GTLS Financial Analysis

Analysis Date: 1/24/2025

Business Model

Chart Industries generates revenue through four main segments: Cryo Tank Solutions, Heat Transfer Systems, Specialty Products, and Repair, Service & Leasing

Revenue Sources

• Cryo Tank Solutions: Global mobile equipment and cryogenic storage solutions
• Heat Transfer Systems: LNG and traditional energy equipment including brazed aluminum and air-cooled heat exchangers
• Specialty Products: Hydrogen, helium, space, carbon capture and water treatment solutions
• Repair, Service & Leasing: Lifecycle services and aftermarket equipment/services

Revenue Distribution by Channel

• Q3 2024 Segment Distribution: CTS (15.3%), HTS (24.1%), Specialty Products (26.7%), RSL (33.9%)

Income Statement Analysis

• Sales increased 22.4% year-over-year to $1.06B driven by strong performance across all segments
• Gross margin expanded 350bps to 34.1% due to favorable mix and synergy realization
• Operating margin improved 560bps to 16.8% reflecting operational leverage and cost controls

Balance Sheet Analysis

• Cash position strengthened to $310.2M, up 64.7% from year-end 2023
• Net leverage ratio improved to 3.04x from 3.26x in Q2 2024

Cash Flow Analysis

• Strong FCF generation of $174.6M in Q3 2024 vs -$97.8M in Q3 2023
• Reduced capital expenditures by 58.2% year-over-year

Capital Allocation

Primary focus on debt reduction with net leverage ratio target of 2.0-2.5x. No material cash acquisitions or share repurchases planned until target leverage achieved. Convertible notes maturity in November 2024 to be settled with cash payment for principal (~$258.7M) and shares for premium.

Management Commentary

Record reported gross profit margin of 34.1% and adjusted operating margin of 22.2%

Earlier than anticipated cost synergies exceeding $250M original year-three target

Strong order book with $4.5B backlog

Reduced 2024 revenue guidance due to timing of larger orders

Overall Sentiment: Positive with strong operational execution and synergy realization, though some near-term timing impacts on revenue

Recommendation

Rating: Buy

Reason for Rating: Strong execution, margin expansion and deleveraging progress support positive outlook

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/24/2025, 1:48:37 PM