Good afternoon to resume things after the lunch. My name is Saurabh Pant. I'm the U.S. Energy Services analyst based in New York. I cover a lot of energy services, traditional companies and one of a very unique company I cover is Chart Industries. Chart Industries plays into a lot of end markets from industrial to energy transition, a lot of exciting markets. I'm lucky to have with us the Chart management team. We've got Joe Brinkman, who is the CFO; we got John Walsh, who heads up IR sitting in the front row and Greg Shewfelt right behind him.
So Joe, I think I'll hand it over to you. You've got a few slides to run through. Thank you.
Great. Thanks, -- good afternoon, everybody. Today, we're going to walk through Chart at a glance, talk about our actions to increase throughput, the global hydrogen opportunity that Chart has in front of us and driving our -- one of our favorite pieces of our business, aftermarket service and repair. So for those that are new to Chart here are some key takeaways about our company. We are uniquely positioned as a leading independent provider of technology, solutions, equipment and services to customers across multiple end markets with all machine critical equipment manufactured in-house.
Chart can deliver multiple solutions across our nexus of clean offering. This allows us to be molecule-agnostic and deliver greater deliver value greater than the sum of its parts. Chart is driving profitable growth and free cash flow generation, driven by a resilient portfolio inclusive of 30%-plus aftermarket service and repair. High-quality backlog provides visibility for 2024 and beyond. Further, our customers that are investing to capture secular trends and are not interest rate sensitive.
This slide really shows the breadth and depth of our organization. As many of you know, we closed Howden one year ago this past Sunday. And it effectively doubled the size of our company, including our commercial and engineering teams. This slide also shows our geographic reach, which is incredibly important for driving aftermarket growth, which I will touch on later in the deck, as well as highlighting how well positioned we are to support emerging markets across the globe.
You can read this slide on your own, but I'd like to highlight a couple of our competitive advantages, including our full-service solution offering from equipment to process technology that we can also support with turnkey installation and aftermarket service and repair.
We are really proud of our domain expertise, which allows us to command leading industry market positions as well as to help increase overall industry safety by being part of global -- partnering with global regulatory bodies. I've been very pleased with our margin performance to date, but there's more to go.
These are some of the tools we use, such as our global flexible manufacturing strategy. We can now produce over 90% of our portfolio across at least 2 factories. We're going to be talking more about some of our throughput actions in a minute, but rest assured we will continue to invest in high ROI CapEx. And third on the slide here is Chart's Business Excellence.
We talked a lot about Chart Business Excellence, or CBE at our Investor Day last November of 2023. It's suffice to say this is an operating framework that is used across the organization to create -- I'm sorry, to create standard work, drive accountability, increase cash and standardize our processes. It's really about identifying best practices in KPIs, driving strong execution through our organization, from our commercial team through engineering, project management and operations.
This slide shows examples of throughput expansions in flight. I'd like to specifically highlight our Teddy 2 facility, which begins production immediately following our ribbon cutting next Thursday. Located directly on the water in Mobile, Alabama, this facility will build the largest shop built cryogenic storage equipment in the world.
We already have over $115 million of backlog for this facility that includes customers in the space, marine, LNG regasification and gas by rail markets.
The next few slides focus on hydrogen. A market with strong momentum across applications and geographies. I'd like to specifically highlight the award from Element resources we announced earlier this week. This is a great example of Chart providing full system solution. This order includes Chart supply of hydrogen liquefaction system, liquid hydrogen storage tanks, trailer load out bays as well as liquid hydrogen transports and ISO containers. Hydrogen compression for storage, distribution and heavy-duty fueling is also included in this order.
I think these next 2 slides are to show the benefit of our offering across the value chain. I would highlight our liquefaction technology and our customers used to ask for 10 to 15 ton per day hydrogen liquefaction solutions. And now they're asking, can you do 100 tons per day. Another great example is our hydrogen compression solution that is deployed in the world's first fossil fuel free steel plant in Sweden.
