Executive Summary / Key Takeaways

• Strategic Transformation and Diversification: Chart Industries has successfully transformed into a backlog-driven business with a significant aftermarket segment (RSL now ~33% of revenue), diversifying its exposure across the "Nexus of Clean" markets including LNG, hydrogen, carbon capture, and data centers, reducing reliance on single large projects.
• Technological Leadership in Critical Infrastructure: The company's proprietary IPSMR® process technology for LNG liquefaction and its unique manufacturing capabilities, such as being the sole U.S. producer of brazed aluminum heat exchangers, provide a strong competitive moat and drive higher-margin project wins.
• Robust Financial Outlook Despite Headwinds: Despite a Q3 2025 net loss driven by a one-time merger termination fee, Chart reiterated its full-year 2025 guidance, projecting sales of $4.65 billion to $4.85 billion and adjusted EBITDA of $1.175 billion to $1.225 billion, underpinned by a strong backlog and anticipated operational efficiencies.
• Deleveraging and Capital Allocation Focus: Chart is on track to achieve its target net leverage ratio of 2.0x to 2.5x in 2025, with a commitment to operational cash generation and normalizing capital expenditures, prioritizing debt reduction before considering material acquisitions or share repurchases.
• Baker Hughes (BKR) Acquisition Offers Premium Value: The proposed all-cash acquisition by Baker Hughes for $210 per share, approved by Chart shareholders, offers immediate value and positions the combined entity as a technology leader in energy and industrial solutions, subject to regulatory approvals.

Charting a Course in the Energy Transition

Chart Industries, Inc. (NYSE:GTLS), a company with roots tracing back to 1859, has strategically evolved into a global leader in designing, engineering, and manufacturing process technologies and equipment essential for the "Nexus of Clean"—encompassing clean power, water, food, and industrials. This transformation has positioned Chart at the forefront of critical infrastructure development for liquefied natural gas (LNG), hydrogen, biogas, and CO2 capture, serving every phase of the liquid gas supply chain from engineering to digital monitoring. The company's journey has been marked by a deliberate shift towards a more project-oriented business model, significantly bolstered by a growing and resilient aftermarket segment.

The global energy landscape is undergoing a profound shift, driven by increasing demand for cleaner energy sources, energy security, and the burgeoning needs of energy-intensive sectors like data centers and artificial intelligence. Chart's strategic focus on these areas, coupled with its flexible manufacturing footprint and a robust in-region supply chain, directly addresses these macro trends. This proactive approach, honed by lessons from past supply chain disruptions, provides a strong foundation for sustainable growth and operational resilience.

Technological Edge: The Core of Chart's Moat

At the heart of Chart's competitive advantage lies its differentiated technology, particularly its IPSMR® (Integrated Pre-cooled Single Mixed Refrigerant) process for LNG liquefaction. This proprietary technology is gaining significant global traction, evidenced by its selection for major projects like Woodside Louisiana LNG Phase 2 and its role in Cheniere (LNG)'s Corpus Christi Stage 3 liquefaction project, which recently achieved its first cargo meaningfully ahead of schedule. The IPSMR® technology offers tangible benefits through its modular design, which reduces plot space requirements and often delivers higher efficiencies, especially when integrated with e-drives for cleaner LNG production.

Beyond LNG, Chart is a key innovator in the burgeoning hydrogen economy. The company is actively developing engineered liquefaction, storage, and compression equipment, with discussions around scaling hydrogen liquefaction capacity to 100-ton and even 300-ton per day facilities in the medium term. This technological roadmap is critical as the market seeks larger scale and more interconnected hydrogen infrastructure. Furthermore, Chart's Earthly Labs technology is scaling up for carbon capture applications, particularly in reuse cases, and its water treatment solutions address various organic and inorganic contaminants, including PFAS.

