Clean Energy Fuels Corp.

Good day, everyone, and welcome to today's Clean Energy Fuels first quarter 2025 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. You may register to ask a question at any time by pressing star 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star 2. Please note this call may be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Robert Freeland, Chief Financial Officer. Please go ahead.

Thank you, Operator. Earlier this afternoon, Clean Energy released financial results for the first quarter ending March 31, 2025. 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 companies' 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 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, 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, and I hope the sound is okay. I'm in Washington, D.C., and I've been up here working to spread the word on RNG. Bob, thanks. I'm pleased to report we had very solid results for the first quarter of the year. In the quarter, we sold 51 million gallons of renewable natural gas. generated $104 million in revenue and $17 million of adjusted EBITDA. We finished the quarter with $227 million in cash on our balance sheet, a $9 million increase since the start of the year. Our R&G sales volumes were lower compared to the first quarter of 2024. This is driven by lower supply volumes from our third-party R&G producers. Some of our producer partners were impacted by weather and other operational events. These issues are seasonal in nature, and we expect a rebound over the remainder of the year. Importantly, we did not see any material decline in demand from our fueling customers despite the market uncertainty regarding the economic impact of tariffs. Our fuel volume is underpinned by steady demand from our fleet customers in the refuse, transit, and trucking sectors. In recent months, there's been a lot of attention on tariffs and renewable energy policy. I believe that our business and product, renewable natural gas, are both well positioned. First, tariffs have minimal direct impact on our business. Our network of fueling stations are located in the U.S. and Canada, and all of our R&D production facilities are located in the U.S. The vast majority of equipment and materials for our construction projects has already been procured. In fact, earlier this year, we moved compressors equipment from inventory in Canada to our facility in Wyoming as a precaution. Unlike other renewable energy supply chains, our RNG is produced, transported, and delivered to customers here in the U.S. We are maintaining our full-year financial outlook and CapEx guidance provided on our last call, which Bob will describe in more detail. However, we could feel some indirect impact of tariffs in that it creates uncertainty for our customers in the heavy-duty trucking sector. Potential impacts from tariffs on trucking supply chains, inflation, and economic activity may affect our customers' business planning, including purchases of all trucks that would include their emission reduction initiatives like replacing diesel trucks and with trucks equipped with the Cummins X15N and running on RNG. Current market dynamics may slow decision timelines for natural gas vehicle purchase, but we strongly believe any delay will be temporary. And the merits of RNG for heavy-duty trucking remain very compelling. In fact, at last week's Advanced Clean Transportation Expo, we heard many speakers comment over and over that RNG is a low-carbon fuel with proven technology and infrastructure at a lower cost per mile than diesel. A parade of executives from a variety of fleets extolled the economic and environmental benefits of operating with R&G. An Amazon executive spoke about the total cost of operating their 3,000 heavy-duty trucks and R&G, as well as being the only alternative available to help them achieve their climate pledge. Shippers like Unilever and carriers like Paper Transport agreed. The theme was so predominant that Eric DeAndros, the coordinator of the expo attended by 11,000 people, claimed that natural gas fueling was having a renaissance as the alternative that is truly viable in the heavy-duty vehicle market. As we said on our last call, we expect early adoption of the X-15N this year with a lot of singles versus home runs. Our station network and full suite of customer services are ideally suited to support fleet's initial purchases of trucks with the X-15N and the expansion over time. In addition to the opportunities in the heavy duty trucking, our other businesses continue to expand. We proudly serve over 69 transit agencies at 120 different sites and 175 refuse customers at 325 different sites across the U.S. and Canada. RNG has been dependable, clean, low-cost fueling solution for those fleets for years. As an example, we completed a new RNG station for our longtime customer, Burtek, a large waste company in Victoria, Victorville, pardon me, California during the first quarter to accommodate an additional 60 trucks. Pertec also contracted with us to add 50 trucks to fuel with RNG at another station we maintain for them. We're also expanding our relationship with USA Hauling, signing a contract to build another private station in South Windsor, Connecticut to fuel an additional 40 CNG trucks. I told you about our success in converting existing customers from CNG to RNG. This allows the customer to dramatically and affordably reduce their carbon emissions while providing us with better margins on the fuel. Transit agencies around the country have taken the advantage of this opportunity, and recently we did this for the station we operate at, the Nashville airport. These are just a few examples of developments. which occurred in the first quarter, but highlighted the nature of overall business in deep customer relationships. On the federal policy front, we continue to await various outcomes. While the alternative fuel tax credit expired at the end of last year, the Renewable Natural Gas Incentive Act was introduced in the House in March, which, if included in the larger tax bill, could be retroactive to the beginning of the year. We are working closely with members of both houses to keep the R&G tax credit top of mind. The 45Z production tax credit is in the process of being finalized. We included a minimal amount from these credits in our Q1 results and our 2025 financial outlook based on the initial guidance. But once the 45Z credit is finalized, it could contribute more meaningful to our results. RNG is a commercial transportation. As a domestically produced biofuel that converts waste into a low-cost, low-emission transportation fuel, we believe RNG fits well with this administration's priorities. In California, the low-carbon fuel standard program updates remain in process. We expect more clarity in the coming weeks. As a reminder, these updates are expected to support higher credit prices over time, which is necessary to support growth and the low carbon fuels needed to hit California's targets. Now briefly turning to our upstream dairy R&G production projects, the six projects that have been operating are doing well, and we are always working to improve production. We have two others in advanced construction. expected to be in service by the end of the year, and have additional projects in construction through our development arrangement with Moss Energy, with three projects likely to come online in 2026. In summary, our business is performing well. We are advancing our growth initiatives, and we have strong balance sheet. We are confident in the stability and growth potential of our business and see multiple avenues for upside as some of these policy outcomes are resolved. That is why we resumed our share repurchase program in late March. We believe our shares are undervalued, and this enables us to make repurchases while still maintaining ample cash to fund our growth. And with that, I'll hand the call back to Bob, who will give more details about our strong quarter.

