Clean Energy Fuels Corp.

Good day, everyone, and welcome to today's Clean Energy Fuels fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note, today's call will be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over. to Chief Financial Officer Robert Freeland. Please go ahead.

Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the fourth quarter and year ending December 31st, 2024. 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. 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 the Clean Energy's Form 10-K that we are filing 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, The 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. I'm pleased to report that we closed the fourth quarter in the year with strong results. In the fourth quarter, we sold 62 million gallons of renewable natural gas, a 9% increase from a year ago, and generated $109 million in revenue and $24 million of adjusted EBITDA. For the full year 2024, we sold 237 million gallons of RNG, an increase of almost 5% over 2023, and reported $77 million of adjusted EBITDA. 2024 marked a decade since the first full year of RNG sales after Clean Energy's first introduced R&G as a transportation fuel when we sold 20 million gallons in 2014. We and the entire R&G industry have come a long way in the commercialization of this clean, affordable, and readily available fuel for the large vehicle market. Amidst a volatile political and regulatory backdrop, our business has continued to perform well. This performance is anchored by our consistent recurring revenue fuel distribution business. For our network of over 600 stations, we supply reliable, affordable, clean fuel or services to our customers. Our downstream R&G fueling business performed very well in 2024, bringing in almost $89 million of EBITDA. And this was before one truck equipped with the new X-15 hit the road. I would note that the new administration's focus on a domestically produced and diversified energy supply, R&G checks all the boxes by being a biofuel made from capturing harmful waste emissions and converting them into a productive transportation fuel. And R&G just makes common sense, which is what the administration is looking for as they move forward with all their policy initiatives. Rural areas are benefiting from the investment of hundreds of millions of dollars in new R&G projects at dairy farms and landfills across the country. And all of us are benefiting from cleaner air and fewer emissions coming from buses, shuttles, and trucks operating on R&G. On our last call, I told you about our customers, the large transit agency in Long Island, New York. Nice bus. and how we converted their existing fleet of buses from traditional compressed natural gas, or CNG, to RNG, allowing them to benefit from a significant reduction in the greenhouse gas emissions. That trend of our transit agency customers converting to a lower emissions fuel continued over the last quarter. City buses in Fort Worth, El Paso, and Laredo, Texas, and Grand Rapids, Michigan, which previously operated on CNG, are now operating on RNG. Experience and deep customer relationships are important in this business. Operators of large fleets that move passengers or goods must have confidence in their fueling capability for those buses and trucks. And they want to be able to operate with the lowest emissions fuel that makes economic sense. Clean Energy prides itself on the support we provide customers, whether it's converting them to lower emission fuels or when they want to test a different fuel, like hydrogen. We have now won contracts to build hydrogen stations for three different transit agencies that have decided to test fuel cell buses. We're seeing this type of confidence in us in the heavy-duty trucking space. As you've heard me say before, adoption of R&G by heavy-duty trucking sector using the Cummins X15 engine is our most exciting growth opportunity. You might have heard Cummins CEO Jennifer Rumsey make a bullish statement about the X-15N on their recent earnings call. But I want to remind you that the early adoption of the X-15N in 2025 will be with a lot of singles versus home runs right out of the gate. Those coming to bat with some of the first orders of trucks equipped with the new engine are a combination of existing natural gas truck operators as well as new fleets to natural gas fueling. Some of these are leading names in the business. We continue to hear positive feedback from the fleets that have been testing the X-15, and now some are beginning to purchase them. For example, our longtime customer Food Express, which tested a truck last year equipped with a beta engine, has now begun to order trucks equipped with the full production X-15N. The world's largest construction materials company, CMEX, has placed an order for trucks equipped with the X-15N that will initially fuel in our existing Southern California network before their designated station is built. Mullen, one of Canada's largest trucking companies, has begun to deploy their first trucks with the X-15N. And FedEx will soon be receiving trucks with the X-15N that will fuel at a station in Oklahoma City operated by Clean Energy since we built it almost 10 years ago. Many carriers have expressed a desire to move forward with ordering trucks with the X15N once Freightliner rolls out their offering later this year. The wider the breadth of the adoption of the X15N, the better for the market. And certainly, we have the fueling infrastructure to accommodate many truck operations across the U.S. and Canada. In recent years, as trucking companies and their shipper customers have evaluated