Chart Industries, Inc. (GTLS) Earnings Call Transcript & Summary

Thank you everybody for joining us for the next session. Next up, we've got Chart Industries. Chart Industries is a leading global manufacturer of highly engineered equipment, servicing multiple applications in the clean energy and industrial gas markets. And it's a privilege for me to share the stage with Chart's President and CEO, Jill Evanko. Jill is going to run through some slides real quick, and then we're going to have a little fireside chat. So Jill, the floor is yours.

All right. Well, thank you, Chase. It's great to be here today. I'm going to step back and talk a little bit about the acquisition that we closed this past Friday, March 17 of Howden and tell you a little bit about our outlook and walk through what we see for the coming couple of years. So starting on our continuation of focusing on execution. If you look back in the last 6 months since we announced the Howden transaction, we have executed on time or ahead of schedule on everything that we have said that we were going to do. So we closed on Friday, fully funded. We did not close into any bridge or any TPS preferred stock. We completed our financing in December of 2022, well within our weighted average cost of debt targeted range of 7% to 8.5%, and we remain well within that range today, even inclusive of what the Fed may do in the next steps. We closed a quarter earlier than what was originally anticipated, which gives us a quarter of additional cash flow and earnings in 2023. So as we look ahead, we're confident in our cost synergy target of $175 million in year 1 and commercial synergies of $150 million of revenue in year 1 as well. And since we announced the transaction in November, we've been able to, as a combined team working together within the gun-jumping rules, identify additional cost synergy savings that I'm going to walk through and get out of the gate early in the last few days since we closed already executing against our synergy targets. Our pro forma 2023 EBITDA of $1 billion, outlook remains unchanged, and we have a calendar year that we'll share with you in a moment as well as our 2024 EBITDA outlook of $1.3 billion. Deleveraging is one of our top focus points going forward. And we have multiple different levers that we're working on to deleverage to our end of year 2024 target of 2.5 to 2.9 net leverage ratio. The actions that we have relate to traditional cash generation actions and I'd point out that historically, Howden has been a better cash generator than Chart has on a stand-alone basis. Additionally, above that range, meaning not included in the targeted 2.5 to 2.9 net leverage range, we have actions surrounding two known divestiture businesses within the combined business that we are currently executing on. I've heard some discussion over the past week in the macro environment, whether or not it's executable to complete these divestitures in the coming quarter or into early of the third quarter 2023. And I can tell you with confidence, obviously, I'm limited on what I can say to you today, but I can tell you that the macro environment for these particular assets is very active from both strategics and private equities. And I have the utmost confidence that we'll be able to execute against these divestitures, bringing in more cash to deleverage sooner against our outlook. So moving ahead here, for those of you who are less familiar with the Howden portfolio, it is 100% complementary to the Chart portfolio. The rotating equipment of compression for specialty end markets, ranging from hydrogen to wastewater treatment, to carbon capture and storage, is something that matches not just our liquefaction capabilities at Chart but also brings us access into other areas of the gaseous markets that previously we were somewhat limited organically penetrating. In addition to that, I'm super excited about the uptime, the digital offerings that Howden brings into the portfolio, which will allow us to expand our aftermarket service repair capabilities and do so not just across Howden's installed base but also across both of our competitors' installed base in terms of being able to repair and service and taking the uptime capability into Chart's original equipment, thereby adding another path for growth. So when I talk about the Nexus of Clean, we refer to clean power, clean water, clean food and clean industrials. Howden fits perfectly into the Nexus of Clean. And you can see on this slide, how Howden's products add to our portfolio on the far right-hand side. But not just that, how they help us penetrate the end markets that we already -- we're a market leader in. So that's around hydrogen giving us gaseous hydrogen access, as an example, water treatment where Howden's aeration systems fit very well; carbon capture, small scale as well as large industrial scale. In addition to that, gives us access to end markets that we didn't have before. So one of the things that we love across the cycle is in the combined business, the aftermarket service repair will be over 30% of our total revenues at low 40% gross margins. And we have multiple different end markets that we can serve with the same product offering, the same products that you saw on the prior page that 4 or 5 years ago were used in more traditional oil and gas applications are not the same products that are being used in this variety of different end markets. So I'm very excited about having access to end markets such as energy recovery, such as nuclear, even electrification from a mining perspective as well as the decarbonization of mines with Howden's VentSim product. So I'll tell you a little bit more about that, but let me run through the numbers first. So there may have been some confusion in this deck, and I just want to clarify that the numbers that we have said for the last 6 months around our revenue, our EBITDA and our deleveraging figures are all reiterated. So there is no change from what we originally said to what we're showing today. The slide that you see on here is around our calendar 2023. And I would point out that, as I started my commentary on additional cost and commercial synergies identified, we've left ourselves room to exceed what you see on this page in 2023. That's also net of the cost to achieve these synergies shown in the calendar year of 2023. So we get 9 months of Howden, 12 months of Chart and then the pro rata on the synergies. I'm very excited about how we look at the year, how we've gotten out of the gate. And again, in a moment, I'll tell you some of the things that we've accomplished in the last 4 days already. What I would say is, if you look back to the February 24 Chart stand-alone earnings call, one of the things that we attempted to articulate on that call was that our 2023 Chart's stand-alone outlook had six different things that gave us confidence in achieving the range that we put out. So we want to make sure that you're hearing the confidence that we have not only to achieve the stand-alone