Thank you, Andrew, and good afternoon to everyone, and I agree. We did have a strong quarter, first quarter of 2025, with revenue of $104 million, and at face value, the $104 million is basically level with last year, and I know we have a number of variables within our revenues, but the one for sure to keep in mind this year is that we do not have the alternative fuel tax credit in our revenue number because it expired. So last year, there was $5.4 million of alternative fuel tax credit in the revenue number for 24. But in the quarter, we generated good, positive operating cash flows in the first quarter of 25, which actually exceeded our capital expenditures. So net-net, as Andrew mentioned, our cash and investment balances grew from the end of last year. I'll start here on our GAAP earnings, and I want to address a couple items on the GAAP earnings. The first item is the planned removal of the LNG station equipment from various Pilot Flying J sites in 2025. We discussed this on our last earnings call. and included the accelerated depreciation in our 2025 outlook. Just reporting here that we are proceeding as planned with that project, and most of the accelerated depreciation expense was recorded in the first quarter of 2025. The remaining accelerated depreciation will be recorded over time through the end of our lease, which is in August of this year. The second item, is the write-off of our long-standing goodwill and tangible balance. This non-cash write-off was purely based on our share price at the end of the quarter. I've included that charge, I've added that into the GAAP outlook for 2025 since it's in the books, if you will. These two non-cash items combined amounted to $115 million of our GAAP loss of $135 million in total for the first quarter of 2025. As a side note, the values of our remaining assets are well supported by our positive cash flows and are not directly tied to our share price. From a non-GAAP standpoint, our adjusted EBITDA for the first quarter of 2025 was $17.1 million compared to $12.8 million a year ago. These positive results were driven by continued strength in our fuel distribution business, including an increase in delivery of RNG to fleets at our stations and to our customers where we're also performing maintenance and services. Andrew went through the overall decline in RNG, which was very much supply related. There was also maybe about 5 million gallons that were in the first quarter of 24 that did not repeat in 25. We've talked about these gallons that we deliver sometimes outside our network just because we're so prevalent in the RNG market. I guess importantly on this, so that we're really dialed in on what's going on with the RNG, Because we have such a large footprint between our suppliers and our stations and our maintenance customers, we are able to optimize the flow of the available RNG such that our stations, our customers that we're maintaining and delivering RNG are priorities. That demand, as I said, went up. We're actually up year over year in those areas, which is why which actually did contribute as well to our positive results for the first quarter. Dairies that we have, our joint ventures there, they were also impacted by the cold weather, but they do remain on plan with their financial results. And as Andrew noted, we are making good progress in the ramp up of these dairies. All in all, a good quarter for us in operations and generating cash, and we have a strong but continued caution, optimism about achieving our plan for 2025. And with that, operator, we'll open the call to questions.

Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star 1 to ask a question. We will pause for just a moment to allow questions to queue. Thank you. Our first question will come from Dushant Alani with Jefferies. Your line is open.

Hey, guys. Thanks for taking my question. I think you just talked about cautioned optimism in hitting a 2025 guide. Could you talk about what would take you to the lower end and then what could take you to the upsides?

