Feb 28, 2025 / 01:30PM GMT
Saurabh Pant - BofA Global Research - Analyst
Good morning, and welcome to the Chart Industries Inc. 2024 fourth-quarter and full year results conference call. (Operator Instructions) 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.chart industries.com. A telephone replay of today's broadcast will be available approximately two hours following the conclusion of the call until Friday, March 28, 2025. 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 latest filings with the SEC. The company undertakes no obligation to update publicly or revise any forward-looking statements.
During this conference call, references may be made to non-GAAP financial measures. To assist you in understanding these non-GAAP terms, Chart has posted reconciliations to the most directly comparable GAAP financial measures on the Chart Industries website. We have provided a supplemental slide presentation to support our comments on this call that can be assets in the Presentations and Webcasts section of the Chart website at www.chartindustries.com.
I would now like to turn the conference call over to Ms. Jill Evanko, Chart Industries' CEO. Thank you. Please go ahead.
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Thank you, Ina. Good morning, everyone. And thank you for joining our fourth-quarter and full year 2024 earnings call. Joining me today is our CFO, Joe Brinkman.
We begin on slide 4 of supplemental data that was released this morning. Results shown are from continuing operations. When referring to any comparative period, all metrics are pro forma for continuing operations of the combined business of Chart in Howden. Pro forma excludes the following businesses that were divested in 2023: Roots, American Fan, Cofimco, Cryo Diffusion.
In the fourth quarter 2024, we generated-$281.5 million of net cash from operating activities and after $20.5 million of CapEx spend had free cash flow of $261 million, contributing to full year 2024 free cash flow of $388 million.
This cash was used to reduce net debt and resulted in our year end 2024 net leverage ratio of 2.8x, making further progress our net leverage ratio target of 2x to 2.5x, which we expect to hit in 2025. When compared to the fourth-quarter 2023 pro forma, orders were $1.55 billion, an increase of 29.4%, including phase one of Woodside Louisiana LNG, which was risk achieved in December 2024.
This contributed to full year 2024 orders of $5 billion, a 13% increase compared to 2023. Fourth-quarter 2024 sales of $1.11 billion increased 10.8%, excluding FX, contributing to full year organic sales growth of 16.9%. Fourth-quarter 2024 had a $17 million headwind from foreign exchange in terms of sales when compared to our forecast heading into the quarter.
Fourth quarter reported operating income of $188.3 million was $243.4 million when adjusted for unusual items, primarily related to integration and restructuring. This reflects lower costs and leveraging SG&A, resulting in 22% adjusted operating margin and 33.6% gross margin. For the full year 2024, adjusted operating margin was 21.1%, an increase of 400 basis points.
Adjusted EBITDA for the fourth quarter of $283.6 million or 25.6% of sales, contributed to our full year adjusted EBITDA of $1.014 billion and EBITDA margin of 24.4%, a year-over-year increase of 330 basis points. Although adjusted operating profit exceeded our internal expectations, fourth-quarter 2024 adjusted diluted earnings per share of $2.66, faced headwinds from foreign exchange, the delta in the tax rate compared to our forecast, the change in share count due to market price movement and interest expense, which combined were approximately a $0.33 headwind to Q4 EPS.
Slide 5 is a summary of fourth quarter compared to Q4 23 pro forma and we'll cover these in the coming few slides. So moving on to slide 6, you can see some specific order examples from the fourth-quarter '24 on slide 6.
Starting in the upper row left-hand side, as I mentioned earlier, we received the phase one order for Woodside Louisiana LNG, and we expect to receive phase two and 2025. Moving left to right in the top row, we have seen an increasing need for nitrogen rejection unit or NRUs as gas composition in the US Gulf Coast becomes more varied.
We are pleased to have received an NRU award from Energy Transfer and look forward to working closely to help them and other midstream and downstream provider solve these challenges in natural gas. While this is a global opportunity for Chart, in the United States, we are specifically seeing more nitrogen and other airs and gas coming out of the ground as wells age and our drill deeper. Many pipelines have a 3% limit on nitrogen and for LNG, the nitrogen limit drops only 1%.
Importantly, this is not driven by policy but rather customer efficiency. We anticipate seeing more activity in the NRU market during 2025 and beyond, as the global NRU market is expected to grow at a 6.3% CAGR from 2025 to 2033. We recently announced Chart's carbon capture solution and helium storage for Pulsar Helium, utilizing our Earthly Labs technology, which has been scaling larger in recent quarters.
On the bottom row of slide 6, you can see a few other fourth quarter wins, including air coolers for data center, as well as an order from our recently announced partnership with Bloom Energy. Together, we intend to offer a solution to customers such as data centers and manufacturers who are seeking power solutions that can be deployed rapidly without compromising reliability or emission goals. We have also received the $26 million order from an African Power Utility, which includes field installation appetite.
Finally, we had orders totaling $28.4 million for the space exploration end-market in the fourth quarter of '24, the highest space exploration order quarter of the year. Additionally, we've now received orders for the space exploration end-market to date in the first quarter of '25 totaling approximately $60 million.
A few other notes to the start of 2025 so far in Q1 in terms of some of the larger orders received to date, we received a $35 million mining award, additional EGR blowers, and multi-million dollar order for tanks for an Asia Pacific chip manufacturing site, and multiple brazed aluminum heat exchanger orders for various energy applications. Additionally, aftermarket has started the year strong and just yesterday, we executed an LTA within Industrial Gas Major.
The above illustrates the breadth of the end-markets and customers that we serve with our flexible manufacturing capacity, as well as the focus we have of not relying on one large project for one end-market. In 2024, we sold to 267 new customers compared to 322 in 2023. Additionally, we had our best order year for cryogen in Europe in 2024 and record hydrogen sales in the fourth quarter and the full year 2024.
