Clean Energy Fuels Corp.

Good afternoon, ladies and gentlemen, and welcome to the Clean Energy Fuels third quarter 2023 earnings conference call. At this time, all lines are in listen-only mode, and 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 Thursday, November 9th, 2023. I would now like to turn the conference call over to Mr. Robert Relin, CFO. Please go ahead.

Robert Relin Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the third quarter ending September 30, 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. 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. 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 and 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. I'll let Bob go into the financial details on the quarter, as this quarter has its share of factors impacting the comparison to a year ago, as well as factors impacting our results for the third quarter of 2023. But at a high level, while our results for the quarter didn't quite reach our expectations There was also nothing occurring within our business of any significant consequence impacting our prospects. Key strategic milestones are being executed, and we do not see any obstacles in the near term. Frankly, in a slightly off order, we still produce adjusted EBITDA of $14.2 million, which equates to $57 million on an annual run rate basis. So while I'd like So with that, I'd like to focus my comments on the progress we're making across many fronts of our business as we put hundreds of millions of dollars to work with plans to deploy well above that. I want to emphasize here that we remain as bullish about the future as we were when we rolled out our comprehensive RNG strategy in early 2022. You know, RNG is moving in the right direction. it's becoming recognized as the most realistic fuel to decarbonize heavy-duty trucking. In our opinion, the way the entire alternative fuel market has been moving has only confirmed that we set out on the right plan. We are making investments in the production of our own steady supply of low-carbon RNG, while at the same time growing the demand with new customers like Amazon and others that will leverage our national fueling infrastructure. Along the way, we've been able to secure the best-in-class financial and operational partners through the joint ventures with BP and Total Energies and sustainable capital providers like Riverstone Credit Partners. The confirmation of our strategy by such story names, along with significant investments by other energy majors, pipeline companies, utilities, and large private equity firms in the R&G space is notable as we move forward. I mean, think about It is really impressive to me that companies like BP, Chevron, Total, Shell, Enbridge, BlackRock, UPS, WM, Republic, Amazon are all involved in the RNG space. We made good progress on the low carbon RNG production project at Dairy's over the last 18 months. And I hope you saw the press release a few weeks ago announcing that we began injecting RNG into the pipeline in June at our first project. Del Rio dairy in Texas. We actually began producing RNG in February and stored it until all the regulatory approvals were obtained. But most importantly, we recently began generating both federal and state environmental credits. We made the decision to flow this first RNG from Del Rio to Oregon, where we have stations and demand, and the price of Oregon's LCFS credits is stronger. So this is a great example of why it's important to have a national fueling infrastructure, which allows us to optimize RNG deliveries for our production projects. We've also begun producing RNG at three other dairies, and there are another two projects that are nearing completion and will be producing RNG by the end of the year, or early 2024. We will be formally announcing the details of these in the coming weeks. Some of these dates might have slipped a little from our original plan, but nothing significant. It's important to note that these are large-scale projects, which in this case represent about $184 million of gross deployed capital by us and our partners. You know, these projects are large, and they can be a little disruptive at first at the dairies and their normal dairy operations. And they need approvals by several regulatory agencies. So there will be... unforeseen delays. But with every project, we have gained important insight and knowledge that is being applied to new projects, and we remain on track to meet our overall R&G supply timeline through our own constructed projects and potential acquisitions. The investments we are putting into R&G supply now will have tremendous value and position us very well for the future. The enthusiasm I have for our R&G supply business is only matched, if not surpassed, by the demand side. Our base business of fueling tens of thousands of large fleet vehicles every day with R&G continues to grow, providing us with recurring revenue, keeping our balance sheets strong, and allowing us to make the investments for what we believe to be sustainable growth. Much of my optimism is based on one of the most significant advancements that has ever taken place in the R&G technology space. Most of you probably know what I'm talking about, which is the introduction of Cummins' new X15 liter natural gas engine that is currently being tested by a handful of some of the country's largest heavy-duty truck freaks. The phrase game-changer is probably overused, even by me, but there's not a better way to describe this larger engine that Cummins is introducing to the heavy-duty market. My 20 years of working very closely with this world-class engine manufacturer, I've never heard Cummins speak about another product quite the way they are about this 15-liter engine. Cummins executives are actively promoting the attributes of the engine to investors, their dealers, industry partners, and potential customers with the message that this engine has it all. Superior power, torque, fuel efficiency, and most importantly, the ability to decarbonize heavy-duty trucks with R&G on a scale that no other technology is coming close to achieving. It would be one thing if it was only Cummins bragging about a new engine. But they are building on a very successful launch and adoption of it in China, where tens of thousands have already been sold. And now we are hearing very positive early feedback from the fleets that are testing it here in the U.S. The fleets that are doing the testing of this 15-liter engine include some of the country's most demanding, such as Walmart, Warner, UPS, and Night Swift. I would not be overstating to say the reviews have been very impressive. A Cummins executive put up a slide at a recent presentation with quotes from the fleets like this. Quote, the drivers love the truck. The engine has a nice pull. It's very quiet, plenty of torque. And quote, the more they drive it, the better it's getting all the way around. And quote, it feels and drives like a diesel, which is a good thing. I could go on, but the feedback like this is what is producing the optimism by Cummins and many within the industry like the OEMs that will place it in their trucks. So much so that for the first time, Cummins is making public their assessment of potential market penetration for the new 15-liter natural gas engine. On the low side, Cummins believes there could be an increase of penetration of the heavy-duty natural gas market share by four-fold, from 2% today to over 8% by 2027. And their realistic high case is 12%. Approximately 250,000 heavy-duty Class A trucks are sold every year in the U.S., and if one takes the medium between Cummins' low and high cases of 10%, that means 25,000 new heavy-duty natural gas trucks can be sold in 2027. Using an average annual fuel usage of 15,000 gallons a year per truck would mean 375 million additional gallons of RNG used incrementally each year. There is no other alternative that could come close to those numbers in the heavy-duty space. Many of the fleets testing the 15-liter do not currently operate many, if any, natural gas trucks. So much of the 25,000 will be coming from new customers. I could go on about the importance of this new engine, but let me close with saying it couldn't come at a more opportune time. The desire for fleets to decarbonize is only increasing. Yet the technology, the summit placed much hope to get them there. is starting to come under increased scrutiny by the entire transportation industry. And, of course, I'm talking about electric. Just in the last few weeks, headline after headline has announced the issues that electric is having in the passenger vehicle market. Many within the heavy-duty space are quietly expressing, and some not so quietly, their concerns about the practicality and cost of operating a fleet with much larger batteries and the need for even more powerful charging equipment. RNG continues to be recognized by hundreds of the country's largest transit agencies and refuse companies as an ultra-easy, low-carbon solution that is here today. Soon, with the addition of the 15-liter, the common suite of natural gas offerings, heavy-duty truck fleets that operate under the most extreme conditions will be able to participate in the RNG low-carbon solution. I will reiterate this. We strongly believe that the future could not be better for clean energy. Our strategy to increase the supply of low-carbon RNG is being well executed, and the almost universal optimism in the new engine technology should be reason for everyone's confidence. It certainly is for me. And with that, I'll turn the call over to Bob. Thank you, Andrew, and good afternoon to everyone.