Clean Energy Fuels Corp.

Good day and welcome to the Clean Energy Fuels third quarter 2022 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Robert 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, 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 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 factor section of the Clean Energy's Form 10-Q file 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 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, everyone, and thank you for joining us. I'm pleased to report that we expanded our leadership as the largest renewable natural gas fueling provider in the United States. In the third quarter of this year, we sold 54 million gallons of RNG, a 28% increase compared to the amount we sold in the same quarter of last year. Year-to-date, we have sold 122 million gallons of RNG into the transportation market, which is 18% more than we sold this time a year ago. Our revenue for the quarter came in at $126 million, compared to $86 million in Q3 of 2021, a 50% increase. The increase in this quarter's revenue was mostly driven by the growth in our fuel volumes, as well as two additional quarters of the alternative fuel tax credit. End of the third quarter with $134 million of cash and investments. This is in addition to the $160 million that we've invested into our JVs for future low-carbon R&G supply. Overall, we find ourselves with a strong balance sheet, a rapidly growing business, and a defined pathway to the future expansion of our renewable fuels business. The key feature of that plan for future growth is our relationship with Amazon as it continues to expand its fleet of heavy-duty trucks powered by renewable natural gas. As I have mentioned, Amazon trucks have been fueling at over 80 of our existing stations around the country for over a year. A significant milestone was met in this last quarter with the opening of the first station that we built from the ground up as part of our agreement with Amazon. Just outside Columbus, Ohio, is a state-of-the-art fueling facility that will allow more than 50 Amazon Class 8 trucks to fuel at the same time. It also has public access lanes for fast fueling for Amazon trucks and other fleets in the area. I had the privilege to cut the ribbon at the station with members of Amazon senior leadership, business partners, and Ohio dairymen who will be providing R&G to our fueling network. the local congressmen, and other political and community leaders. Upon opening, 53 brand-new Amazon trucks began fueling with R&G at this one station, allowing Amazon to realize huge carbon emission savings compared to diesel trucks. It's interesting to note that the other alternatives in the heavy-duty vehicle space continue to struggle to roll out that many trucks in total, making R&G the leader in clean fuel transportation. Plans to expand this site and increase the capacity to be able to accommodate 84 Amazon trucks are already in the works. This station opening was just the beginning of our execution of the Amazon agreement to build 19 new similar stations around the country. Stations in Illinois, Pennsylvania, and Florida should be flowing RNG to the Amazon fleet in about a month, with more by the end of the year and others opening early next year. Our relationship with Amazon continues to deepen, and we are excited about their long-range plans for their clean fleet of R&G trucks. The Amazon stations are only a portion of our active construction portfolio. We plan to complete 27 station projects this year for our refuse, transit, trucking, and airport customers, and an additional 43 stations are in some stage of the construction process. This is a solid backlog. In September, we signed a three-year agreement to expand our relationship with our longtime customer, Waste Management, for three-station projects where they will fuel their R&G refuse trucks. That will bring total stations at Clean Energy Services for Waste Management to 96 in the U.S. and Canada. We recently signed a new transit customer, Valley Regional Transit in Idaho, which operates 30 buses. We also extended our relationship with Santa Monica's Big Blue Transit Agency, winning a contract to supply them with 1.8 million gallons of RNG for 177 buses. In addition to Amazon's adoption of RNG, carriers for other big brands like McDonald's and Unilever are ordering RNG trucks. So it's interesting to note that the carrier which won the Unilever bid did so by meeting the Unilever Biogenic Criteria Assessment. That assessment wanted to know three criteria. One, could the feedstock of the fuel be used as a food source? Two, is there a non-deforestation and land impact use of the feedstock? And three, is there a better alternative use of the fuel's feedstock? In the Unilever bid, R&G had a perfect score. We also recently signed a contract with U.S. Foods to fuel 14 heavy-duty trucks at one of our stations in Sacramento. These companies continue to be focused on reducing greenhouse gas emissions and meeting sustainability goals and are not waiting for other technologies and their costly and uneconomic fueling infrastructure to be developed. The program with Chevron at the ports of L.A. and Long Beach continues to have success with a total of 850 heavy-duty trucks either already financed or going through the approval process. And speaking of the ports, another exciting event in the third quarter for me was attending a ceremony at the port of Long Beach celebrating the first bunkering with liquefied natural gas of Pace's new container ship. This is the first ship to use this clean fuel on the west coast of the United States. 300,000 gallons of LNG went into the 774-foot ship from our liquefaction plant in Boron, California. The patient will be expanding its fleet with two additional container ships that will travel back and forth from Long Beach to Hawaii, powered by LNG. The second is expected to launch in May of next year, followed by the third ship in October 2023. In total, the three ships are expected to consume 105 million gallons of LNG from our boron plant over the next five years. And being the first is not always easy. I want to congratulate the Clean Energy team, which worked for years to get the deal done with PACIA and World Fuel Services. That included providing bunkering support at the dry dock facility in Brownsville, Texas, where the newly built ship was commissioned. As you can imagine, the demand for bulk LNG continues to grow with volatile global energy markets. Our two LNG plants in California and Texas have been very busy. In fact, with the patient LNG fuel deal, we are expanding the capacity at our boron plant. The third train should be completed in the second quarter of next year and will add 50% more capacity and increase production capability by 90,000 LNG gallons for a total of 270,000 gallons a day. Our boron liquefaction plant is the only one of its kind in the state of California, which gives us a competitive advantage as demand increases. And speaking of production, our investment in new RNG sources, primarily at dairies, continues at a healthy clip. We have great partners in Total Energies and BP that not only bring capital and strong balance sheets, but bring know-how in major projects like RNG digesters. It doesn't seem like that long ago when I put a shovel in the dirt at Del Rio Dairy in Texas to break ground for the construction of our first new low-carbon RNG digester. With great effort from the team, the first RNG molecules are expected to be produced at Del Rio in early 2023. We've all been reading the announcements about the M&A activity in the R&G production space, which we see as a positive because it validates that there is a market and the importance of owning production assets. This was emphasized during the call with BP CEO Bernard Looney after their announcement to buy Archaea. Bernard and BP executives spoke of the value of their marketing relationship with clean energy that gives them access to our fueling infrastructure. No company is as well positioned as we are by owning and operating the largest fueling infrastructure in the country where the highest value of the RNG is captured. I'll close with saying that we are very pleased that the extension of the alternative fuel tax credit was included in the Inflation Reduction Act. This is assurance that for the next several years, RNG transportation fuel will be rewarded with a 50 cent a gallon credit. This is also recognition by policymakers that this ultra clean transportation fuel needs to be in the mix of alternatives. There were other incentives in the IRA which should help the expansion and adoption of RNG as well. A new and significant investment tax credit of up to 30% for qualified biogas projects like our current and future RNG digesters of dairies was in the legislation. The Clean Fuels Production Credit in the bill creates a valuable tax credit for the production of low-emissions transportation fuels like R&G. Those are the highlights of a very productive third quarter. I feel good about the last quarter and the progress we've made as a company, and I feel even better about the future. And with that, I'll hand the call over to Bob.