Q4 2019 Earnings Call
Greetings and welcome to the clean energy fuels fourth quarter 2019 earnings conference call.
This time, all participants are in listen only mode a.
<unk> answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like turn the conference over to your host Mr. Robert Freeland. Please go ahead Sir.
Thank you operator.
Earlier this afternoon clean energy released financial results for the quarter and you're ending December 31st 2019.
If you did not receive the release it is available on the Investor Relations section of the company's website at Www Dot clean energy fuels Dot com for 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. It on this conference call contains forward looking statements that involve risks uncertainties and assumptions that are difficult to predict.
Words of expression, reflecting optimism.
And with current prospects as well as words, such as believe intend expect plan should anticipate and similar variations identify forward looking statements, but they're absence does not mean that the statement is not forward booking.
Such forward looking statements or not a guarantee a correspondent companies actual results could differ.
Sure away 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 Energys form 10-K filed today.
These forward looking statements speak only as the date of this release the company undertakes no.
And to publicly update any forward looking statements for supply new information regarding that circumstances. After the date of this release.
The company's non-GAAP EPS and adjusted EBITDA will be reviewed on this call and excludes certain expenses that accompanies 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 gap and should not be considered 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.
And a reconciliation between these non-GAAP and GAAP figures is provided in the Companys press release, which has been furnished to the FCC on form 8-K today.
But that I will turn the call over to our President and Chief Executive Officer, Andrew Littlefair.
Thank you Bob good afternoon, everyone and thank.
Looking for joining us.
Before I begin to report on our last quarter in the year I would like to speak briefly about what is going on in the markets and especially as the global energy markets.
Oh, well all of energy is being.
Hit hard I'd like to remind everyone how clean energy, it's specifically position going forward.
Our competition diesel is a refined petroleum products, which may not necessarily reflect as dramatic reduction in prices at the pump as we're seeing in the price of oil.
Pricing natural gas as well, which is good for our customers and much of our growth is coming from redeem which is the renewable sustainable.
Transportation products.
And I will discuss in a minute in more detail. We continued to be very bullish about redeems continued growth.
Also the probably most importantly, the company has a healthy balance sheet with plenty of cash on hand to cover our debt payments.
And with that let me jump into the fourth quarter and the yearend results we.
Close 2019, very positively with a 10% increase in our volumes over 2018 reporting over 400 million gallons of natural gas fuel sold for the year. The first time, passing medmarc and the Caprice company's history.
Fourth quarter, we sold 103 million gallons close to a 5% increase over the same quarter last.
Sure.
It was the second consecutive quarter that we exceeded the 100 million gallons Mark.
Growing our fuel volumes will continue to be our priority is the recently extended federal alternative fuel tax credit or FTC will be applied to fuel gallons through at least the remainder of this year.
We reported 344 million in revenue for the year and over 119 million for the quarter that ended in December.
Our overall financial position on balance sheet continues to strengthen.
Even before the FTC in the last quarter or adjusted EBITDA has consistently improve quarter after quarter well was true true <unk>.
Charge from the FTC to 57 million for the fourth quarter or.
Our balance sheet strength into 106 million in cash and investments, which does not include the additional 47 million NMTC cash that we will be receiving.
Yeah.
I Hope you had a chance to redeploy.
Press release that we distributed at the end of January announcing the record amount of redeem or renewable natural gas that we delivered in 2019.
143 million gallons, a 30% increase over the previous year.
We continue to sign additional contracts for the fuel through the end of 2019 and into this year, adding.
Trucking companies transit agencies airport shovels and other fleets around the country.
To the roster that have opted to easily switch to the cleanest method of transportation.
Redeem grew to 36% of our overall fuel mix and 29 team and as we announced earlier last year.
Oh, we have an.
Ambitious goal to offer carbon free redeem at all of our fueling stations by 2025.
Our aggressive move in converting more of our business to a renewable ultra clean fuel coincides very nicely with the acceleration of companies looking to operate in a more sustainable way.
It is no longer only.
As an NGL shows which are demanding the shift the investment community has dramatically stepped up their pressure on publicly traded companies to take a look at their entire supply chain to see how they can operate in a manner that reduces their contributions to the issues.
