Good morning, and welcome to the Chart Industries Inc. 2019 First Quarter 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 supplemental presentation was 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 following the conclusion of the call until Thursday, April 25, 2019. 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 over to Jill Evanko, Chart Industries' CEO.

Thank you, Sherrie, and thank you everyone for joining us to walk through our first quarter 2019 results and outlook. Given the high level of order activity since the first of the year across the business, I will begin by walking through each segment’s order level with specific market trends and significant orders received year-to-date. As many of you are aware, one of the unique elements of the Chart business is that we are an industrial manufacturing company with a complementary Energy and LNG play. We participate in many aspects of LNG infrastructure not just export terminal builds, but across liquefaction, storage and transport globally. You will hear that theme throughout our comments about the first quarter results as we continue to see strong demand globally for both the Energy & Chemicals and Distribution & Storage products. As I’ve mentioned over the past six months, one of the exciting things about our business is how much margin opportunity exists within our control to execute. I will discuss the actions completed in Q1 that will generate over $6.5 million of anticipated incremental annualized operating income and how those actions combine with the order activity in the first quarter inclusive of big LNG increase our full year 2019 revenue and adjusted EPS guidance and Jeff Lass, our CFO will provide specifics on the first quarter financial results. Beginning on Slide 2 of the supplemental deck which was released this morning, total orders for the first quarter were $461 million, an increase of 60% over the first quarter of 2018 and a 69% increase sequentially over the fourth quarter of 2018. That backlog is $733.8 million, 54% higher than the first quarter of 2018 and 29% higher than the fourth quarter of 2018. , : E&C orders of $264 million included $135 million…

Thanks, Jill. Turning to Slide 9, let’s walk through the first quarter sales, margin and EPS. First quarter sales of $289.3 million, an 18.5% increase or 9.5% organic increase over the first quarter of 2018 reflected our strong December ending backlog position and our first quarter order activity that Jill spoke about. Sales in all segments grew organically over the first quarter of 2018. Additionally, while our first quarter is generally our lowest quarter of the year seasonally, first quarter 2019 sales declined sequentially from the fourth quarter of 2018 by only 0.3% or 3.2% organically. The past three years sequential sales declined from the fourth quarter to the first quarter were 9.4%, 6% and 26%. First quarter 2019 gross margin as a percent of sales was 23.2%. Adjusted for one-time cost recognized in cost of goods sold in the first quarter, gross margin as a percent of sales would have been 26.4%. This compares to actual gross margin as a percent of sales in the fourth quarter of 2018 of 25.5%, or 26.1% excluding one-time costs. We expect the benefits of our restructuring actions as well as our ongoing sourcing and pricing impacts to improve gross margin as a percent of sales throughout the year. SG&A of $55.3 million included $1.9 million of restructuring-related costs and is in line with our previously guided figures. As is typical each year, stock compensation expense is higher in the first quarter than it will be for the rest of the year. First quarter stock comp expense was $2.4 million, subsequent 2019 quarters will have lower SG&A than we saw in Q1. Net income for the first quarter of 2019 of $0.9 million resulted in reported earnings per share of $0.03, and included $8.9 million of restructuring and transaction-related cost or $0.23 of EPS as shown in row one on the table on Slide 9. Also included in reported EPS are $3.9 million of VRV associated integration and employee step up costs or $0.09 of EPS shown on row 2 and $1 million of other one-time costs or $0.04 of EPS. Adjusted EPS of $0.39 is more than double the first quarter of 2018 adjusted EPS of $0.18. Slide 10 reiterates our increased full year guidance as Jill previously discussed. As mentioned, this includes the expected revenue impacts associated with the 2019 portion of Calcasieu Pass and Gimi which are subject to project timing but does not include the $30 million order we won this week. Our forecasted tax rate guidance range remains at 22% to 23%. Lastly, our capital expenditure outlook remains unchanged at $35 million to $40 million and I can now confirm that we will be proceeding with the LNG fueling systems line build out in our Italian production facility given the first quarter committed long-term agreements with two key customers. I will now turn it over to Sherrie to open it up for questions.