cleaner alternatives to diesel, Their decision-making process has been impacted by policy volatility and uncertainty. The previous administration's myopic focus on battery electric vehicles forced fleets to consider a technology that is not ready for most heavy-duty trucking applications. In most cases, fleets found insurmountable challenges with battery electric and its infrastructure and continued to operate on diesel. And to make matters worse, California pushed its advanced clean trucks and advanced clean fleet rules that mandated the manufacturing and purchasing of zero emission vehicles. The result? Confusion, uncertainty, and inaction. As of last summer, heavy duty truck sales in California were down 50% compared to 2023. This means older, higher emission trucks staying on the road longer. That is not progress. And recently, California reversed its advanced clean fleet mandate. But there still needs to be some more clarifying steps to be taken. Carriers and shippers alike have goals to continue to reduce emissions, no matter what administration is in place. And that has not and will not change. The examples of fleets that are moving forward with an RNG solution that I just mentioned are signs that low emission objectives can be balanced with the practical realities of commerce and available technology. We are optimistic that the federal state policies going forward will support more of a technology neutral path to lower transportation sector emissions. R&G is very well positioned to provide this common sense solution to fleets. And with the right engine and an ultra clean fuel available at a nationwide infrastructure, we believe that all the pieces have finally fallen into place for significant adoption. The Alternative Fuel Tax Credit has been important for the natural gas transportation sector since the credit began in 2005. It has helped support adoption of cleaner natural gas vehicles and fueling infrastructure as a replacement for diesel. The credit expired at the end of last year. However, it has been retroactively approved several times in the past. We, along with our industry partners, will continue to push for this important credit. It offers key support to our customers and industry. I will touch on this more later, but we did not include any AFTC revenue in our 2025 outlook because it is currently not in effect. Turning to our upstream dairy R&G production projects, we have six projects operating, two that are well underway in construction, and four that began construction at the end of 2024 as part of our development arrangement with our partner, Moss Energy. Our six operating projects are expected to produce four to six million gallons of RNG in 2025. Two projects further along in construction are expected to be in service by the end of this year and could contribute an additional RNG production in 2025, depending on the timing of completion. Four projects with MOS energy more likely will come online in 2026. As you know, The Section 45Z Clean Fuel Production Credit, established under the Inflation Reduction Act, is still pending finalization. It is designed to incent the production of transportation fuels with low life cycle emissions. Energy has a deeply negative life cycle emission score because of the methane emissions that it captures and prevents from escaping to the atmosphere. This credit will play a role in supporting continued growth of low carbon fuels production. We in the RNG industry have already been active in educating the new administration about the benefits domestically produced RNG has as they move forward to finalize and even improve this credit. And like the AFTC, we have not included 45Z in our 2025 outlook because the rules have not yet been finalized. Bob will go into more detail on the financials soon, but I would like to comment on our 2025 outlook. First off, you'll notice on our gap outlook our potential exit from 55 pilot flying jail locations where we lease space from pilot, which almost exclusively houses LNG fueling equipment. When we signed this deal 15 years ago, LNG was the best solution for long-haul natural gas trucking. Since then, CNG tanks and range have improved substantially, and now there really isn't a market for LNG. We will likely remove this equipment and save some money on leases and operations, although we will take a non-cash hit. We'll probably spend some money to remove the equipment. Importantly, we have a good relationship with Pilot, and we plan to continue that relationship. I also want to make note of our 2025 adjusted EBITDA outlook of $50 to $55 million, compared to our 2024 adjusted EBITDA of $77 million. and remind everyone of why there is a decrease for 2025. Our 2025 outlook does not include AFTC, which contributed nearly $24 million to our results last year. As well, RIN prices are currently 30% lower than some of the higher values we saw in 2024. Those two factors account for a reduction of approximately $34 million year over year to our adjusted EBITDA. And we will see. AFTC may well be extended in one of the tax bills that will be moving through Congress later this year. So I hope we are being a tad conservative not adding in AFTC and the 45Z, as well as planning for lower RIN prices and modest growth in this calendar year coming from the X15N adoption. But I do want to strongly remind you that as we begin 2025, we have a strong balance sheet And as I just gave you a few examples earlier in my remarks, we have a robust recurring business positioning us for growth opportunities in front of us in both fuel distribution and RNG production. And with that, I'll turn the call over to Bob.