Surrounding climate change that the world is grappling with.
[noise].
What are written by Black rock CEO, Larry think about his firms decision to score companies with an E.S.G. rating was only the start since then Goldman Sachs State Street, JP Morgan and other investment firms have made similar announcements so the pressures on.
One of the easiest ways.
To do dramatically reduce the carbon footprint for any company that is involved in moving goods, whether it is logistics company a consumer products company a retailer is to convert their trucking to our Angie.
With the backdrop of this new focus by the investment community and he is Gee, we're reaching out to those.
Well.
Managed companies brands in shippers of goods to help them realize the environmental benefits of our zero now offering which enables their own fleets and for higher carriers to get into new ultra clean natural gas heavy duty easily and affordably and.
In fact, we have recently had logistics companies approaches.
It's about transitioning to our in GI, citing the fact that Blackrock is one of their investors.
Currently there really is no cleaner alternative to move large vehicles, then with renewable natural gas even electric.
Benefits of Orange your Numerable its readily available it's affordable compare to diesel.
So there is currently nationwide fueling infrastructure work and flow and it can be scored at a minimum of 70% and up to 300% less carbon producing than diesel depending on the source.
As you know more interested parties, including the major energy companies are investing in R&D.
By our marketing agreement with BP.
Chevron is currently running TV ads, featuring there recently signed agreement to finance.
Number of orangeade production facilities in California, Dairies. There were also substantial investments in the construction of new production facilities around the country.
The good news is it.
All of this additional R&D will need a fueling outlet and there is no company better positioned to provide that than clean energy.
With over 550 stations around North America that we either own operator supply, we will be able to provide customers of every shape and size with this ultra clean fuel.
Our zero.
Oh initiative continues to progress with new contracts recently signed by TCR transport for 50, CNG heavy duty trucks crowd unexpressed transport for 25.
If it could trucking for 11 in Lincoln Transportation services were 29 trucks, all the fuel to redeem at our current network of stations.
Carriers, which do business with the United States Boson service continue to expand in natural gas heavy duty trucks.
The postal service as directive that in order to get their business carriers need to increasingly use cleaner trucks and the number one option for them as natural gas. Thus far we have added over 250.
Heavy duty trucks.
There are fueling network by postal service carers, including Aer, Matheson Vvo, representing an anticipated 3 million gallons a year.
We recently added a new feature to the zero now and offering called touch point.
It's a partnership with respect to natural.
I guess vehicle Institute, a leader in technical training on natural gas vehicles, and fueling technologies touch point will give fleet operators the assurance of an easy transition to natural gas.
Another expansion of the zero now program that we're particularly excited about is into the box truck market.
With the.
Recent EPA and carbs certification of the ultra clean 6.7 leader natural gas engine built by Commons.
Leads that utilizes slightly smaller truck are now eligible bring down the price.
To be equivalent to a diesel or gasoline truck, while saving on fuel and receiving the benefit of.
Operating on clean natural gas.
An average of 155000, new box rupture sold every year and now have the option of operating with the latest clean technology and clean as fuel.
The engines won't be delivered into the Oems until later this year, but it's a natural extension of zero now we plan to aggressively.
Second our offering at that time and importantly, these trucks can use our existing public net workstations.
Our core business of refuse fleets services and transit continued to add new customers and renew contracts with existing ones recently in the revenue sector, we signed contracts to extend our.
Going with CR recall energy waste connections advanced disposal and the cities in San Antonio in long Beach, representing approximately 3 million gallons of fuel year and expanded current relationships.
With Bert Tech waste and Republic services for additional stations and ultimately new.
Gallons.
We signed deals with new customers Homewood disposal in Illinois Atlas disposal in the cities of Philadelphia, Spokane, Chesapeake, Virginia and Tusa.
We signed transit deals with Stark area regional in Canton, Ohio, Long Beach, and Garden Grove, California and.
Grand Canyon National Park, as well as Gillick buses a manufacturer buses for their own manufacturing plant.
On the fleet services front, new contracts were recently signed with lazy parking Amato industries Fox rent a car Western Eagle shuttle in San Francisco Bay.
And the port of Seattle.