[Operator Instructions] Our first question comes from James West with Evercore ISI.

Hey, good morning, Jill. Good morning, Jeff.

Hey, Jim.

Good morning.

So, Jill, curious on the larger scale LNG projects. There is clearly been some rush to FID here for a number of these project, but there has been some weakness in and of course the LNG market as I am sure you are aware in terms of pricing. Has this changed any of the dynamics in the conversations that you are having with customers? And I know, these are projects that the build out cycle is two, three years. So it’s short-term pricing trends little matter, but just want to make sure that everything is good to go here. And then, if so, is that rush to FID is still the case?

Absolutely. So, let me take the second piece of the question first. The rush to FID is certainly still the case. We are actually seeing much more activity even in late Q1, early Q2 than we did in late Q4 early Q1. So certainly the market dynamic of a certain amount of million tons per annum that’s required is driving these operators to move very quickly and I think you’ve seen that with the LNG 19 announcements across the board. We are certainly not seeing slowdown from any of the pricing in the market and probably just anecdotally for you, these projects are, as you said are multi-year and they’ve already been multi-year for suppliers like us in terms of working with the operators in the EPCs on pre-feed work and FERC filing et cetera. So we have also been asked to reprice our portion on certain projects and are coming out right in line with where we expected given some of the material cost changes et cetera, but no change from our perspective to the margin opportunities and the revenue side that exists for us and I would end the answer to your question with the comment around Tellurian Driftwood project which the move to 16.6 MTPA for Phase 1 is a significant boost to what we expect from our 2019 order pipeline.

Got it. Okay, that’s great to hear. And then, on the other side of things, on the M&A front, obviously, VRV, a big transaction, nice transaction for you guys. But I know, just knowing you Jill, you are not rested on your Laurel. So I suspect you are engaging in other opportunities. Are there more tuck-ins or opportunities out there that could come to fruition in the next, call it, couple quarters?

Absolutely. So, we are – we have always said that we will use our cash and our balance sheet to invest both organically and inorganically. And we talked about the opportunities on the repair and service side, as well as on some of the E&C opportunities that exist. While we are focused on integration, you can only stick timing on some of these deals. And we would continue to pursue some of the opportunities that are highly strategic to us. And I think just as a general comment in the energy space, you are seeing Chevron Anadarko is a great example and I think there is many strategic opportunities that could happen very quickly here in the industry as a whole and certainly, we won’t look to wake up one morning and read about a strategic deal that could have been important to us. So we are trying to stay ahead of that from generating opportunities in our pipeline.

Okay, perfect. Thanks, Jill.

Thank you.

Thank you. Our next question comes from Walter Liptak with Seaport Global.

Hi, thanks. Good morning, Jill and Jeff.

Good morning, Walt.

Good morning.

I wanted to ask about the guidance for this year. Obviously, some nice things going on there with $20 million to $30 million from the Venture Global and the Gimi project. But I wondered about the all-in number that’s there like. Now if you are figuring out the margins for Venture Global and other projects, what kind of margins should we be assuming on those?

Yes, obviously from a competitive standpoint, we don’t share project-specific margins. But you can look at big LNG project margins at kind of between 33% and 40% depending on the content, the size, et cetera from a gross margin as a percent of sales perspective. Some of that depends on the timing with which deliveries happen and so on. Hence, why we repeated four or five times in our comments that it’s subject to project timing. So, my statement of the conservative estimate on margins takes the projects that we’ve included, our estimated 2019 portion that we’ve guided to add about 25% operating income drop-through.

Okay, got it. And in the 2019 EPS number, it sounds like there is some nice 80-20 coming through. But it also sounds like there is some big opportunity with purchasing. Is that in the 2019 guidance?

There is a part of both of those numbers in our guide. But there is incrementally more that are not included in the guide, which we are continuing to go after. And I think, everyone just take the elephant in the room off the table here. Everyone understands our philosophy on guidance is to put guide out there that we can achieve handily. And we look to do that and continue to do that and then continue to take margins from the opportunities that we’ve talked about.