outlooks but also the synergies that we've identified. The big box in the middle of the page, what's not included here, I'm going to reiterate our confidence in getting these 2 divestitures done in the next 3 to 5 months remains high even in the current market conditions. And that's not included in the free cash flow available for debt paydown. And then the commercial synergies for 2023 are not included in these figures here. So again, reiterating what we've said before, pro forma 2023, $1 billion of EBITDA and 2024, $1.3 billion of EBITDA is our outlook. So demand is strong. What I would tell you is that we have not seen in either business, and certainly, now we're seeing even more momentum in the combined business, we've not seen any slowdown. And that's a broad-based comment across our end markets. Howden had record Q4 2022 orders and full year 2022 record orders. Chart had record full year 2022 orders. As of last Wednesday, March 15, Chart's stand-alone orders quarter-to-date were $520 million and Howden's orders through the end of February, were exceeding the original forecast. When we talk about our customers and our banking relationships, I do think it's worth just taking a moment and noting that the combined business and neither of us on our own had exposure to any of the banks that you're hearing about having challenges. So that's SVB and Silvergate and First Republic. Nor do we have outstanding receivables with any customers that pay us from those institutions. And then lastly, as I've already commented, deleveraging is a focus. We reiterate our financial policy that we will not do any material acquisitions or share repurchases until we are well within the targeted high 2s range as forecasted for the end of 2024. And on that, we do have multiple actions underway. And I can go into a lot of detail on what those actions are around cash generation, and that is something that ranges from a daily working capital management call across the globe that we do on all the way through to implementing inventory reduction standards with our suppliers that have started as of Friday in the combined business. So backlog. Backlog is for both businesses coming into 2023 the strongest that it has ever been to cover the percent of the following years revenue. So what that means is there's a typical range of available backlog for the following year. And as both Howden and Chart headed into 2023, we had higher than typical coverage for the 2023 revenue forecast in our backlog than we would typically have. One of the things that is important to note and is important to our confidence in the growth across the cycle regardless of macro conditions is that the businesses have different balances between the length of project-based business and the amount of project-based business compared to shorter cycle book and ship. So Howden is a shorter cycle book and ship business and also has just under 50% of revenues in aftermarket service repair. Chart has, over the course of the last few years, tended more towards small, mid- and large-scale projects, which have a duration that's typically longer than 12 months. And so that balance: a, gives us the visibility I just described; and b, it gives us more levers to pull to continue to grow across the cycle. So Howden's ending backlog as of 12/31/2022 of $1.3 billion, more than 53% of the 2023 revenue is covered in that backlog, which again is higher than they would typically have. And that backlog is flat to September 30, so a 1:1 a book-and-bill style ratio is typical in that business. So I included a slide here. I'm not going to read you. I won't bore you to read you all these bullets here, but it's pretty great to see, and I'm really excited. I've had a chance over the last 4 days to spend time, again, with a broader set of the combined teams and see our combined executive staff in action and the amount of excitement in the business and from our customers is something that is hard for me to convey because it's just coming at us on a minute-by-minute basis. And you can see that we've already had numerous inbounds from our customer base, new customers that are excited about having the offering combined, for example, hydrogen refueling stations in South Africa, a very large South African public company that is looking to implement green hydrogen refuelers is talking to us as a Friday afternoon. We have an opportunity for Chart and Howden combined equipment on hydrogen project in Ghana. We've seen international oil companies that we're working with one or both of us on renewables coming and asking for a combined meeting. I would also point out that we -- after years of having LNG onboard vehicle tanks, which typically have only been used in Class 8 commercial truck applications in Europe for the most part, on Friday afternoon, we did receive a commitment for LNG onboard tanks with a mine in India that's working on decarbonization efforts and Howden's presence in that space is bringing us more and more opportunity. And then on the cost side, certainly staying focused on what we said we were going to do and when. So day 1, day 30, day 90, 180 and at the end of the first year is a hyper focus for this management team, having the combined executive staff ready to go on day 1 in those who were not going to stay with the business gone, is the first step in that, and that was achieved right out of the gate after we closed Friday morning. In addition to that, we've already begun supplier conversations across both supplier bases and from an engineering perspective, exchange test opportunities, brought some of our backlog in-house. So backlog that we hadn't subbed out, we're now utilizing the combined business capability. So plenty of cost actions already underway in the past 4 days. And we do think of -- we do think in our world of Friday to Monday night is 4 days, and that's how we're going to continue to execute against the synergies here and deliver upside to our commitments. So I'll conclude my prepared remarks with -- again, our excitement, not just on being able to deliver what we have said to date, but also what we intend to deliver in the next 2 years. And that's across the board, reiterating what we say on the EBITDA and the synergies on the deleveraging actions, but more than anything, having -- going from day minus 1 to day 1, doubling our engineering capability, our ability to service around the globe with 41 service and repair centers and taking that to next level in an unparalleled very differentiated business with both stationary and rotating equipment. So I'm super excited, and I'm very ready to go. I think our team is saying, "Hey, Jill, let's get move in. And the ideas before I walked in the door, had another 20 e-mails from Howden team members around the world saying, get me the installed base in this region because I'm going to deploy ASAP on aftermarket parts. So really exciting times in the Chart business. And from my chair, I've never been more confident in our ability to deliver what we say we're going to do.