We continue to expand our presence in the Canadian market with recently signed contracts with BC Transit and translate coast Mountain bus in the city of London, Ontario is transitioning a fleet of 37 refuse trucks, the CNG that will fuel our existing station there.
I'm optimistic about the future while there are many new entrants and speculation of war of the future is going we see confirmation everyday from our existing customers that they are pleased with the way their natural gas fleets are performing savings they receive on the fuel in the environmental benefits that come with it.
Well on the other half.
And there are reports of delays in mis deadlines, a large electric vehicles and serious pro formas issues.
What was reported a few weeks go in Indianapolis, where the local transit agency sent back their electric buses cancel in order for additional buses.
The transition to natural gas is picking up speed around the world.
In Europe, and the countries like Egypt, India, Mexico.
The U.S. doesn't have the same government mandates, but the pressure is on in our domestic transportation market is the largest with the trucks driving the most miles and using the most fuel.
The U.S. is also blessed with abundant amount of inexpensive natural.
Yes, and a growing supply renewable natural gas and now with a renewed focus on E.S.G. the future is bright.
As I described earlier, our business continues to grow we strengthened our balance sheet.
We are positioned very well to go after the latest markets transition to natural gas heavy duty trucking providing.
Those fleets same opportunity as other markets like refuse and transit to easily make great strides in their own sustainability goals, while pleasing policymakers investors and customer.
As I hand, the call over to Bob I'd like to just reiterate that.
We're having to adjusted to figure out the world's events, including to try.
Trying to acclimate to the downward pressure in energy prices.
But I'd also like to repeat that the company has never been in a better financial position.
Just know that we have the flexibility in our planned capex spending which has been.
Primarily earmarked in 2020 for growth.
That can always be adjusted is this continues to develop.
And with that I'll give you Bob.
Thank you Andrew.
We finished 2019 on a strong though with the passage of the alternative fuel tax credit.
Through the end of 2020, and achieving 10% volume growth.
The FTC represented 46.7 million a net earnings in the.
Fourth quarter pertaining to 2018 in 2019 eligible volumes and we should see approximately 20 million in a FTC for 2020.
This provides sufficient cash to pay down our convertible notes coming due in June of 2020, as well as additional discretionary capital to support our business.
I'll discuss our outlook for 2020 in a moment.
[noise] apart from the FTC and its positive impact on our results. We saw continued low RIN prices through the end of 2019, which I mentioned was likely on our previous call that contributed to a lower.
In per gallon in the quarter.
For the year 2019, we were at 23 cents per gallon or slightly below our guidance of 24 to 28 cents per gallon.
Construction revenues for 2019 were 23 million with the fourth quarter trending up from the prior three.
Orders and we finished the year slightly ahead of the 21 million forecasts noted in our second quarter earnings call.
Our SGN a expense came in at 73.4 million matching the low end of our guidance range and with the help of the alternative fuel tax credit. We ended 2019 with 20.4 million in.
GAAP net income.
As we've mentioned our annual volume growth for 2019 was 10% with growth in trucking refuse and transit fueled by our redeem renewable natural gas as well as LNG advantage.
Most of this annual growth was in CNG with LNG being essentially flat.
Last year over year.
For the fourth quarter of our volume growth was 5% above last year, driven principally by growth in trucking as well as energy advantage, while transit and airport fleet services were essentially flat in the fourth quarter compared to last year.
The fourth quarter growth was principally in CNG well.
LNG bulk was slightly down due to normal variability and customer orders.
Redeemed volume was 32.3 million gallons in the fourth quarter of 2019, despite experiencing some biomethane plant production issues, which delayed supply those production issues have been addressed today.
And there's plenty of supply on the horizon for the year, we delivered 143 million gallons of redeem which was.
The 30% increase over 2018.
Our revenue for the fourth quarter, 2019 was 119.6 million compared to 96.2 million.
And in the fourth quarter of 2018.
As I've pointed out on calls in the past our revenue can swing significantly as a result of the price of natural gas the timing of recognition of the FTC and our fair value adjustments from our zeroed out fuel hedge.
And the fourth quarter of 2019.
And versus 2018 has all of those comparability nuances present.