Okay, great. So just to be clear, that $4 million in procurement savings, the timing of that is part of 2019 and part of 2020?

Yes, so the $4 million that we’ve included in 2019 is sourcing and pricing together. And if you took what we expect from an annualized perspective from sourcing and pricing, that’s currently well underway. You can double that number.

Okay, great. Okay, all right. Thank you very much.

Thank you.

Thank you. Our next question comes from Martin Malloy with Johnson Rice.

Congratulations on the orders. Good morning.

Good morning, Marty.

I just wanted to follow-up along the lines of the margin question. Can you maybe give us an update segment-by-segment in terms of where you are looking to get to in terms of gross profit margins and maybe, timing?

Sure. So for the full year, our total gross margin, we continue to guide sort of in the 25% to 30% range for the full company and that breaks down by segments, E&C is in the mid-20s, 24%, 25%. D&S West is mid-30s, and D&S East all in is sort of low-20s for the full year.

Okay, great. And then, with respect to the long-term agreements that you signed with the two key LNG fueling system customers. If my memory serves me correctly, that market was pretty tight in terms of manufacturing capacity. Could you maybe talk about the importance of these long-term agreements and what it might allow you to do on the manufacturing side?

Absolutely. So, as you know, there is a big move, especially in Europe for these trucking customers to move to LNG fueled trucks. What we are seeing is a breadth of customers. If you asked this six months ago, we would have said, one or two customers are really moving in this direction and now we are seeing more than a handful that are talking about going there and actually starting to build LNG fueling systems. We anticipate that the size of this opportunity is much bigger than we had originally sized it at and I think across and you could safely say across the next four, six years, you are looking at $500 million easily will build, of which we would have the significant subset of given these long-term agreements. The manufacturing capacity standpoint, one of the reasons that we are building out another line in Italy is given our expected size and volumes across the next four to six years for these European customers. We are also seeing opportunities for these tanks on other vehicles in India in particular. So, with respect to the MOU we signed with IOCL, there is also LNG opportunity for over-the-road truck for some of the larger trucking suppliers that are in India and we are starting to see interest there. So the capacity build out this year will be critical for the next period of time given the long-term agreements that we’ve executed.

Great. Thank you.

Thank you. Our next question comes from Rob Brown with Lake Street Capital.

Good morning. Thanks for taking my question.

Hi, Rob.

Good morning.

Thinking about the European opportunity, you also talked about station build out. I think you said you’ve got an order for one or more in Germany and other 15 or so. What’s sort of the selling price of revenue per station you can get and what’s the opportunity on the station side?

Yes, so there is multiple different types of stations and you can have fueling stations that go from the bunkering side which are 5 million euros to 35 million euros of content – of short content per project. We think that that’s one to two projects a year with the first order opportunity coming in Q4 of this year, which would result in one build in 2020. But these smaller stations which in particular are for the NGL toll avoidance in Germany range from 1 million to 2.5 million of content for us per station. I think that you will see probably three to five a year would be my estimate given the 2019 and 2020 suspension.

Okay, great. And then, maybe switching to large LNG projects, I know you gave some color on 2019. How do you see the split of projects signed kind of going into 2020 and 2021 maybe on a percent of order or some basis like that?

So, just – Rob, just to clarify, are you asking in a way the order – I think the orders will flow or the revenue associated with the order?

Yes, I was referring at the revenue. If you get an order this year, how does the revenue flow through?

Yes, so the majority of the revenue will be in 2020 and 2021 for the orders that come in this year. Just by way of example, I mentioned that we are still sorting through the timing on the $30 million air cooled award that we got yesterday, that would be $4 million or $5 million of revenue in 2019 with the brunt of it in 2020. If we were to get a Driftwood in the third quarter, you would have just a couple million dollars recognized in 2019 and then subsequent to that would be another 2.5 years from there. So you can handily say, that is a small percent in 2019 and then a very big ramp in 2020, 2021 in assuming the timing, kind of between now and Q3, then it would ramp down in 2022.

Okay, thank you. I will turn it over.

Thanks, Rob.

Thank you. Our next question comes from Tom Hayes with Northcoast Research.

