million and $500 million. This combination is favorable as it contributes to a strong margin mix and enhances the consistency across our operations, which we anticipate will further boost margins as we benefit from absorption during different cycles.

Got it. Okay. Thanks, Jill. I will take the rest offline.

Thank you, Eric.

One moment for our next question. The next question comes from Ben Nolan with Stifel. Your line is open.

Hi, Jill. I really want to ask about LNG, but I'll hold off. Instead, I’d like to start with carbon capture. We’ve clearly seen a surge in activity over the past few months. I expected that if there was going to be an increase in the total addressable market, there might have been more indications of that. I’m curious about a few things; first, you've been anticipating some kind of acceleration like we’re experiencing. As you look at the guidance for 2023, how much of that includes carbon capture, and how should we think about the margins for that business? I know it probably varies based on specifics, but generally speaking.

Sure. So first of all, on the TAM side, I completely agree with you that I anticipate it's going to get larger as we start to see commercialization. So we took an approach of building it from an anticipated number of plants of various different sizes, and you can see those assumptions in the appendix. With that said, I would anticipate that it continues to grow across the coming years. It was a little hesitant to go larger until we start to see the commercialization of the plant build themselves; we're certainly seeing the most activity on feasibility and design studies than we have ever seen. So positive trend in that direction, but I'm looking for the certainty around some of these larger scale actual plants being added to facilities. That will be something key to watch to see that TAM grow for us. So it's on the horizon here, and I was very bullish on this two years ago and I continue to be bullish, but I think we finally hit the point where the macro factors support some of the larger industrial applications for the full solution. In terms of what we're seeing on the CCUS side, and this is – we will roll Earthly Labs, the small-scale in with the larger industrial to kind of give you a number that's in the $40 million range in the year. With that said, the margins on CCUS do depend on the application so Earthly Labs, obviously, is a very unique application, it's a very quick turn from booked to delivery and install and has a nice payback for the customers. Those types of applications are above that 35% gross margin as a percent of sales mark. On the larger scale industrial, the studies which are engineering work, we get nice margin on those but we roll it in our mindset towards the full project. The larger size industrials will be at kind of that 30% mark, and we don't anticipate that there's a lot of downside to that, but it's probably not a ton of upside to the margin on these larger projects just because of all the different input costs that go into them.

I appreciate the information. Shifting topics, I was somewhat surprised to see the increase in Cryo Tank orders, especially considering the current macro environment, which typically leans more towards industrial gas. It's encouraging to note the focus on hydrogen. However, with the uncertainty in Europe, I’m curious if you could provide some insight. It seems there might be more acceleration in hydrogen projects in Europe, particularly in hydrogen and CCUS, beyond what you would expect from your standard industrial operations. Is that an accurate perception? Additionally, are you noticing any changes in order activity in Europe?

I think your point is valid. Ben, you attended Gas Tech earlier this quarter in September, and we continue to hear from both the public and private sectors in the EU that while there’s an urgent need to address the natural gas issue, there’s also a significant emphasis on sustainability in the region. During a recent trip to the EU, governments discussed how the US Inflation Reduction Act has increased pressure on the EU to encourage demand for hydrogen, particularly on the consumer side. I believe hydrogen adoption will keep accelerating across the EU, with a range of applications. I touched on this in my prepared remarks and want to reiterate that potential and existing customers who previously focused solely on gaseous hydrogen are now approaching us, stating that to meet their needs—such as for trains or linking fuel cells with the necessary equipment for heavier applications—they require liquid hydrogen. There’s been a noticeable shift in the EU. Although natural gas often dominates the news, hydrogen is advancing rapidly, and we see this reflected in our order books, like the projects we’re involved in for hydrogen-powered cruise ships. There are diverse applications emerging, and if the EU Commission implements measures similar to the Inflation Reduction Act, I expect this trend will further accelerate in 2023. On the industrial gas side, we’re particularly monitoring developments in the EU. Our industrial gas customers, on a global level, are projecting growth of around 4% to 6% in 2023 compared to 2022, although there are regional nuances. I anticipate flat growth in the EU regarding tank purchases, influenced by seasonal timing; typically, purchases are lower in winter and rise in spring, depending on their existing inventory. Overall, we've modeled this approach for 2023, and I believe Europe will show the greatest softness among all regions as we enter the New Year.