2019 has FTC of 47.002 million 18 has an unrealized gain of 10.3 million from our zero now.
Joe hedge while 2019 has an.
Slide loss of 3.3 million from zero now fuel hedge.
And 2019 fourth quarter had a 14 cents lower effective price per gallon from lower natural gas costs.
Although the impact to our margin is mostly mitigated since our commodity costs is lower as well.
We describe all the differences impacting revenue in our 10-K, but this highlights that our revenue trends can be choppy and the better metric for us is volume and what our margin per gallon is on that volume.
Our overall gross profit margin in the fourth quarter 2019 was 63.9 million compared to.
36.6 million last year with 2019 being impacted by the FTC and the unrealized thrown out fuel hedge loss, while 2018 fourth quarter included the unrealized gain on zero now fuel hedge also impacting the margin comparison was the impact of the lower RIN pricing at the end of 2000.
I was in the 19 compared to a year ago, lower redeem volumes and timing of credit sales in California quarter over quarter.
Which caused our 2019 fourth quarter margin to be lower by approximately $5 million.
As such the more recent rebound and RIN pricing will benefit our margin going forward our.
That margin per gallon for the fourth quarter was 19 cents per gallon in 2019 compared to 26 cents a year ago.
And with 2019, principally being impacted by the lower environmental credits.
But again with the more recent increase in RIN pricing, which.
They've doubled in the past they've doubled in price since the end of December and with the Biomethane projects operating better we continue to see great upside to our renewable natural gas business.
Our SDMA was 19.
Point 5 million in the fourth quarter, 2019 versus 20 million a year ago and as.
As mentioned, we finished 2019 at 73.4 million versus 77.2 million for 2018.
That's a 5% decline while volume rose, 10% or effectively a decrease in our SGN a per gallon of three cents.
We also recognize seven.
Point 5 million, an earn out income associated with our sale of bio methane assets to BP. This was the third year of a five year earn out.
Our GAAP net income or fourth quarter of 19 was 41.1 million compared to GAAP net income of 6.9 million a year ago.
On an adjusted net income basis 2000.
On a 19 adjusted net income was 42.6 million versus an adjusted net loss of 1.8 million in 2018.
Our adjusted EBITDA for the fourth quarter of 2019 was 57 million compared to 12.7 million in 2018 and for the year 2019.
Adjusted EBITDA was 85.6 million versus 59.7 million in 2018.
We ended 2019 with cash and investments of 106 million and we have 47 million in cash coming to us from the FTC for 2018 and 2019 as.
Well as another approximate 20 million in FTC cash for 2020.
Well pay off our $50 million and convertible notes and be left with only equipment financing debt principally at energy advantage.
This puts us in a strong financial position to drive volume growth and support the ongoing.
Business.
We generated positive operating cash flow in 2019 of 12 million our purchases of property plant and equipment of 27 million were relatively flat year over year, we continue to be diligent and our focus on generating cash as we move forward.
Now for 2020.
We entered 2020 with expectations of lower double digit percentage growth in volume.
But in light of what's going on in the markets today with their krona virus and oil prices the guidance, we're giving today contemplates 5% to 10% volume growth with some pressure on margins due to the effect of lower oil.
Oil prices, which could persist for a prolonged period.
The good news here is our customers need to fuel each day.
We have a more than adequate fueling station network that can take on incremental volume without any meaningful capex and will have no unsecured debt with very adequate with very.
Amount of cash on hand.
And finally, we have the discretion to tailor our spending in 2020 to deal with the unfavorable external economic factors.
Having said that on on volume and with the FTC in place for 2020, we're expecting GAAP net income.
To be approximately breakeven and adjusted EBITDA to be approximately 56 million.
Keep in mind, our adjusted EBITDA for 2019 of 85.6 million included approximately 23 million in a FTC related to 2018.
As well 2019 included 7.5 million in earn out gains that were expecting to be 1 million in 2020 based on terms of the earn out agreement.
Also I am not including any estimate of unrealized gains or losses related to our zero now fuel hedge in our expected.
GAAP net income for 2020.