Chart's manufacturing capabilities further solidify its technological moat. The company is the only manufacturer of brazed aluminum heat exchangers in the United States, operating the world's two largest brazing furnaces. It also boasts a strong U.S. footprint for air cooler and fan manufacturing, and the world's largest shop-built cryogenic tanks produced at its Theodore, Alabama facility. These specialized assets enable Chart to deliver high-performance, mission-critical equipment that cannot fail, particularly in demanding applications like space exploration, where orders have seen substantial growth. The strategic intent behind these technological investments and manufacturing prowess is clear: to maintain leadership in high-value, specialized markets, drive premium pricing, and secure long-term growth by enabling the global energy transition.

Competitive Dynamics and Strategic Positioning

Chart operates within a competitive landscape populated by industrial giants such as Linde plc (LIN), Air Products and Chemicals, Inc. (APD), Emerson Electric Co. (EMR), and Honeywell International Inc. (HON). While these competitors offer broad industrial gas and automation solutions, Chart distinguishes itself through its deep specialization in cryogenic and heat transfer equipment for specific, high-value applications.

Chart's strength lies in its ability to provide customized, durable, and highly efficient engineered equipment, particularly for extreme conditions in LNG, hydrogen, and industrial gas applications. This specialized focus often translates to superior performance in niche environments compared to the more generalized offerings of its larger rivals. For instance, Chart's cryogenic components offer significantly higher efficiency in energy storage and transfer, a critical advantage in the rapidly expanding hydrogen and LNG sectors. The company's extensive Repair, Service & Leasing (RSL) network further enhances customer loyalty and provides a recurring revenue stream, offering localized support that can be a differentiator against competitors with broader but potentially less specialized service capabilities.

However, Chart's reliance on specialized markets can also be a vulnerability. While its flexible manufacturing and in-region supply chain strategies mitigate some supply chain dependencies, disruptions could still impact costs more acutely than for highly diversified conglomerates. Furthermore, digitally-focused competitors like Emerson and Honeywell, with their advanced automation and integrated digital tools, could potentially outpace Chart in innovation speed for smart systems, posing a challenge in tech-integrated projects. Nevertheless, high capital requirements, stringent regulatory approvals, and the need for deep technological expertise act as significant barriers to entry, protecting Chart's market position. The proposed acquisition by Baker Hughes is expected to further strengthen Chart's competitive standing by combining its specialized technology with Baker Hughes' scale and integrated solutions, particularly in LNG, data centers, and new energy sectors.

Financial Performance: A Story of Resilience and Growth

Chart Industries' recent financial performance reflects a company in transition, demonstrating resilience and strategic growth despite significant one-time events. For the three months ended September 30, 2025, Chart reported consolidated sales of $1100.6 million, a 3.6% increase over the $1062.5 million recorded in Q3 2024. This growth was primarily fueled by the Heat Transfer Systems (HTS) segment, which saw sales jump by $93.1 million (36.3%) due to strong execution on LNG projects, data centers, and traditional energy.

Despite this top-line growth, the company reported a net loss of $135.4 million in Q3 2025, a stark contrast to the net income of $72.7 million in Q3 2024. This loss was largely attributable to a $266 million termination fee expense related to the aborted merger with Flowserve Corporation (FLS). Consequently, operating income shifted to a loss of $88.5 million in Q3 2025 from an income of $178.5 million in the prior year period. Selling, General and Administrative (SGA) expenses also increased by 9.1% to $148.1 million, including $17.2 million in costs related to the terminated Flowserve merger and the proposed Baker Hughes acquisition.

On a more positive note, consolidated gross profit margin remained stable at 34.1% in Q3 2025, with improved margins in HTS offsetting declines in other segments. The HTS segment's gross profit margin notably expanded by 870 basis points to 38.5% in Q3 2025, driven by favorable project mix and increased productivity. The Specialty Products segment also showed strong underlying performance, achieving a gross margin of 30.3% in Q1 2025, the first time above 30% since 2022, reflecting improved efficiencies in its manufacturing facilities. The Repair, Service & Leasing (RSL) segment, now approximately one-third of Chart's revenue, continues to be a consistent contributor, though its Q3 2025 sales decreased due to non-recurring large projects from the prior year.