All right. I really appreciate it. Very thorough again. Thank you.

Thanks, Ben.

One moment for our next question. Your next question comes from John Walsh with Credit Suisse. Your line is open.

Hi, good morning, everyone.

Good morning, John.

I guess maybe just first thinking about the operating margin, I think you already went into detail on the quarter, but maybe you can just give us some of the expectations you have for Q4. And maybe even beyond since you have ‘23 out there, obviously, good momentum. But just maybe level-set us on the trajectory you see here from Q3?

Definitely. We share your view about the positive momentum. We were very pleased with the third quarter overall, especially with the sequential margin improvement in three out of the four segments. As I've mentioned before, our business doesn’t operate on a quarterly basis, so fluctuations in specialty don’t significantly affect us, but they do provide more clarity for the fourth quarter and the expected sequential margin improvement. We anticipate our gross margin for the year to exceed 30%, and for the fourth quarter, we expect our operating margin to be in the mid-teens range. Looking at the segments, I expect Cryo Tank Solutions' gross margin as a percentage of sales to increase in the fourth quarter. The heat transfer segment will likely remain close to the performance of the third quarter, as we have good insight into the project mix there, which we are pleased with. In specialty, we see a sequential increase of a few hundred basis points in margins. For RSL, we expect margins to be around 38% in the fourth quarter. As we move into 2023, I want to remind everyone that historically, the first quarter is always the lowest for all metrics, and we expect this trend to continue, except for HTS, where our backlog supports more consistent sales throughout 2023. We anticipate Q4 and Q1 margins to be quite similar, with an increase expected as volumes grow in Q2, Q3, and Q4 of 2023.

That's great. Thank you for that. And then maybe just switching to cash, if I did the math correct, next year you're kind of implying 13% or so free cash flow margin. But obviously, you are going to be delivering a lot of sales and so probably building some working capital. Just curious what the levers are there to pull for that free cash flow outlook? And maybe just as we think about these milestone payments that you have coming in Q4, I'm sure there're some of those next year as well. Just maybe anything around that cash, because it looks like you have really strong cash next year.

Yes, we do anticipate really strong cash and it's never fun; people don't like to have a heavy fourth-quarter on any metric, but that's just the way that our project schedules are. The milestone payments in the fourth quarter are mid project milestone or early project milestone payments, so we definitely anticipate and have very specific scheduled around the 2023 full-year milestone payments. So those are our contributors, those are one of the levers. The other is that we'll have some build of working capital on the AR side, but ultimately we have built so much safety stock on the inventory side that we at a point where we feel like we cannot hold as much on the inventory and bleed some of that out, so that's another lever to pull from a working capital perspective. So all-in-all the 13% we think is kind of right down the fairway number and with the milestone payment schedule, it gives us the confidence to put that number out there right now.

Great. Thanks for the details. I'll pass it along.

Thank you, John.

One moment for our next question. Our next question comes from Rob Brown with Lake Street Capital Markets. Your line is open.

Good morning, Jill.

Hey, Rob. Good morning.

Maybe we can continue discussing the margin question. Does this give you an idea of the operating margin you expect to achieve in the business, and how do you see that developing?

I believe we can achieve over a 20% operating margin in the next few years, driven by various factors including our ongoing productivity automation. Additionally, the integration of smaller projects ranging from $10 million to $40 million alongside larger projects enables us to better manage our operations, allowing us to operate multiple locations and avoid the cyclical labor fluctuations we have experienced in the past. Overall, this goal aligns with our targets for 2024 and 2025. Specifically, we project an operating margin of 20% for 2024, with an expected increase of about 100 basis points into 2025.

Thank you for the clarification. Regarding your outlook for 2023, what are your assumptions about the situation with energy and supply chain issues in Europe? Do you expect these conditions to improve, remain the same, or worsen?

Yes. In our current outlook, we assume that they get worse before getting better across the coming kind of six months or maybe its four months. But through the winter, we expect that it's going to get worse and then return to kind of where we are now. But our assumption is that there is no silver bullet that makes that situation better. Now the opposite side of the coin is that's a positive for our business in the sense of demand and being able to help on the energy access side of things, and we're certainly seeing regas terminal activity, some of the Dagger, the mobile regas units that we have being adopted by new customers very quickly. That's a solution that we can solve for and deliver in a matter of months versus larger terminals that get built in years. So it's a double-edged coin because in manufacturing world, the input costs and the uncertainty exist, yet on the opposite side of that, we're able to anticipate more demand associated with the European regions trying to resolve this energy issue.

