Clean Energy Fuels Corp. (CLNE) on Q2 2021 Results - Earnings Call Transcript

Operator: Greetings and welcome to Clean Energy Fuels Second Quarter 2021 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Robert Vreeland, Chief Financial Officer. Thank you, sir. You may begin. Robert Vreeland: Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the second quarter ending June 30, 2021. If you did not receive the release, it is available on the Investor Relations section of the company’s website at www.cleanenergyfuels.com where the call is also being webcast. There will be a replay available on the website for 30 days. Before we begin, we would like to remind you that some of the information contained in the news release, and on this conference call, contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words of expression reflecting optimism, satisfaction with current prospects as well as words such as believe, intend, expect, plan, should, anticipate and similar variations identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. Such forward-looking statements are not a guarantee of performance and the company’s actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the Risk Factors section of Clean Energy’s Form 10-Q filed today. These forward-looking statements speak only as of the date of this release. The company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release. The company’s non-GAAP EPS and adjusted EBITDA will be reviewed on this call and excludes certain expenses that the company’s management does not believe are indicative of the company’s core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBITDA and a reconciliation between these non-GAAP and GAAP figures is provided in the company’s press release, which has been furnished to the SEC on Form 8-K today. With that, I will turn the call over to our President and Chief Executive Officer, Andrew Littlefair. Andrew Littlefair: Thank you, Bob. Good afternoon, everyone and thank you for joining us. This was a great quarter for us. In Q2, we signed the most important commercial agreement in the history of our company with Amazon. Our business is growing again and surpassing pre-COVID levels. We raised $200 million in growth capital. Our earnings were better than expected. And there continues to be an increased understanding of the role our renewable fuel can play in addressing climate change today. Notably, our fuel volumes surpassed 100 million gallons a quarter again, a healthy 13% increase over the second quarter of 2020 when the pandemic had begun to take hold. We saw volumes bounce back in all sectors. And the good news in particular is that airport fleet volumes increased 36% and transit increased 24% compared to a year ago, which surpassed our own internal projections. Our renewable natural gas, or RNG volumes, grew 19% over the same quarter a year ago and continues to become a larger share of our overall fuel mix. Our efforts to accelerate that demand for this ultra clean fuel is only matched by our focus on bringing on additional RNG supply to meet the growing demand, which I will elaborate on in a minute. As you know, we are focused on providing more and more RNG, a fuel that can be rated to have a negative carbon intensity allowing our customers to meet their transportation sustainability goals easily, immediately and affordably. I am going to let Bob go into more detail about our strange revenue number this quarter, but it’s not hard to see. There were accounting-related non-cash charges that highly impacted it, most notably the Amazon warrant charge. Excluding the non-cash charges, our revenues would have been $79 million, a 29% increase and apples-to-apples comparison to the second quarter of 2020 which was $61 million. Our balance sheet has significantly improved placing us on solid footing. During the second quarter of the year, we added $200 million of cash through an at-the-market equity offering managed by Goldman Sachs. In fact, the demand was so high we raised $100 million in 1 day during the second round of the offering. We finished the quarter with $254 million in cash and investments after contributing $50 million into our negative carbon intensity RNG development JV with BP. Our debt at the end of the quarter was $42 million. This places us in a strong financial position as we expand our fueling infrastructure for our new large anchor customer, Amazon, and make investments in RNG production to ensure a growing supply of RNG fuel in future years. Our adjusted EBITDA for the second quarter was $14 million, a 51% increase over the adjusted EBITDA on the second quarter of last year. Overall, it was a strong quarter financially and operationally. Regarding the supply of RNG, let me just quickly report that our efforts to make agreements with dairies is moving along very well. No other company has as compelling and offers we do, with a strong balance sheet supported by our JVs with Total Energies and BP and the largest vehicle fueling infrastructure in the country, which provides the mechanism to generate the valuable environmental fuel credits. Dozens of dairies from California to Texas to the Upper Midwest are in discussions with us. We have already signed our first partners and have a robust development pipeline. But before the RNG from these new partnerships comes online, we are also aggressively and continuously signing RNG supply contracts with third-parties to meet today’s growing demand. Since the beginning of the year, we have secured an additional 53 million gallons of RNG with a healthy pipeline of additional supply agreements. As I mentioned, our base of existing customers is back to previous levels and we were adding new businesses as well. The adopter port program with Chevron, which makes replacing old dirty truck – diesel trucks with clean RNG trucks affordable for smaller operators in the ports of LA and Long Beach continues to expand. Financing for over 485 heavy duty trucks is either closed or is in the contracting phase. These trucks will fuel in the ports at our surrounding network of RNG stations in Southern California. We are working our way through the additional $20 million of financing that Chevron recently committed to the program. And