Clean Energy Fuels Corp.

Greetings and welcome to Clean Energy Fuels first quarter 2020 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference call is being recorded. I would now like to turn the conference over to your host, Robert Vreeland. Thank you. You may begin.

Robert Vreeland Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the first quarter into March 31, 2020. 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'd 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 risk, 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 a 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 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 exclude 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 generally accepted accounting principles and should not be considered as a substitute for or superior to GAAP results. The directly comparable gap information, reasons why management uses non-gap information, a definition of non-gap EPS and adjusted EBITDA, and a reconciliation between these non-gap gap figures is provided in the company's press release, which has been furnished to the SEC on Form 8K today. With that, I will turn the call over to our President and Chief Executive Officer, Andrew Littlefair.

Thank you, Bob. Good afternoon, everyone, and thank you for joining us. It would be an understatement to say this is a unique quarter for all companies reporting their results during this unprecedented and challenging time presented by the COVID-19 pandemic. And clean energy would be no exception. Let me take a few minutes to report on how we have been operating over this period. Like most companies during this crisis, we have and continue to act aggressively to protect our employees and allow them to support their families. But as a Recognized as central company, we have also kept our operations running, serving our customers and particularly those sectors that are critically important in keeping the country operational during the lockdown. The majority of our employees began working from home in mid-March, while our operations group, which includes our service technicians, were provided additional measures to ensure their safety and continue to work in the field. I'm proud to say that this dedicated group of men and women have, from the beginning of the lockdown, kept all our 550 stations around North America open. This has allowed the trucking industry to deliver essential products to grocery stores, pharmacies, health care facilities, and other key businesses which have remained open. We have continued to fuel tens of thousands of refuse trucks every day that have had to deal with a shift to more residential waste collections without skipping a beat. and we have fueled city buses around the country that are transporting essential workers who continue to need public transportation. I want to express my deep appreciation to all of our employees who have faced these challenges without flinching and a special shout out to our customers who are performing some of the most heroic tasks under the most difficult of circumstances. We began to successfully bring back our employees last week to our headquarters here in Orange County. in keeping with state and federal guidelines with all the new workplace procedures of masks, gloves, temperature checks, cleaning and social distancing in place. And thankfully, as of today, we've had no reported cases of the virus at the company. Fortunately, we went into this crisis in the best financial position since the company went public in 2007. After making significant investments for future We began to curtail our expenses and capital spending over the last two or three years, and we paid down most of our debt. In fact, we paid $35 million of convertible notes earlier this week and will pay off the last $15 million on May 14th, leaving us with no debt other than equipment financing, and we still have a comfortable cash cushion in the event of an extended COVID-19 downturn. Our cash flow is also markedly and consistently improved. We are fortunate to have a good base of recurring revenue customers, but it should be no surprise that our volume and revenue were impacted in the first quarter due to the crisis that has shut down most of the economy. Our volume for the first quarter was 99 million gallons sold, which is 4% more than the first quarter of last year. Volumes were tracking well at the beginning of the quarter, but we did see a decline towards the end as the lockdowns began to take effect. As I mentioned, all the transportation sectors that we support are still active, but some have reduced their operations like transit agencies which have cut back the routes and a number of buses running. We have seen an approximate 30% decline in our transit volumes. Our airport fleet services business has been the hardest hit due to the significant reduction in flights. But a few sectors such as refuse and trucking have seen relatively modest declines. These trends have continued in April with fleet services and airports being off substantially TransitOff 30% and Refuse and Trucking holding up well. Overall for April, our volumes were roughly 80% of what we expected before the COVID-19 impact. We foresee volumes increasing going forward in all market sectors as the country's economy begins to open state by state. Our revenues for the first quarter of the year were $86 million, an increase of 11% from 2019, which were $30 which were $77.7 million in the first quarter of that year. Bob will take us through some of the more details on our year-over-year comparison. Adjusted EBITDA was $11.2 million which was unchanged from a year ago. Although there were different year-over-year drivers behind those figures, we feel very good about $11 million in adjusted EBITDA given the circumstances and ended the quarter with $99 million in cash. Since the end of the quarter, we received an additional $47 million in alternative fuel tax credit funds, and as I mentioned, we paid off the last of our convertible notes. We will pay off the last of our convertible notes next week. Expansion of our business continued in the first quarter despite the challenges presented by COVID-19. We signed new deals and extensions of current business in every sector. These include building a fourth station for USA Hauling in Waterbury, Connecticut, that is expected to dispense an estimated 1.8 million gallons over the five-year contract. We completed our fifth station for South Jersey Gas in Cape May that will fuel utility vehicles, transfer trucks, and Jitney shuttle buses. Recology King County in Seattle signed a 10-year operations and maintenance agreement for its stations that is expected to fuel their fleet of 100 refuse trucks with 10 million gallons over the life of the contract. We increased our business with long-time customer Republic Services with station expansions at facilities in Las Vegas, San Diego, and Chula Vista, California. Garden Grove Unified School District in California signed a five-year supply agreement for over half a million gallons of Redeem to fuel 67 vehicles. FCC Environmental Services in Florida signed a multi-year deal that will include an expected 300,000 gallons of CNG to fuel their fleet of Waste and Recycling Trucks. In the heavy-duty trucking space, K&I Services purchased seven new trucks through our Zero Now program that will fuel with Redeem in our networker stations in California, and the U.S. Postal Service Carrier Matheson Postal Services signed an extension with us to fuel 80 of their CNG tractors. Those were highlights of some, but not all, of the agreements signed during the quarter, which gives you a sense that our business has continued through this unprecedented time with more fleets Realizing the benefits of fueling with an easy-to-adopt clean fuel. I'd also like to point out that a number of these deals, like USA Hauling, South Jersey Gas, and Republic Services, were fleets that continue to expand with natural gas, demonstrating their satisfaction with both the performance of the fuel and their relationship with clean energy. Let me end my remarks with addressing the other unprecedented story during this time, and that's the wild fluctuation and oil prices. We are impacted by extremely low oil prices, which eventually see their way to the price of diesel at the pump, albeit not at the same ratio. As I've explained before, the price of a refined product like diesel won't necessarily decline at the same rate as its feedstock. But when you think about it, we have seen extremely volatile oil prices over the last eight years when it topped at over $100 a barrel and then went down to the mid-20s. and then back up to the mid-60s not long ago. And during this time, clean energy's business has continued to expand. The reason it has, and I strongly believe will continue, is because we offer a superior product at a very competitive price. And let me emphasize, a very stable competitive price. Businesses and operators of fleets appreciate that they can depend on the budget for price stability with natural gas fuel versus the wild swings of oil and diesel. Another reason more operators are looking to natural gas and increasingly to renewable natural gas is because of its superior quality with its environmental benefits. As I went into detail in the last quarter's call, the renewed focus on ESG is putting pressure on fleet operators to find cleaner transportation alternatives, and that pressure is coming from all directions, regulators, investors, communities, and the general public. This will not stop. Despite the pandemic, and in fact, some experts believe the desire for a cleaner environment will only increase as we come out of the shutdown and begin to open the economy again. Our Redeem R&G provides those fleets with an easy way to provide ultra-clean, zero-carbon transportation for their heavy-duty and mid-sized trucks, buses, refuse trucks, shuttles, and other vehicles. With vastly improved natural gas engine technology, grants from states, municipalities, and other incentives like our Zero Now program, we are confident the transition to natural gas will continue. I hope everyone stays safe and continues to practice the measures that keep us healthy and allow us to get through these challenging times. And with that, I'll turn the call over to Bob.