Executive Summary / Key Takeaways

• Strategic Transformation & Market Leadership: Chart Industries has fundamentally transformed into a diversified leader in "Nexus of Clean" technologies, leveraging its deep cryogenic and heat transfer expertise, significantly bolstered by the Howden acquisition, to capture growth in LNG, hydrogen, carbon capture, and emerging sectors like data centers and nuclear.
• Robust Financial Performance & Deleveraging: The company delivered record Q2 2025 results, with strong sales and expanding margins, driven by backlog conversion and operational efficiencies. It is on track to achieve its 2025 net leverage target of 2.0x-2.5x, supported by robust free cash flow generation of $550 million to $600 million.
• Technological Moat & Growth Drivers: Chart's proprietary IPSMR technology is gaining significant traction in LNG, while its specialized equipment for hydrogen (including 300-ton/day scale-up capability) and a growing $400 million pipeline in data center cooling underscore its differentiated technological advantages and future growth avenues.
• Compelling Outlook Amidst Macro Headwinds: Despite macroeconomic uncertainties and tariff impacts, Chart reiterates its 2025 sales guidance of $4.65 billion to $4.85 billion and adjusted EBITDA of $1.175 billion to $1.225 billion, reflecting confidence in its diverse backlog and aftermarket strength.
• Baker Hughes Acquisition & Future Potential: The proposed all-cash acquisition by Baker Hughes Company (NASDAQ: BKR) at $210 per share, announced on July 28, 2025, marks a pivotal strategic move, positioning Chart within a larger entity to accelerate its energy and industrial technology strategy and potentially unlock further synergies.

The Enduring Legacy and Strategic Evolution of Chart Industries

Chart Industries, founded in 1859, has evolved from a long-standing industrial equipment manufacturer into a global leader at the forefront of the "Nexus of Clean" – providing critical process technologies and equipment for clean power, water, food, and industrials. This transformation has been underpinned by a strategic focus on gas and liquid molecule handling, spanning the entire supply chain from engineering and installation to preventive maintenance and digital monitoring. The company's journey has been marked by a deliberate expansion into high-growth, energy transition markets, differentiating itself through specialized cryogenic and heat transfer expertise.

In the competitive landscape, Chart operates against a backdrop of diversified industrial giants and specialized niche players. Companies like Linde plc (LIN) and Air Products and Chemicals, Inc. (APD) offer broader industrial gas and engineering solutions, while Emerson Electric Co. (EMR) focuses on automation and control systems, and MYR Group Inc. (MYRG) specializes in utility infrastructure and data center construction. Chart distinguishes itself through its deep specialization in cryogenic applications, offering engineered solutions that often provide superior performance in low-temperature environments. For instance, Chart's brazed aluminum heat exchangers and vacuum insulated pipes are designed for extreme conditions, potentially offering greater efficiency and durability compared to more generalized offerings from competitors. This technological edge allows Chart to command higher pricing power and secure recurring service contracts in performance-critical segments like LNG and hydrogen. While larger competitors like Linde and Air Products benefit from immense scale and diversified revenue streams, Chart's strategic response has been to leverage its flexible manufacturing footprint across 65 global locations and over 50 service centers. This enables in-region sourcing and production, mitigating supply chain risks and tariff impacts, a key advantage over rivals potentially more exposed to single-source dependencies.

A pivotal moment in Chart's recent history was the early 2023 acquisition of Howden. This strategic move significantly diversified Chart's revenue streams and enhanced its competitive positioning. The Repair, Service & Leasing (RSL) segment, which encompasses aftermarket services, saw its contribution to total revenue surge from the low teens to approximately 35%. This segment is crucial as its installed base of Howden equipment is mission-critical, ensuring consistent maintenance demand even during economic downturns, making it a non-cyclical and high-margin business. The Howden integration has also been a synergy powerhouse, with Chart surpassing its original 2026 cost synergy target of $250 million by Q3 2024, achieving $223 million. Commercial synergies have been even more impressive, reaching $924 million by the end of 2024, well on track to hit $1 billion in Q3 2024. These synergies have directly contributed to Chart's expanding operational margins and improved financial health.

Differentiated Technology: The Core of Chart's Moat

Chart's investment thesis is deeply rooted in its differentiated technologies, which provide tangible benefits and a competitive moat in high-growth markets.