Well, thanks, Jill. Appreciate the update post the close there and some of the questions that I wanted to kick off with to clear up some of the market concerns you did in the slide deck. So I guess kind of one more -- I guess, let's start on deleveraging the balance sheet before we kind of get into the business because I think that's the number one focus of investors today. You've disclosed that you have about $4.2 billion kind of net debt post close. And some of that is on the revolver. And I think your plan was to obviously sell your assets so those businesses and pay down the revolver and you spoke to that. And so, I guess, maybe just talk about -- we talked about this last week, but you've got a couple of businesses that you're selling, and there's concerns that you may not be able to sell, they may not be able to raise if they need to raise debt or anything. So talk about -- you talked a little bit about this, but strategic buyers versus asset buyers and kind of help -- kind of investors get a little bit more comfort in kind of selling the [$500] million business?

Yes. And I would step back and say that we've actually had -- and in fairness, there's only so much I can share, given where we are in the processes. But we've had more interest in both assets than what the bankers had originally indicated we would have. One is a smaller asset, one is a larger asset. So you'll see disproportionate proceeds between the two, but adding up to the approximately $500 million of proceeds is our targeted outcome. And with that, we are seeing in the smaller business. It's a niche year business and doesn't -- neither business impact synergies. So that's a positive. And I think one of the things that I would clarify as well is in our range that we've put out for the year, while we say the divestiture proceeds are not included for deleveraging, we still feel that when that EBITDA is out of the business that we still can accomplish the EBITDA range we've put out. Strategic buyers, multiple strategic interests on the larger business of the two. And these are industry folks that are plenty familiar with the asset and are able to move very quickly. So that gives us confidence as well in our time frame. In the smaller business, strategics and private equity. And I think, ultimately, in the smaller business, probably more suited for a private equity just given the smaller scope. So good movement there and good progress. And I think that you would see us execute certainly in the range that we've put out. You asked me last week, hey, would we accelerate if we had a lower price point on these assets, would we accelerate that and make the decision to take a lower price to bring the cash in? And my answer to Chase on that was, it's a balance, like there's a point where we might. But given the amount of interest that we have, we don't feel that we're going to need to be at that decision point. And then as a slight tangent, but I think capturing in the first part of your question, we feel good about the liquidity that we have. We're glad we did move into the markets in December because we certainly wouldn't want to be doing that now, and we don't foresee having to go to the public markets for any liquidity in the future.