Well, Deshaun, let me start, and Bob, feel free to... You know, let's see how this tariff shakes out relative to putting some pressure on, you know, the future outlook for people buying equipment and buying trucks. You know, we've noticed, and if you look at... you know, the numbers coming in. I mean, there has been a lowered purchasing of heavy-duty trucks in the first quarter. You know, I guess I'm an optimist at Deshaun and believe that we're going to have more clarity on tariffs and that I think that the market will settle down and you'll see trucking companies begin to increase their purchases as sort of the underlying tariffs begin to get worked out over the course of the year. So that's number one, and that'll impact our future outlook in terms of volume growth being contributed by the X15N, albeit most of that will end up in the very latter part of the year and in early, and in 2026, as we've said. The other is 45Z, depending how that shakes out, you know, that could end up being a more meaningful number. And then, you know, on this legislation, you know, it's too early to tell, but we'll know more here in the next few months on if there's some supportive incentives like the RNG Incentive Act. All of those would be significant contributors to us. You know, we still have a very nice underlying relationship between oil and natural gas. That's been very constructive. That helps our underlying fuel business. That's contributing. But we have our eye on that oil price as well. And so I think for the most part, these things can resolve themselves in an optimistic way to show that oil makes us feel comfortable. Now, you know, in the very macro market sense of what's happening with sustainability, what's happening with the effort to continue to be green from our customers, we saw this and heard this loud and clear from the ACT Conference. Our customers still want to be green, but it has to make economic sense. And frankly, with the framework in the Biden administration of mandates and California mandates, many of which were pushing for battery electric or hydrogen. A lot of those things have been, frankly, are in the process of being unwound. And we believe that RNG is taking its rightful place as a common sense economic alternative fuel. And we'll end up being the main competitive fuel. fuel, alternative fuel, low-carbon fuel, versus renewable diesel and diesel fuel. And so that gives us great optimism. We're in the shakeout phase of that, but our customers know it. Those people that went to the ACT conference know it. So that's kind of, Sean, how we see the remainder of the year working out.

That's helpful. Thank you. And then just one more I guess Bob and Andrew, you guys talked about it where revenue was largely in line versus last year despite the loss of AFTC and also volume coming in a little lower. I think you touched on it briefly on pricing. How do we think about that? I think that that was basically what supported 1Q as well. You had some strong pricing there. Could you talk about how that shakes out for the remainder of the year? Bob, go ahead and take that one.

Okay, I think, Dushon, I think it would, at least the way we see it, is it would shake out kind of similarly the remaining quarters as we are, assuming there's not some radical change in the underlying commodity of natural gas, which can impact our revenues. But I think we see somewhat steady case going forward. on that, you know, so we won't have the AFTC, but we still enjoy kind of a nice spread between oil and natural gas, so that's supportive. And we are seeing, you know, we should continue to see good fleet volumes and our, you know, maintenance deals as we did in Q1, so I think that should... mean that the revenue number will be kind of in line with where we were in Q1.

Got it. Thank you.

Thank you. Our next question comes from Eric Stein with Craig Callum. Your line is open.

Hi, Andrew. Hi, Bob. Hey, Eric. Hey. So you mentioned ACT, and I was out there, obviously. One thing I heard kind of loud and clear, obviously a lot of interest, excitement in the X-15N, but arguably it is behind schedule versus what Cummins was expecting and others. And I was just hearing a lot about incremental cost. And I know that to this point, you've got PACCAR in the market and Freightliner just opened their order book. Curious your thoughts on maybe the impact that that has, where incremental costs for the X-15N or trucks with the X-15N have been and what that trend looks like going forward.

Eric, you know, I want to be careful to air all the dirty laundry of my friends on truck pricing, but I think I've said it before, which is that as those early trucks, the X-15N, were launched into the market latter part of last year, You know, it's no secret. The incremental price was just a bit too high. And by the time you move that from the engine cost and the, you know, and I think, frankly, in-line fuel system cost, and then, you know, you put the OEM markup on it and the dealer markup on it, I think people got a tad bit carried away. You know, at one point, a very powerful dealer said, well, it's still... half the price of the incremental cost of an electric truck. And I said, well, you know, wait a minute. We don't compete with an electric truck. We compete with a diesel truck. So we worked very hard with Cummins. We have a program with Cummins that was joined in by the fuel system folks. And frankly, and with our friends at PACCAR, to reduce that from as much as $110,000 incremental price to something that's on the way toward $80,000 incremental price or so. What we found, Eric, that an incremental price at around $75,000 to $80,000 with an aggressive but doable fuel price, certainly for us with our network and our ability to supply RNG, you can get the total cost of ownership for the fleet where it needs to be. That is, you can get a fleet somewhere around the two to two and a half year payback. And that's enough to start the discussion of get them to then put in for ordering. Now, there's some good news here. The Freightliner, as you mentioned, a product has come to market. They have a little bit lower price point overall. And I think competition is a good thing. So we have seen some initial orders go in. For the Freightliner, that price is lower. So I think we're on our way toward where we want to be. I think over time, it's clear that if we can get to something closer to 6,000 units a year, you can drive somewhere between 15% to 20% out of the fuel system cost, too. So we're at early stages. Incremental has been a little high at the initial launch. It is coming down, and so I feel like it's headed in the right direction to get to where we need to be.

