Chart Industries, Inc. (NYSE:GTLS) Q2 2024 Earnings Conference Call August 2, 2024 8:30 AM ET

Company Participants

Jill Evanko - President & CEO
Joe Brinkman - CFO

Conference Call Participants

James West - Evercore ISI
Ben Nolan - Stifel
Marc Bianchi - TD Cowen
Manav Gupta - UBS
Eric Stine - Craig-Hallum
Rob Brown - Lake Street Capital Markets
Pavel Molchanov - Raymond James
Ati Modak - Goldman Sachs
Walt Liptak - Seaport Research Partners
Martin Malloy - Johnson Rice
Craig Shere - Tuohy Brothers
Sherif Elmaghrabi - BTIG

Operator

Good morning, and welcome to Chart Industries, Inc. 2024 Second Quarter Results Conference Call. All lines have been placed on mute to prevent background noise. After the speakers’ remarks, there will be a question-and-answer session. The company’s release and supplemental presentation were issued earlier this morning. If you have not received the release, you may access it by visiting Chart’s website at www.Chartindustries.com. A telephone replay of today’s broadcast will be available approximately two hours following the conclusion of the call, until Sunday, September 1, 2024. The replay information is contained in the company’s press release.

Before we begin, the company would like to remind you that statements made during this call that are not historical, in fact, are forward-looking statements. Please refer to the information regarding forward-looking statements and risk factors included in the company’s earnings release and latest filings with the SEC. The company undertakes no obligation to update publicly or revise any forward-looking statements.

I would now like to turn the conference call over to Jill Evanko, Chart Industries’ CEO. Please go ahead.

Jill Evanko

Thank you, Joelle. Good morning and thank you for joining Joe Brinkman, our CFO, and me, to walk through our second quarter 2024 results. We are executing consistently and on the path to our reiterated medium-term financial targets, including organic sales CAGR of mid-teens, mid 30% gross margin, adjusted diluted EPS growth CAGR of mid 40%, and free cash flow conversion to attain our target net leverage ratio range of two to two and a half. For all periods referenced, all metrics are pro forma for continuing operations of the combined business of Chart and Howden, unless otherwise noted, which also excludes all assets divested in 2023. Starting on Slide 5, I would point you to the far right hand column of the table showing the growth in each metric from the second quarter 2023 to second quarter 2024. We had numerous all-time historical records in Q2. These included all-time record reported sales, backlog, gross profit, gross margin, operating income and margin, EBITDA, and EBITDA margin. All the associated adjusted metrics for these are also all-time records. Orders were $1.16 billion, an increase of 12%, and an increase of about 40% excluding big LNG. Demand remains robust. In a few slides, we'll take you through some examples of key wins in the second quarter, including a $40 million data center win for our air-cooled heat exchangers and record orders for carbon capture, metals, mining, water treatment, and field service. Record sales of $1.04 billion increased 18.8%. Repair service leasing, or aftermarket segment, as we use for shorthand, was about 35% of our second quarter sales. We had record reported gross margin of 33.8%, and record reported operating income of $167.8 million or 16.1% of sales. This was also a record $225.7 million when adjusted for specific items, primarily related to the Howden integration, and consolidation and restructure of our Asia Pacific region into our Middle East and Africa region, resulting in 21.7% record adjusted operating margin.