Yes. I mean you've got $1 billion revolver. So that was expanded up to $1 billion. One more question on kind of deleveraging, and you've got 2024 converts due the latter part of November of '24. You highlighted the free cash flow. So if you look at the free cash flow, I think it was 2 75 to 3 25 was the number you put up there, that's calendar year. And so I'm assuming that could go towards paying down the 2024. I don't know if that's the plan or not. I don't know if you can say, but just to kind of highlight to everybody when you think about revolver, how you plan to pay that down and the 2024 converts with the cash flow that you have to be able to pay that down?

Yes. And I think there's a strong interest in the 2024 converts going away. It's probably sooner rather than later. What I can say broadly is that now that we are closed, we have multiple opportunities in the near, medium term here to optimize the balance sheet. Our strong banking relationships with JPMorgan and Morgan Stanley, just to name a few, all have been actively coming to us with various different ideas, and we were oversubscribed in the debt. So various different levers that we could pull, but we will be opportunistic about how we do that. So that we make good decisions and we leave ourselves the liquidity that we need. But certainly, one of the things that we are reviewing is how we handle the 2024 converts.

Awesome. And then one other question I get is just kind of how these businesses would perform in a recession. Hopefully, we don't go into a recession, but obviously, credit markets have tightened up. So we're getting lots of investor questions around that. So could you take a minute and just kind of walk through the legacy Chart business, Howden business kind of how they perform during a recession, which parts of the business you would see the most volatility or the most downside in a recession scenario?

Yes. And let me start by saying that we are seeing no indications in our end markets or from our customers that there's any type of softening or slowing. So that may be particular to our business, but we're not seeing that at this point in time. When we think about the recession, at one point when we were back in November to December describing kind of what was the worst case down cycle that either business had experienced back in 2015, 2016 time frame. But remember that we're a very different business today than we were back then with multiple different end markets, multiple different levers to pull as well as one of the things that is a drumbeat for our business is being 30% aftermarket service repair gives us a lot more resiliency across the cycle. So less peaky-troughy type of activity that you would see. So to specifically go into the respective businesses, when you look at both Chart and Howden over the prior few years even through COVID, our industrial gas business was down, I think, 1% and the Howden aftermarket service repair was consistent through that period of time as well as the OEM being flat or a little bit up. So that should be a good indicator of what it would look like in kind of the nowadays version. If I peel that back a little bit further, when you look at the Chart business, we would look at it as industrial gas, traditional energy and then what we refer to as specialty when we're referring to OEM or new builds. And in those, industrial gas is pretty darn resilient, minus 1% to plus 7%, 8% is kind of your range in good times and in bad. But we can tell you that the industrial gas folks have year-to-date been buying as actively and in some cases, more actively than in a typical Q1. So we haven't seen that slowdown from them. On the traditional energy side of the house, we had started this year recovery in our air cooler business for traditional applications, upstream midstream. And I think that's one that you watch oil, you watch WTI and you see what happens there. But we have not built -- I think we built 3% growth in our model for 2023 in that business. So that one is a little more tied to what happens in a recession or not. And then specialty, just so many different levers to pull in specialty, but I'd answer the recession question the other way is backlog is so strong. What in backlog has already started to be worked on and we're being paid for versus is waiting on getting funding or waiting on the IRA or anything like that. And the super majority of our backlog is already underway in terms of that minimum engineering work around it. And so that's a key metric that we watch. And in both the Chart and the Howden business, we have sub-1% cancellation rates. We haven't seen cancellations neither has Howden. And then if you look at the Howden, I already talked about aftermarket service repair, about 44% to 48% of the revenue. On the OEM side, where specialty markets like we're describing and book and ship style markets are pretty resilient in their business, I would watch things like carbon capture applications. Now that would be something that would be the same for Chart, right, is, okay, this is a business that is very embryonic, very nascent. And so it's going to take longer to get where we're forecasting it to go. But if you look at that in our 2023 numbers, we don't build. It's de minimis businesses. So those same products -- what I love about both businesses is those same products can be used in multiple applications. So it's not like we have to stop making a blower if the carbon capture market doesn't go the way we want because the blower is used in water treatment, is used in traditional energy. And so there's a lot of ways that we can adjust if we see demand market start to lighten up.