I believe it will accelerate as the state of California soon distributes another round of its grants for clean trucks, making the switch to RNG all that more appealing. On the East Coast, our existing customer, Manhattan Beer Distributors, recently announced that they would be expanding their natural gas fleet to 29 trucks, which will fuel at our stations in the New York City area. And in the middle part of the country, we signed a new customer, Energy, a large regional fuel provider in Nebraska. We will be taking over the operation of three stations that sell an approximate 900,000 gallons of CNG a year and we forecast that to grow as adds medium and heavy duty trucks to their fleet. Another new customer, the City of Fort Smith, Arkansas will begin to fuel new fleet of natural gas refuge trucks and has plans to convert their entire fleet to natural gas. These are a sampling of recent agreements. But of course, the biggest deal signed during the second quarter of this year, well in fact, the biggest deal we have signed since the company began was the agreement with Amazon. I spent quite a bit of time discussing on the last call. So I won’t go into much more detail today. But since our last call, Amazon issued their latest sustainability report, and in it they confirm for the first time that they plan to initially deploy 2,700 heavy duty natural gas trucks by the end of the year, and all the fuel we will provide for Amazon will be RNG. We are making good progress on the additional stations that we plan to construct for Amazon and Amazon continues to deploy its heavy duty truck fleet. In addition to the fueling infrastructure expansion, we are facilitating training classes with the Natural Gas Vehicle Institute for dozens of maintenance technicians who will be keeping the Amazon trucks on the road. Our excitement about our new relationship with Amazon has only increased since our last call. This significant feeling agreement and their right to buy clean energy shares, provided they purchase hundreds of millions of gallons of RNG, demonstrates the overall commitment and strategic alignment that one of the world’s largest companies which moves more goods than anyone else has made to renewable natural gas. We are seeing that message open doors with other fleets, which have been a little hesitant in the past to think about leaving diesel. And fleets are feeling other pressure points as well. I don’t have to tell this audience that companies are under increased scrutiny to find ways to reduce their carbon footprint. Investors, regulators and the public are asking to see specific plans to meeting their emission reduction goals. I am going a little bit off the farm here, but it’s my belief that our RNG fuel solution has the momentum versus other alternatives. It’s almost becoming a weekly occurrence when we – where we see stories about transit agencies turning back electric buses, because of serious issues, including thermal events. And by the way, where I come from we call those fires or delays and rollouts of electric heavy duty trucks and other promises and claims not kept by startup OEMs or the lack of charging and fueling infrastructure for large vehicles, the expense of charging and fueling infrastructure, and a growing realization that there is no perfect clean solution, highlighted by a recent in-depth story by the Los Angeles Times about the environmental impacts and problems associated with the mining of minerals for large batteries. Now, don’t get me wrong, I think electric and fuel cells will be fine in the light duty space. And as I have said before our experience in station construction, along with our access to RNG fuel supply, which can be used as a clean feedstock in-time will allow us to expand in other alternatives as our customers do. In fact, we have recently submitted bids to build hydrogen stations for transit agencies that will be testing a handful of hydrogen buses. But for fleets of large vehicles, which are looking for immediate and significant carbon reduction solutions, we think there is nothing comparable to RNG. It’s becoming easier to make our sales pitch. A fuel produced from capturing naturally occurring methane at dairies, which number in the tens of thousands and then turning it into a transportation fuel. Displacing a harmful incumbent fuel is an easy story. This two-pronged missions mitigation is why RNG fuel can receive a negative carbon intensity rating and why more fleets like Amazon are realizing it’s the easiest and most cost effective way to meet their aggressive sustainability goals. We are already having – we already have a nationwide fueling infrastructure in place that is expanding. Cummins provides a natural gas engine that performs as well as its diesel counterpart, albeit with 90% fewer tailpipe emissions and a carbon negative fleet can be deployed in short order at much less cost than other untested alternatives. We have recently begun an exercise to dive deep into large heavy duty truck fleets with specific data that demonstrates to companies how they can reduce their greenhouse gas emissions. As an example, at their request in July, we provided one of the country’s largest fleets, which operates thousands of heavy duty diesel tractors, with specific data about how they could achieve their long-term carbon emissions reduction goal by replacing only 1,200, that’s 1,200 trucks over 63 years with RNG. Using the same California Air Resources Board carbon intensity scoring, this company would have to purchase over 6,400 electric heavy duty trucks, or 13,000 fuel cell trucks to achieve the same carbon reduction as only 1,200 trucks running a negative carbon RNG. As I mentioned at the top of my remarks, the second quarter was a great one for Clean Energy. Our recurring business is returning to normal levels and we are beginning to see real growth in our fuel volumes driven by new customers in no small part by one in particular, Amazon. And we are on solid financial ground as we continue to make additional investments for future growth. And with that, I will turn the call over to Bob. Robert Vreeland: Thank you, Andrew and good afternoon everyone. And I will reiterate what Andrew said, the second quarter was a good financial