Executive Summary / Key Takeaways

• Chart Industries has successfully transformed through strategic acquisitions and divestitures, notably the Howden integration, establishing a diversified portfolio across the "Nexus of Clean" (clean power, water, food, industrials) with a significant and growing aftermarket presence.
• The company's differentiated technologies, including IPSMR for LNG and advanced cryogenics, provide tangible operational and efficiency benefits, contributing to a competitive moat and supporting margin expansion, particularly evident in the Heat Transfer Systems and Specialty Products segments.
• Strong operational execution, driven by synergy realization and productivity initiatives, is translating into improved financial performance, with Q1 2025 showing increased gross and operating margins and improved cash flow usage compared to the prior year.
• Management has reiterated its full-year 2025 outlook, projecting continued double-digit sales growth and margin expansion, underpinned by a robust backlog, anticipated large project bookings, and the resilience of the aftermarket business, despite macroeconomic and tariff-related uncertainties.
• Chart is making steady progress towards its target net leverage ratio of 2.0x-2.5x in 2025, supported by strong free cash flow generation expectations, which will provide increased financial flexibility for future capital allocation priorities.

A Transformed Enterprise in the Nexus of Clean

Chart Industries, Inc. traces its roots back to 1859, but the company operating today is fundamentally shaped by recent strategic actions. A pivotal moment arrived around the first quarter of 2023 with the transformative acquisition of Howden. This move dramatically expanded Chart's capabilities, particularly in rotating equipment like compressors and fans, and significantly bolstered its global service network. Concurrently, the company divested non-core assets, streamlining its focus towards process technologies and equipment for gas and liquid molecule handling across what it terms the "Nexus of Clean" – encompassing clean power, water, food, and industrials.

This strategic reshaping has positioned Chart as a key player in industries driving energy transition and efficiency. Its portfolio now spans stationary and rotating equipment used across the entire liquid gas supply chain, from engineering and installation to maintenance and digital monitoring. Key end markets include liquefied natural gas (LNG), hydrogen, biogas, and CO2 capture. The Howden integration, in particular, has diversified Chart's revenue streams, notably increasing the contribution from the higher-margin Repair, Service & Leasing (RSL) segment, which now accounts for approximately one-third of total revenue, up from the low teens previously. This expanded RSL business provides a layer of resilience and recurring revenue that was less prominent in the historical Chart.

Within the broader industrial process technologies landscape, Chart competes with a range of players, from large industrial gas giants like Linde plc (LIN) and Air Products and Chemicals (APD) to more specialized clean energy firms like Bloom Energy (BE). Linde and Air Products, with their vast scale and integrated gas production models, represent formidable competitors, particularly in large-scale industrial gas supply and hydrogen production. Linde's proprietary VPSA technology, for instance, offers energy efficiency advantages in air separation. Air Products' on-site production model can provide lower operating costs per unit compared to more modular solutions. Bloom Energy, while a partner in some carbon capture initiatives, competes in clean energy generation with its fuel cell technology, which can offer faster processing for power generation in certain applications.

Chart differentiates itself through its specialized cryogenic components, integrated solutions across the supply chain, and its extensive service network, particularly benefiting from the Howden integration. While its overall scale and profitability margins (TTM Gross Margin 32.75%, Operating Margin 16.41%) may trail those of larger, more diversified industrial gas companies like Linde (TTM Gross Margin 48%, Operating Margin 26%) and Air Products (TTM Gross Margin 32%, Operating Margin 37%), Chart's focus on niche efficiency and faster deployment in specific applications, such as mid-scale LNG or virtual pipelines, provides a competitive edge. The company's RSL segment's strong growth and higher margins (Q1 2025 Gross Margin 44.7%) also stand out compared to the service components of its larger rivals, offering a valuable source of stable revenue and profitability.

The market environment is characterized by several compelling growth drivers. The increasing energy intensity driven by trends like AI and data centers is creating demand for Chart's heat rejection and cryogenic cooling solutions. The ongoing global energy transition, including the build-out of LNG infrastructure, hydrogen ecosystems, and carbon capture projects, directly aligns with Chart's core offerings. The need for more efficient processing of varied natural gas compositions is driving demand for Nitrogen Rejection Units (NRUs). These broad trends, coupled with nearshoring initiatives and increasing interest in nuclear/SMR technologies, provide a fertile ground for Chart's diversified portfolio.

Technological Edge and Operational Execution

At the heart of Chart's competitive positioning lies its differentiated process technologies and equipment. A prime example is its IPSMR process technology for LNG liquefaction. This technology is gaining traction globally, chosen for significant projects like Woodside Louisiana LNG Phase 2 and ExxonMobil Mozambique Rovuma LNG. IPSMR is particularly well-suited for modular applications, offering benefits like limited plot space needs and the potential for higher efficiencies when integrated with e-drives. While specific quantifiable efficiency improvements over all competing technologies are not detailed, management highlights its acceptance as a validated solution and its role in securing large project awards.

Beyond IPSMR, Chart's expertise in cryogenic technologies for hydrogen, helium, and other industrial gases is a core strength. Its vacuum insulated pipes and storage tanks are designed for high efficiency in low-temperature applications. The company is also developing larger-scale hydrogen liquefiers, with discussions around 100-ton-per-day and even 300-ton-per-day designs, demonstrating a focus on scaling its technology to meet anticipated market growth. In the fan segment, the Tuf-Lite IV fan, with its unique backwards sweep blade design, improves efficiency and resiliency, making it suitable for demanding applications like data center cooling and LNG terminals.