Yes. So can we kind of just come back to the deal dynamics and kind of the strategic rationale behind the deal. I know that you've talked a lot about this, but there's a lot of new investors and so maybe it's worth kind of just taking a couple of minutes and kind of refreshing everybody on the strategic rationale behind the Howden business.

Yes. So if you look back, we've known the Howden business for many, many years. And I guess, good and bad, Howden was in the private sector for the last 4 years and therefore, the strategic pivot that many investors saw Chart go through over the last 4 to 5 years in the public domain, where every move we made was available to be witnessed, Howden didn't have that. So investors when traditionally have anchored on what it looked like coming out of Colfax. Well, Howden in the private sector has gone through the similar, if not the same, I'm almost inclined to say the same, but very, very similar strategic transition that Chart has gone through. And we know the business really well because as I commented in my prepared remarks, you have a high level of complement between our business and theirs. And so, in a lot of cases for liquefaction, we would utilize a Howden compressor. So the business has got to know each other in that respect. And we watch that strategic pivot happen, and the complement became more and more evident as they transitioned into these Nexus of Clean or clean energy end markets. So over the course of the last couple of years, we have been watching and waiting for an entry point. We had that happen in the middle of last year, and we announced in November this agreement. I believe that a lot of people will be skeptics and say, well, it wasn't well time given the macro environment, et cetera, et cetera. But we're positioned in a way that there is no competition to this combined business. And so having that in the portfolio now and the amount of strategic interest in some of the pieces and parts that we just talked about furthers our ability to get ahead in some of these more nascent markets and be the market leader in all of these equipments and solutions. So it's been something we've wanted for a while under the radar. And when it became available, we felt like it was a good time to strike.

Yes. Could you just speak to the compressor market and the business? And why it's really so important that you wanted to get into that business? And maybe talk to the competitive positioning of Howden versus its peers?

Yes. So I think there's a little bit of a misperception that compression as a market is just one big bucket. Compression is very varied across the different types of applications, the machines that are there, the sizes of these machines and how they are used. So one of the things that was important to us was that we know in like the big, super large project market, take big LNG, right, you're not going to displace the folks that are already providing compression, but rather, those folks actually Howden's compressors are complementary to their offering. And so we wanted to target the compression for specialty applications. And these are smaller machines, machines that can handle molecules like hydrogen different -- it's a different handling than handling LNG as an example. And that was our target base. So when you look at the competition to Howden in these compression arenas, you'd have [indiscernible], you'd have an Atlas Corp Co., those Burkhart versus having a Baker or Siemens. And that, to us, was important because that's the focus of the markets that we think are going to grow fastest first of all, and we wanted to have in-house the mission-critical equipment that was the longest lead time in the projects that we were doing. And compression is the longest lead time in the projects for hydrogen liquefaction, helium liquefaction and so on. So a lot of cases we win on lead times and having that within our control was something that was really important to us. And then lastly, I would say that, certainly, cost synergy -- immediate cost synergy is not having to buy out compression for projects that were awarded in the specialty arena, having that in-house as an immediate cost synergy. So pretty excited about it. We love the targeted market, and we also love that we can continue to play with the larger compression suppliers.

And you've been on the road talking with some investors. And so what's kind of been the feedback from investors? And what do you think investors are missing about the deal?