We currently have approximately $24 billion in our commercial pipeline of opportunities that are not yet in backlog. And we also have customers who have committed work to us that is not yet in backlog, totaling approximately $2 billion of commitments.
Our only end-market ended 2024 with strength. And as we look ahead, we are seeing an expanded commercial pipeline of global opportunities. India, the Philippines, and Japan have recently shared their intent to import US LNG., supported by the current US administration support of growing American energy production.
And as you can see on the left-hand side of slide 7, and as previously discussed, we booked the Woodside Louisiana LNG phase one order in the fourth quarter. As a reminder, the full potential for the Woodside Louisiana LNG site is three additional phases of 5.5 million tonnes per annum each.
We are pleased to support Cheniere and [Beckel] Energy on the Corpus Christi Stage 3 Liquefaction Project with our IPSMR process technology. Cheniere's first cargo out of CCL Stage 3 was last week, meaningfully ahead of schedule. As we extend our process technology installed base, we are also supporting our customers with more service arrangements, and we look forward to supporting Cheniere over the coming years with our recently executed Master Services Agreement.
Our recently executed Master Goods and Services Agreement with ExxonMobil includes partnering on the supply of LNG equipment, as well as the utilization of our IPSMR process technology. And lastly, on LNG, there's an increasing global interest in small-scale LNG, in particular, around hub and spoke models in development in South America, Africa, Southeast Asia, and Europe, driven, at least in part, by the distribution for local power generation and industrial use to support growing power demand.
And now Joe will speak to our fourth-quarter and full year results as well as cash.
Joe Brinkman - Chart Industries Inc - Chief Financial Officer, Vice President
Slides 8 to 9 showed the fourth-quarter 2024 results compared ot the fourth quarter of 2023 pro forma. The full year 2024 metrics are in the appendix on slides 16 and 17. For the full year 2024, orders, sales, gross profit dollars and margin, operating profit dollars and margin, EBITDA dollars and margin, and free cash flow were records.
Fourth-quarter 2024 sales of $1.11 billion increased 10.1%. Each quarter in 2024 sales sequentially increased. And full year 2024 sales for $4.16 billion was a year-over-year organic increase of 17.5% with a negative 0.6% foreign exchange headwind.
Reported operating income in the fourth quarter was $188.3 million and when adjusted was $243.4 million or 22% of sales. Supporting the full year 2024 adjusted operating margin of 21.1%, an increase year-over-year of 400 basis points.
The second half of 2024 adjusted operating margin was 22.1% compared to the first half of 19 9%, reflecting synergies flowing through the P&L as well as leveraging SG&A. Adjusted EBITDA for Q4 of to $283.6 million contributed to our full year 2024 $1.014 billion or 24.4% of sales when adjusted, an increase of 330 basis points. We also continue to have confidence in our mid 30s gross margin percent medium-term targets.
Fourth quarter 2024 free cash flow was $261 million, contributing to our end of the year 2024 net leverage ratio of 2.8x that is shown on slide 10. We reiterate our financial policy that until we are in our target net leverage ratio range of 2x to 2.5x, we do not do any share repurchases or material cash acquisitions.
As reflected in the second half of 2024, our CapEx spend is now normalizing, and we expect CapEx to be approximately $110 million. Net working capital, defined as accounts receivable inventory, accounts payable, unbilled contract revenue, customer advances, and billings in excess of as percent of trailing 12-month sales improved to 13.4%. We continue to look to optimize our capital structure and took a step toward this in the fourth quarter 2024 by fully settling our convertible notes that came due in November 2024.
Additionally, in our minority investment in [age deck], we have a portfolio option that could have been exercised following the September 2024 three-year mark. We have assigned LOI to modify the option so that it will be structured similar to the 2021 option, and it will not be exercisable until 2028. Therefore, we do not expect any balance sheet impact or cash impact from the option until at least that time.
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Moving to slide 11, we'll provide some color around the segments in a set up to our reiterated 2025 outlook. Starting with Cryo Tank Solutions or CTS, fourth quarter '24 CTS orders of $138.5 million decreased 11.9% when compared to the fourth quarter of 2023, primarily driven by softer European industrial gas demand in the fourth quarter of 2023, having three customers that ordered a larger projects in the Americas. Demand to start 2025 and the commercial pipeline for 2025 in CTS is picking up and expected to drive year over year increases in both orders and sales.
Fourth quarter CTS sales of $150 million decreased 26.4% when copared to the fourth quarter of '23, which had approximately $17 million of specific project sale that did not repeat in the fourth quarter of '24. Reported gross profit margin of 24.4% for CTS increased 210 basis points compared to the prior year. Continued efforts in efficiency in operational improvements driving improvement in gross margin in 2024 for the full year and EPS of 140 basis points.
In Heat Transfer Systems or HTS, the fourth quarter order sales, gross profit, gross margin, operating income, operating income margin, and EBITDA and EBITDA margin were records for the segment for that quarter and any quarter in our history. With that said, we continue to expect to HTS orders and sales to grow 2025 over 2024, driven by traditional energy as well as LNG.
Fourth quarter 2024 HTS. orders of $536 million increased over 66% when compared to the fourth quarter of 2023, driven by the large LNG phase one order that we got, as well as grow growth in the order book for all of our HTS.
Excluding the Woodside order, HTS orders still grew in the fourth quarter of '24. Asia sales for the quarter were $288.8 million, which grew 14.2% compared to Q4 '23 and had associated gross profit margin of 31.8%, the highest quarter of the year for HTS.
Moving to Specialty Products. Fourth-quarter '24 Specialty Products orders of $509 million increased 27.7% when compared to the fourth quarter of '23, driven by orders and carbon capture, energy recovery, infrastructure, and space exploration; each more than doubling compared to the fourth quarter of 2023.
Fourth quarter '24 Specialty Products sales of $317 million increased 47.7% when compared to Q4 23, driven by a combination of meaningful increases, meaning 30% or more in sales and carbon capture, hydrogen, LNG vehicle tanks, infrastructure, water treatment, space exploration, energy recovery, and marine.