quarter for us. We started to see the anticipated rebound in volumes along with good fuel margins and a continued favorable environmental credit market for D3 RINs and LCFS. Of course, our GAAP results as reported were significantly impacted by the non-cash contra revenue charges of $78.1 million from the Amazon warrants. But looking at our non-GAAP earnings, we earned a $0.01 a share with adjusted EBITDA of $14 million. These contra revenue charges related to the Amazon warrants is why we are reporting a revenue number of $0.5 million for the second quarter. Without those warrant charges and changes in fair value of Zero Now hedge, our revenue was $79 million or 29% above 2020 second quarter revenue of $61.3 million on a comparable basis. The Amazon warrant non-cash contra revenue charges for the second quarter included $76.6 million related to the immediate vesting of approximately 25% of the warrant shares and $1.5 million related to ongoing fuel delivery to Amazon under our fueling agreement. We will continue to record non-cash contra revenue charges each quarter that could be in the range of $3 million to $4 million per quarter related to the ongoing spending on fuel by Amazon. As also note the contra revenue charge related to the immediate vesting in the second quarter was higher than our initial estimate of $68 million due to additional warrants being issued in connection with our share issuance from our at-the-market stock offering program. As such, we have updated our guidance for estimated – for our estimated GAAP loss to $86 million for 2021 to reflect the increased contra revenue charges in the second quarter, which has no impact on our cash flows or adjusted EBITDA. We are maintaining our adjusted EBITDA guidance for 2021 of $60 million to $62 million. Now continuing on with the second quarter, total volumes were 101.4 million gallons compared to 89.5 million gallons a year ago. Andrew noted the big increases coming from airport fleets and transit sectors, which have been the most impacted by the pandemic. Trucking and refuse also saw year-over-year volume gains. And our RNG volume grew 19% to 42.9 million gallons in the quarter, up from 36 million RNG gallons in the second quarter last year. Our effective price per gallon in the second quarter of 2021 was $0.67 per gallon compared to $0.58 per gallon a year ago. This reflects generally higher natural gas prices and related prices at the pump as well as significant gains in our D3 RIN revenue. Both station construction sales and the alternative fuel tax credit revenues were better than a year ago by 15% and 20% respectively, collectively an improvement of $1.7 million for the second quarter compared to last year. Our overall gross profit margin improved in the second quarter of 2021 compared to 2020 exclusive of the non-cash contra revenue and non-cash fair value changes in our Zero Now hedge. Exclusive of these non-cash items, our gross margin was $32.1 million in the second quarter of 2021 compared to $22.8 million in the second quarter of 2020 or a 41% improvement. Increased volumes together with a rise in our margin per gallon from a year ago were the primary drivers of this year-over-year improvement in margin. Our effective margin per gallon for the second quarter of 2021 was $0.26 per gallon compared to $0.20 a gallon a year ago, also reflecting the greater fuel volumes and higher rent pricing. We believe our margin per gallon will remain within our expected range of $0.22 to $0.26 for the year. But as we have seen, we’ve been at the high end of that range in our first two quarters. Our SG&A was $21.6 million in the second quarter of 2021 compared to $16.9 million a year ago, an increase of $4.7 million, of which 57% or $2.7 million of that increase relates to an increase in stock compensation as expected. Our GAAP net loss for the second quarter of 2021 was $79.7 million which includes the effects of the non-cash warrant contra revenue charges and the Zero Now hedge changes. Our non-GAAP net income for the second quarter was $1.8 million or $0.01 per share, which we believe is more indicative of our operating results. Our adjusted EBITDA of $14 million for the second quarter of 2021 compares to $9.2 million a year ago, which again highlighted the benefit of increased volumes and improved margins principally associated with our RNG deliveries. Our cash flow provided from operations amounted to $9.7 million for the second quarter of 2021 compared to $54 million in the second quarter of 2020, which that figure included 2 years of alternative fuel tax credit collections in the second quarter of 2020. Exclusive of changes in operating assets and liabilities, cash flow from operations was $14.3 million in the second quarter of 2021 versus $6.6 million in the second quarter of 2020. CapEx spending was $4.6 million for the second quarter of 2021. Of course, we see that amount increasing as our station building continues and ramps up as we accommodate principally Amazon. And Andrew mentioned our cash and investments of $254 million, with debt of $42 million at the end of June 2021. We contributed $50 million in June into our RNG investment with our JV with BP and we anticipate funding our RNG JV with Total Energies on a project by project basis as specific projects are approved for funding. Our share of the net results of these JVs is and will continue to be reflected in our adjusted EBITDA as we progress forward in bringing projects up and producing RNG. With that, operator, we can open the call to questions. Operator: Thank you. Our first question comes from the line of Eric Stine with Craig-Hallum. Please proceed with your question. Eric Stine: Hi, Andrew. Hi, Bob. Andrew Littlefair: Hey, Eric. Eric Stine: Hey, so I know you mentioned that Amazon is not a surprise that it’s helping more broadly in discussions with customers. But maybe could you talk about specifically Amazon suppliers, maybe some specific data points as much as you can share tractions you are making there and kind of how you see that overall volume opportunity? Andrew Littlefair: Our stations that we are building for Amazon are going to be open to the public. And of course knowing our business, Eric, when I open to the