Our effective margin per gallon for 2020 is expected to be within a range of 22 to 2006 cents, which reflects a softer RIN credit market and some pressure on fuel pricing as I mentioned a moment ago.
Our station construction sales are expected.
Good to range from 25 to 30 million in 2020 with a stronger backlog going into 2020 than what we had going into 2019.
We will be keeping an eye on these projects given what's going on today.
Our 2020, SGN as expected to range from 73% to 78 million.
With possible increases over 2019 to support volume growth, but if we don't see the expected growth we can pull back on this spending and stay at the low end of the range.
We're expecting positive cash flow from operations for 2020 with an incremental lift from the FTC from.
2000 from.
From a FTC.
Our purchases of property and equipment could reach 30 million and at that level, we would expect operating cash flow to exceed our purchases of property and equipment by at least 40 million for 2020.
Our maintenance Capex is closer to six or 7 million. So a good portion of the 30 million impossible.
Capex is at our discretion based on volume and return on capital considerations.
Of course, we're in a fluid market situation here today, and we'll have an update of our 2020 outlook on our next call, let's hope that things stabilize as we believe we have good momentum going into 2020.
With that operator, we'll now open the call to questions.
Thank you at this time, we will be conducting a question answer session. If you'd like to ask a question. Please press star one on your telephone keypad a confirmation total indicate your line is in the question Q you May press star to if you'd like to remove your.
From the Q for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keith one moment, please while we pull for questions.
Your first question comes from the line of Eric Stine with Craig Hallum. Please proceed with your question.
Question.
Hi, Andrew.
Hi, Eric.
Hey, So just curious I know you talked about the graben pretty deep discussions with people in the marketplace I'm curious.
Related to redeem kind of what sort of knowledge levels are you getting from.
From fleets, what the education needs to be there and then I'd love an update on the zero now financing I know that you had you were on your way into 2000 plus trucks.
They're still an update would be great.
Yes.
So I think we've done a lot at what we did a lot of work in 2019.
And on redeem.
It's a little different than the the constant media attention about you know the future is electric in the futures hydrogen and these different things and so.
But as you know fleets are pretty practical and so.
As you well know most of our fleets understand the natural gas story.
We do have to educate them some redeem and you know right now we can't offer redeem everywhere in the United States I mean, we're working on supply all the time I think we still.
Sell redeem and 20 different states, but.
But.
It's not available everywhere, we were approached growing supply all the time.
I will say this though Eric.
Our largest fleets that have that are doing some hauling for some of the companies that are consumer facing is shippers.
The.
Redeem the renewable natural gas really gets their attention.
That's why I said it in my remarks is that there really isn't anything they can do when they really are looking at how to become more sustainable and reduce carbon and hit those targets that are that they're putting in their annual reports and such.
As to move there.
Pauling over to using.
Renewable natural gas and so.
It's one of the strongest offerings, we have right now.
And I think also importantly, the big move you PS.
You'll recall earlier or less.
Last year, we entered into a contract to sell them 170 million gallons of.
Of renewable natural gas over six seven years.
That was heard by fleet and so that got a lot of interest. So it's it's a story thats, becoming better known and once our customers that are using.
Diesel and some natural gas once they begin to be familiar that they can have really the cleanest commercial offering available.
And put it into trucked acts like their current truck or into their existing fleet a natural gas. It's one that's hard to be.
Now on on zero now.
Thats your second part of your question.
We continue to see more interest.
I was hoping I'd have some other announcements for you today.
We are making good progress on that front.
We have a specialized trucking team that's working with some of the largest fleets in America. We're.
Making good headway.
We've got some serious negotiations negotiations on now with the I would say little bit larger numbers than the ones that I just mentioned today and I hope that soon I'll have something to report on that.
But you know this takes awhile and it takes longer than I'd like sometimes but theres many steps as you as you.
Moved through the sales cycle, and we're asking people to.
When we're asking them to consider purchasing 50, or 100 or 200 trucks user significant purchases that involve lots of moving parts.
And.
But we're making progress on it and we continue to expand the pipeline of vehicles in the sales.
Process, which we continue to check and our CIO CRM system. So.
Stay tuned.
We consider.
Hopefully this is current market situation in the oil price collapse doesn't slowed up too much I'm, hoping that we'll see some bounce back on that.