Reported gross profit margin of 27.4% decreased 120 basis points when compared to the fourth quarter of '23 in Specialty. Although gross margin increased 110 basis points sequentially compared to third quarter of '24.
The Q4 '24 gross margin reflected specific third-party expenses and inefficiencies in our start up, which we incurred at the Theodore, Alabama or Teddy 2 facility. Looking at the full year Specialty Products gross margin of 27%, if we did not have the inefficiencies related to the Teddy costs that I just referred to, Specialty gross margin would have been approximately 29%.
Repair, Service, and Leasing for the fourth quarter, orders were $369 million, which increased 14.2% compared to Q4 2023, driven by general strong aftermarket trends as well as a $25 million retro-fit order for a utility. This past year, we saw consistent retrofit service and repair awards and we have good visibility to more ahead for 2025.
Q4 RSL sales of $351 million increased 4% and associated gross profit margin of 44.8% was in line with our typical gross profit margin in the RSL segment. Q4 RSL contributed to growth in the full year 2024 RSL order book of 10.5% year over year and sales growth for the year of 19.2%.
RSL is now approximately one-third of our business, an increase from a few years ago in the [low-10s]. We expect it to continue to grow in the approximately high-single digit to 10% range, driven by multiple actions that are underway.
To give a few examples of those actions, those are around covering our install base globally in geographies that we have less current coverage; penetrating our digital uptime offering and coverage, including deploying digital uptime on products such as Earthly Labs, Orca, and LNG fleet; and continuing to drive LTSAs and framework agreement increases as we've discussed earlier.
So finally, moving to slide 12, we reiterate our prior 2025 outlook, as shown here. I want to point out a few 2025 considerations about the outlook. Our strong December 31, 2024, backlog, including the Woodside LNG phase one order that we referred to, as well as a few specific larger orders received quarter-to-date in Q1, such as the mining order I referred to and the strong start to the year in the space exploration end-market, supports our backlog conversion for our full year 2025 guidance range; offsetting the potential negative foreign exchange impact that it holds, as it is currently for the full year, would have an approximately 2% negative impact on sales.
Faster conversion in commercial pipeline conversion to backlog would be key contributors to achieving the higher end of our outlook. We anticipate the second half of 2025 to sequentially increase when compared to the first half of 2025.
Our first quarter is anticipated to be our lowest quarter of the year, as is typical. Additionally, the first quarter of our year is typically a use of cash, given the timing of insurance, taxes, bonuses, and our senior note interest, and other seasonal cash uses. As a reminder, we have our semi-annual security interest payment of approximately $79 million in the first and third quarter of '25.
Regarding tariffs, this is not explicitly in our guidance as there is little clarity yet on the breadth and specificity of the actions, as well as the length of their respective durations. To offer a point of information based on our work on this topic done to date internally, potential growth impacts from tariffs, as we understand them today, would fall within our EBITDA range.
We also want to point out a few things that we have done and continue to do to mitigate impacts from tariffs. We believe that we are much better positioned today, not only for tariffs, but also potential supply chain disruption, following the last round of tariffs, as well as the supply chain challenges of 2021. And our associated actions taken subsequently around multiple sources of supply and regional, as well global supply structures.
As we referred to before, we have flexible manufacturing and flexible supply chain in our business. We worked very hard on instilling our Chart Business Excellence or CBE process, and we're seeing traction from this effort. And as a reminder, we are the only manufacturer of brazed aluminum heat exchangers in the United States, including the world's two largest variances in our facilities.
We have a strong air cooler and fan manufacturing footprint, also in the United States, as well as the world's largest shop build cryogenic fabrication in our Theodore, Alabama facility. The strong United States manufacturing footprint can also help our customers as they navigate their supply needs.
Before we open it up for Q&A, we want to take a moment to share our enormous thanks to our Global One Chart to our team members for their focus to execution and dedication to accomplish this past year's results and for the start to 2025. Thank you all for all of your efforts, and now, Ina, please open it up for Q&A.
Questions and Answers:
Operator(Operator Instructions) Saurabh Pant, Bank of America.
Saurabh Pant - BofA Global Research - Analyst
Jill, if you don't mind I'll start at a little bit higher level on 2025 guide. I know the revenue guidance is unchanged despite the FX headwinds, which is good to see. Can you maybe just remind us of how you're thinking about the four segments?
I know you talked about data at your Capital Markets Day. At a video you say that RSL should still grow high-single digit to 10%. But maybe if you can step through some of the other segments as one is looking better or something else is slightly offsetting. Just walk us through that.
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
So you commented on RSL and we see many, many actions that are well underway to achieve that, and consistently achieve that ahead is our expectation in RSL segment. In HTS, we expect growth in 2025 or 2024. LNG is a driver of that. So we would expect LNG sales to be higher in '25 compared to 2024.
We also see just traditional energy applications in being very active right now, in particular, when we talk to our customers the last couple of months. And it's really around we're going to take this opportunity under the current administration to build out the the energy framework.
But also just this growing demand for all things energy, energy intensity, around app locations that we are about every day, whether that's data centers or whether that's providing LNG globally. So on that, HTS segment, we expect to grow with a tailwind from LNG.
And CTS, really said, traditionally for CTS this is our low- to mid-single digit grower. We would expect to see approximately mid-single digits too in the CTS segment. And we've seen a good start to Q1 in terms of on CTS orders.
And then finally, in Specialty, backlog conversion on Specialty is the key driver to our expected growth in that particular segment. We started to see some improving backlog conversion in 2024 in the Specialty segment. And expect that to continue to pick up the pace, especially with some of these carbon capture projects that we've referred to and some of the orders that came into the order book in the second half of 2024. So we anticipate growth across each of the four segments in '25 when compared to '24.