Hi, good morning. Congratulations on the quarter.

Hi, Tom. Thank you.

I was just wondering, maybe you could elaborate a little bit more on the agreements you signed with your key industrial gas customers, especially you called out, I guess, governing global activity?

Yes. So, obviously, we are unable to comment on the specific customers themselves. But you guys understand who the majors are in this basis. The one particular customer that we signed the agreement to govern global activity, that’s a pretty big move. Historically, the purchasing would happen in the independent regions while governed by a corporate structure. The negotiations on agreements would happen regionally through the purchasing locations, which can take a lot of time as you are working on each individual agreement. So this expedites the way that we can move forward with each region and how quickly we get new orders on the long-term agreements coming through for us. So, that’s a big move. It’s something that we had never had before and we are very excited about that. And then the second agreement that I mentioned that we extended two years, that’s a very large player as well and that allows us to fulfill their needs, work with them on innovative solutions that they’ve asked us to work with them on without having to spend six or nine months in a renegotiation and a lot of the legal back and forth. So, it’s expedites volume. It allows us to add opportunities that we didn’t have before and takes a lot of back and forth off the table. So, any time we comment on an extension or a new long-term agreement, those are very, very positive when it comes to the industrial gas guys.

Great. Then a just quick follow-up on VRV. You mentioned in your release that they had an operating margin loss for the quarter as the low margin backlog projects look through. Maybe just kind of broadly speaking, how many more quarters, do you think we have is kind of working to that low margin backlog kind of get into the higher margin projects?

I think you have a full another quarter. So, Q2, we expect that to be the case and then, Q3, Q4, we expect that to be fairly well flushed out at that point. So the second half you will see synergies and you’ll see higher margins flow through out of the backlog.

Great. Thank you.

Thanks.

Thank you. Our next question comes from Matthew Trusz with G. Research.

Good morning. Thank you for taking my question.

Hi, Matt.

Jill, with increasing your order – potential order outlook for big LNG in 2019.

Some knowledge that we have as a business which we are unable to share, but that we would anticipate, it might accelerate certain projects that we previously thought would be in 2020 potentially into late 2019.

Great. Thank you. And then, just to follow-up on the food, space and cannabis discussion. Can you frame what you see as your total addressable market here compared to the revenue and growth numbers currently stand? Thanks.

Yes, absolutely. So, you have to really take this by each of the pieces of specialty markets in order to address the total. But the magnitude of this is very significant and cannabis alone, we gave some numbers on the February call about the size of the market there. We don’t see a lot of early competitive activity in that market and as we continue to be first to market with new products, we think that, the size of that is in the hundreds of millions of dollars space. On the space exploration side, that’s a smaller addressable market. Just given that its fewer players and obviously the application itself doesn’t happen as frequently. So, that’s kind of in that $50 million to $75 million of addressable market, we are getting kind of $12 million to $20 million a year on an annual basis is significant to us and that’s where I would see that particular piece of specialty markets continuing. Food and beverage is a multi hundreds of millions of dollar market opportunity for us. Lots of different applications for our tanks as well as the doser side of the business. And then, I did commented on hydrogen, which is certainly up and coming. It’s been around the edges for a long period of time. But between cannabis and hydrogen, those markets we are getting an exceptional number of inbound inquiries. Certainly, locking in a lot of our slot production on the hydrogen side and a lots of different applications, not just for the passenger vehicles that I talked about today. But across the board, globally, for various different hydrogen applications. So that market it is another hundreds of millions of dollars of market. So there is a lot to go after there and I would say, across the specialty market space that, for the most part, we are not taking share from someone else. Their share of the market to go and get on our own.

Good to hear the color. Thank you.

Thanks, Matt.

Thank you. Our next question comes from Eric Stine with Craig-Hallum.

Hi, Jill. Hi, Jeff.

Hey, Eric.

Hey, Eric.

Hey, just wondering if we can just go back to India, given the agreement with IOCL. I know a lot of the oil majors are making noise along with OEMs around a pretty sizable infrastructure build out. So just, maybe talk about the opportunity that you see there and then beyond IOCL, just curious, what type of interest you are seeing from the other large players Petronet and GAIL, I guess, specifically?