Got it. Good color there. And maybe, you know, you just were talking about kind of the overall environment versus battery, and I guess fuel cells way out, and the realization, and obviously the customers are saying that pretty loud and clear, but Just curious, I mean, from a policy standpoint, I know in California, always enamored with battery electric, fuel cells, et cetera, and not really RNG in this current environment. Do you see a situation where, I mean, you could, you don't necessarily need to have a benefit versus those, but at least on equal footing?

Well, you know, Eric, look, it's kind of tricky right now to go through all the, bore everybody to tears, but, you know, the California government ACF, that is the fleet rules that they put in place, those are gone. And the manufacturer side, which required manufacturers to sell 10% batteries, that thing, as you probably well know, the Congress voted to clear those out, those policies, and the omnibus rule. Now, the Senate hasn't taken up that CRA action yet. There's question of whether or not they will, but I have a feeling that they might. There's some question of whether or not the parliamentarian would think that's appropriate. But there's no doubt we are working with CARB that their program is a mess. And what's happening right now when people can't buy an electric or won't buy an electric, And there is no requirement anymore. They're buying diesel. They're buying older diesel vehicles. So CARB understands this is not good. We are working with CARB and feel like it makes great sense that RNG should, once again, or should be a compliant fuel. And so it's not done yet. There are discussions that are underway. It's different from where you know, in their crystal ball, in their sort of theology, where they wanted to be. But look, electric doesn't get it. It might on light duty. It doesn't on heavy duty. There isn't the electricity. The cost is too high. The experience is not right. And the customers weren't going to do it. And so it's been a fiasco, frankly. About 11 of the states that adopted the CARB policies have all backed water on it. So I think that if you want clean air, 90% less NOx, and you want lower carbon, RNG will rise to the surface. And we're seeing that now. Those are discussions that we're having with the policymakers, frankly, at the federal level as well as at the state level.

Okay, thanks. Yep.

Thank you. Our next question comes from Rob Brown with Lake Street Capital Markets. Your line is open.

Good afternoon. I just wanted to dive in a little bit to the RNG facilities, sort of where you're at in terms of getting those open and running and generating kind of EBITDA. Could you just update us on the timeline there?

Well, you know, one of them has been open a while, Rob, and it's producing pretty well, and we're steadily increasing the production. So we know there's We know there's hope, right? We know that through good operations you can increase them, get them closer. They're not quite there yet to nameplate. That's our Del Rio facility. The other five we have are a little bit behind that trajectory. We have one bad weather problem with one of them, but they're all now in production, albeit not quite to the levels that we want yet, but by the end of the year we like to think that they're going to be you know, 80% of where we thought they should, you know, kind of in that range. So they're making nice headway. We're making, you know, we're making some tinkering with our operators there, and we like the way that's going. Two more should be, you know, sort of on production toward the end of this year, late. And we're making very nice headway at our south end fork dairy that's in the Texas panhandle, and we're making good progress, though I don't know it'll be late in the year, but our big Idaho facility as well. And then our relationship with Moss, as I mentioned in my remarks, those come on a little later, but there, you know, Daryl Moss is a great operator, a great developer, and those projects are, you know, underway. So, These projects still take a little longer than all of us would like. Certainly the pathway process is cumbersome and slow, though in a conversation with the chairwoman of CARB the other day, she said help is on the way, that more staff are being brought in to deal with the backlog of pathways. So, you know, we like to think that that will help us because some of these have just taken too long already. to certify the pathway, but it looks like some helps on the way. By the way, Rob, if I can use this to answer your question, one of the other things that from our first question on Deshaun, you know, we think you're going to be through the final stages of cleaning up the administrative problems that CARB had with the, you know, moving forward on their new program and think that should get done here by... late May. And so that would mean that you'll begin to move forward. And that should work off, over time, work off the credit oversupply that we see in California. And that should lead later this year and early next year to a strengthening of the low carbon fuel credit pricing.

Okay, great. Thank you for all the color there. And then And then as you think about the current environment and how, if at all, does that change your CAPEX plans for this year? Are you potentially slowing that at all or are you just maintaining the plan as before?