IPSMR: The LNG Liquefaction Standard

Chart's proprietary IPSMR (Integrated Pre-cooled Single Mixed Refrigerant) process technology is a cornerstone of its LNG offering. This technology is designed for modularity and efficiency, enabling faster deployment and often higher operational efficiencies for liquefaction facilities. The tangible benefits are evident in its growing adoption:

• Woodside Louisiana LNG Phase 2: Booked in Q1 2025, this project utilizes IPSMR, with Woodside anticipating Phases 3 and 4 to use the same content.
• LNG Alliance's Amigo LNG Export Facility: Selected IPSMR for its 7.8 MTPA project in Mexico, highlighting its "cutting-edge" and "industry standard" performance.
• ExxonMobil Mozambique Rovuma LNG Project: Chosen IPSMR, signaling its acceptance by major international oil companies.
• Cheniere (LNG)'s Corpus Christi Stage 3: Chart's IPSMR technology supported this project, which achieved its first cargo meaningfully ahead of schedule.
• New Fortress Energy (NFE)'s Fast LNG: Utilizes IPSMR and is producing meaningfully above nameplate capacity.
  The "so what" for investors is clear: IPSMR's modularity and efficiency translate into faster project timelines and potentially lower capital costs for customers, driving Chart's market share in the booming global LNG sector and contributing to higher margins in its Heat Transfer Systems (HTS) segment.

Expanding Horizons: Hydrogen, Data Centers, and Nuclear

Chart's technological prowess extends beyond LNG into other critical clean energy applications:

• Hydrogen Solutions: Chart is a leading provider of engineered liquefaction, storage, and compression equipment for hydrogen. The company has seen its best order year for hydrogen in Europe in 2024 and record hydrogen sales in Q4 2024. Management projects a high single-digit to 10% CAGR for the global hydrogen market between now and 2030, a target they believe is "very achievable." Critically, Chart's technology has "no upper limit" to liquefaction capacity, with discussions underway for projects up to 300-ton per day in the medium term, significantly larger than the current 30-ton per day projects like the one for Renergy Group Partners LLC in Egypt. This scalability positions Chart to capture future large-scale hydrogen infrastructure development.
• Data Centers & AI Cooling: The increasing energy intensity of data centers and AI is a significant growth driver. Chart's existing portfolio of heat rejection, cryogenic storage, water treatment, and digital monitoring solutions are directly applicable. In Q2 2024, Chart secured a $40 million order for air-cooled heat exchangers for a data center. The company estimates a $400 million commercial pipeline for data centers over the next 12-18 months, with a near-term opportunity of approximately $500 million based on three gigawatts of data center addition per year. This can expand further into heavy industrial chilling using Howden's screw compressors. Chart's Tuf-Lite IV fans, with their unique sweeping blade design, offer improved efficiency and resiliency for high-wind environments, making them ideal for data center cooling.
• Nitrogen Rejection Units (NRUs): Chart's NRU technology addresses a growing need in the U.S. Gulf Coast due to varied natural gas compositions. These units are critical for meeting pipeline and LNG specifications. Chart content per NRU can range from $20 million to $75 million, and the global NRU market is projected to grow at a 6.3% CAGR from 2025 to 2033.
• Carbon Capture: Chart's Earthly Labs technology is scaling up, as evidenced by a recent carbon capture retrofit order for a coal-fired power plant within the RSL segment. This demonstrates the practical application and growing demand for Chart's solutions in industrial decarbonization.
• Nuclear & SMR: Chart's fans, gas circulators, turbines, and air coolers serve both traditional nuclear facilities and emerging Small Modular Reactor (SMR) technologies. Orders from EDF (EDF) and Axima in October 2024 highlight increasing traction in this market.

These technological differentiators allow Chart to compete effectively against broader industrial players. While Emerson Electric (EMR) offers advanced automation, Chart's specialized cryogenic solutions provide superior performance in low-temperature applications. Against MYR Group (MYRG), which excels in electrical construction for data centers, Chart's focus on the specialized cooling and energy infrastructure for these facilities offers a distinct value proposition. Chart's commitment to R&D, coupled with its flexible manufacturing capabilities (being the only U.S. manufacturer of brazed aluminum heat exchangers with the world's two largest furnaces), ensures it can meet diverse customer needs and maintain its competitive edge.

Financial Performance and Operational Momentum

Chart Industries has demonstrated impressive financial performance and operational discipline, particularly following the Howden integration. For the second quarter of 2025, the company reported sales of $1,082.3 million, an increase of 4.0% from Q2 2024. Year-to-date Q2 2025 sales reached $2,083.8 million, up 4.7% from the prior year. This growth was primarily driven by strong performances in the Heat Transfer Systems (HTS) and Specialty Products segments.

Profitability metrics also reflect operational improvements. The consolidated gross profit margin for Q2 2025 was 33.6%, a slight decrease from 33.8% in Q2 2024, primarily due to lower margins in the Repair, Service & Leasing (RSL) segment from the non-recurrence of high-margin emergency service contracts. However, year-to-date Q2 2025 gross profit margin improved to 33.8% from 32.8% in the prior year, driven by gains in Cryo Tank Solutions (CTS), HTS, and Specialty Products. Adjusted operating income margin expanded by 190 basis points in Q1 2025, reflecting the realization of cost synergies from the Howden integration. Specialty Products achieved a gross margin of 30.3% in Q1 2025, its first time above 30% since Q3 2022, a testament to improved efficiencies and SG&A leverage.