Yes. So I'll -- let's see, we'll have the line of my answer be 01/01/23. So up to 01/01/23, the discussion and the focus was really around can you get the financing done in the debt range that you say you're going to? And we did that, but that was really it for the stub period, November 9 to 12/31. 01/01 focus has turned to, okay, let me understand the strategic rationale of this combination. And two a [indiscernible], everyone that we have spoken to understands that, whether they understand it with explanation or just knowing the two businesses is very varied. Understanding the details of how detailed we are on the synergies and our confidence level in achieving those, I mean, this was not a synergy number that we just applied a percent to cost of goods sold and said, "Hey, let's go after it, let's figure it out once we close." I mean this was literally built bottoms up with specific functions, headcount, name, suppliers and so on. So I think having that confidence, I mean, for me to be able to convey the confidence that I have in this combination is something that's really important, I think, for people to hear and certainly executing against what we say we're going to do. So I think a little bit of it too is, hey, let's now that we've closed. And one of the things that somebody asked me on Friday was, well, if somebody sold today, do they really believe in the combination we want to see it through? And my answer, that's their prerogative, right? But I viewed it as an opportunity to get more Chart stock, and let's go and show what we can do here. I think that you're going to see us deliver not only what we say we've laid out in our targets but also be floored by the amount of synergies between the two businesses. And we haven't really spent a lot of time even on the commercial side. But the amount of inbound since Friday, until today on the commercial side, especially outside of North America, is lining out as I would have expected, but better certainly than the teams had in their commercial synergies.

Yes. Last one on Howden and then I want to kind of transition and talk kind of more specifically on some of the clean energy and LNG stuff. But obviously, Howden, big acquisition. And so what's the integration plan, how you're getting employee buy-in, how do the two cultures kind of fit together?

Yes. It's a really neat thing to watch because we were deemed -- we deemed ourselves one Chart and Howden had deemed themselves one Howden. So like even the lingo kind of coming out of the gate was really well aligned. And you have two very similarly sized business, not just from financial metrics, but also from a number of team members around the world. And we had yesterday held town halls. And the positivity, the ideas that flowed coming out of just an initial, hey, this is how we think about the business. People know the two businesses. We work together. And so they're ready, ready to really roll. One of the things that I do every day have done every day, 7 days a week since May 2, 2020, beginning of COVID there is send the daily shout out to one or more of our team members around the world. And I have not had a day where I don't have a nomination for that daily shout out. As of Friday, when I started that in the combined business, I've already gotten 7 shout-outs from Howden people. And so you kind of get that sense that this is a similarly minded group of team members that are working toward the same thing. I also think that the things that they're very good at and we're not as good at, I referenced cash flow, right, they focus on deleveraging. They lived in a world that generating cash was really important. And we got a little bit fat on our inventory. And so bringing those types of skills together, I think, are going to go a really, really long way. And then integration being led by Howden's former COO, Massimo [indiscernible] is fantastic because not only does he have that drive and that understanding of operations and operational excellence, he also has the relations with the employees deep into the organization. And so that's something that he has my partner in this is, I believe, going to make us very successful. We'll -- we're going to be off to Germany tomorrow to visit one of the Howden sites and the combined staff being together. And so this is a team that's eager and excited. And one of our premises was you have to want to be here to deliver the results, and that's also shed some people on day 1, too. And I think that having the right attitude is half the battle, but knowing the businesses like we don't have to teach each other because rotating and stationary work together in these applications gives us a leg up right out of the gate.

We've got like 5 minutes left, and we've got four topics I want to cover between LNG, hydrogen, water treatment, CCUS, and we'll talk really fast. LNG, I think, people are beginning to appreciate the longer tail with LNG and just the cleaner fuel aspect there. There have been some concerns that LNG projects sanctioning could stall. We officially saw VGPlaqumin's Phase II earlier this week or last week. And then we saw Port Arthur [indiscernible] Port Arthur last night. And I haven't seen a press release out, so I'm not sure you can say anything, but it looks like that we're still going to have LNG, believe it or not. And so it's good to kind of see that. So talk -- and you've had some small-scale LNG got, I think if I've tried to add some of the stuff up from last year. You had like $400 million plus of small-scale LNG, so really strong orders there, which was additive to the $600 million plus of the big LNG that you had. So maybe take 30, 40 seconds to kind of lay out the landscape of what you see for the LNG market over the next 2 or 3 years?