This slide is about blue hydrogen. The main point here is how we went across colors and geographies with hydrogen. Hydrogen has gone from a niche market to being viewed as an energy carrier, and we are able to support our customers across geographies and across all forms of low-emission hydrogen.
We absolutely love our aftermarket service and repair business. We're still in the early days of unlocking the opportunities around aftermarket. I like this slide because it shows how the business acts as an annuity for us, with our full solution of equipment feeding perpetual aftermarket business for us. As the equipment manufacturer or process technology owner, we think we are entitled to this business and our customers want us servicing the equipment because we have the domain expertise and the global footprint to support them.
Our aftermarket business has been a key synergy area for us across our installed base of liquefaction, storage and transportable and rotating equipment. Again, leveraging our expanded global footprint, coupled with tracking the installed base of equipment and utilizing our uptime monitoring technology to what we would call sticky -- getting sticky with our customers, as we like to say, under long-term service agreements.
With that, Saurabh?
Yes, Joe, I think we just have a quick discussion and, maybe a few [indiscernible]. Thank you for this, Joe. We'll spend some time on this. I have some other topics and questions.
Sounds good.
But -- maybe if we just continue with the theme, Joe, obviously, you spent a lot of time on hydrogen on your throughput actions on aftermarket, I want to go through your key product lines. The hydrogen is obviously one of them. So let's start there. Because clearly, the opportunity is huge. It's spread across the globe.
It's not in one country or one region, but just given the regulatory landscape, interest rates, you have a lot of concerns around opportunity, but you seem to be booking new orders. You booked 2 orders just this quarter including the element resources just this week. Just talk about that opportunity set for you specifically, how do play, where do you play in that market? And what are you thinking?
Yes. I mean what we really love about hydrogen is the excitement around the globe whether it's hydrogen fueling for heavy haul Class 8 trucks, or for other power generation opportunities for maritime, we're getting interest and part of our opportunity funnel is for hydrogen fueling for cruise ships, for ferries, they want to run their ships with no emissions here.
But it really plays to Chart's strength because we've been building hydrogen storage equipment in the legacy Chart side of the business, since the '70s and have really a significant installed base of serge equipment on the legacy Howden side. The first one to develop hydrogen compression was Howden decades ago.
And so we're really leveraging our strengths here. And so as the hydrogen economy takes off and we've got the deep experience with hydrogen as a molecule, now we can leverage what we've already done in things like LNG, for example, where we have thousands of trucks in Europe running on liquefied natural gas. We started building liquefied natural gas vehicle tanks in the U.S. back in the 90s, and China, we did a lot in the early 2000s. And in Europe, there's tons.
Well, the same equipment, the same technology platform applies to hydrogen as well. Whether it's the fueling stations, the onboard vehicle tanks and so. There's just a tremendous opportunity funnel for hydrogen. And it's not just in the U.S., we're seeing it globally.
Right, right. And just to be clear to everybody, you don't own the molecule, you do not operate or own that.
No. We do not -- we don't own molecules, but really, our equipment is needed to -- for the molecule economy to happen. We build the liquefaction, the storage, the compression, the transportation. So those that are in the business of selling molecules need our equipment to move those molecules, and that's where the cryogenic piece comes in the equation because if -- unless you've got a pipeline going from point A to point B, the most economical way to move large quantities of gas is to liquefy it, take advantage of that density, put it in a truck or an ISO container, deliver to its end use point, which is usually to turn it back into a gas and use it. Sometimes people use the liquid, but...
Right. Right. So that also means you are agnostic to the color, right, because all the use and shades of hydrogen...
We are agnostic to the color of the hydrogen. We are agnostic to the molecule itself, like I was referencing earlier with our background in LNG, whether it's regasification downstream for creating a virtual pipeline into a community, which we've done in Norway. We've done it in Northern Canada. We've done it in the Caribbean, or over-the-road trucks. What we've done on the LNG side applies to hydrogen. And so really if economies stick with natural gas, we've got the equipment. If countries pivot to hydrogen, take advantage of the emissions benefit, it's the same technology platform. And we've got the equipment solution.
