Clean Energy Fuels Corp.

Good afternoon, ladies and gentlemen, and welcome to the Clean Energy Fuels first quarter 2023 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, May 9th, 2023. I would now like to turn the conference over to Robert Relin, Chief Financial Officer of Clean Energy Fuels. Please go ahead.

Operator, earlier this afternoon, Clean Energy released financial results for the first quarter ending March 31st, 2023. 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 factor section of Clean Energy's Form 10-Q filed today. These forward-looking statements speak only as of 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 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. Well, for the first quarter, the good news is that our underlying growth and fundamentals were strong. Bad news is our first quarter results were impacted by an anomaly and hopefully a one-time occurrence, which was a historic spike in natural gas prices in California, resulting in a $10 million compression in our profits. A confluence of events, including unusually cold weather in California, the lack of natural gas storage capacity by the gas utilities, and the El Paso pipeline that supplies 20% of the natural gas to California being out of commission, all contributed to cause the price of natural gas to spike as high as $50 in MMBTU here in California in January. The move from $7 in MMBTU in November to January was a 600% increase, translating into an increase in our costs at the pump from approximately $1 a diesel equivalent to $7.50. We did everything we could to mitigate this unprecedented chain of events that impacted the cost of our commodity. But California continues to be our biggest market by far, with the largest transit agencies in the state, dozens of refuse truck fleets, airport vehicles, and a growing number of heavy-duty trucks all fueling at our network of 150 stations across the state. He passed along some of the increase in fuel costs to these customers, but we felt we could only do so much. Good news is that they understood, in large part because every household and business in California was also seeing their gas bills at least triple, if not quadruple, during January. The other important point of this historic increase is that the price began to moderate in February, although there were still some balancing effects that we were feeling. The old El Paso pipeline is back online and gas utilities have filed plans for additional storage. And as of March, the price of natural gas at the SoCal city gate was back closer to $7 in an MVTU. Something else that has been impacting our bottom line and that we discussed the last quarter's call is the price of the environmental credits. I know these are followed closely by many on this call. And as you know, There has been a nice turnaround in the California low carbon fuel credit price recently, about a 35% increase. But for the majority of Q1, prices were on the low end and had an impact on our adjusted EBITDA when compared to a year ago. By March, credit prices were in line with our plan, if not exceeding it. In the first quarter, we sold over 53 million gallons of renewable natural gas, We won several large transit contracts, converted existing customers from traditional CNG to more profitable RNG, and opened additional RNG stations where Amazon heavy-duty trucks are the anchor customer. Our revenue for the quarter was $132 million, $48 million more than Q1 2022, but this was heavily impacted on the plus side by the commodity price in California that I just spoke about. By the time we got to March, we saw our overall business begin to right itself and track the plan that we had at the beginning of the year. Our balance sheet remains in very good shape with $220 million in cash and investments, in addition to $132 million cash off balance sheet at our RNG Supply Joint Ventures. As I spoke about last quarter, our first RNG supply project, Del Rio Dairy in Texas, is now online. We now have three dairies in commissioning and two others in final construction. By summertime, we should have six projects producing RNG. Many of you have read about the tragic fire in South Fork Dairy in Texas, where we had plans to build an RNG digester. While we have funded some design, engineering, and early equipment purchases for that project, we had not started onsite construction. And we are now working with the dairy owner as he plans to rebuild the barn and repopulate the herd. We will keep you updated on its progress. We've added expertise in construction, project management, and origination to our RNG team that are keeping our projects moving along at a good pace. Not only clean energy and our customers who remain bullish on this ultra clean fuel, Washington knows the benefits of RNG as well. I hope you saw the announcement that a bill was introduced last month in the U.S. House of Representatives to provide a dollar per gallon tax credit for vehicles that use RNG. It's interesting to note that the bipartisan bill is being co-sponsored by a Republican member from a rural district, Congressman Brian Fitzpatrick, and a Democrat from an urban Southern California district, Congresswoman Linda Sanchez. Members understand both the environmental benefits of RNG which reduces air pollution and carbon emissions, and that the investment of tens of millions of dollars per new RNG digester benefits their agricultural communities. We believe a companion bill will soon be introduced in the Senate by another bipartisan coalition. You know, 70% of all on-road fuel used in natural gas vehicles in 2022 in the U.S. was R&G, which is a great testament to its acceptance and the ease to transition it to existing fueling infrastructure and fleets. I think a tax credit will be a big boost to the adoption of R&G if it passes. We're also very excited about the rollout of the new Cummins 15-liter natural gas engine. It seems like a week doesn't go by that we don't hear some of the country's largest fleets like Walmart, Werner, Nightswift, taking delivery of these pre-production 15-liter engines. I've spoken multiple times on these calls about the importance of this 15-liter engine to the heavy-duty truck market because it delivers the power, torque, and economics the industry needs. And it's incredibly gratifying to see the early response. A few weeks ago, I was with the CEO of the largest trucking company in Canada and a customer of ours, Murray Mullet. And he is anxiously awaiting the delivery of two test 15-liter engines in a few months. I've gone on a little long, and my goal is to keep my remarks shorter, giving us more time to get to your questions. But I do want to end by highlighting why I was in Canada, which was for a significant announcement with the largest natural gas company in Canada and one of the most successful energy companies in North America over the last couple of decades, Tourmaline. Mike Rose, Tourmaline's founder and CEO, and I announced that the two companies are partnering to build a network of natural gas stations across Western Canada, primarily targeting the heavy-duty truck market. We've identified locations for the first four with one already operating in Edmonton and have plans to eventually add 15 or so stations that will be co-owned by the two companies. Clean Energy will build and operate the stations. We are very bullish about this new partnership with Tourmaline as well as our overall business. As I detailed at the top of my remarks, we experienced some headwinds at the beginning of the year, but the momentum has already shifted back. R&G continues to be a breakthrough fueling solution, allowing fleets to decarbonize quickly and affordably. No other company is better positioned for the R&G future with our expanding low-carbon supply and our growing fueling infrastructure. Thank you for your time today, and now I'll hand the call over to Bob. Thank you, Andrew.