Yes. So, we signed that agreement – first of all it is not an exclusive agreement and we did that purposeful because of your comment there around Petronet and GAIL and the other opportunities. But IOCL amongst the other major players in India certainly see a lot of LNG infrastructure build out opportunities anywhere from – you got regas stations to over-the-road trucking, like I commented on. So there is a significant amount of infrastructure build that has to happen. India is different than China, it has been in terms of how they intend to build out the infrastructure. So growing the LNG market and being a key participant in that from an equipment standpoint was the key reason that we chose to partner up with IOCL and work to build that market out. Since the announcement of our MOU to work together with them and this is primarily on the D&S side of our products category that we are seeing in the interest. We’ve had both of the parties that you mentioned along with two or three others that have come to us and also asked us to work with them around building the market out and having some tanks and trailer offerings. Right now, there is – I mentioned about $11.5 million of bidding activity that we have currently in hand which we expect that we will be able to lock down fairly quickly here. There is multiple other tenders that we are aware of that we don’t include in that number just given the fact that we wait until we actually have that RFQ in house. But I would expect this opportunity is, again, in the hundreds of millions of dollars for the market and for us growing very quickly in the next two years. I think you will also see as these offtakers start signing agreements with Tellurian’s comment on Petronet and some of the other folks that have offtake agreements into India, there will be a forced infrastructure build versus just a casual, hey, we are going to need it at some point, because you got to get the gas in somehow.

Yes, got it. Very helpful. Maybe last one from me. Just on the pipeline, the $600 million to $800 million. I assume that that does not include at least in the past, I don’t think you’ve included the air cooled heat exchange or potential content. So, maybe if you could just talk about what that could look like how that matches up with the list that you provided in every deck?

Yes, I mean, the order I just commented on today, the $30 million air cooled order we were awarded yesterday from Bechtel, that’s a great example of a content we would not have had without the Hudson products business in part of the Chart family. Those are – that’s a project that’s been well underway that we didn’t have content on previously and we are able to get content given that product offering that we have. Generally speaking, what we are seeing is, on the total equipment content for us, air cooleds are adding somewhere between kind of 7% to 9% of additional content. So if you said, a $500 million order at air cooled, you could say between $35 million and $45 million more for air cooled. Well, and I don’t want to mislead anyone to say it’s a walk that the air cooleds are Chart content. But certainly, we have a good shot at some of these projects for air cooled that we wouldn’t have had two years ago.

Got it. Thanks a lot.

Thanks.

Thank you. Our next question comes from Pavel Molchanov with Raymond James.

Thanks for taking the question. This kind of goes back to, I think what we talked about just a few minutes ago, which is, this week, the order that you won from the unnamed LNG project is only heat exchangers. By contrast, Calcasieu Pass is a more integrated solution with cold boxes. What determines for any given project whether the customer will want an integrated solution from Chart versus purely components?

It really comes down to what point in the project the customer is and how far along. So, some of these projects have been baked – for example long before, we ever had IPSMR as a process technology offering or even in the case of air cooled, long before we had an air cooled heat exchanger for the LNG market which really came through Hudson. So, where you see air cooled content by itself, it generally is the result of a project being further along as well as a different type of heat exchanger in the actual content heat exchanger cold box combination, meaning from a different supplier. What we are seeing this time around on the mid-scale projects and certainly you can see that on the slide that we presented today of the ten projects, we are seeing much, much more on the integrated solution side, where the customer or the operator actually is asking for the braze, the cold box, and the air cooled. And then the differentiation point is really whether they are just wanting to integrate the equipment solution or they want the equipment plus the process technology. So, that’s become much more of the dividing lines is whether it’s the technology plus equipment or just the equipment suite together.

Okay. And, obviously, kind of setting aside the higher revenue number from the integrated sales that you may have, is there a difference in the percentage gross margins in structure in terms of pure heat exchanger sales versus the cold box?

