Clean Energy Fuels Corp.

Greetings and welcome to the Clean Energy Fuels second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A brief 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. 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.

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'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 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 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. Companies 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 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 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. 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 volume 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 period, quarter a year ago and continues to become a larger share of our overall fuel mix. Our efforts to accelerate the 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'm 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 an 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 one day during the second round of the offer. 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 in 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 an offer as 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 are adding new businesses as well. The adopt-a-port program with Chevron, which makes replacing old, dirty diesel trucks with clean R&G trucks affordable for smaller operators in the ports of L.A. 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 R&G stations in Southern California. We're 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 R&G 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, Calm 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 Calm adds medium and heavy duty trucks to their fleet. Another new customer, the city of Fort Smith, Arkansas, will begin to fuel a 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 confirmed 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 R&G. 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. The significant fueling 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'm 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 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've 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 into 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 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've 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 three years with R&G. 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're 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'll turn the call over to Bob.