public that means it’s they are open to other truck companies, right. And in that case, I think it’s likely to be other vendors and suppliers as well as other fleets that operate for Amazon. We have seen a few companies that haul for Amazon begin to bring natural gas trucks into their fleet. And I think you will see more of that in the future. And that’s really all I can talk about right now is, but I know that as I believe that Amazon looks at their emissions and their goals and their reductions in the future, they are going to try to encourage many of the people they work with to bring on cleaner and cleaner vehicles over time. And we hope to be right in the middle of that and kind of stay tuned. Eric Stine: Yes, okay. Well, maybe just sticking with that, I mean, is there anyway, obviously, as you’ve got the joint ventures now you’ve brought on more supply, you’ve had the supply agreements in hand for some time, maybe the size of the pipeline for Redeem whether it’s versus a year ago, 3 years ago, anything along those lines would be helpful? Andrew Littlefair: Right. And I am going to be a little cagey here, Eric. And it’s just because I guess there is lot of good news here, but which is there is a – there are a lot of competitors that are out there trying to develop dairy projects. And in one way that’s really a good thing, right, because that just confirmed for me that there is lot of money and there is some big players with deep pockets recognizing that this is a really viable fuel that’s economic and that has a great role to play in reducing carbon emissions today. So, that’s good. Remember that we are ahead even while we are competing at let’s call it at the dairy location. Often, we are – I don’t want to say the only game in town we often get though the supply from our competitors as they go look to put it in a vehicle tank, right because we have the infrastructure. So, just because we are not developing a dairy farm and harnessing the dairy fuel for our own account, that doesn’t mean that we don’t ultimately bring that loan carbon negative fuel to our customer, our fueling station. Now, obviously, we would like to get a lot of it on the upstream side, because that makes economic sense for us as well, but just want to kind of keep that in mind. So if you go back and look, 3 years, I mean, there was hardly anything going on in the dairy business. So, when you look at the pipeline today, it’s dramatically increased. And I have said on a previous call, I am not going to dissect it today, I said in the previous call that we have got several projects that are either in that we have given the notice to proceed that are either in construction or in the – or signed or in our pipeline that’s grown since our last call, but I’ll just kind of leave it at that right now. But yes, Eric, compared to where we were several years ago, I mean, remember, we were early in this business. We started I guess we were the first ones to put landfill gas in a truck 10 years ago, right. And so up until recently, it was all landfill gas. And it will continue – there is a lot of landfill gas in the United States and it will continue to be a lot of landfill gas. But you will also see more and more dairy and farmed hogs coming on board because of its low carbon nature. Eric Stine: Got it. That’s so much helpful. Andrew Littlefair: For instance, let me give you one other little point and I can’t go back a few years, but our carbon intensity is coming down. And by the end of this year, our carbon intensity will be – in the fourth quarter was – is going to be approaching zero for our fuel. And it wasn’t too many years ago as it just wasn’t, it wasn’t that way. And it’s coming down fast, because we do bring down this negative carbon fuel. It’s so much lower carbon that it brings down the other. So, that’s a good thing. Eric Stine: Yes, no, that’s good. Maybe last one for me just, I mean, great to hear a rebound in transit and airport. Have you seen any change or with variants and things along those lines or is that something that you kind of feel like those few areas are back on track and they should continue to grow going forward? Andrew Littlefair: Yes, we are seeing them all grow. I don’t think airports aren’t fully back. I mean, they have come back a long way. And I’d say they are back to about where we were before, but they are still not, I don’t think they are operating on all cylinders yet just based on what I know on the passenger load. But they are pretty – they are essentially back to where we were before, but I think there is growth there. Transit buses, I’ve said this from the – in the kind of the early days of the pandemic, they kind of flipped the switch, right, they went from 100% to 50% and they drop it in big pieces. And it doesn’t have as much to do necessarily, with the passenger load on a given days, it does that they just turn on different routes. And we have seen the transit back to pre-pandemic levels. The transit is back. We have seen transit properties growing. We see transit buses taking delivery of new natural gas transit buses. So I think you’ll see both those segments continue to grow. So, that’s good news that we are starting to finally see some growth back now. Rep use grew last year, right, I want to say 8% and it’s continuing this year, along those lines. Eric Stine: Okay, thanks a lot. Andrew Littlefair: You bet. Operator: Thank you. Our next question comes from the line of Rob Brown with Lake Street Capital Markets. Please proceed with your question. Rob Brown: Good afternoon. Andrew Littlefair: Hey, Rob. Robert Vreeland: Hey, Rob. Rob Brown: Just wanted to get a little more color on the Amazon build out where are you at in terms of getting stations completed and do you expect to have really all of them by the end of the year or what’s sort of the timeline there? Andrew Littlefair: Right. Now, of course, we have told Amazon we are going to bring those stations down as quickly as we can. And of course, as you know, as we build those stations, the toughest part just to be candid and where we are with Amazon and other, our customers know this, the longest lead part of developing a station is the sighting of the land and is the permitting and is the due