But we continue to move along on zero now program.
Got it thanks for that.
Maybe just turning to the outlook a little bit and I can certainly appreciate being taken a conservative view, there, especially given the lets even happen in the last couple of days.
But just wanted to clarify so given the big move in the three rins.
When you think about next year or I'm, sorry for 2020.
Guidance for the outlook are you assuming that they stay here at kind of sounds like you're assuming that they moderate a little bit.
Yes, probably moderate a little bit there certainly.
We're assuming.
That they've.
Come up from.
The lows of 19.
But we're being we're being.
You know just kind of cautiously positive on those <unk>.
<unk>.
Okay makes sense and then on the EBITDA Guide just caught my eye.
Could you give a range and this.
This go around you gave a specific.
Approximately I believe it was 56 million so just.
Just keep.
And Eric that's just a little bit of where we're.
Where we're at today and.
What's going on.
On in the market, so approximately theres, a little room below and above that.
Okay got it.
Yes, and maybe just last one from me just at the Port Semina I know the port fee, it's still a bit of a moving target I mean is that something that.
You could provide an update on.
And maybe.
Whether whether you think it's a number.
That that actually it's going to have some teeth and drive adoption at the ports.
Well I.
Well I have to say that I'm not altogether thrilled with the number that they've come up with the portside yesterday on a fee generates.
$90 million worth of $10 per container move so it generates a close to $100 million year for cleaner trucks.
It's certainly on the low end what needed to be done in order to have.
Large scale adoption I think the.
The port.
Missions.
Hit behind the current.
Trade, you know trade tension with China in the quarter Corona virus and other things to to come up with the like number I don't think they really acted in the best.
Interest of air quality, and I think I missed a little bit of an opportunity now you know.
Dave said, it's the beginning that they wanted to go slow and they want it to.
Launch program into adjusted overtime, it's not.
Eric it's not enough to drive the kind of adoption that.
At the plant itself calls for so it's.
Start.
We do have about.
365 trucks that it put in for.
Grants that would fund natural gas trucks in the port so I like that.
Theres still a few more pieces to the.
Let's call it the.
The final program that will take shape over the next couple of months about the adoption dates and exactly when does is zero or low nox qualify and how long does that get exempted four or not how that all figures out.
So there is little bit more to be done and you know there's there's other moves a foot.
By the air quality officials to is two to continue to put pressure on the port to.
To be.
More aggressive than what I think we came up with so let's say, it's a it's start in the right direction.
It that container fee that came out yesterday is not one that Scott.
The overnight changed port.
To anything.
And I have happened to think that more needs to be done in order to make it more bold tend to really get rid of the dirty is polluting trucks down there.
Okay. Thanks, a lot.
You bet.
Your next question comes from line of Rob Brown with Lake Street Capital markets. Please proceed with your question.
Good afternoon.
Hey, Rob Rob.
Just a little bit more on the 2020 outlook you gave a range of growth I guess, how how much is that range.
I have already baked in in terms of the contracts, you've signed up and how much needs needs new sign ups.
Those kind of ranges.
Yeah.
Well.
You know I mean, a good portion is.
You know is kinda.
Nick growth, but no I don't know if I would say, it's even 50 50, but.
I mean theres certainly some.
Organic growth that if you're come off of.
You come off of some of our recent run rate.
And you kind of pencil that out and no theres a little bit of.
Variation in the summer months when the gas.
Use is higher.
So I mean, Rob we're not hedging is I guess would just to think about it this way as you and others.
That isn't day sandbag number right theres lot of work to be done all we have to sell right we have to work.
Fleets all the time, we know for instance that certain of our customers are probably going to buy more refuse trucks next year right. So you kind of look our embedded.
A volume and you know we have a lot of refuse customers and so we tend to think that we know that theres probably going to be.
You know it addition of trucks.
But they're not in the bag and they're not under contract necessarily so theres some of that but theres still probably half of that.
If we thought going.
A month or so ago, we were kind of thinking that we were going to see growth in though in the.
No double digits.
And.
So we brought it in here a bit because we know we have experienced to say that if you have prolong period at $30 oil, it's going to 10, it's going to tap and down the growth rate.