Yes. I think your comment is spot on that there was a question mark about the tail of especially the big LNG. And we have a high level of -- we're bullish on big LNG continuing here. And again, like you said, [indiscernible] Port Arthur FID is just kind of the start of what we think we're going to see in 2023. And globally -- but I believe it will be more heavily tilted to U.S. Gulf Coast. Included in that is -- included in my bullishness is the small scale and the floating LNG. So in January, we booked $115 million small-scale series with the Asia Pac [EPC]. And we're starting to see much broader opportunities globally on the small scale, not just North America, which is where it was before. So I think that I've said in the last few weeks as recently as last week that I think we'll see at Chart at least one release this year in the first half and certainly two or more is what we're targeting. And what that does is it keeps that higher kind of what we call icing on the cake of the big LNG revenue and earnings for longer, not just a drop-off in 2025 or 2026. And I think that's going to continue into 2024.

Okay. Hydrogen real quick. Hydro orders were strong. They were up again last year. And IRA, we'll see with IRS and kind of what happens, I guess, maybe that's what they say in April. But what's your outlook on hydrogen and continued order momentum for '23?

Yes. I think hydrogen is going to continue to build, not just in '23, but for all the years to come, and that's my view on this. You're seeing -- we're seeing a movement from just production into storage and transport and end use. So we -- prior to '22, we never saw basically end-user buying anything from us, whether that was a fueling station or an onboard tank. Now we're starting to see much more of that on balance with these other two value chains in the molecule. I think we'll see -- we'll continue to see some liquefaction. What I'm probably most excited about in hydrogen in our business specifically is the access to the gaseous production now that we have Howden that was -- that's the industry itself has evolved that it's going to be both gaseous and liquid, but gaseous is certainly the larger percent of that, at least in the here and now. And I think that gives us a ton more opportunity to grow our order book in '23 comparative to 2022. And our commercial team has a target of increasing orders, combined orders 20% this year over last year. So that's what we've agreed on as a target, and that's going to be what our measure of success is.

We've got 1.5 minutes left, and I want to hit on water treatment. It doesn't get a lot of airtime. But you have a great PFAS remediation solution. The EPA's proposed drinking water limits on forever chemicals. So how could this help your water treatment business?

Yes, it's actually an exceptional help. So sometimes you hear me when I talk about government policy, I'm balanced in the sense of whether it actually helps or not in this case. I think it really does help the added water technology that we acquired a couple of summers ago is specifically targeted to PFAS, and that came out last Tuesday. And by Thursday, our water guys have said, we're being called all over the United States because these guys have 70 sites or 50 sites that they've got to address. And so I think it's going to be a kick start in what was already records off of a small base in fairness on water, but I think it's going to really accelerate water demand. And that's a very nicely profitable business for us. And then you throw in on top of it, Howden's equipment that goes into wastewater and water treatment, and we have a larger starting point package with a broader audience that's being mandated to do something really sets the stage well for us in 2023 for water. So that's amazing.

You're right there, right at the end. I mean, when you think about Howden and Chart and your Nexus of Clean, we didn't get to walk through all of that, but I believe that it basically doubled your TAM when you -- so I just want to make sure that everybody kind of understood that. I mean there's a lot of synergies there and a lot of opportunities that Howden bring. So with that, I'll turn it over to you for any closing remarks.

I think you covered it really well on the topics that I wanted to hit on and just reiterating our readiness to execute against what we've put out there and our reiteration of the outlook as well as our focus on deleveraging, all being priorities for us. And I think you're going to just incredible things come from this combined business. We didn't even get to hit on regional synergies in locations like South Africa and Chile and South Korea. So please continue to listen and here as we deliver against the commitments we've laid out. Thank you.

Yes. Thanks, Jill. Appreciate it. Thank you.

Appreciate it.