Right, right. So just given your customer base, right, which can be very different from somebody else, by the way, right? So that's why I asked this question. How do you look at the potential interest rate sensitivity or the level of subsidy or government support your customers need to just move ahead on their hydrogen plans?
Yes. I mean we're not -- where we're winning business on the hydrogen side, it's where there's economic viability there. It's not reliant on subsidies, it's not reliant on any of that. So where we're winning it's economically viable.
Right, right. And then on the margin side of hydrogen should we think about the margins on your hydrogen business being accretive, dilutive or relatively in line to the rest of your portfolio.
Yes. For the most part, it's accretive. Hydrogen is -- it's the lightest element, right? Number one, on the periodic table, it's -- when you liquefy it, it's colder, there's some additional complexities that you deal with hydrogen, which then leverages our decades of experience with that molecule, both on the cryogenic side and on the compression side. And so when we're winning business in hydrogen, it's generally a margin accretive.
Okay. We can keep talking about hydrogen, but moving on, you mentioned LNG a little bit, right? So maybe let's talk about that because there's been a lot of news flow on that topic, particularly in the U.S. but literally global, right? So we saw the Biden administration announced a pause in terms of new non-FDA approval. How does that impact Chart, right? Because we did see non-U.S. exporters take advantage of that. We saw Qatar. We saw you book an order late in December, and you talked about an IPSMR award, potentially come in by the end of this year, right? So just talk to us about that a little bit and how it's Chart positions.
Yes. I mean the -- as you said, the U.S. has a pause, which I think is largely a politically motivated pause there. But we play in natural gas liquefaction across the globe. So whether it's the U.S, whether it's Sub-Saharan Africa, wherever -- Southeast Asia, wherever it is, those we've got $8.6 billion of big LNG opportunity funnel, and that has not changed with the pause. It has affected nothing that's in our backlog. And we just continue to see opportunities on the big LNG side.
And then like I alluded to earlier, there is -- people maybe have -- it's not been the top of the talking point in the industry, but there are substantial downstream LNG opportunities as well. I mean, I alluded to a little bit earlier, but specifically power generation in remote areas like Caribbean Island, Southeast Asian Islands. There's 7 of our 1,000 cubic meter storage tanks that feed a power plant in Montego Bay, Jamaica, and that power plant wanted to get off of hauling in diesel fuel. And so they basically offload LNG right into these really large storage tanks and convert a power plant from diesel to natural gas. And there's significant opportunities in our funnel to do more of those. right?
And then even further in the Caribbean people that are running manufacturing facilities, say, a pharmaceutical company or even a resort that doesn't want to rely on the local grid, to haul LNG in to feed gen sets to make sure that they always have power, that LNG is being hauled by our LNG ISO containers, and it can come from the U.S., LNG can come from anywhere, but we build LNG ISO containers and feed that. And that activity on the LNG side is -- downstream continues to robust, so.
And I think a key part of your evolution in the LNG market is you develop your IPSMR solution in-house, it caters really well to the modular LNG applications, which is actually, I think, gaining ground even outside the U.S. right? So just talk to that a little bit and maybe what does that mean from a margin perspective as well?
Thanks for bringing that up. So IPSMR is a proprietary process technology that we own. So just remind folks that when LNG liquefaction happens, it could be our process technology, which obviously we prefer or it could be somebody else's, either way we've got cold box content, we've got brazed aluminum heat exchanger content in those plants. Specific to your question about IPSMR, we've announced that we have -- that process technology has been approved for another international liquefaction opportunity and we expect that to turn to award later this year, early next year.