Here, just because the economics get tougher and of course, if we have some.
But to me that really slows down people begin to put off purchases of trucks and refuse trucks and everything else. So.
But when you if we were thinking 2020 should we have we felt pretty good about low double digit growth and I would say of that we probably.
You could probably bank on about 5% of it.
We felt pretty good about and the other 7% or so of that we've we had a very good line on and that's kind of how we we got to that number. So we brought in a little hair now we're still adding when you think about the size here.
We're still adding a lot of new gallons.
Even with the guidance, we're providing today.
And so it's still significant growth. It's you know a few million gallons every month.
So it it adds up and it's it's important for US does that does that help.
Oh that.
I was a great discussion thank you.
It really gives coty there. Thank you.
Okay, and then and then kind of back to the redeem environment.
Is it.
You talked about you PS driving a fair amount of interest.
Just wanted to get a sense of sort of big fleets small fleets sort of whereas that interest coming is it is.
Concentrated in a certain area or do you really see it across the board.
Well I think I'd be safe in saying that really now you know we provide all of our customers in California renewable natural gas.
Sure they like it or not right. So.
They're all they all have benefit from it and then they are all.
Okay.
And it's so it's important to I would say the really isn't there isn't a customer that tells us that l. water renewed of renewable natural gas I mean, it's the most potent thing that we have so.
Kroger and and public.
Public wanted it in 20 states.
And waste management and you PS wanted to for seven years. So this this is the most potent fuel that's out there and the fleets although it.
And they all audit and so all of our rescue refuse customers want it in fact to go to the.
Rob you probably been would you go to the to the one of the Big refuge shows Theres all sorts of stuff there on Digesters and renewable natural gas that at the track because the trash guys are involved in many ways in landfills and such.
So our rep.
Clearly want it.
The the transits love It you know our LMCA that runs the largest natural gas fleet in the United States Public Transit fleece all of them are on natural gas, except a handful of electric buses.
[music].
Here in Los Angeles.
It's largely and I think I'm right about this if it's not 100% renewable it's dark close its is mostly renewable natural gas.
I mean, they run a fleet that's cleaner than if they were switch over to electric today.
So they they get that.
And that's super powerful.
And they get to do at a discount to to diesel and on parity with natural gas. So it's a really powerful tool for us.
And our customers love it.
Yeah, I mean, it's absolutely a solution.
To address the sustainability.
And Thats, becoming.
It.
Can you sleeve. It ended the existing network, we've already spent the money to build these stations across the country.
Eventually all of our customers will be getting the renewable.
And.
And over time, what's happening is you'll move more and more to the low.
Hi, and I think for those some of you on the phone understand but.
But you know will migrate from.
Last methane, that's that's cleaned up out of the landfill to methane that's taken out of date.
Digester dairy farm and.
That but that fuel.
The latter that I've talked about the dairy farm is dramatically less 300% less than diesel. So it's really a carbon sick. So it's hard for other alternative fuels no matter, how exotic and how space age they are to get to where we are on that.
We don't always fit.
No we don't always fit the environmental community's desire or some of our regulators out here, but when you when the market. We're kind of the rubber meets the road to be able do it in an economic way and do it efficiently, it's really kind of what the private sector showing you the others think at work and it's.
It's pretty far.
Yes, yes.
And then that point as it is it the the private sector when the regulators sort of set these rules do they do they take into account private sector view are these rules going to sort of clash with that private sector view in the in the economic sort of that makes sense and drives some disruption there.
So with rules you talk about rules to push everybody to an electric truck, you mean or sort of vessels I would say proposed discussions that really rules, yet, but sort of some of that pros discussions around zero mission.
Yeah, I think Theres, just I know it doesn't sound avant garde, but I think there is this kind of this.
Somewhat.
Religious sorta fervor that that somehow has gotten into the sort of the view that it has to be electric or hydrogen or.
We ended the solar and those are the only particular things that really fit.
And.
And.
And you know, it's kind of funny a few years ago when that was getting little ahead of steam we didnt have real really renewable gas, we didnt have the pathway for.
And now that we have it's a little bit of a fly in the ointment.