Yes, there is. So, there is three ways to think about the gross margin on these projects. If you get the process technology and the equipment suite together, that’s the highest gross margin combination and that’s one I commented earlier kind of think of it as 33% to 40% for these projects. That’s at the higher end of that. If you are – braze plus the cold box combination, plus air cooled, then you are in that mid-30s range, kind of low to mid-30s. And if you are strictly air cooleds, you are in the mid-20s.

Okay. Very helpful. Appreciate it.

Thanks.

Thank you. And we do have a follow-up from Walter Liptak with Seaport Global.

Thanks. Just a quick follow-up. You mentioned the converts solution. I wonder if you could just help us with that, because the potential impact beyond the first – sort of 2019?

Yes. So, I would just comment first by saying we are very early in the life of those converts, right. So, while they are currently in the money and we have got to consider the possibility that they would be converted both from how we treat the debt perspective and you will see that when the Q comes out and you look at the balance sheet but also from a dilution perspective. The likelihood of conversion certainly in this year is relatively low. But that being said, we saw a penny of dilution in the first quarter. As we look at the full year, it looks like 10% to 12%. 10% to 12%, sorry.

10% to 12%. Okay. All right. Great. Thank you.

Thank you. And we do have a follow-up from Martin Malloy with Johnson Rice.

Hello. I was wondering if you might be able to comment about conversations kind of the tone of conversations you are having with the customers on the fractionation and gas processing side for the brazing on the heat exchangers?

So, we continue to see a healthy market on that side and I would kind of split it between natgas and then the petrochem side of things. Petrochem, as I’ve commented, now it’s – but then I guess two quarters I made the statement that it’s been healthy market. It’s a hard to predict market. It has ups and downs and we’re kind of at the ups right now. And we continue to see that in particular in the Middle East. So that’s been a very healthy and continues to be and I’ll have more color on that as the quarter continues. But certainly out of the gate, the first two weeks of April, we have had very strong order activity on that side of the house. On the natgas processing side, this has been going on. I think a year ago, I commented that I expected that to slowdown a little bit in the second half of 2018 and that didn’t happen. Order activity has been healthy and continues to be and then I did comment that we booked another natgas processing plant equipment order. But I would say that, I think we have to be cautious about the natgas side of the market for us. We have a very conservative growth number in our 2019 outlook, I am talking 1% to 2%. But I think that, at some point here, like in a typical natgas cycle, it will become overbuilt and slowdown. We haven’t heard that yet from the customers. But I think everybody is sharing the sentiment with each other that that could happen here and taper off a little bit as the year goes on and that’s how we’ve designed or forecasting our guide.

Okay. And NGL fractionation, is that included in your comments about gas processing?

Yes. It is.

Okay. Thank you.

Thank you. And we do have a question from John Sturges with Oppenheimer.

Yes, exceptional quarter. I was just curious with the order growth that you are seeing and I know you have a lean process ongoing to expand capacity with the same footprint. Will there be a need for additional capacity build out and financing?

There will not be a need for additional capacity build out. If there were a financing need, it would be for one of the inorganic strategic opportunities if they were to arise. But given the lean actions that we are well underway into – we have plenty of capacity to take on the orders that we’ve described both from the base business, as well as from the big LNG side of things.

So, SG&A then will be expected to – as I see in the forecast to roughly remain fairly static?

Correct, correct. The incremental SG&A is essentially zero for the order activity and the pipeline that we have. And our goal is actually to reduce SG&A further than what we’ve guided to.

Thank you very much.

Thanks, John.

Thank you. Ladies and gentlemen, thank you for participating in today’s question and answer session. I would now like to turn the call back over to management for any closing remarks.

Thanks, Sherrie. We are excited and fully ramped to begin production on the Venture Global and Golar orders and we are confident on the execution across our business on both the top-line and margin opportunities discussed today. Lastly, I would like to invite our analysts and shareholders to our Investor Day on November 14 at our brazed aluminum heat exchanger facility in La Crosse, Wisconsin. We pick November to make sure you guys really wanted to come. Save the Date invitations will be distributed this afternoon. And thank you all for joining us today. Good bye.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may all disconnect and have a wonderful day.