Saurabh Pant - BofA Global Research - Analyst
Okay. Fantastic, Jill. And I know, Jill, you just talked about RSL, LNG contributing to growth over there. If you can dive a little deeper, Jill, on that LNG side of things, especially big LNG. If you think about what's in your backlog, how that converts to revenue in 2025? How should that grow?
Or part of the reason I ask is it's supposed to be an offering, if it's IPSMR, by the way, it's good to see really good traction project starting up. And how does that convert out of backlog next year '25 versus '24? And then what does that mean for HTS margins?
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Okay, first of all, I really thank you for pointing out the IPS, our attraction. We're thrilled with what's happened to date in terms of the first liquid and the first cargo for Cheniere's Corpus Christi Stage 3 Project. New Fortress Energy sharing that. Fast LNG is producing a meaningfully above nameplate capacity. So gaining that traction globally for IPSMR has been a positive, including any floating project.
So to address your question directly, when you see a big LNG project announced coming into the order book, what we would anticipate typically in those projects is revenue meaningfully start approximately six to eight months after the order comes in. There's a little bit of revenue around engineering and maybe some material ordering for that.
But in terms of the cadence of when it really starts to be consistent across coming quarters, it's that six to eight month mark. In terms of what we would expect in '25, the timing of Woodside, obviously, we referred to it being a Q4 '24 order, so you can apply that type of logic to it. Also having strong global LNG backlog, not only around big LNG. We'd expect that to flow through the year with a first half to second half step up just simply because of the Woodside timing.
And LNG projects are nice contributors to our HTS segment margin, in particular, when they utilize IPSMR. And so that is another factor in how we anticipate to achieve our 2025 growth and margin for the total company, with HTS being a key contributor to that.
Saurabh Pant - BofA Global Research - Analyst
Fantastic. Okay, thanks for that color. I'll turn it back.
Operator
Ben Nolan, Stifel.
Ben Nolan - Stifel Nicolaus and Company, Incorporated - Analyst
So I wanted to start on CTS. It was a little lower, but it sounds like 1Q is going pretty well. I know that China is a big part of that particular business. Are you seeing -- well, I guess the improvement that you're seeing, is it in China or is it elsewhere? And can you maybe talk through how you're thinking about the China exposure and how that fits broadly to you have going on?
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
So let me just hit CTS first and then I'll take China broadly second. In terms of CTS, so far, I'm pleased to the start of '25, especially coming off of declining orders and sales and year over year in the fourth quarter in this segment.
Which interestingly enough, the second half of '24, we did see industrial gas slowdown in China, which would impact CTS. But also we saw the summer slowdowns in CTS, in Europe as well. And no real chunk orders in Q4 of 24 in that segment.
The team is feeling good about order and sales growth in CTS for 2025. And so we'll continue to monitor that closely, not only specific to China, but globally. Really pleased to have executed that LTA yesterday with one of IG majors. So those types of things also help us have visibility to the forecast.
When we speak of China, obviously, first quarter in China, obviously, you have Chinese New Year in there, but we're seeing consistency in China right now. And I think the other part of the question earlier that I want to address is around supply chain in China, in particular.
We're not dependent on China supply chain. We have other sources of supply. We're very regionalized in our supply chain, really as a result of the actions that our global sourcing team has taken since 2021. And we'll continue to dynamically assess and make those sourcing decisions based on the market conditions. But we feel positioned well to be agile in response to what's happening in China.
Ben Nolan - Stifel Nicolaus and Company, Incorporated - Analyst
Great. And then just another quick one. Appreciate the color that you gave on NRU (inaudible). Can you maybe just frame out how big of a business that is now just so that we can understand a little bit about what it could be for you?
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Yes. So to give a sense of what the size of an NRUs could be, there is, I guess in terms of content, depending on the size an NRU can be anywhere between approximately $20 million of Chart content to could be upwards of $75 million per NRU. It just depends on the scope of the application, et cetera.
Definitely, in areas that we have seen a meaningful increase in terms of customer inbound around this, yes, the CapEx decisions then, but it's also an optimization and efficiency spend for these plants on the currently, it's not a very large portion of our business. You'd have you you would have had EUNRU.s in any given type of the year, but we would expect that to step up meaningfully. And what we've had to date has been toward the lower end of what I described and are used to be built out our time.
Ben Nolan - Stifel Nicolaus and Company, Incorporated - Analyst
Very helpful. Appreciate it. Thanks, Joe. I think then appreciate it.
Operator
Scott Gruber, Citigroup.
Scott Gruber - Citi Investment Research - Analyst
Based on the Brazil, com was spot on aftermarket on your the so the growth you're 24, but your last couple quarters kind of flattish, since you mentioned the strong start to the Enbrel in 1Q. Can you speak specifically to the growth outlook for aftermarket and 25? Will it be in line with the for the high single digit longer term partners who have slowed renewed discipline from an order perspective of early near them to make that happen?
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Yes, yes, on a sequential and of Q2 to Q3, Q3 to Q4 in terms of RSL, each of those had either a specific aftermarket or servicing repair order of a decent have a decent size. And we have good visibility to the LTSA., the framework agreement on as well as multiple service and repair of the ex that that customers are looking to do it in 2025.
So we feel confident in our RSL growth outlook, both for the order and the sales book is important that we don't get behind in the year, I think is very is a key metric for us. We look at internally is that where we're seeing consistency in the aftermarket globally, and that is true so far to date, Q. one quarter to date, we don't want to get behind where we're sitting here in September saying you need to get a large service and repair or in order to hit that to hit that high single digit to 10%.
But the visibility that we have to the pipeline is strong around ourself. And then what will we also launched new fleet, take advantage of things that are within our own control on the RSL side. And those are multiple different and act activities that are going.