And.
So.
I think that the regulators as usual our little out of sync.
What the market is now beginning to show you.
Thanks, all of our legislated regularly regular.
Regulators in California are a little behind the times and clinging to.
The two what they think people want to here.
Yeah, I think there are frankly, I think there I've step and.
So far what theyre, having to do is they're having to pay for it all.
Well, they don't have the money to pay for oil.
They came up with a proposed rule for Los Angeles International Airport that will require.
Our everything to go to electric it's a few billion dollar they don't have the money for there isn't the money in the private sector to pay for so I think once all of that becomes the figured out.
I'll, let alone the couple of thousand transit buses LTM today to switch over from low.
Super low.
Ultralow renewable natural gas today.
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Running the low Nox engine here in Los Angeles to go over to electric Thats, a 5 billion dollar program to get something that's not as clean as what they have right now.
I think what's that kind of stuff begins.
The figured out people are going to say what the world are you guys do it so.
So I feel pretty good about that we have the right fuel that is actually economic and there can be a lot of it in the country.
So I don't know how how long it all goes still at some of the regulations.
Greater on themselves.
But they will at some point.
Okay, great. Thank for that overview, I'll turn it over and yet the same way Rob I don't think that the movement is going backward.
I, just think side of the kind of some of this blind command and control.
It has to albeit old technology, forcing is not going to fall I never never really has.
Okay, great. Thank you.
Your next question comes from line of Pavel Molchanov with Raymond James. Please proceed with your question.
Thanks for taking my question.
LNG volumes were down I think.
You are in a row and I'm, just curious kind of what what the headwinds are and.
What.
You are doing to address that.
CNG is.
King well in.
In trucking.
Okay.
And.
I think until about El you see more wide spread adoption now that you have better tank packages on on trucks until you see wider.
More.
Dispersed.
Doug.
Deeper penetration in over the road trucking in North America, I think you'll see the split being heavily weighted towards CNG not LNG.
Now you will you will have LNG in certain places I think you'll still see some LNG.
When you see some longer range trucking that does sleeper cabs and some of that but you know you've got some range now on CNG vehicles, where you get six 700 miles range, that's a lot of range.
You didn't have that several years ago.
So I don't know that theres anything to be addressed here is to be able to provide what.
With the customer needs.
I think as you begin to see some longer range stuff that you are still sort of seeing super regions of course that the industry is going more towards super regional but.
Until you see you.
Meet a lot of the ban on Super regions, you get to be sung some really.
Longer routes stuff.
Maybe heavier duty.
Well you will you move to LNG.
What's the difference between your margins between the two fuel types kind of on average.
Better our CNG.
No.
Overall tough.
Okay used to be the opposite right.
Well I'm not sure ever really was good.
Okay.
Hi, there side you provided by the time, you liquefied haul it in that it it's it's.
CNG is pretty hard to be.
Okay last question.
Even after paying down the.
7.5% notes in June.
Have a pretty pretty good cash balance with fee.
40 million plus of tax credit youre going to get this quarter.
And.
Curious are there any.
Kind of M&A consolidation opportunities, particularly if some of the smaller players in the space.
End up running into trouble in this $30 per barrel oil world.
You know.
Well, we look at that all the time and you know we've done it before right Weve, though over the years, we've acquired different franchises from utilities and others. We've looked at a lot of a lot of them that have been consolidated in more recent times.
We have a pretty robust network.
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And so you know nodes on the system is not.
Really that necessary for us I mean, the last thing we need as a whole bunch of more under.
Underutilized fueling stations and so we always look at them and we talked all to our our competitors and we talked.
Two.
Customers that might have customer stations and so.
We'll look at them from time to time, they're not a whole lot of networks out there that that are that advantageous for us.
I appreciate it if there are if they if there are they don't they don't have volume.
Yes, we work hard it.
Picking off that volume overtime so.
Were good competitors are too.
[noise] appreciate you and you know yes, okay.
So I don't I don't see any.
Real big M&A activity out there.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to management for closing remarks.
Good well. Thank you operator, well. Thank you everybody appreciate you attending our call today, and we will keep you updated and.
Next.
Quarters call. Thank you.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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