Okay. Thank you. I’ll turn it over.

Thank you, Rob.

One moment for our next question. Our next question comes from Sam Burwell with Jefferies. Your line is open.

Hi. Good morning, everybody. I wanted to circle back towards carbon capture. I mean, as I understand that your Cryo Solution is differentiated from most others in the carbon capture space. So I was curious if you could sort of breakdown how you think about how your TAM compares to others and that you're better suited to retrofit existing facilities versus others that kind of require new builds. And then in terms of what we can expect to see in terms of the MOUs like bearing fruit with orders coming in and ultimately, the revenue being recognized. What's the time frame you guys see in terms of being able to have us like see orders and revenues come in from carbon capture at least for the large-scale industrial stuff.

Absolutely. So great questions. On the SDS cryogenic carbon capture technology or CCC, as we call it, it definitely is differentiated very, very strong applications for the retrofits in particular, in large industrial applications, where we've seen the majority of the work come into our order book to date have been in industrial manufacturers, ranging from studies for a large metals manufacturer to cement plants, to International Flavors & Fragrances, there is a variety of different retrofit studies that have been completed or are in place. So in terms of the TAM, I think you're going to see larger TAMs out there for carbon capture as a whole than what we show. Ours is being built up and saying, okay, realistically how many of these plants are going to be built in this period of time. The larger the CCUS plant gets the longer period of time it takes to build. My view is, if you ask for a TAM that was out into 2035 or 2040, you're going to see a sharp ramp from 2030 to those periods of time because this will become more standard. It will become more standard sizes and the applications will have kind of picked the technology that they want to use. So on a longer view, I think that we're really, really well positioned, well positioned this decade, but really well positioned in the coming couple of decades. With that said, on how these MOUs play out into the order book. I'll give you one example. We weren't allowed to provide specifics, but I commented that the one MOU that came with a master service agreement in the quarter, which is for a large beverage manufacturer. With that MOU when we signed it, we received a $2.5 million order for CO2 related equipment for their facilities and that is in conjunction with carbon capture. In addition to that, the majority of the MOUs that we signed in the quarter came with some order associated with it, not certainly at the $2.5 million level, but we're starting to see these relationships really benefit the order book. The other part that I like about the partnerships and collaborations is that it pulls you through to end markets that were not necessarily kind of already well positioned in. For example, South Africa with CAT Group is a market that they're strong in, and they can pull our technology through the opposite way, not just geographies, but end markets and applications like the AG gas agreement where we're having access to agriculture, further penetrating that and it opens up the option for and what I believe will be the larger TAM as we hit more of these end markets. It's still really embryonic, but I think the future is very bright for carbon capture. I think we made the investments in the technology at the right time so that we had this kind of runway to get to the point that we are commercialized and this can be built tomorrow when someone places an order.

Got it. That's very, very helpful. And then maybe another one going back to LNG. You guys have obviously done a really good job winning orders for modular train projects between Venture and Cheniere and the New Fortress as well. Just curious what the TAM that you guys associate with LNG, how much of an increase in modularity does that assume? And does that really hit on kind of the smaller ticket items? Or do you think that there will be like a wave of sort of larger but modular train projects that you guys can capture business on?

Yes. The figures we shared, particularly on slide 28 of the supplemental deck, are derived from actual project discussions with customers who are in various stages of the design phase. This approach provides a more bottom-up perspective rather than a top-down one, which gives me greater confidence than simply estimating a percentage of the total addressable market. I feel optimistic about our position regarding the projects presented on slide 28 in the $5.6 billion larger addressable market. However, it's important to note that the timing of these projects remains uncertain. If you had asked us this question two years ago, the projected number would have been significantly smaller, primarily due to the shift towards modularity. There are many questions regarding what modularity entails, but in our field, it means implementing mid-scale, utilizing IPSMR as process technology, rather than building a full 20 MTPA base-load facility at once. Instead, we focus on developing one, two, or three MTPA trains, allowing operators the flexibility to connect them and execute based on their financial conditions. Consequently, I believe the addressable market has expanded due to this macro-level shift, along with our engagements with several international oil companies for process validation. To address your question directly, I believe there are certainly additional opportunities available beyond what we're currently showing, particularly if this trend continues. In brief, yes, there are indeed more potential opportunities in the small-scale and floating sectors. Thank you for your question.