The aftermarket team and our regions working with them on are working on that specific product line targeting in Europe, North Africa, around piston compressors, penetration for the aftermarket on the centrifugal compressors coverage globally is an area that you will. And then chart legacy coverage.
We also are seeing more opportunities to have service agreement with the operators have larger plants were that's something that ties hand-in-hand to IPSMR in particular, where the EPCE. once the first gas or first liquid has achieved the EPC. Typically that is done with it, Roger, with the operator technology is a is a way for us to further penetrate service agreements on the in the digital uptime.
We're seeing great traction on taking that across specific products, and we're about to introduce that into our into the heat exchanger offering as well. So there's just a few examples of kind of within our own control to make sure that we're not relying on market dynamics to achieve that on that growth that we have laid out for 25 and ourselves.
Scott Gruber - Citi Investment Research - Analyst
So that's good color. And I want to come back to the IPO. Similar technologies gaining good traction. I believe that the payment structure and most of the contracts so far is an upfront licensing fee, but was greater adoption and global MSAs. Like the one you have with Exxon, what would you consider transition towards more of an ongoing fee structure for the technology update?
What we what we currently have done it, as you described, there is a technology fee associated with the utilization of IPSMR, but we are flexible working with our customers around what that what that could look like and how it's built into them into the contracts are key.
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Our key on any of these larger problem projects with or without IPSMR is that we do not go upside down on working capital. So that on those milestones are tied to on our are tied to our spend on material. And that or not, we're not behind the ball on that. And that's been a key focus.
So the overarching that's the first quarter and then on we work with individual customers on kind of what that technology see, how that's embedded. We'll go with their particular project. We're adverse to it. It's just dumb customer-specific. So the pressure, which Jonathan, but I think that.
Scott Gruber - Citi Investment Research - Analyst
Thank you.
Operator
Manav Gupta, UBS.
Manav Gupta - UBS Equities - Analyst
Good morning, one complete because of the data center market. As we look a whole lot of discussions progressing with the data center providers and some of the deep seek announcement. Any change any of those discussions? If you could just talk about that.
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Good morning. Mark. Would data centers as a whole? Maybe maybe I'll just step back to the increasing need for global energy is, is the theme, and that's that's inclusive of data centers. And our discussions amongst multiple different hyperscalers is consistent would be my would be my one.
What I would use if you had to FY. one word consistent in that they're going to be spending money in this area and CapEx, and they have a need for multiple different types of heat rejection associated with these data centers. And that the energy power demand is going to continue to increase as artificial intelligence becomes smarter and there's more of it out there.
So I think that deep seek or otherwise, there is not a change in direction of these folks looking for multiple different forms of power in multiple different ways to reject heat. And that's really what we're hearing from them.
We also because we're starting to see more demand in this market. We have recently hired a data center commercial team member, who will be joining our business development team here in the next week or so.
He brings a breadth of data center background and market knowledge and connection. So we would on we do see this as a meaningful opportunity ahead for us. I think my quick funnel is to use your free cash flow guidance for next year by 50 to $600 million.
And trying to understand what pushes towards the bulk of that guidance of EUR600 million. And similarly for EBITDA, trying to understand the blue sky scenario, which pushes you towards the top end versus the midpoint of the guide guidance.
Sure. I'm going to help of emission runoff. So the free cash flow forecast for this year is coming from stronger EBITDA conversion conversion from existing backlog.
We do have some we do have some normalizing of CapEx that I mentioned in my comments earlier. So just a combination of the two there in our overall growth is driving the free cash flow to the progress that we have.
And then eventually that so I'm sorry, your second part of my question there to the higher end of the EBITDA guidance, which would also be a contributor to the higher end of free cash flow guidance, you and speak to speak to that, Joe?
Joe Brinkman - Chart Industries Inc - Chief Financial Officer, Vice President
Yes, just just the home, just as Joe described there as well as on a lower charge route and the good the backlog conversion backlog conversion and lower deal integration costs. And in mono, if there is a larger orders that come in early in the first half of the E really in the first half of 25, those would have the opportunity also to contribute on some revenue in the second half of two toward the higher end of the multiple different factors that go into achieving the higher end royalty. Is it off of an absolute growth rate perspective on the higher end would be year over year, lower than what we achieved in 20 for over 23 from the top line growth?
Manav Gupta - UBS Equities - Analyst
Thank you so much.
Operator
Marc Bianchi, TD Cowen.
Marc Bianchi - TD Cowen - Analyst
Could could you say what the out of out of 2024 orders? How much was LNG.? And how are you thinking about that number for 2025 on all, approximately that Mark, in terms of orders for LNGO. and I'm an approximately only because when you look at the kind of LNG. with in within HTS., sensible way larger and then you have LNG infrastructure and per vehicle tanks into the jump in specialty. And then there's some LNGRE., I guess that can show up in CTS. as well.
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
I would estimate is approximately 20% to 25% range and of orders. And then we would anticipate that to be similar in 2025 compared to 2024.
Marc Bianchi - TD Cowen - Analyst
Okay. I think some folks anticipate an increase in 25 just given the change in the on the licensing for the U.S. and pump. Is it is that conservatism on your part or was it just, you know, some stuff going into the back half of 24 and that maybe makes it likely for growth? Maybe you could expand on that a little bit?
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Sure. I would say that it's a kind of down the fairway way to answer your questions and element of conservatism in that, given it's hard to predict on the larger pieces and parts, right? So to see consistent in the back half of 24, we mentioned meat anticipate Phase two coming in 25.
There's also a handful, as you mentioned, of other LNG projects globally now in the US that could move ahead. So there's opportunity for that to be larger and 25 compared to 24.
But that is not required for us to hit our 25 guidance that we put out there. So that's kind of how we're thinking of coming into the year. The construct around it really because there is variability of when these orders can can or may come in.