But on the -- to your margin question, when we have our own process technology, it is margin accretive to what -- versus when we're supplying cold boxes and exchangers to other people. And -- as long as we're talking about IPSMR, I want to point out that, that proprietary technology runs, it operates more efficiently than other technologies. So we're able to build smaller scale plants and still have the efficiency where it's worthwhile to go to liquefaction and smaller scale opportunities. And then we're deploying the same process technology on hydrogen and helium liquefaction as well, so.
Right, right, right. And then just maybe moving on, you've got a lot of interesting end markets. I want to make sure we touch on those. So carbon capture maybe quickly, that clearly has a lot of potential. You play into both the small scale and the large scale set of things, right? And for you, just listening to your calls and your Investor Day seems like the small scale Earthly Labs business is making tremendous progress, right? But not just for you, for the industry, the large-scale side of things are slower to move on. So maybe talk to those 2 aspects.
Yes. Well, let's start with the Earthly Labs acquisition in the small-scale carbon capture, a very -- I would call, boutique business when we acquired it a couple of years back, building CO2 capture equipment for breweries, whether they're micro breweries or larger breweries was subcontracting that manufacturing. Since our acquisition, we've both token that manufacturing in-house, which is helping on the margin performance.
But it was really necessary to scale up to meet the market demand, which continues to be impressive with most brewery opportunities, the payback for -- on our equipment is 2 years or less, which makes it obviously very attractive and then it's literally an enabling technology in some areas where there's actually, believe it or not, there's a CO2 shortage.
We're all worried about CO2, but markets like Australia, getting the CO2, they need to package their beverages there's a shortage there. So this basically enables them to capture the CO2 from the brewing and then use it in the packaging and so it's actually enabling people that would have a hard time and payback is extremely good in those markets.
And then pivoting to your question about large-scale, we've got pilot plants going in the U.S. and Europe on cement manufacturing, on some steel manufacturing there. But it's definitely a longer horizon on the large scale.
I will note that anybody that's looking at direct air capture, they would utilize our storage equipment in any one of those solutions. So that's not specific to our carbon capture, but still opportunity for us as anything happens in the converters.
Okay. And then I just -- you talk about food and beverage industry, a fair amount in your calls, water, it seems you guys are very excited about the water side of the equation, I think it's still relatively small, but it's growing quickly.The opportunity set is big. Maybe just touch on those 2 markets a little bit.
Yes, yes. And well, before we get into water, I'll just talk legacy food and beverage. We're in beverage carbonation, the CO2 tanks that are in restaurants across the globe for beverage carbonation, we've been in that business for decades. It's extremely solid for us as well as we build nitrogen dose for dosing water bottles with liquid nitrogen or any other inert packaging where you've got, you want to displace any oxygen on the top of a bottle of wine or you want to put it in a water bottle, so you can use 1/3 less plastic and have the water bottle not collapse when you stack that. So that's a smaller piece of our business, but it's -- again, it's food and beverage, and it's strong for us.
On the water side, we've got drinking water treatment technology and then we've got water disposal clean up technology. And on the drink water treatment side, seeing a lot of activity in the U.S. for PFAS removal, for arsenic removal. But it's not just in the U.S., we've got villages in India that are using -- deploying our technology to clean the drinking water. We've got opportunities in Brazil as well.
And so like you said, it's not a huge piece of our business, but the growth we're seeing is significantly double digit on the water side. So it's really something that takes off as there's more and more installed base traction, example -- when you're dealing with municipal projects, you want to be able to point to examples of look at that community and how well it's working. And we're seeing some of that in India and Brazil, which is very exciting.
No man, I'm from India. I spent 30 years of my life in India, so I can appreciate the opportunity, not just the opportunity, right, but the opportunity for the population and for the countries to serve their citizens.
Yes, everyone needs clean drinking water, yes.
Yes. Yes, exactly. Let's just move on to aftermarket. You touched on aftermarket in your presentation and that's one thing that changed a lot post the Howden acquisition for you, right? The size of your aftermarket business is now slightly above 30%. But if you look at from a margin perspective, actually, it's much higher than that right? So it's a lot more stable. But it's also growing relatively quickly. If I would tell aftermarket to anybody, they would think it's growing single-digit, right. So just talk about that growth opportunity.
