Clean Energy Fuels Corp.

Greetings, and welcome to the Clean Energy Fuels third quarter 2020 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. If you have a question, at any time, you can press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press the star followed by the Xero. As a reminder, today's call is being recorded Wednesday, November the 5th, 2020. Your presenters today are Mr. Bob Vreeland and Mr. Andrew Littlefair. And I would now like to turn the conference over to Mr. Bob Vreeland, Chief Financial Officer. Please go ahead, sir.

Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the third quarter ending September 30, 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 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 factor section of the Clean Energy 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 excludes certain expenses that the company's management does not believe are indicative of the company's core business operating results. 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.

Thank you, Bob. Good afternoon, and thank you for joining us. As we close another quarter with the world still grappling with COVID-19, Clean Energy continues to successfully navigate through this period, sustaining much of our business and expanding with new opportunities. We believe that this positions us well for the future once the world gets a handle on The personal and economic difficulties that this pandemic has brought to so many. During these uncertain times, we continue to leverage our strong position as the leader in alternative fueling. Working with our customers to support their operations, which are vital in keeping the country running smoothly. I want to thank the clean energy workforce for managing this demanding environment by focusing on keeping costs down and improving efficiencies while continuing to meet customer needs. We delivered almost 98 million gallons in the third quarter of this year versus 103 million in the same quarter of last year. Refuse continues to perform well, but transit and airport fleets remain challenged due to the economic slowdown and reduction in travel related to the virus. While our trucking business was flat in the third quarter, we remain optimistic about this segment, which is up 18% for the year. Our optimism stems from the progress we are seeing with our Zero Now program and Chevron Adopt-a-Port program, as well as the pressure this industry is feeling to operate more sustainably. I'll expand on both in a moment. Overall, volumes declined 5% in the quarter, but by comparison, they were down 10% in the second quarter of this year, so we are seeing an improvement. Our revenue for the quarter was down a little less than 5% to just under $71 million compared to $74 million a year ago. In the second quarter of this year, our revenue was down 17%, so another indication that things are going in the right direction. Our EBITDA grew to $11 million versus $8.5 million in the third quarter of last year, an 18% improvement. Our balance sheet remained strong with a little over $92 million in cash. and investments and only $35 million in debt, which is principally equipment financing at our NG Advantage subsidiary. You have heard me speak over the last several quarters about the acceptance and the growth of our renewable fuel product, Redeem. It is truly a remarkable fuel that allows customers to easily chalk up big reductions in the amount of carbon they release into the atmosphere. With no inconvenience, they can switch their vehicle fleets from diesel, whether it's a shuttle van at an airport, refuse trucks or city buses or heavy-duty trucks. Even if they are already operating on a regular blue CNG or LNG, we can switch them to redeem without a blip in their operations, allowing them to reduce their carbon output more than what they were doing before. Customers are responding. With the emphasis on ESG investing and pressure from regulators, politicians, investors, and their customers, companies are looking at their entire supply chain to make reductions in their carbon footprints. Fortunately, clean energy can provide them an easy and cost-effective transportation fueling solution. We were the first to introduce RNG as a vehicle fuel in 2013, and our volumes have rapidly grown every year. Additionally, Redeem makes up an increasingly large percent of our overall fuel mix, growing to over 60%. We're so bullish on this ultra-clean fuel that one of our own company's sustainability goals is to provide 100% Redeem to our entire fueling infrastructure by 2025. In short, R&G is the future of clean energy. Others have seen the potential of R&G and jumped into the market with their own offer. But no other company has the existing fueling infrastructure across the entire country to deliver the numbers that we do. And importantly, no other company has secured the quantities of fuel from RNG producers like Clean Energy has. We recently signed additional supply deals with Chevron and DTE Biomass Energy to provide us with millions of gallons of negative carbon RNG. Some of this fuel is already flowing into our California stations and much more will be coming online in the months ahead. The latest development of our transition to RNG is that more and more of it will be coming from dairies and agricultural facilities. We call this negative carbon fuel because it is derived from methane, which is a potent greenhouse gas. But now it is displacing diesel and gasoline, allowing the California Air Resources Board to give it a negative carbon rating, sometimes over 300% minus. To put this in perspective, gasoline has a carbon intensity of 137 and diesel has a carbon intensity of 97. Even vehicles powered by electric batteries have a carbon intensity of 46, according to the California Air Resources Board. So you can see that a minus 300 carbon intensity rating is why it catches the attention of companies seeking to reduce their carbon footprints. For instance, we are currently working with a brand new name customer, which has begun to roll out a fleet of over 300 natural gas heavy-duty trucks, which will fuel at over a dozen of our fueling stations around the country. They've asked us to provide them with as much negative carbon redeemed as possible because they want to apply those carbon reduction savings to their aggressive sustainability goals. This could represent over 4 million gallons of negative carbon fuel in 2021 by just one customer. This company joins others like UPS, Kroger, Republic Service, Waste Management, and many transit authorities which have expanded their use of RNG, realizing it is a long-term environmental benefit for the planet while allowing them to meet their own goals. Having a long-term certainty of RNG supply is critical, which is why we have been so aggressive signing agreements with producers. Other transportation technologies might be receiving attention recently. But that's not all they're doing. But that's about all they're doing, getting headlines. Some of them aren't so good. One you may have missed is about a large transit agency here in Southern California which several weeks ago quietly took all their electric buses out of service due to multiple fires on buses. This agency follows the cities of Indianapolis and Albuquerque in decommissioning electric buses that turn out to be expensive and dangerous disappointments. Yet the use of RNG as a fuel is making substantial dents and reducing the amount of greenhouse gas emitted by transportation industry today. Electric and fuel cell heavy duty vehicles are most likely many years away from doing this, which is why the interest is growing in RNG. As you know, we are now significant partners with three of the world's largest diverse energy companies in total. BP, and Chevron, all of whom have made it known that they are investing more heavily in clean alternatives. That is why they want to work with clean energy to expand the market for RNG. We continue to remotely but aggressively make sales calls, respond to RFPs, and work with existing customers to expand their fleets with success. We secured one of the largest orders through our Zero Now program with a 50 truck expansion by Estes Express Lines for their California fleet which now increases their natural gas truck fleet to 70 across multiple states. Other trucking companies that have recently deployed new natural gas trucks include Alpha Lion, a USPS carrier, Food Express, Gen-Ace Agriculture, Agile Transportation among others. Our extended Zero Now program with Chevron which targets trucking companies Operating out of the ports of L.A. and Long Beach has begun to show results with firms signing contracts to purchase 46 new natural gas heavy duty trucks to fuel with Chevron's R&G at clean energy stations. And almost twice that many trucks are in the final contracting stage. We also signed deals with transit agencies like Jacksonville Transportation, WMATA, which serves the Washington, D.C. area, Santa Clarita Transit in California, and others. In addition, we recently expanded our relationship with LA County Metro by being awarded an agreement to supply Redeem at three additional locations that represent approximately 9 million new RNG gowns a year for five years. Our refuse business continues to grow despite the overall economic slowdown that the country is experiencing. New deals were signed with Mesa Public Utilities, the cities of San Diego and Tucson, Athens Services, and others. As I said at the beginning of my remarks, we feel like we met the immediate COVID challenge that confronts all of us, and we have the right priorities and strategies which we are executing that will ensure long-term growth. The country and the world are manning that we all do business in a more sustainable way. The transportation sector has been called out particularly, and clean energy has the sustainable clean fuel solutions that are making an immediate and meaningful difference. And with that, I'll hand the call over to Bob. Thank you, Andrew.