But with that said, our pipeline of LNG opportunities have grown in the last three months since we bought the vast. So pipeline of LNG. project opportunities, not only for equipment, but also for IPSMR potential has expanded. And that's definitely a direct result of our growing global demand for LNG.
The US administration bullishness on Alaska on Pennsylvania and US Gulf Coast, as well as projects that we're hearing are much closer to moving ahead than they maybe were even six months ago. We've got folks talking out there about products like like Abadi LNG with impacts like that in Tanzania.
And he is that Delfin, that's definitely more likely than it was even a year ago. So just to name a few on, I think I think the opportunity set has increased in the last few months, and we're really well positioned to play on many of them. It's just that hard to time. Some of the larger. Yes. Just makes sense from the other one I had was on this study to kind of cost saving that was happening.
Just first of all, to clarify, I think you said it was like what margins would have been 29% without that was that for fourth quarter was up for the full year selling the full year here? So Avoca, as we've looked at the cost around inefficiencies on specific costs related to we had we had a challenge with one particular third party supplier on the machine and getting that started up, which was a real challenge in the back half for us. So very specific cost that we do not anticipate repeating and what we call that went out.
Marc Bianchi - TD Cowen - Analyst
Mark was just because we wanted to clarify, if you're looking at modeling 25 in the segments where where kind of the 24, 25 jumping off points and was what were some of the contributors to the less than less than where we want Specialty Products gross margin to be?
Can you tell us exactly what I was asking? So we should sort of be solving for like this impact happening in to a true that 20, the clean market going towards like these issues are resolved now as we step into 25. Right?
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
That's right.
Marc Bianchi - TD Cowen - Analyst
So any thought you thought about how the load and 24 very well, there was a little bit in Q2, but it really was Q3 and Q4.
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
So I think you hit the nail on it.
Marc Bianchi - TD Cowen - Analyst
Great.
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Thanks so much.
Jolts OpEx.
Thank you, Mark.
Operator
Arun Jayaram, JPMorgan.
Arun Jayaram - JPMorgan - Analyst
You had a strong of a quarter of bookings, 1.5 billion, 5 billion of orders, about two thirds drain HGS, some specialty. I was just wondering if you could just comment on the quality of the bookings and maybe the margin implications for for Culp for HGS and specialty in particular.
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
So it was a strong quarter on booking. It as a whole, obviously would buy Louisiana LNG. order being of meaningful magnitude, given given the utilization of IPSMR and the associated LNG equipment that will provide into that was a key contributor to us.
To add to that number, though, LNG and the projects in ACS, those bookings are above average gross margin generally. So the way to think about that is the strong Q4 bookings as a whole across the segments were an elevator to margin in backlog.
And then on the specialty side, very on a very broad mix. As we pointed out, though, I want to call out just maybe a couple of end markets and specialty that were strong performers in the fourth quarter on carbon capture.
And we've seen some really strong progress commercially in the market, in particular, on the use cases on. We've talked about a couple of those, whether that was the Bloom Energy Partnership or some of these other ones. But that's we're feeling we're seeing that on our carbon capture technology is now being used in larger Chart content applications and with the full solution mix come generally improving margin.
And then the other end market that I really would like to point out is space exploration and one point that went out because it had very strong that end market within specialty at a very strong Q4 in terms of all orders. But and even stronger start to 2025 with approximately $16 million of orders in the space exploration market in a combined January and February 2025.
And as you might imagine, in this space, type of end market is really low temperature, high pressure application that cannot fail. And we're talking about providing storage tanks as well as heat exchangers into these into these applications. So that's that's another key contributor to on two nice margin in backlog.
Arun Jayaram - JPMorgan - Analyst
Understood. It's clearly a mission critical applications on. Maybe just a follow up on just no, your outlook on orders. I think you highlighted around 2 billion of customer commitments that aren't yet quite in the backlog.
Can you just maybe describe the breadth and depth of those commitments? And thoughts on just backlog conversion into backlog for yet?
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
The U.S. are absolutely on. So on that $2 billion pretty broad on. There's a couple of larger LNG projects in their need to have the ExxonMobil Mozambique resume a in that mix.
So that's not in backlog, but that's included in that $2 billion of commitments and years. A couple of other in there that would be LNG related. And so the timing of those aren't easily predictable, but you've heard what the larger operators have said around their timing associated with SID. So I would anticipate about, let's say, half of that 2 billion is related to LNG end markets.
And then you have on a handful of carbon capture applications that hadn't been booked because they would be dependent on government grant funding into the timing of that will be related to when they get their funding into that will likely be around clarity on plan funding for from certain states or in one case Canada, that's a small dollars, but I thought worth calling out because of the end market itself.
And then you have a couple of hydrogen related projects that are on international projects and have have site have permits and our and have offtake and are very close on on their financing with respect to financing that those would be we'd anticipate in 2025. So that's probably $150 million or so associated with those guys.
And then the last on is around a particular helium project outside of North America. And that project we have we have the award and waiting for their or their final go on their full financing. It's a very large project on a few that $300 million for that particular project. And we'd anticipate that that that one either will move forward and 25 or just won't move forward.
Arun Jayaram - JPMorgan - Analyst
Great. Thanks for the color. Interest.
Operator
Eric Stine, Craig-Hallum.
Eric Stine - Craig Hallum - Analyst
So just sticking with the customer commitments that you just detail them, is it fair to say as you kind of rattle those off, it doesn't sound like that is very exposed to any of the issues that are uncertainty at the federal level US federal level. So I guess that would be first.
And then second, when we think about that number, is there any way to kind of compare that to what you've seen in the past? I mean, that's obviously seems like a pretty elevated number. But just looking for some context how to compare that to other periods?
Joe Brinkman - Chart Industries Inc - Chief Financial Officer, Vice President
Yes. Thanks, Eric, for the question. You're absolutely right. The first part, which is that there's really very limited exposure to the decision making on at the federal US government level on or really at any government level, I should say across across the world on these, most of them really are in the case of Exxon taking FID on the project.