Yeah. Got it. Thanks, Jill.

Thank you, Sam.

One moment for our next question. Our next question comes from Martin Malloy with Johnson Rice. Your line is open.

Good morning. Congratulations on the strong order quarter. My first question is about water treatment, which is on slide eight. It appears to be the second largest total addressable market in the near term, showing a significant increase from previous figures. Could you provide more insight into what's happening in the water treatment sector? Additionally, I'm curious about the food and beverage segment; I would have anticipated an increase there, especially considering current trends in CO2 pricing for pure CO2. Could you comment on these areas?

Absolutely. Thanks, Marty. On the water side, we have always viewed water as an underappreciated part of our portfolio. With the technologies from BlueInGreen and AdEdge, we have been able to enter more markets than we could have with just equipment. Now that we have technology that addresses all 300-plus contaminants, we are seeing larger wins in international markets. For instance, in India, once we begin a project, there are often several follow-on projects where the state decides on the technology and provider. India's demand has significantly increased our total addressable market for water. To date this year, we've secured two large water treatment contracts in India, each worth about $5 million. We're also in discussions for multiple additional projects in those same states in the near future. Additionally, over the past year, we have penetrated the Brazilian market through a water treatment project in Sao Paulo. Now that we're positioned to operate in these regions with proven technologies, we are in conversations for more projects. We wanted to wait until we gained enough experience and backlog before expressing our belief that there are more opportunities in a short timeframe. Also, we are noticing larger order sizes overall, driven by the types of contaminants. Just this month, we received another $3 million water treatment order in the United States. This illustrates a shift from previous projects, which ranged from $100,000 to $250,000, to now seeing multimillion-dollar projects in our pipeline. These factors are significant contributors to our water market penetration and the increase in the near-term addressable market. Additionally, the total addressable market for water reflects the interconnectedness of the Nexus of Clean. If I had to identify three areas of our business that benefit from collaboration, I would choose food and beverage, water, and carbon capture. We’re witnessing traditional food and beverage customers discussing water treatment with us and Earthly Labs customers interested in tanks for their applications involving water. We appreciate this synergy, though it’s still developing. We have not yet adjusted the total addressable market for food and beverage, but we are gaining new customers in that sector. While we haven’t increased the market size, I believe our market share is growing in food and beverage, particularly with some significant national accounts with multiple store builds.

Great. And my second question, I wanted to ask about the leasing business. And it looks like you've got strong orders on the ISO container side. Could you maybe talk about what you're seeing on the outlook for the leasing business?

Absolutely. On the leasing business, we continue to invest our organic CapEx into the fleet itself. We did a pretty big ramp between the middle of 2020 and the middle of 2021. Over the last year, we've probably put in another kind of $7 million or $8 million of CapEx. With that said, we continue to stay very disciplined on what's in that leasing fleet. The standard product, if it is returned we are able to redeploy it. It's rarely returned; I can tell you almost the majority of the time, certainly, the leaseholder ends up buying the equipment. So good outlook on the leasing side. It is a function of how fast it grows is a direct function of our ability to add to the fleet itself. The ISO container side; we've actually seen more outright buys than leases on the ISO side. I think that is a direct result of the movement towards this energy access and security and resiliency trend. We're looking ahead to seeing the leasing business continue to grow. It's a nice tool to have in the portfolio when you're talking with customers that have a bookend to their capital budget. I think that where you'll also see an uptick on the leasing side in the portfolio is if we are to offer leasing options on trailers or tanks for hydrogen applications.

Great. Thank you very much.

Thanks, Marty.

One moment for our next question. Our next question comes from Marc Bianchi with Cowen. Your line is open.

Hi. Thank you. Just first off, I'd like to confirm the year-to-date EPS that would be consistent with the guidance. I see $3.04 for year-to-date. Is that correct?

That is correct.