diligence on the utility and the utilities and the acquisition of land or the leasing of the land. That’s the longest lead item. The construction is actually the shortest part. So we have made very good progress of the new locations. The majority of them have been – we’ve gotten through the real estate piece of this and you’ll begin to see construction phase on most of these stations being developed in the latter part, third and fourth quarters of this year, some of those will get probably finished next year as well early though, but we are making good progress on all of them. And we are also making additional investments and adding to existing stations, as I think I said, maybe in the last call, we are currently fueling Amazon trucks and we have seen them at our existing network, where we have actually been fueling Amazon trucks at 37 of our different stations already. And some of those network co-locations are receiving some increases in additional investment to make sure that they are – they can serve the Amazon characteristic and fleet well as well as we can. And so that’s what’s going on. So I feel pretty good. We monitor it very carefully. And look, real estate locations in the Northeast are not easy to come by. There is a lot going on up in certain states, right now. But we made pretty good progress on. Rob Brown: Okay, great. Thanks for that color. And then in terms of the fuel volume or the accounting of the revenue, I think, Bob, you mentioned some offsets going forward, could you just give some color on sort of is that volume driven or is that kind of a fixed amount? Robert Vreeland: It’s volume spend driven. So, they – Amazon vests and the warrant says they spend and there is thresholds and milestones frankly, but from an accrual accounting standpoint, you assume they will make the various thresholds. So, it’s kind of we are going to record those as the spend occurs. And that’s how that will – that’s where those will come from. Rob Brown: Okay, great. Thank you. I will turn it over. Robert Vreeland: Okay. Andrew Littlefair: Thanks, Rob. Operator: Thank you. Our next question comes from the line of Pavel Molchanov with Raymond James. Please proceed with your question. Pavel Molchanov: Thanks for taking the question. So we are obviously waiting for the infrastructure built the past and I noticed that one of the changes from the original March version to the – what’s actually going to be voted on is there is some provision for buses that are low emission, but not zero emission. Have you guys looked at whether nat gas can be included within that? Andrew Littlefair: Right. Well, Pavel, we were heavily involved in that. So, you go back about 6 or 8 years when the LoNo – NoLo program was put in place. And it always envisioned low-NOx, which is natural gas bus. It’s just that the Obama administration decided not to ever fund any natural gas buses. And so the LoNoLo program was always used as a slush button for electric vehicle programs. And it was on the order of $100 million, $150 million. So in the scheme of transit, it didn’t really amount to much, right, because that doesn’t go very far in the electric world. And so, come this year, there were some United States senators on the Republican side with some Democratic colleagues, in fact, Chairman Brown that just felt like the LoNoLo program should return to the original legislative tent, which is that if you could put help fund low-NOx buses, especially using RNG on the road, which have arguably a lower carbon content than electric that should get put in place. And so, when you look at the plus up, so the LoNoLo program has gone from on the order of a couple of $100 million a year to $5 billion, right, $5.25 billion. There is a 25% carve out of that $5.25 billion for low-NOx buses, which would be natural gas buses. So, it’s a big – for me, it’s a big recognition and it’s a carve-out right. It’s solid. So you got a $1 billion basically there, that’s going to be for natural gas buses. And so we are real pleased about that. And when you kind of compare that versus the other $3 billion that’s going to go to electric, you are going to get on a bus on bus comparison, you will have about as many natural gas buses funded as you will electric. So yes, we are on top of that one. Pavel Molchanov: Okay, okay. No, I appreciate the detail. Going back to your comments in the intro about certain municipal bus lease that are unhappy with their electric purchase, do you know of any specific examples of a city fleet that did a pilot or initial deployment of electric and then essentially gave up on it and said, we are going go back to what we had before? Andrew Littlefair: You mean, like Foothill, you mean… Pavel Molchanov: Well… Andrew Littlefair: So, you mean transit properties that tried it, no, thank you. Pavel Molchanov: Exactly. And actually walked away electrification entirely. Andrew Littlefair: Well, I think and I know you follow this so you may know, but I believe Albuquerque did. And I imagine they are still running some. But I am pretty sure Foothill Transit has decided that they are – in fact Foothill Transit is going to now go with I guess they are going to take a swing at hydrogen. Indianapolis that was a disaster and Duluth, so, I don’t know of any others, but those are the ones that come to mind. I am sure there are others that just haven’t had a good experience. Pavel Molchanov: Okay, that’s helpful. I am just trying to kind of visualize how common that kind of reversal it is? Andrew Littlefair: Look, I know it always comes across like pick on him, but I – and I do, I do in a way. But you know what I sort of recognize that there maybe a role for the public funding to sometimes push on these extravagant technologies. And we saw that 20 years ago with natural gas buses, right. Transit fleets funded natural gas when that wasn’t the thing to do, right. And so occasionally, the public monies are being used here to push on the technology side. And that’s one thing, okay. Though, Pavel, what you and I talked a lot about over time is that when you have something that’s being funded 93% by the Feds, okay, so you don’t really look at it as a dollar and cents cost effective thing, you just don’t, you don’t have to, but