Clean Energy Fuels Corp.

Good day and welcome to the Clean Energy Fuels second quarter 2022 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Robert Veland, Chief Financial Officer. Please go ahead, sir.

Thank you, Operator. Earlier this afternoon, Clean Energy released financial results for the second quarter ending June 30, 2022. 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 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 factor section of the Clean Energy's Form 10-Q filed today. These forward-looking statements speak only as the date of this release. Company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release. 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 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 VPS 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. We are very pleased with the results of the second quarter of this year, both by the numbers and by the trends that we see in our business with the strategies that we've put into place over a year ago. These strategies are beginning to show real results. Fuel volumes of 107 million gallons were up year over year, more than 5% compared to the second quarter of 2021, and revenues came in at over $97 million. Comparing the revenue number from the second quarter of 2021 is hard because we had a large initial non-cash revenue charge related to the warrants we issued to Amazon last year. But taking last year's initial charge out, revenue in the second quarter of this year was up by 20%, despite the continued uncertainties of the economy, supply chain, COVID, and volatile energy prices. As we told you in our last call, our adjusted EBITDA should increase throughout the year, which it did, from Q1's $3.3 million to $10 million in the second quarter. And just as importantly, we saw the margin on our fuel volume increase 12% from the first quarter of this year to $0.28 a gallon. That's despite lower prices on the credits from California's low-carbon fuel standard and the federal RIN program. I believe this is a testament to the diverse and recurring nature of our business model. Fortunately, the LCFS and rent prices have stabilized and even risen slightly over the last month. In the second quarter of this year, we had positive cash flow from our operations, and we ended the quarter with $187 million in cash and equivalents after making additional investments in our R&G joint ventures with Total Energies and BP. This performance positions us with a strong balance sheet as we continue to expand our RNG production and supply offering. Anyone who has followed clean energy for very long knows that I'm the eternal optimist about the future of our proposition. But I have to say I cannot remember a time that I have been more enthusiastic about what's going on in the alternative fuel market and specifically with renewable natural gas for heavy-duty vehicles. One of the reasons for the optimism was highlighted in an in-depth article that appeared a few weeks ago in one of the leading trade publications, Heavy Duty Trucking, about the new Cummins 15-liter natural gas engine. Cummins officials quietly began to talk about this new product last year to those of us in the industry. But recently, they have stepped up their public communications like I have not really seen them do over the last two decades of our close association. Cummins' general manager for their natural gas business was quoted in the piece that customers have been asking for a 15-liter engine for over 10 years. But Cummins wanted to wait to bring a larger engine to market until the time was right, and they were confident there would be demand for it. And now is that time. The article goes into detail about how Cummins took the learnings of the previous generations of their 12, 9, and 6.7-liter natural gas engines and are confident that they have designed a larger engine that will be well-received by the heavy-duty truck market. Not only will this engine provide more power and torque, but it will do it weighing 500 pounds less than their current 15-liter diesel engine. Cummins' enthusiasm for this new 15-liter natural gas engine is powerful, to say the least. The new 15-liter engine is already operational in China and is expected to be commercially available in the U.S. in 2024. But some of the largest fleets in the country plan to test the new engine early next year, including Walmart, Werner, and Tyson Foods, just to name a few. In fact, Cummins said it received requests from more than 400 different fleets to demonstrate the 15-liter natural gas engine. These requests were from existing customers, which have been operating the 12-liter natural gas engine. But really, for me, more exciting, many other fleets that have never looked at natural gas before wanted to be on the list. Puneet Jawar, the GM at Cummins, said in the article that one of the main reasons why now is the right time to bring a larger natural gas engine for heavy-duty trucking to the market is the introduction and expanding availability of renewable natural gas. According to GNA Consulting, R&G represented 98% of all the natural gas consumed in the California vehicle market in 2021, and over 60% nationally. Now, for clean energy, those figures are 100% in California and over 75% nationally. I've spent a lot of time on these calls regaling the environmental benefits of RNG, so I won't repeat myself other than to say it has a greater beneficial effect on climate change and reduction of greenhouse gas than electric. So why wouldn't a heavy-duty truck fleet that is looking to reduce its emissions look at RNG? We have been hearing for many years about the hundreds of quote-unquote, you know, reservations for new heavy-duty electric trucks from a handful of OEMs with nothing but a few test trucks to show for it. I remind you that Elon Musk, who deserves a