From a liquidity perspective, Chart's cash and cash equivalents stood at $399.2 million as of September 30, 2025, an increase from $308.6 million at the end of 2024. Net cash provided by operating activities for the nine months ended September 30, 2025, was $205.9 million. The company's net leverage ratio was 2.91 at March 31, 2025, and it remains committed to achieving its target of 2.0x to 2.5x in 2025. Capital expenditures for 2025 are projected to be a normalized 2% to 2.5% of sales, focusing on enhancing compressor capacity and improving productivity. This disciplined approach to capital allocation and a strong "cash culture" are central to Chart's strategy for sustainable financial health.

Outlook and Strategic Momentum

Chart Industries has reiterated its full-year 2025 guidance, signaling confidence in its strategic direction and operational execution. The company anticipates sales in the range of $4.65 billion to $4.85 billion and adjusted EBITDA between $1.175 billion and $1.225 billion. Adjusted diluted EPS is projected to be $12 to $13, with free cash flow expected to be $550 million to $600 million. These targets are supported by a robust backlog of $6049.5 million as of September 30, 2025, with approximately 60% of the year-end 2024 backlog expected to convert to revenue in 2025.

Management expects a stronger second half of 2025 compared to the first, driven by the timing of specific project revenue and service work in backlog, including the Woodside Louisiana LNG project and larger space exploration and marine orders. While the company acknowledges an estimated gross annual impact from tariffs of approximately $50 million, it is actively implementing mitigation strategies, such as leveraging its flexible manufacturing footprint and in-region supply chain, to ensure these impacts fall within the existing EBITDA guidance range.

Looking further ahead to 2026, Chart's medium-term financial outlook remains unchanged, targeting an organic sales CAGR in the mid-teens, mid-30% gross margins, and adjusted diluted EPS growth CAGR in the mid-40%. This outlook does not yet incorporate potential upside from large LNG projects not currently in backlog (such as the approximately $1.5 billion in Chart content from Argent, Driftwood, and an international oil company's project) or future benefits from U.S. Hydrogen Hub projects. The company's expanding commercial pipeline, including a $400 million opportunity in data centers over the next 12-18 months and a $1 billion LNG-specific pipeline over the next 12 months (excluding ExxonMobil (XOM) Mozambique Rovuma), underscores significant growth potential.

Risks and Considerations

Despite a compelling growth story, investors should be mindful of several key risks. The proposed acquisition by Baker Hughes, while offering a premium to shareholders, remains subject to regulatory approvals, which could be delayed or impose conditions that impact the combined entity. The potential for a $250 million termination fee payable to Baker Hughes, plus reimbursement of the $258 million Flowserve termination payment, exists under specific circumstances if the merger does not close.

Macroeconomic uncertainties, including geopolitical instability and potential slowdowns in industrial gas and hydrogen markets in the Americas, could affect demand. While Chart has demonstrated agility in managing supply chain disruptions and tariff impacts, these external factors always present a degree of risk. Shareholder lawsuits related to the Baker Hughes merger, though deemed meritless by management, introduce legal and reputational considerations. Finally, the inherent project-based nature of a significant portion of Chart's business means that project timing shifts can impact quarterly results, though management has actively worked to incorporate this variability into its guidance.

Conclusion

Chart Industries stands at a pivotal juncture, poised for continued growth as a specialized leader in the global energy transition. Its deep-rooted history, coupled with a relentless focus on innovation and operational excellence, has forged a resilient business model. The company's proprietary technologies, particularly IPSMR® for LNG and its expanding portfolio in hydrogen and carbon capture, provide a distinct competitive advantage in markets demanding increasingly efficient and clean energy solutions. This technological leadership, combined with a robust aftermarket service segment and a flexible manufacturing footprint, underpins Chart's ability to deliver consistent performance and capture significant opportunities in the "Nexus of Clean."

While the proposed acquisition by Baker Hughes offers a clear path to immediate shareholder value and strengthens its competitive position, Chart's intrinsic value proposition remains compelling. The company's disciplined approach to deleveraging, coupled with a strong outlook for revenue and EBITDA growth, signals a financially sound trajectory. For discerning investors, Chart Industries represents a unique opportunity to participate in the long-term secular trends of energy transition and industrial decarbonization, driven by a company with a proven track record of innovation and strategic execution.