Yes. I mean it's -- like I had in some of my prepared remarks, we love the aftermarket business. It's margin accretive for us. It's really like an annuity for us where you get this installed base of equipment that customers want us to service. We signed long-term service agreements, and then that business just continues. And so it's -- I would say it's rare that any of that business would fall off of our radar.
And every year, we're putting more and more equipment out there. So it just adds to the total installed base and we offer the uptime monitoring solution where basically we can monitor rotating equipment and predict potential failures before they happen, get in there and do preventative maintenance. And these customers are highly appreciative because downtime on a piece of rotating equipment.
The losses they incur in downtime are just astronomical compared to the cost of the service or even the equipment itself. And so it's a very, very strong business for us. And then adding all the global locations that we had, that we did through Howden acquisition like I talked to earlier, that's just open the door for us to be able to service legacy Chart equipment that's deployed globally.
And I know it's tangential to your question, but as you look at hydrogen economies that emerge globally, and oftentimes, with hydrogen, it might be a gaseous solution before it gets to a liquid solution where you can have gaseous hydrogen at a play before liquefaction has really ramped up there.
You need to be able to service that equipment in order for that market to go. And having that footprint just enables us to be everywhere where hydrogen is going to emerge. In the economy, we're already there, which is just a huge advantage for us.
Right, right. And I think the footprint of the Howden and the legacy Chart side was very complementary.
Yes, it was very complementary. And definitely, on the aftermarket side, where we are very U.S. focused with some European presence and then basically Howden just filled in the global gaps for us, so.
Great. Let's spend a little time on -- before that, actually I had a follow-up on the aftermarket side. I think your guidance, your outlook for 2024 calls for aftermarket revenue to grow 15% to 20% in '24. And then I think longer term, you've talked about double-digit growth. So is there something unique in 2024 that's benefiting 2024 above and beyond the double-digit growth that you understand?
Yes. I mean other than the installed base ramping up, like I talked about, we've got existing brownfield LNG plants that are engaging our aftermarket services to improve efficiency and just leverage what they've already invested in there. And so there's actually significant aftermarket activity going in there, utilizing our Tuf-Lite fan technology to increase the efficiency of their plants is one example there. And so we've got significant LNG brownfield LNG servicing aspect in 2024.
Okay. Okay. No, thanks for that reminder. I forgot for a second that the retrofitting actually moved through the RSL business, that's a good point. Okay. Okay. Then on the throughput action, you talked about that, right? Teddy 2 you spent money on your tool cell Oklahoma, based aluminum facility last year, I think, go for Germany. So you are taking all those actions. One point I wanted to clarify was that your medium-term revenue growth outlook of mid-teens, do you think you need to invest more, you need to continue to invest in your throughput actions or these large chunky items are enough to get you there?
We will continue invest in high ROI CapEx and throughput expansion as those opportunities appear where we're blessed with a significant backlog, and we've had book-to-bill ratios above one and expect that one number to be the number above for this year. And so to keep our lead times down where it doesn't cause us an issue as markets evolve, we're going to continue to invest in CapEx for sure.
But we've got -- for what we're seeing in the medium term outlook, we're well positioned with the big pieces, like Teddy 2 was huge because it gives us the capability expansion there with larger tanks, which is drawing tremendous interest. I mentioned it in the prepared remarks, but we've got over $115 million in backlog. I mean, there's liquid propelling tanks for launch pads in there. There is gas by rail in there.
If you think about the example I mentioned earlier of converting a power plant in Jamaica. It's got 7 of our 1,000 cubic meter storage tanks, well, we'll be able to build 1,700-cubic meter storage tanks at Teddy 2 and ship them right on the water. Although 7 tanks could now be 4 tanks in the same opportunity and get the same liquid storage.