No, we're being cautious on the RNG side. We've said, we've looked at a lot of projects. We've looked at some opportunities to perhaps purchase some RNG projects that are very close to We're being very careful with looking at that. And so, you know, I think we kind of have the projects that we're currently developing on RNG funded. We don't see any increases to that right now. We want to get the ones done that we have. You know, we're in a nice position in that we have 90 or so on the way toward 100 with new contracts that aren't. We're not taking supply yet. We have 100 different suppliers to R&G. So we're in a unique position to have a lot of supply. We have a very nice relationship, joint marketing relationship with BP. So we have a lot of supply that's available. We like our position on the six projects that we've got and the new ones that will come on. On the station side, I could see that we might – not because we put the brakes on, that we might be a little bit lighter on CapEx, just on some of the projects tend to get permitted and this and that. It's my hope, though, that as you start seeing some of these really big fleets begin to look at taking more X15 ends and beginning to, you know, if you will, do what Amazon did and start asking us to, you know, Later this year, early next year, you're going to need some CapEx to build out stations. Of course, that's a very nice thing and a very good thing. We're very happy. We'll be very happy if we need to do that. But I would say for the year, Rob, it should come in about what we've said and, you know, maybe a bit lighter, a bit lighter, but not because we're worried about the future, just because kind of the way the things are. We're wanting to be careful and be prudent, but just because the way we – you know, these things sometimes take a little longer to come online than you might think.

Okay, great. Thank you. I'll turn it over.

Thank you. Our next question comes from Derek Whitfield with Texas Capital.

Your line is open.

Good afternoon, all, and thanks for your time.

Hi, Derek. Andrew, I want to I wanted to follow up, Andrew, on your CARB commentary just to make sure I'm clear on your understanding of how it's progressing. I mean, clearly this has been far from a straight line, but as you think about where CARB is today, do you think they're going to have final policy in place by June? And do you know if they intend to retroactively apply that policy across the first half of 2025?

you're right, it's not really a straight line, and I've kind of been wrong on timing a little bit, you know, because it's hard to predict what's going to happen. I'm told, and we think, and CARB staff believes, that it should be, that it should be done by June 1st, and that it should, therefore it'll be retroactive. Now, you know, if it doesn't make the June 1st, then there's a question whether or not that they can. So, but But in conversations with senior members of CARB, we've been told that they think that it should. And it looks like through the comment period that I think already came and went on the OPL issue, I think, you know, fingers crossed, looks like that's kind of headed in the right direction.

All right. So fingers crossed there. Maybe staying with you on the policy front, I'd love to get But, Phil, for the support you're hearing from your discussions in D.C., maybe beginning with the RENs, we've heard throughout earnings there's been a constructive dialogue between ag and the refining sector on the future of biofuels policy. And while I've heard this could lead to a 5.25 billion gallon RVO for bio-based diesels in 2026, we haven't heard that much in the cellulosic category. But setting aside the exemption commentary from last November, Do you guys have a view on where the EPA may land on the RBO for the cellular office category?

The quick answer is no, we don't. And it wouldn't be right to say that we're having in-depth engagement. We are engaging as an industry. We have participated in some meetings on that. I feel like the administration understands the balance here. It understands what's necessary to have a vibrant RFS program, but yet they're pulled in several directions. But, you know, one of the things I think is constructive is that the Trump administration seems to understand that we are a biofuel, that RNG, cellulosic, is from the farm. And it is not to be overly political here, But it is a red state fuel, and it is a biofuel. So, you know, there's a lot of things we're weighing here, but we feel like they'll be constructive. But, you know, that's about as far as we can go. We haven't heard any numbers on that. I haven't, anyway.

Terrific. I'll leave it there. Thanks for your time.

You bet.

Thank you. Our next question comes from Matthew Blair with TPH. Your line is open.

Great. Thank you, and good afternoon. I was hoping to dig in a little bit more on the strong results in the first quarter. Your RNG volumes came in lower than our modeling, and your written revenue was also lower, and maybe those two things are connected, but what would you attribute the strong results to? Seasonally, Q1 can also be a little soft, and You know, there's tough weather in certain parts of the country. So was this just better core fueling margins due to a healthy oil-to-gas spread? Or what really pushed things up? And, you know, was there anything that was pulled forward into Q1 that really should have been part of Q2? Thank you.

Yeah.

Maybe I'll go on that one.

Matthew, yeah, no, I think you kind of hit it there, just the kind of the core fueling The core fueling and, you know, effectively just what our effective pricing and from our stations is what was driving that. The lower RIN was connected to the supply and the lower volumes there. But, you know, we had actually a pretty strong showing of low carbon fuel going into California. So the LCFS actually did. um, you know, probably better than expected there because that pricing remained, uh, remained under, uh, where we had, um, pegged it, you know, ultimately to, to pan out for the year. So it is the, um, your kind of underlying base business, uh, fueling and, you know, we're seeing, uh, it's kind of the effect that, that we've talked about before too, with this is that, uh, We get a gradual incremental increase, incremental flow of volume just because as fleets bring on trucks during the year, then it's all additive. And so that's just kind of progressing through. Pricing remained good. The spread was good. And we're opportunistic with with basically how we source. We're good at sourcing cheap natural gas, which is feedstock into this too, so all that combined. We're big players, but we've got some leverage there on all that front.