Segment-specific performance highlights the diversified growth:

• Heat Transfer Systems (HTS): Q2 2025 sales surged 24.8% to $295.3 million, driven by backlog execution in LNG, data centers, and traditional energy. Its gross profit margin improved by 450 basis points to 30.2% due to better productivity and project mix.
• Specialty Products: Q2 2025 sales increased 5.5% to $292.9 million, fueled by growth in hydrogen, space, chemicals, infrastructure, and helium. While Q2 gross margin slightly dipped due to mix and production costs, the segment's overall trajectory remains strong.
• Repair, Service & Leasing (RSL): Despite a Q2 2025 sales decrease due to the non-recurrence of record field service work from Q2 2024, RSL remains a high-margin segment, with Q2 2025 gross margin at 44.6%. RSL is approximately one-third of Chart's business and half of its operating profit, providing stability and consistent aftermarket demand.

Liquidity and capital management are key priorities. As of June 30, 2025, cash and cash equivalents stood at $342.3 million. The net leverage ratio improved to 2.91x as of March 31, 2025, down from 4.08x five quarters prior. Chart aims to achieve a net leverage ratio of 2.0x to 2.5x in 2025, primarily through operational cash generation. Free cash flow for H1 2025 was $85.9 million, a significant improvement from $21.0 million in H1 2024, driven by higher net income. Capital expenditures for 2025 are anticipated to be a normalized 2.0%-2.5% of sales, focused on capacity and automation. The company has explicitly stated that it will not pursue material cash acquisitions or share repurchases until its leverage target is met, underscoring its commitment to debt reduction.

Outlook and Strategic Imperatives

Chart Industries reiterates its full-year 2025 outlook, anticipating 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 is supported by a robust ending backlog of $5,536.5 million as of June 30, 2025, with approximately 52% of remaining performance obligations expected to be recognized in the next 12 months. The company expects the second half of 2025 to be stronger than the first half, driven by the timing of specific project revenue and service work in backlog, including large LNG, mining, and space exploration projects.

The commercial pipeline remains strong at approximately $24 billion, with a significant $1 billion pipeline of potential large global LNG orders expected to convert to backlog in 2025. This does not include the ExxonMobil (XOM) Mozambique Rovuma project, which is already committed. Customer feedback indicates continued positive trends in marine, metals mining, energy, natural gas, space exploration, nuclear, data centers, aftermarket, carbon capture, and hydrogen (especially in Europe). While industrial gas and hydrogen in the Americas are being closely monitored for uncertainty, the company's diversified end markets and flexible manufacturing provide resilience.

Risks to the outlook include macroeconomic and geopolitical instability, which could affect project timing and supply chains. Tariffs pose an estimated gross annual impact of approximately $50 million, but Chart is actively mitigating this through in-region sourcing, flexible manufacturing, and price adjustments. The company's ability to pivot between international and domestic raw material sources, and its focus on manufacturing in the U.S. for the U.S. market, significantly reduces its overall tariff exposure on finished goods.

The most significant recent development is the proposed acquisition by Baker Hughes Company (NASDAQ: BKR), announced on July 28, 2025. This all-cash deal, valued at $210 per share for Chart common stock, will see Chart become a wholly owned subsidiary of Baker Hughes. This transaction, which followed the termination of a prior merger agreement with Flowserve Corporation (FLS), positions Chart to accelerate its energy and industrial technology strategy within a larger, more integrated entity. The completion of this merger is subject to customary conditions, including Chart stockholder approval and regulatory clearances, with specific termination fees outlined for various scenarios. This strategic alignment with Baker Hughes could unlock further synergies and expand Chart's market reach, particularly in the broader energy and industrial technology sectors.

Conclusion

Chart Industries stands at a pivotal juncture, having successfully transformed into a technologically differentiated leader in the burgeoning clean energy and industrial gas sectors. Its strategic acquisition of Howden has not only diversified its revenue base and significantly boosted its high-margin aftermarket business but has also unlocked substantial cost and commercial synergies, driving impressive financial performance. The company's proprietary IPSMR technology, coupled with its advanced solutions for hydrogen, carbon capture, and emerging markets like data centers and nuclear, provides a robust competitive moat.

Despite the inherent uncertainties of a dynamic global economy and the specific challenges of tariffs, Chart's strong backlog, diversified end markets, and disciplined operational execution underpin a confident 2025 outlook. The proposed acquisition by Baker Hughes Company (NASDAQ: BKR) represents a significant validation of Chart's strategic value and technological leadership, promising to integrate its specialized capabilities into a larger, more comprehensive energy and industrial solutions provider. For investors, Chart offers a compelling narrative of a company with a rich history, a proven ability to adapt and innovate, and a clear path to sustained growth and value creation, particularly as it becomes a core component of Baker Hughes's diversified portfolio.