Okay. Great. So implying $1.96 to $2.21 for the fourth quarter. What tax rate is assumed for the fourth quarter? I got you on the 17% for the year, but it looks like there was a pretty big tax benefit in the third quarter and that might bring down the full year, but maybe the fourth quarter is still 20% or something. Can you just clarify that?

Yes. In the third quarter, we did have a tax benefit in China, which was the release of the valuation allowance associated with kind of continued improvements in our results in China and some of our foreign jurisdictions. I anticipate that the fourth quarter, though, doesn't have that one-time benefit that we saw. In the kind of low 20% for the fourth quarter.

Got it. Okay. One last question from me. Regarding the free cash flow, could you explain the nonrecurring costs that are accounted for? It was about $43 million year-to-date. What should we expect for the fourth quarter as we consider the guidance for the year?

Yes. We have projected around $5 million in nonrecurring add-backs for the fourth quarter, which could be slightly higher. We are not anticipating any inventory related to a strategic build as we focus on reducing inventory levels, and given our shipment patterns in the fourth quarter, we expect inventory to drop. Additionally, there will be no divestiture-related tax payments or any escrows being released during this time.

Okay. Can you talk about sort of what the year-to-date includes that $43 million that I referenced? It sounds like maybe it's some of the stuff you just said, but just curious if you could spend a little more time on it?

Yes. The add-back specifics by category, there's some details in the appendix of the deck, I think on slide 43 maybe. In there, we have restructured. And I can run through some of those if you want.

I was just curious, yes, I mean, the biggest bucket is that sort of nonrecurring items outside of the working capital movements and that totaled $43 million year-to-date, I guess it was $13 million in the most recent quarter. Maybe just discuss what that is? And I guess the implication of calling that out is that it's not going to be something that we would see in 2023? I guess I just want to kind of confirm that.

Yes, we anticipate some add-backs in 2023, but not all categories currently visible. The restructuring category pertains to severance and other organizational changes we've undertaken. I previously mentioned the RSL, where we've actually decreased add-backs this quarter due to an excess accrual related to management restructuring in that segment. Regarding deal and integration-related costs, we only add back the first year of integration expenses. You will see these fully unless we execute another deal before the end of 2023. Our last acquisition was Fronti in May of this year, and integration efforts will start by next May, with minimal impact since both Fronti and CSC were small acquisitions. Any costs tied to the remaining liability from the Cryo bio divestiture will also be considered, along with actual expenses incurred from any deals or acquisitions. For organic startups, similar rules apply; we won’t have add-backs for these. For instance, the air cooler consolidation completed in the second quarter resulted in no add-backs for the third quarter. We expect the brazed aluminum pulse line to be operational in the first quarter. The German trailers will be utilized until mid-2023, and the vapor riser line will be fully operational by the end of this year. Training costs are just excess amounts captured in the startup expenses. Each quarter, we will adjust for market changes, whether up or down, affecting the add-backs.

Got you. Okay. So is there any steer on what the number ought to be for '23 if we think about the reported free cash flow and the adjusted free cash flow, what the difference there would be in 2023?

Yes. I would say sub half of what you see for 2022.

Okay. Great. Thanks so much Jill. I’ll turn it back.

Thank you, Marc.

One moment for our next question. Next question comes from Walter Liptak with Seaport Research. Your line is open.

Hi. Thanks. Good morning, guys. I wanted to ask kind of a follow-on. You talked earlier about gross margins, operating margins for 2023. I wonder if you can just help us with the cadence of revenue and the way you think the EPS are going to flow in 2023? Are we looking at something similar to this year, maybe with better supply chains or some of the project work for LNG, there's a different cadence?

Yes. I'll start the comment of the first quarter every year is the lowest quarter, and that is certainly going to be the case in 2023. That's a function of when the customers want the standard product, kind of the difference between book and shift based on the holiday booking period to the shipments themselves, whereas on the project side, that's a little more consistent. So Q1, certainly the lowest from a sales perspective. I would anticipate that which would be similar to this year is Q2 every quarter being sequential. If you look back before this past year, we would have had Q1 as the lowest quarter and Q4 as the second lowest quarter. This year, we'll have each quarter sequentially increasing from the top line. Next year would be the same scenario, so Q1 to Q2 and so on.