In the case of the larger helium, one is getting their their final full funding over the fence. So those that's a positive, I guess, in my mind, just given the changing dynamic in landscape with the people looking for certainty from the U.S. government, that's not the driver of these in the second part compared to the past.
That's a really interesting question. It was I was thinking about it in the last couple of weeks. What I think we said, gosh, I can't remember when we said is currently 1.5 billion or so maybe nine months ago. And then you wait at one point in the last six or eight months on that list was Woodside Phase one.
So even with booking Woodside Phase one, we've seen that funnel increase or at least stay flat. And that is that for me and my commitment funnel and we into that company is on a they're kind of tidbit of information around how we're viewing the demand profile of this coming 12 months.
Eric Stine - Craig Hallum - Analyst
Okay. Very helpful, um, and then maybe just on orders. I mean, you obviously Kobo Woodside and there's a broad base. So I'm just curious, I mean, do you attribute any of the shrinks to it to a year end push on the part of your customers?
Or is this a true indication of the strength of the overall business? And then is it fair to assume 2025 While there can be quarter-to-quarter variability, book-to-bill above one?
Joe Brinkman - Chart Industries Inc - Chief Financial Officer, Vice President
Yes, the book-to-bill above one and 25, we absolutely stick the words right out of my mouth on. I wouldn't I would say that we anticipate that Q1 book-to-bill will be one or both.
Eric Stine - Craig Hallum - Analyst
Okay. Thank you.
Joe Brinkman - Chart Industries Inc - Chief Financial Officer, Vice President
Thanks, Eric.
Operator
Robert Brown, Lake Street Capital Markets.
Robert Brown - Lake Street Capital Markets - Analyst
Third jobs. I just wanted to dig in a little bit under gross margin expansion from discussion. Where where do you sort of see that getting to know because over time we're committed to the left and where that could be?
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Yes. Just as I mentioned in my comments, mid mid 30s gross margin still is arbitrary target. Nothing changing on that. I think over time, that's a that's a journey from would be the way we would describe it on that. We anticipate to get beyond the mid 30s, right, that that's really truly a medium term.
And when we laid the medium term out, that was for 2026. And I think we're in early innings of on our business excellence activities as well. Yes.
So as we continue to deliver center to, as Joe mentioned, in the mid 30s or medium term target and will continue to expand on that more favorable favorable product mix across our U.S. So and specialty and on the specific business for booking United States just will continue to drive those margins up over time.
Robert Brown - Lake Street Capital Markets - Analyst
Okay, great. We talked about the oh two on industrial gas meter. On how much how much penetration is there to go in and kind of that such customer base around the world sort of visibility there?
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
So AMI on with the majors, those we've typically had over the years and when they when they come up for renewal, we worked really hard with with the in conjunction with them and partner with them on what their needs are and what the challenges both sides faced in the last go around.
And so how do we how do we optimize that for win-wins? So on the on the major side, I think there's more opportunity to penetrate other products within those LTAs. And that's an area that we have. We're working with them on as well as penetrating more on the aftermarket service repair aspects of those agreements are in terms of kind of other industrial gas folks unit is the way we tend to speak to the majors, but there's also So multiple different others on that play in industrial gas.
From the independent perspective, we home independent to these would be the nonindustrial gas majors folks that are more localized, regionalized industrial gas. And we see a meaningful opportunity to to work more closely with them. And we have been over the last year. So we've been working to develop those partnerships to move them to to LTA. in particular. And that is primarily a North American and European continent.
We I think there's one or two real strong potentials in Europe or this in 2025 and a handful in the United States that we could get done in the next 18 months or so. So there's there's more opportunity for us, but would be more of them at lower volumes just because of the size of their businesses.
Robert Brown - Lake Street Capital Markets - Analyst
Thank you.
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Thank you, Rob.
Operator
Question, and I'm Sharon Malka, Ravi from BYIG.
Unidentified Participant
First, the addition of Asia Oriental Hong versus this moratorium Saga for U.S. LNG projects. And you talked about growing funnel if all these projects have been paused, the starting line, so to speak and looking at FID. around the same time, good long lead equipment for these projects become sort of a bottleneck.
And just to ask you to answer, I guess, between that and tariffs, would you say pricing? Is it becoming a more flexible or should we still think about $30 million per MMTDA. for IPSMR?
Joe Brinkman - Chart Industries Inc - Chief Financial Officer, Vice President
So So it depends on the project in terms of the dollar per on per MTPA., but it just yet whether they have hydrocarbon renewables or a various content. But I think directionally, you directionally used an estimate of what we've said historically, per and TPS and definitely growing, as you mentioned, growing utilization of IPSMR and on, there's there's brownfield opportunities from existing operators and then there's greenfield opportunities.
I think the brownfield opportunities look similar to what they look like even during the L&G moratorium, whereas Greenfield opportunities are the ones that have expanded in the ones that maybe prior thought of themselves as we're not going to move forward. And now there is demand for it. And so there's an opportunity for us to move forward.
So all that said, we feel good about the fact that we expanded our capacity over the course of the last seven years to be able to serve not only the LNG market but the heat, it's all things, energy, all things molecules in the heart and soul of that is around the heat exchanger capacity and the tank capacity and as well as fans.
So those three have been a key area of focus for us to ensure that we have the capacity and the size of the furnaces that are needed to be able to deliver these customers' needs. And so I think we're really well-positioned. Capacity-wise pipeline is growing, and we'll just see how these how the project timing and which ones going forward as the year and the years the next three years go on.
Unidentified Participant
That's very helpful. Thanks, Joe.
Joe Brinkman - Chart Industries Inc - Chief Financial Officer, Vice President
Thanks, Ralph.
Operator
Doug Becker, Capital One.