And then it's easier for the customer on a foundation. There's less interconnecting piping, interconnecting the tanks together. And we can still deliver those tanks to those customers much quicker than if they were going to go to an alternative like build a field-directed tank, on a remote Island, that would take years for example, versus just barging in our tanks, putting them on the ground, you go from ordering those tanks to having that online a little more than a year, taking 3 years to build a fuel-directed tank.
So the Teddy 2 is a big piece of that, adding the brazed aluminum heat exchanger capacity in Tulsa is big and then expansions in Germany like you highlighted for additional industrial gas and hydrogen trailers as the market in Europe evolves on hydrogen, which is almost certain to do.
Right. Right. I will get to free cash flow in a little bit. But just on the CapEx side, Joe, while you have, 2% to 2.5% of revenue that's still the right way to think about medium-term CapEx?
Yes, that's the right way to think about it.
Okay. Okay. Awesome. So let's just quickly move on to your 2024 outlook. Free cash flow, absolutely we want to make sure we touch on that. That's a key topic for investors. Before we go to free cash flows, just to revisit that 2024 outlook because one thing that we've talked about a lot is timing of the revenue recognition, right, as you have become much more of a project business versus a discrete product company, it's been harder to perfectly time when you recognize it. Will you talk to that a little bit and talk to the $200 million in revenue allowance you're building in your guidance for '24.
Yes, right. And you're referencing our deck in our earnings call where we just put out 3 weeks ago -- today, actually, I think it was. And as you mentioned, as we pivot to -- as we're doing our pivot to more of a system solution provider, these projects are great because they are margin accretive. There's synergies with Howden compression technology and Chart technology, they also tend to be more complicated from an engineering standpoint. So we're seeing that engineering can take longer and that can affect our rev rec timing from one quarter to the next.
But I will highlight specific to EBITDA to free cash flow conversion as we're getting better and better at this pivot, making a concerted effort through our cash culture initiative to make sure that our projects are flowing cash positive. So that when you see the growth, the pivot to solutions and the growth, it isn't coming with a ton of additional working capital investment like you might have with the traditional component were.
Your business is ramping up, okay, that means more inventory, which means more cash tied up until you ship that stuff. And it's a key focus of ours with our cash culture to make sure that as we're growing through these solutions that these projects are running cash neutral or preferentially cash positive. So it's not a drain on free cash flow.
Got it. Right. Right. And related to that, on the margin front because you have made a lot of progress on raising your margin rate. Not that long ago, you used to be in the mid- to upper 20s in gross margin. Now you've been above 30% for 3 consecutive quarters, I think, right? So talk to that a little bit, what has led to that improvement and how should we think about that going forward?
Yes. I mean the aftermarket piece is certainly benefiting us there, again, pivoting to the systems solution that's a higher margin wins for us than supplying just the components, that's for sure. And then as you look forward to 2024, we've got the full year of 2024 with our cost synergies that we came out of the -- what the first year of the Howden acquisition all benefiting margin here in the short term.
Right. No, I think $130 million was a number of incremental full year over full year synergy benefit, right?
Yes. And there's more to be had on the cost outside, too. I mean one specific example, I'll highlight. As part of our year 1 synergies, we did a rapid negotiation with our supplier base, basically where you've got 2 businesses of a similar size coming together. You got supply base, so there's a lot more business to be had here, going to give us some quick cost reductions and you have a leg up on securing that business for the long term. We had a lot of suppliers that signed up for that, and we booked that. I would say that, that we didn't get the entire supply base to sign up for that, but we're still sitting there with double the purchasing volume in that various commodities.
And now we go through a more lengthy RFP process and potentially resourcing as needed to leverage that. But there's more savings to be had there. So I expect our global procurement organization and hopefully they're listening to deliver $40 million of annualized procurement cost out. Now when I say annualize, I don't mean for this year -- I mean, throughout the year, finding annualized savings of $40 million to benefit us for years to come, but that's the target that the team is running with.