One other thing, Bob, that I would add is trucking is good, right? The Amazon stations are open and running well, and Trucking volume is looking pretty good. So that all contributed, but the underlying fuel business was strong.

Do you think it's part of it due to a tightening dispensing market? You know, we're hearing from upstream RNG players that it's increasingly tough to place their volumes in the transportation market. The dispensing side is getting tighter and tighter, and the rates are going up. Is that playing a role as well?

Starting to? Yep, starting. We're seeing that. Go ahead, Bob. No, no, I was just going to say it, yeah, we are seeing that.

I'm not going to say wholesale that, but yeah, we're certainly, you know, in a good kind of negotiating position there.

The nozzle tips are valuable. Great. Thanks for your comments.

Thank you. Our next question comes from Sonia Yon with UBS. Your line is open.

Hi. Do you guys see any volumes from the transportation sector, you know, maybe going towards power generation or any update on the data center front? How are you guys looking at that going forward?

You know, let me start. You know, I think my number is right. 80% of the RNG goes into transportation, and it's the best market. That's what Matthew was getting at, is that, you know, it's tight. Supply wants to find its way to transportation. That's why we're in an enviable position at the nozzle tip. You know, of course, some RNG will make its way into PowerGent. We have not heard of any significant that I'm aware of, though I thought it would be eventually. I imagined that RNG would be such a beautiful and relatively effective and easy way to decarbonize AI power generation, right? When I started hearing that we're going to open up Three Mile Island and build nuclear power plants, I thought to myself, my God, we've got to have a better solution than that. So I don't want to say it'll never go into those markets because I'm a believer in that it ought to go and should go into the market, which is the hard to decarbonize market, which is the heavy-duty trucking sector, which is, you know, remember, 40 billion gallons of fuel is used in that sector. And this is where R&G should go. And so still it's about 80%. We hear of different things. I think some of the regulatory and some of the Washington and regulatory push to force utilities to use renewable sources and some of what we saw over the last couple of years, my guess is some of that will take a breather, and I think it will make vegetation that much more important.

Got it. Thanks. And then could you give some updates on your partnerships with Total, BP, Chevron? How are they progressing or what's the outlook on those types of oil companies?

You know, Total is still our largest shareholder. They're our partner in our first R&G project. We have a very robust and ongoing and deep relationship with BP. We call it a co-marketing agreement where we work together on RNG hand in glove. When those Archaea volumes were, if they were to go to transportation, we'd be involved with them on that. So we're very excited about the future of that. So we continue to work with BP's RNG partner on those development projects. the other five, and the other two that I talked about at length are the one in Idaho and South Fork and one in Texas. So we have a very deep relationship with them. Chevron, because the electric truck push, hydrogen truck push, reality is sinking in, we're starting to see a renewed interest in our California R&G Chevron program that, you know, has fielded upwards of 350 trucks and put on the road, funded and put on the road to fuel with R&G. So we've always liked that program on Chevron, and we continue to work with them. So that's kind of the status of those three relationships, partnerships.

Got it. Thank you.

Thank you. Our next question comes from Craig Shearer with Tui Brothers. Your line is open.

Good afternoon. Thanks for taking the questions. You bet. So I'm sorry, did you specify anywhere exactly how much 45Z was in the quarter?

It was a – no, we didn't. It was not – it was really not material, if you will, so we didn't specify it. Okay.

So, I mean, as far as what that could be, if after that gets finalized, I mean, could you see that competing with, you know, say current LCFS run rates that you've been seeing? As far as quarterly contributions?

I mean, you know, Craig, it's all in the detail there, right? I mean, you remember the heady days of saying that with an active correct greet model with a minus 335, you remember our friend said that it could be worth $7 a gallon and, you know, you run all that out, sure, it would be a very strong contributor. Those discussions are underway. Just what How will that be measured? If the Congress chooses to keep 45Z in, will they use a GREET model? Will they specify different CI scores for different various types of manure? And just where does that come down? Does it end up being where it is today at 90 cents or a dollar or less the energy? Do you get some credit for having a low-carbon manure? RNG, in which case it would be more meaningful, you know, two or three, four bucks? Or does it go way up the scale? So it kind of depends on where that comes out. And look, you've got sort of parallel tracks working, right? You have a final rule that the annuded Treasury Department's working on. I talked on this very subject matter about a Greek model and how it was corrupted by the Biden administration. I mean, it's really a shame that you take science and you made it political and you put a bogus Greek model in that final temporary rule five days before the inauguration, and that's what the industry is trying to deal with. And just what does Congress want to do, and what does it cost? So those are all, you know, it's sort of wild on how that's all going to shake out. I think there's a a body of the Congress that understands 45Z and wants it in. They're trying to wrestle with just how they fix it and should they fix it, and what does that mean to the ethanol guys and the biofuel guys, and what does it mean to the RNG methane guys like us? So that's what's being dealt with, but if anybody were to tell you today that they know exactly how that's going to pan out, it's not quite right, though I feel like If I was a betting person, I'm thinking that there probably will be a 45Z and that it is probably likely to be better than where it sits right at this moment.