The "so what" for investors is that these technological differentiators contribute directly to Chart's competitive moat. They enable the company to win significant projects, command potentially better pricing in certain niche applications, and position itself favorably in high-growth markets like hydrogen and data centers. While R&D investment figures are not explicitly compared to competitors, Chart's ongoing development work, such as expanding its digital uptime offering and exploring larger liquefier scales, indicates a commitment to maintaining its technological relevance and capturing future market opportunities.

Operationally, Chart is focused on translating its strategic positioning and technological capabilities into improved financial results. The Howden integration has been a key driver, with cost and commercial synergies tracking ahead of original targets. This is reflected in the company's expanding margins. In Q1 2025, consolidated gross profit margin increased to 33.9% from 31.8% in Q1 2024, and the adjusted operating margin expanded by 190 basis points, demonstrating the leverage gained from higher throughput and synergy realization.

Segment performance in Q1 2025 highlights these trends. Heat Transfer Systems saw sales increase by 5.4% year-over-year, driven by LNG project execution, with gross margin improving to 30.9% from 27.6%. Specialty Products sales grew significantly by 16.7%, boosted by hydrogen and water treatment projects, and achieved a gross margin of 30.3%, the first time above 30% since Q3 2022, attributed to improved project mix and efficiencies at the Theodore, Alabama facility. Cryo Tank Solutions sales decreased slightly by 4.1%, but gross margin improved substantially to 24.3% from 20.5% due to better product mix and productivity. Repair, Service & Leasing sales grew modestly by 1.3%, but gross margin remained strong at 44.7%, although down from the prior year due to mix.

Liquidity and cash flow management are critical focuses, particularly following the Howden acquisition. Q1 2025 saw cash used in operating activities improve to $60.0 million from $95.1 million in Q1 2024, reflecting stronger operating performance. Investing activities also saw lower cash usage, primarily due to reduced capital expenditures ($20.1 million in Q1 2025 vs. $46.1 million in Q1 2024). The company's net leverage ratio has steadily declined, reaching 2.91x at March 31, 2025, down from 3.26x at June 30, 2024, and 4.08x post-Howden closing. This deleveraging is a key priority, supported by anticipated strong free cash flow generation.

Outlook, Guidance, and Risk Considerations

Chart Industries has reiterated its full-year 2025 outlook, signaling confidence in its trajectory despite the dynamic global environment. The company anticipates sales in the range of $4.65 billion to $4.85 billion and adjusted EBITDA between $1.175 billion and $1.225 billion. This guidance implies continued double-digit sales growth and margin expansion compared to 2024. Management expects the second half of 2025 to be stronger than the first half, driven by the scheduled conversion of specific large projects in the backlog.

The outlook is underpinned by a robust backlog, which stood at $5143.6 million at March 31, 2025, up significantly from $4331.1 million a year prior. The aftermarket business is expected to continue its strong performance, contributing to both revenue and margin stability. The company also has a meaningful commercial pipeline, including potential large global LNG projects and expanding opportunities in areas like data centers (with a 12-18 month pipeline of approximately $400 million), nuclear, and NRUs, which could contribute to future orders and potentially push results towards the higher end of the guidance range if booked and scheduled promptly.

However, the outlook is not without risks. Geopolitical instability, including tensions between major global powers and unrest in the Middle East, could impact supply chains and project timing. Uncertainty in international monetary and trade policies, particularly regarding tariffs, remains a factor. Chart estimates a gross annual impact from tariffs of approximately $50 million, with about $34 million remaining for the rest of 2025 if unmitigated. The company is actively employing mitigation strategies, such as leveraging its flexible manufacturing footprint, regional sourcing, and price adjustments, aiming to manage this impact within its EBITDA range. Management is also closely monitoring demand trends in specific markets like industrial gas and hydrogen in the Americas, which could be susceptible to economic uncertainty. While the HTEC put option was modified to defer potential cash impact until at least 2028, other financial risks, such as interest rate volatility on variable debt, persist.

The company's financial policy remains focused on achieving its target net leverage ratio of 2.0x-2.5x in 2025, supported by expected free cash flow generation of $550 million to $600 million. This deleveraging is a critical step towards increasing financial flexibility. Once the target is met, Chart plans to evaluate capital allocation priorities, including high ROI organic capital expenditures, potential share repurchases, and strategic bolt-on acquisitions focused on aftermarket, specific technologies, and high-pressure low-temperature capabilities.

Conclusion

Chart Industries has successfully navigated a period of significant transformation, emerging as a more diversified and resilient company strategically positioned within the growing Nexus of Clean markets. The integration of Howden has been instrumental, expanding its addressable market, enhancing its technological breadth, and significantly boosting its higher-margin aftermarket business. The company's differentiated technologies, particularly in cryogenics and LNG liquefaction, provide a competitive edge in key growth areas like hydrogen, data centers, and modular LNG.

Operational execution is translating into tangible financial improvements, with expanding margins and improving cash flow dynamics supporting the deleveraging effort. The reiterated 2025 outlook reflects confidence in the company's ability to deliver continued growth and profitability, underpinned by a strong backlog and diverse market opportunities. While macroeconomic uncertainties and tariff impacts present challenges, management's proactive mitigation strategies and the inherent resilience of the aftermarket segment provide a degree of insulation. For discerning investors, Chart Industries represents an opportunity to invest in a company with a clear strategy, proven technological capabilities, and a defined path towards improved financial health, poised to capitalize on secular growth trends in clean energy and industrial efficiency, while steadily improving its competitive standing against larger rivals through specialization and service excellence.