when you start looking at a private sector fleet and then it’s totally different. When it’s 100% your own money, then this really does come into play and that’s where I always try to let people know is don’t think, because somebody is funding or fielding some electric transit buses that necessarily translates to private sector trucking company doing the same thing, because there is different economics at that point. And I think that’s important for people to understand. Pavel Molchanov: Yes. No, appreciate the perspective. Thank you, guys. Andrew Littlefair: You bet. Operator: Thank you. Our next question comes from the line of Manav Gupta with Credit Suisse. Please proceed with your question. Manav Gupta: Hey, Bob. Hey, Andrew. I mean, I am trying to understand this, you put in about $50 million with the BP JV and then you are saying with Total, it’s going to be more project by project based. And I know you can’t get too specific, but let’s say, we are looking out to year end 2022 or you picked 2023 like how many dairies are you targeting would have contracted with you and how many do you think would be online between BP and Total, just some rough numbers, so we can model those JVs a little better? Andrew Littlefair: Yes, that’s well, Manav. That’s a good question. But there is – all these dairy projects vary kind of so much with the size and what we have said, generally speaking – we are talking about in gallons and you are going to spend on the low – on the negative carbon, the dairy, you are going to spend maybe $20 million per million gallons, right. And so, but we started to do that math. I mean, our intent is to spend the 400 million in the BP deal and the 400 million in the Total Energy deal and it could go bigger. But let’s just say, we will go through both 100 million, so that would be kind of 200 million at the JV level 100 million each. Manav Gupta: And they – and that might be leveraged. Andrew Littlefair: So, Manav I don’t know that we are going to – you are going to get from us today, a dairy cow and headcount gallon count of low CI count that you can put in your model. But what we have said is by 2025 100% of our fuel is going to be that way. And what we have said is that we are working with very large fleets that if you just – I think you did it on one of your fine notes, if you kind of run out and use Amazon and do the multiplier on gallons, and all of that has to be RNG. You can see we need another 100 million gallons, 50 million to 100 million gallons just for them. So, there is going to be a lot of money put to work here, from us, our partners and also for others that we are going to have to bring in, because the future is going to be a landfill and dairy projects over time. That’s the future, so that’s not going to be the fossil, it’s going to be this RNG bring – coming to bear. Manav Gupta: Yes. With significant flow from those investments more in 2023? Andrew Littlefair: Right. Manav Gupta: So, I mean, I think the point is the intent is to spend the full amount of capital there that can be leveraged at the project level. So, and there typically would be…? Andrew Littlefair: Well, in Total energy sales indicated their preference to upsize there that JV and they have said they would like to see that go up to 400 million. So, we are not ready to do that, right. The second, but we know that that’s their intent. And that’s what they would like to do. So, there will be a lot of money on our side put to work. Manav Gupta: Perfect. I had a policy question. On one hand, we obviously see the Biden administration about lowering carbon emissions and everything. And then all you see from most members of the administration, talk about is EV. I think even today, it was all EV. I mean there are one or two senators like Senator Amy Klobuchar, or some other people who are talking biofuels. But most of the time, what we hear from media, at least, is just EV. And again, you guys are very close to all this, like on the ground do you think the current administration is more supportive of biofuels or do you think it’s just the support is just EV and nothing really has changed even from the Trump era? Andrew Littlefair: I think it’s been easy. It’s frankly, easy for politicians to just at this point, just kind of lump it all in and it’s gotten to be very comfortable to sort of talk about an EV – solar and EV future. I mean, that’s kind of what the environmental community likes to hear, that’s kind of what they have adopted now. If you press it is why you see – it’s why you see that that buildup prevail and I just talked about. All of a sudden, there was a 25% of carve out or low-NOx, which is natural gas – natural gas, there is a recognition that you should try to do whatever you can today to lower emissions and not wait, because they know that. And we don’t really get any pushback from either side of the aisle is when you really address it. As you know, there isn’t a fuel cell truck today. There isn’t a hydrogen – then you can buy. And frankly, there is not really an electric, so that is code for if you don’t do something that’s available today, you are just allowing that to go to diesel. And that’s why you just saw this carve out in this LoNo program. I would call your attention Manav and others on the call and it may be a little hard to find, but the Executive Officer of the South Coast Air Quality Management District just wrote a really compelling I guess rebuttal to the Environmental Justice Community and some of the Health Communities that we are kind of roughing the South Coast Air Quality Management District who is responsible for the air quality in Southern California. And frankly, I have been on the leading and bleeding edge of air quality issues for last 50 years. And his name is Wayne Nastri. And I would encourage you – N, A, S, T, R, I. And if you would like we will send it to you if it’s hard to find. But if you go online, he has out yesterday or the day before a six page, single spaced, written letter where he calls out that low-NOx, natural gas is got to be part of the equation to do what you can do today for air quality, because frankly, when he looked in when his – as much as they have spent $350 million on electric technologies, in the