Gotcha. And on Rob's question for the upstream, do you have a timeline to get to systemically positive upstream rates? numbers EBITDA there I know you had one facility a large facility that you were expensing the development of so when that comes on it should flip pretty quick right I don't know if it would flip pretty quick but the but certainly the the projects that you know we have one that's been operating for a while that you know that'll that'll contribute EBITDA

Um, it is, uh, the other five, um, will next year, but then you've got two big, uh, you have two big, uh, projects coming online, you know, kind of right at the beginning of the year that are going to go through kind of that OPEX. So, you know, individually, um, these, these, uh, dairies are going to contribute to EBITDA and many of them will in 26. Absolutely. Whether that's going to net to an overall positive as we do our guidance and we kind of have our upstream and our distribution. That we'll have to see how that pencils out once we have them all operating just because we have a 37,000 cow dairy that's going to come online as you know. But they'll get to I mean, at least what we're seeing is there, with the appropriate yield on the manure and the CI, you know, the methane content, they get there.

Just to be on the safe side, given what you said, it sounds like, you know, second half next year, we should certainly be there.

Yeah. You know, yes on certain farms, on certain dairies. And then, you know, whether that can overtake. And, you know, what I'm looking at is do you get a net positive number from the upstream, you know, EBITDA when we give our guidance. And that one, we're going to need time to sort that out. But within that number, there absolutely will be positive dairies contributing EBITDA. But as we bring on other, you know, we got the Daryl Moss one. So there's a little bit of, you know, certain dairies are going to go even positive for sure. One of them already is. But the other ones are going to come on. And whether they're going to kind of, you know, overtake the positive side, we don't know.

All right. And last kind of big picture one for me. The Trump administration wants to kind of streamline as much LNG exports as possible. Obviously, that's a real easy way to right-size trade deficits. And at the same time, it seems it wants to flood the world with as much oil as possible from U.S. producers and some of our friends around the world. So Obviously, in terms of spreads, in terms of the fuel advantage, if that holds true, so if we have four 450 Henry Hub and we have $50 Brent, I'm not saying it's going to happen for sure, but if those are the concerns and we're not sure, are you hearing any fleet customers express concern, well, We just don't know what the end of the decade looks like on the fuel advantage and these trends, and maybe we just wait a bit longer.

No, we're not hearing that. And my view on that, and I've been right on this, and I don't have to be, you know, look, it's hard to tell. I completely agree with you on oil. I mean, I think you're going to have, you will have, I mean, look, the president's going to Saudi Arabia. We've seen this act before, and they're increasing production. OPEC is. And so, you know, it's going to put downward pressure on world oil price. And yet, our producers have been through this before, and so don't count on them to drill baby drill in the face of $53 oil or $49 on the way to $48 oil, right? So they get it. They got burned once before on that. So they're going to be careful. So I think... Could you see a moment when you have a lower oil price? I think so. On the other hand, I've long believed that this natural gas price has been too high. The United States is just knee-deep in natural gas, and you know this because you follow it closely. The LNG is not moving as quickly. It will. They do want to push a lot out. But, you know, 450 gas was too high. And sure enough, you saw it come down to 350 and $3. And so I think you're going to have a spread that won't be on the highest end that we've seen, but will still be constructive for us and still able to allow us to price our fuel. You know, today, Greg, we can price our fuel and make a nice margin and undershoot West Coast diesel by $2 a gallon. Now, that will get challenging, but you'll still have an opportunity to be in the $1.25 to $1.50 range, cheaper than diesel fuel, almost no matter where you operate, where you're buying diesel in the United States. So we've long, and I've been giving this speech for 20 years, that's what's different about our fuel versus some of the others is that we have an inherent advantage of on the commodity pricing relative to oil on our fuel. And I still feel like that's going to be good for us. Though I don't disagree with you that you might see a, you know, you may get, the market may overplay the oil on the downside here in a minute, but I don't believe that the gas is going to be, you're not going to have $4.50 gas and $40 oil. I don't think that's in the cards.