lot of credit for his success in the electric passenger car market, rolled out with great fanfare the Tesla Semi in 2017 and said it would be commercially available in 2019. Yet here we are in the back half of 2022 and it's still not available. And if Tesla is having difficulty with manufacturing a battery large enough to power a heavy-duty truck, or it has rethought the obstacles involved. And I'm not sure who can anytime soon. If I were making a bet, I'd place a chip on a manufacturer of truck engines that's been in the business for over a century and that has been also producing and improving natural gas engines for 20 years to offer a heavy-duty fleet's commercial alternatives to diesel that will provide them the sustainability benefits they are looking for. You know, something else that Punit would come and said in the article, and I wholeheartedly agree with him, is that he rejects the notion that RNG is a bridge fuel. Now, let's pivot to our upstream RNG business. It has been a little over six months since we rolled out our RNG plans on RNG Day. i'm pleased to say we are not only executing on that plan we are ahead of schedule in some key areas for instance we set a goal of executing contract contracts representing 25 million gallons of low carbon dairy rng by the end of the year and it looks like we will be over 29 million gallons we wanted to have three dairy projects completed by the end of 2022 And it looks like we'll have four completed, three of which should be injecting RNG into the pipeline. Right now, we have seven projects under construction. We intended to have eight projects under construction by the end of the year. And we are on track to have nine by the end of the year. And another seven projects are in the final design and permitting stages. We know... We've been bumping into representatives from other companies that have recently jumped into the RNG production business out in the farmland. But what distinguishes clean energy from others with dairy owners is our ability to bring to these savvy business owners a large customer base of fleets thirsty for RNG demand. Few, if any, other companies in the business can offer the assurance to have a steady monetization of dairy owners' RNG like we can because of our downstream fueling infrastructure. There will be a seminal event that takes place on September 28th outside of Columbus, Ohio that demonstrates exactly this point. As you know, we announced last year that Amazon contracted with us to build 19 new stations to fuel their rapidly growing fleet of RNG heavy-duty trucks it is deploying. The Amazon fleet fuels us with us daily all over the country and has already fueled at over 85 of our existing clean energy stations. But next month, we will be cutting a ribbon on the first of these 19 new stations that we designed and constructed from the ground up, specifically for Amazon, but will also be available to other customers. Besides the local officials and Amazon executives joining me on stage in Columbus will be Evan Barton, owner of the South Fork Dairy, a 3,300 milking cow farm in Newark, Ohio. We recently signed a contract with Evan to develop a digester that should produce a half a million gallons of RNG a year when completed. It will be a great demonstration of the beginning to end benefits of RNG with a dairy owner who will be able to solve the issue of fugitive methane from his cow's manure. standing alongside a logistics operator who will be running a fleet of heavy-duty trucks with the cleanest fuel in the world that originated from that dairy. The new station in Ohio looks awesome, with multiple fast-filled dispensers, 50-time-filled dispensers, and 110 parking spots for Amazon R&G trucks. Amazon is up to, I guess, over 3,000 R&G trucks purchased, with more to come. and their fuel volume at our existing stations grew by over 40% from January to June of this year. We expect that growth rate to only accelerate as these new stations come online. The station in Ohio is the first completed. Several more will be opening soon after that. A few other recent wins that I would like to quickly mention are the signing of contracts with three large new transit agency in Fort Worth, Texas. Arlington, Virginia, and Sacramento, which represent over 5.8 million gallons a year. We also are expanding with our longtime customer, South Jersey Gas, by building a new station for a larger natural gas fleet. And Republic Services is adding another 110 R&G trucks here in California that will fuel at a station in Carlsbad. Cal Portland, our good, ready, mixed customer, continued to expand its RNG truck fleet last quarter. And the finance program we have with Chevron to put new RNG heavy-duty trucks into the ports of L.A. and Long Beach continues to have success, with over 730 new trucks either already financed or working their way through the approval process. Much of this success is being driven by our grants department, which has secured grants through multiple California programs for dozens and dozens of heavy-duty trucks for our customers in addition to the Chevron financing program. I'm pleased to report that fuel volumes in all of our segments, refuse, transit, heavy-duty trucking, and fleet services and airports, grew in the second quarter. I've gone on a little long, and I know you're anxious to hear from Bob, but I can Hope you can fully appreciate where my optimism comes from that I mentioned at the top of my remarks. The prospects and opportunity offered by RNG have literally changed our business and given us the ability to be a significant player in the world's effort to tackle climate change. We are executing on all levels, from the RNG production side down to the construction and first-rate operations of fueling stations for new and expanding customers. And with that, I'll hand the call back to Bob.