Right, right. And then on -- just on the absolute free cash flow outlook for 2024, right, midpoint is $600 million. That number is unchanged even though the EBITDA you introduced a lower end versus the original $1.3 billion number, now it's $1.175 billion to $1.3 billion. So -- even though EBITDA came down by a little bit. At the midpoint, free cash flow outlook is the same. So what's driving the offset?
Yes. I mean I would just -- we covered that pretty well 3 weeks ago in our slide deck. So I don't want to give too much additional context there. But I will talk a little bit about free cash flow pieces that happen specific to meaningful cash flows that we have in Q1, for example, that don't recur throughout the year. And we have our semiannual bond payment that's in the first quarter and the third quarter every year. So it's [indiscernible], it's $73 million.
Like we've been talking about Teddy 2 and the way that build-out has happened is as there was more CapEx spent in Q3 of last year and then kind of finishing the facility with the ribbon cutting next week and all the new -- the equipment arriving, the CapEx number for Q1 will be more like Q3 of last year versus Q4. It's kind of the way I would look at that.
And then other onetime within the year activity that's happening in Q1, we do our annual short-term incentive payout in the month of March that -- and all the things like insurance, now we're twice the size of the company we were going into last year, so our insurance premiums that are paid in the first quarter nominally double what they used to be, so there are -- I would say, as you're looking at -- we're not going to forecast cash by quarter, but certainly, there are meaningful cash outflows in Q1 and we noted those 3 weeks ago in our earnings release, so I don't think I'm....
It's worth a reminder because the business has changed the cash flow probability, the seasonality in that has changed. So thanks for that...
As far as improvement throughout the year, as we continue to delever -- and we're on our path there and continued on that path, there's just less interest expense as we go down the path.
Right. Right. And just pivoting -- I think we've got 2 minutes left, just pivoting to deleveraging. You have found good success like you guided the Street, right, $500 million in divestitures. You're done with that, you use those proceeds to reduce your debt rate. I think the number at the end of last quarter was 3.35%. Your target is getting down to 2.5% to 2.9% by the middle of '24 and then the sweet spot for you is 2% to 2.5%, right? So talk to that a little bit. When should we expect for you to get there. I know it's hard to pin you down on that, right, but just a rough sense is helpful. And then why is 2% to 2.5% the right number?
Yes. So we -- like you highlighted expect to be in the high 2s around the middle of this year and then closer to our sweet spot range around the end of this year. And 2% to 2.5% is just really where we're comfortable operating where we could start to consider things that we're currently keeping off the table like significant cash acquisitions and other uses of cash that until we delever, we're not going to do those things. But once we get in the 2% to 2.5% range, then we'll -- that's where we're comfortable reconsidering that stuff.
Right, right, right. And once you get there, we should expect you get back to your bolt-on M&As because there are a lot of growth opportunities?
No question. Yes. No question that there are a lot of opportunities for sure, you see them all the time.
Right, right. But again, to be sure you have said that until you get there, you're not doing any meaningful cash acquisitions?
Not any significant cash acquisitions, no.
Right, right, right. Okay. Okay. Fantastic. We're almost out of time. If somebody has a question in the audience, we can take that.
Maybe you can highlight the midterm pick in terms of growth for your business in terms of organic growth? How do you see that? And how much leverage would you get on your margin for additional growth, let's say, if you have a 3- to 5-year perspective?
Yes. We put out significant medium-term guidance at our Investor Day last September -- it was September? No, it was October, but it was information as of September 30 last year. Mid-teens CAGR on the medium term there expect that I'm not bringing new news there. We're still confident in that medium term, all as a matter of fact, we just reinforced that outlook in light of the big LNG pause news we wanted to go out to the market and reiterate or I should say, just restate that. And so we did that earlier in Q1. So I would stick with that.
Okay. Joe, I think we'll just wrap it over there. We are over our scheduled time. So thank you.
Thanks a lot. Really appreciate it.
Thanks, everybody.