All right, thank you very much.

If you did, it would be more of a spike situation, not a longer term.

Understood. Thank you.

Okay.

Thank you. Our next question comes from Betty Zhang with Dolce Bank. Your line is open.

Thanks. Good afternoon. Thanks for taking my questions. My first one is on M&A. I'm just curious how you're thinking about M&A these days, whether there are any opportunities or if you are more so looking to build out organically.

I think, Betty, we're being very careful, and I think for good reason. We're trying to be careful with our capital. We like our current position. We believe we're getting a chance to look at projects where maybe private equity or some others have tired of projects that are nearly complete or about to be complete. I think given that these projects take a little longer than one would like on the greenfield nature of them, that that is what adds us more. We're more interested in those kind of projects than putting our precious capital right at this moment, given what we know right today. you know, in greenfield projects. Now, having said that, we've looked at them, and, you know, perhaps there still needs to be a little bit more market therapy before some of those make sense. But, you know, we're in a nice position in that we get to look at a lot of projects, and we have a team that's smarter looking at them. And so, you know, we continue to look at whether or not there are some projects that would be, you know, finished that we could add in. But we haven't really found those that make sense yet.

That's helpful. Thank you.

And I wanted to ask, so for the first quarter, obviously volumes were a bit lower than we expected, and you guys had talked about that. But I'm curious, for the full year of 2025, the $246 million target. Is that still achievable? How are you thinking about that?

You know, Betty, the way I look at that is we'll be close to that, right? I mean, financially, even if we're a bit shy of the 246, we'll close on that number. We may not get there, but we'll be in the range. But financially, I think we'll end up probably being even better than, you know, than hitting the 246 because we're liking the way that's shaping up. So the next part of the year, we'll close. You know, whether or not we get exactly there, hard to tell at this moment, but we'll get within very close range of it.

Great. Thanks very much.

Thank you. Our next question comes from Jason Gableman with TD Cowen. Your line is open.

Yeah. Hey, good afternoon. Thanks for taking my questions. I know you said you started repurchasing stock again, and I'm just wondering, as you think about capital allocation, how you're determining funds to go towards the buyback. Is it more organic cash flow? Is it using cash from the balance sheet? And how comfortable is Are you with, or I should say, where are you comfortable taking the cash balance to support the buyback?

Yeah, I'll let Bob kind of get into maybe the detail. He has some thoughts on this. I mean, look, we believe our stock is really undervalued, and we wanted to put some capital to use to support the stock and believe it's a good buy. And so that's why we've done it. and probably will continue to do it at these levels. But, you know, we're being prudent about it. Bob, do you want to give a little more color on it?

Yeah, I mean, Jason, we're basically just kind of we reinstated a program that we already had in place, so it's not just an unlimited and real subjective of how far do you go. I mean, We had about $26 million available from a prior approval that we got from the board and everyone, and we just put that back in place. And so we'll see how far we go within that perimeter, if you will. So there is a little bit of maybe a cap that you would say before we would have to get some other approvals. So it's a bit, you know, programmatically done, okay, you know, in terms of, you know, how we get in when we get in and, yeah, and how that's done. You have, you know, blackout periods, all that stuff you've got to kind of orchestrate around.

Got it. And my other question is I think you mentioned you're in D.C. kind of supporting another, Bill, um, that, that supports RNG. Can you just remind us what that bill exactly entails?

Yeah, that bill is called the RNG incentive act was introduced in both houses of the Senate. It was the one that we started a couple of years ago. He got, you know, every time you have a new Congress, you have to re reintroduce a bill from the previous Congress. So that's the incentive act. It was introduced by Brian Fitzpatrick. and Sanchez and Tom Tillis in the Senate and Senator Mark Warner, that's a dollar a gallon at the nozzle tip RNG.

Got it.

I sort of see it as a modern day re-up of the AFTC. And, you know, let's be honest. They're looking to take stuff out right now, and they're adding a lot of stuff in, and there will be incentives put in this bill. But this is a pretty wild time up here, and so it's nothing easy about this. But I like the fact that we have a bipartisan bill that I think can be cost-effective. And one of the strengths of it is it really is an economic – It's economic development. It helps in rural Americas. It helps the farmer because it's R&G. So we're seeing some interest. Let's leave it there.

Understood. Thanks.

Thank you. It appears we have no further questions at this time. I would now like to turn the program back over to Andrew Littlefair for any additional or closing remarks.

Good. Well, thank you, operator, and thank you, everyone, for joining the call today. We look forward to filling you in next quarter on how we're doing. Thank you. Good day.

Thank you, ladies and gentlemen. This does conclude today's event. You may now disconnect.