last few years, probably done more than any other local agency supporting electric, they are the first to admit that they have to do other things to continue to bring down and improve the air quality and tailpipe emissions and carbon emissions. And so what Wayne was arguing is that this idea that it’s natural gas or its low-NOx, or it’s RNG versus electric is a foolish thing to get engaged and that you have to keep them – you have to employ all of these technologies. Otherwise, you get diesel. And that’s then so this is a long winded. So, I would encourage everybody to look at that because here is the professional officer in charge of air quality, who makes the case for why you need to be doing RNG and natural gas technologies right now. It doesn’t mean that you are against electric, it just means that’s what you have today, and you need to do it. And that’s the same thing that we will see in the Federal level. When it all shakes out there for instance, natural gas is in the corridor program. So, all you are going to redevelop is electric charging stations in this new corridor program, natural gas is funded in that too. It’s just not as environmentally politically correct to talk about that. Manav Gupta: Perfect. My last question is, you have currently in the quarter 42.9 million gallons of RNG was supplied, help us understand how much of that was landfill, and versus the dairy farm and how that has tracked over the last 1 year or so? Andrew Littlefair: Well, you are consistent Manav. On that, I don’t know that we are going to break that down for you. But we are increasing our dairy farm. And if you kind of look back, last year, you were 2% dairy, and by the end of this year, you will be up to 10% dairy and so that’s kind of way to think about it. And of course, we will continue to bring on dairy at a higher – more and more as we go, because of what it does for us. Bob, I don’t know if you had another way to…? Robert Vreeland: Well, we have delivered – we have taken supply of more dairy through the first six months than we did all of last year. Manav Gupta: Okay. Robert Vreeland: And we were probably – we are probably almost up close to 100% from one quarter to the next. So, that is – so the dairy is growing as expected. But there is still plenty of room. It’s kind of good news, bad news thing, because, frankly the numbers that we see in front of us that was a very good quarter, are not heavily weighted toward dairy RNG. There are some in there for sure. And we also had some very nice RIN pricing. So, we just have – we continue to have the upside in the replacement. And to your question that those stats should tell you some at least in terms of that pace is going with the growth rate of the dairy. Manav Gupta: Thank you so much for taking my questions. Andrew Littlefair: You bet. Thank you. Operator: Thank you. Our next question comes from the line of Jason Gabelman with Cowen. Please proceed with your question. Jason Gabelman: Hi guys. I want to ask first on I guess this margin range that you have provided, could you just help us understand what’s kind of driving the potential for you to come in at the high end versus the low end, is it just RIN volatility. Is that kind of the main factor? And if so, what’s the sensitivity there? Andrew Littlefair: Bob. Robert Vreeland: It’s some of that, Jason. But it’s not all. It’s not all banked on that. So, it’s also just an anticipation of volume rebounding from the pandemic. So, and I think Eric had a question too on that. But we all know this variant stuff is going on. But frankly, we are not seeing anything like that right now impacting our volume. So, we still are anticipating that we are going to gradually recover. And so as we put on more fuel volume and we grow volumes that really also is a driver to our margin per gallon. Along with RINs, that’s helpful. But the LCFS has been – is lower than when we started the year, right. So that hasn’t necessarily been off the charts. It’s still strong. It’s and by no means not good. But that’s kind of off the RINs picked up. So, there is always a little bit of this and that, that goes on, but then the fuel. Andrew Littlefair: There is a little mix in there, too. Robert Vreeland: Yes. The increase of fuel volume with greater mix and look at the Amazon fuelings, those types of volumes help in that absolutely because those are our core fuel volumes. So, we see that increasing. Jason Gabelman: Okay. Great. And then I guess, just more broadly on the volume outlook, now that they have kind of rebounded to 2019 levels, I think your 2Q was flat with where 2Q ‘19 was. Could you give us a sense of the volume trajectory moving forward into next year? And if you expect, kind of, and within that, I guess, the RNG volume growth as well. Robert Vreeland: Yes. I think, we have said at the beginning of the year that we have kind of – we have come out of Q4 at around a 12%, kind of middle, 12%, year-over-year, 12% to 15% in volume growth. So, I think that we will get there with our Q4, Q3 will be not at that level, but it will rise and then Q4 will kind of be maybe at 12% to 15%, above what it was a year ago. And then assuming there is no real setback from what’s going on out there, we will – we should be in a solid double-digit volume growth. But that’s we still want to see how all that various deals shake out before we give too much guidance towards the 2022 volume. But it should be north of 10% as we go into that grade. Jason Gabelman: And then the last one, just on the equity raise you did in the quarter, did you consider other channels of financing? Why was I guess the equity more attractive than whatever other options that you could have pursued? Andrew Littlefair: Sure. Jason, we are always looking at different things, right. And in our history, we have done – we have had convertible notes and so. So, we were always looking for what we think is best. And we are not – because we did this via latest couple rounds of equity. I mean, I don’t think one should assume that that’s the only thing we are going to do. Well, there is probably a time when some other debt on these projects and would make some sense. But we felt like with what was happening in the market at the time, and the need