Doug Becker - Capital One Securities, Inc - Analyst
Joe, you had another strong quarter two quarters, including some large orders or some ongoing throughput initiatives. Just how much of your backlog you now expect to convert to revenue this year? And just any context you can provide around how much of Year End 23 backlog was converted last year?
Joe Brinkman - Chart Industries Inc - Chief Financial Officer, Vice President
Yes. So we would expect approximately 60% of year end 24 backlog to convert in 2025. And it's I don't have the answer to the second part of your question on 23. But definitely, could we could go back and provide that to. I would probably estimate in the 5% to 60%, but I'm not I would need to check that figure to be to be specifically accurate on that.
Doug Becker - Capital One Securities, Inc - Analyst
No, that's fair. And the higher conversion, is that a function of throughput initiatives or is it just the type of projects in the backlog?
Joe Brinkman - Chart Industries Inc - Chief Financial Officer, Vice President
The throughput initiatives are key to that. And also in particular shops, I should say, like the compressor shops as an example, to screw compressor shops in Europe. I mean there was some bottleneck challenges there.
We're getting more and more throughput in the heat exchanger shops, in particular, the cold box shops. So those would be the three that really can drive improved backlog conversion.
With the efforts that we've done so far, we still have more to do on on throughput, improved payments in 25 and the teams are really working hard on that, but that that contributor definite contributor to this.
And then you. And then there's also something like the large LNG projects, like the wood side, where we had pretty good visibility on the timing of that revenue and the associated engineering associated on milestones with that particular project.
As an example, that's kind of combo of both. But I really want to see the self-help throughput start to flow through on for growth through the top line here in 2025.
Doug Becker - Capital One Securities, Inc - Analyst
Got it. And then just another one on trying to get more comfortable with the CTS. outlook. Like the backlog was down 20% last year and from the outside looking in that seems like a very high hurdle to get over the LPA with the industrial gas majors that in isolation enough to support growth in she just this year or do you need some of those smaller independents to come in to actually show growth this year?
Joe Brinkman - Chart Industries Inc - Chief Financial Officer, Vice President
We did not revise our forecast does not rely on the small independents to come in, but it's not that one in particular LTA, either that is the driver of the growth is kind of a broad-based global look at where the where the industrial gas guys are spending their money.
And then the other part, the answer, Doug, is just to there, there's a handful of on these projects that were a bit larger and 23 that we have visibility to similarly sized ones for 25 with two of those being anticipated to come in on the first half of 25 as well.
So I think the LTAs nice contributor to it. But also just the general kind of demand profile globally is a key contributor to our outlook. Also the first couple of months start to the year. I'm informed our thought process around it as well.
Yes, I would just a lot of news on the industrial gas. There are ebbs and flows to their CapEx cycles on with some willingness to their to their ordering practices. So that could contribute on a quarter-over-quarter basis.
Doug Becker - Capital One Securities, Inc - Analyst
Got it. Thank you.
Joe Brinkman - Chart Industries Inc - Chief Financial Officer, Vice President
Thanks, Doug.
Operator
Ati Modak, Goldman Sachs.
Ati Modak - Goldman Sachs & Company, Inc. - Analyst
Harsh question. I was not good for us an update on how you're seeing hydrogen and especially in that time period from the 45 favorable Charlie January. How are you seeing that 7% to 10% growth through 2030 that you highlighted during the Capital Markets Day?
Jill Evanko - Chart Industries Inc - President, Chief Executive Officer, Director
Yes, thanks for the question on. So I think the hydrogen market at times get pigeonholed into being a US discussion. And for us, it is a much more global discussion. We've seen, as I mentioned in his script, we saw a strong year in Europe, in particular on the hydrogen side.
So for us was storage tanks in comparison to those were kind of the two primary products that went into on to those applications. And we're seeing continued continued demand in hydrogen from mostly the liquefaction side globally as well.
In terms of the 45 V and some clarifications that came out. What I'd say to that is the market in the operators that will that we're waiting, they really need the IRA was to ensure clarity until the 45 the clarification came out in the last couple of months. And so there is really 2.5 years years of these guys waiting for those clarification.
I almost view it as a catalyst in a positive way to on to move folks who can't do it out of the way. And those who really are on you have a real projects here in real funding here and can utilize the structure as it's been laid out a positively as being for the United States in the industry.
And I do think from a global perspective that on that high single digits to 10% for the key here between now and 2030 is is very achievable for the market and in for our company to play in that both gases and liquid end market.
Ati Modak - Goldman Sachs & Company, Inc. - Analyst
Thanks, Nicole. And I'll turn it back. Thank you.
Operator
Thinking that answer your question and answer session. I will now hand the call back to Mr. Jonathan Cohen for any closing remarks.
Unidentified Company Representative
Thank you, Anna, and thank you, everyone, for joining us this morning. We look forward to the coming months to provide further updates. Have a great rest of the day. I think.
Operator
And this concludes today's call. Thank you for participating. You may all disconnect.
Call participants:
Corporate ParticipantsJill Evanko, Chart Industries Inc - President, Chief Executive Officer, Director
Joe Brinkman, Chart Industries Inc - Chief Financial Officer, Vice President
Conference Call Participants
Saurabh Pant, BofA Global Research - Analyst
Ben Nolan, Stifel Nicolaus and Company, Incorporated - Analyst
Scott Gruber, Citi Investment Research - Analyst
Manav Gupta, UBS Equities - Analyst
Marc Bianchi, TD Cowen - Analyst
Arun Jayaram, JPMorgan - Analyst
Eric Stine, Craig Hallum - Analyst
Robert Brown, Lake Street Capital Markets - Analyst
Doug Becker, Capital One Securities, Inc - Analyst
Ati Modak, Goldman Sachs & Company, Inc. - Analyst
Refinitiv StreetEvents Transcript
Q4 2024 Chart Industries Inc Earnings Call
Feb 28, 2025 / 01:30PM GMT