for growth capital, that it was prudent for us to put some on the balance sheet when we had a chance. Jason Gabelman: Alright. Great. Thanks a lot. I appreciate the answers. Andrew Littlefair: You bet. Operator: Thank you. Our final question comes from the line of Todd Firestone with Evercore ISI. Please proceed with your question. Todd Firestone: Good afternoon. Thanks. Thanks for taking my question. I had a couple questions. One was maybe I could come on it a little different angle. Are you able to disclose or maybe an internal estimate of what one of the Amazon trucks would use annually on a gallon basis? Andrew Littlefair: I don’t know that we have ever really said exactly. But look it wouldn’t be I am not divulging any Amazon secret. When you look at kind of normal over the road trucks that can operate like Amazon, I think and I have been saying this for years, right. It’s somewhere between kind of depending if they are regional or a little more super regional. They tend anywhere between 12,500 gallons and 20,000 gallons, right. So, I mean, I think if you were to use a number in the 14,000 gallons, 15,000 gallons that’s sort of a good placeholder for an over the road truck, J. B. Hunt type truck, those kind of big over the road trucks in that neighborhood. Todd Firestone: Great. I appreciate that. Second question is just on the number of stations, and the just logistics around that, and I apologize if you disclosed it on our prior call, but is there may be a hard or soft cost contingency built into – building out these stations. So, what I am really trying to get at, are you seeing trouble getting workers and the crews to build these stations and is there any reason to be concerned about that? Andrew Littlefair: Well, we have seen like everybody else. We have seen some cost increases. I don’t know that it’s been – I don’t know that we have been faced with horror stories on that. But to concrete it up a little bit, some of the – our steel cylinders, we have seen. Now, we were lucky and that we kind of pre-ordered some and we were able to get some supply that will take us through. I think almost all of our first initial build for Amazon. But we always put a contingency on the construction area and somewhere between 10% and a little bit more. So, we will probably eat up some of that, I would guess. But we haven’t seen anything that’s been completely off scale, I wouldn’t say. Robert Vreeland: Right. And I think labor wise, we are active on station builds have been. Andrew Littlefair: Right. Robert Vreeland: So, we have been keeping a lot of people employed. And so that’s, that kind of remains the case on that front. We have got good contracts. Andrew Littlefair: We have good subs that have been continuing them through kind of thick and thin. They worked with us last year and this year, so we are not seeing – we are not having to go out and hire dozens and dozens of new construction guys, which I think could be a little daunting. We have some pretty well squared away firms that have long history with us. Todd Firestone: I appreciate that color. So, that’s all I have. Andrew Littlefair: Okay. Thanks Todd. Operator: Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over to Mr. Littlefair for any closing remarks. Andrew Littlefair: Good. Well, thank you, operator. And thank you, everybody for participating and listening in today. And we will keep you posted as we go forward on RNG and our station build out and growth plans. Talk to you next time. Thank you. Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
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Clean Energy Fuels Corp. (NASDAQ: CLNE) Financial Performance Review

  • Clean Energy Fuels Corp. (NASDAQ:CLNE) reported a revenue of $104.9 million, surpassing estimates and indicating growth from the previous year.
  • The company recorded an EPS of -$0.08135, missing the estimated EPS, but showed improvement in net loss and adjusted EBITDA year-over-year.
  • Despite a negative P/E ratio, CLNE's price-to-sales ratio and strong liquidity suggest investor confidence and a solid financial foundation for future operations.

Clean Energy Fuels Corp. (NASDAQ:CLNE) is a key player in the natural gas industry, focusing on providing clean fuel solutions. The company operates within the Zacks Utility - Gas Distribution industry, offering renewable natural gas (RNG) and conventional natural gas for vehicle fleets. Despite facing competition from other clean energy providers, CLNE continues to make strides in its financial performance.

On November 6, 2024, CLNE reported an earnings per share (EPS) of -$0.08135, which fell short of the estimated EPS of -$0.02. This indicates a larger-than-expected loss for the quarter. However, the company generated a revenue of approximately $104.9 million, surpassing the estimated revenue of $100.6 million. This revenue growth is a positive sign, reflecting an increase from the $95.6 million reported in the same quarter of 2023.

Despite the negative EPS, CLNE's financial performance shows improvement. The company recorded a net loss of $18.2 million, or $0.08 per share, which is better than the $25.8 million, or $0.12 per share, loss in the third quarter of the previous year. Additionally, the adjusted EBITDA grew to $21.3 million from $14.2 million in Q3 2023, indicating enhanced operational efficiency.

CLNE's financial ratios provide further insights into its current standing. The negative price-to-earnings (P/E) ratio of approximately -10.14 highlights ongoing losses. However, the price-to-sales ratio of about 1.76 suggests that investors are willing to pay $1.76 for every dollar of sales, indicating some confidence in the company's revenue potential. The debt-to-equity ratio of about 0.51 suggests a moderate level of debt relative to equity, while a current ratio of approximately 3.06 indicates strong liquidity.

Looking ahead, CLNE maintains its outlook for a GAAP net loss ranging from $91 million to $81 million and an adjusted EBITDA between $62 million and $72 million for the year 2024. As of September 30, 2024, the company holds cash, cash equivalents, and short-term investments totaling $243.5 million, providing a solid financial cushion for future operations.