Q1 2021 Clean Energy Fuels Corp Earnings Call

[music].

Greetings and welcome to clean energy fuels first quarter, 2020 One earnings conference call.

At this time all participants are in a listen only mode. A question and 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 it is now my pleasure to introduce your host Robert Vreeland, Chief Financial Officer. Thank you you may begin.

Thank you operator.

This afternoon clean energy released financial results for the first quarter, ending March 31, 2020 one.

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.

The call is also being webcast.

And there will be a replay available on the website for 30 days.

Before we begin we'd like to remind you that some of the information contained in the news release and on this conference call contains forward looking statements that involve risks uncertainties and assumptions that are difficult to predict.

Words or expressions, reflecting optimism satisfaction with current prospects as well as words, such as believe intend expect plan should.

Anticipate and similar variations identify forward looking statements, but their absence does not mean that the statement is not forward looking.

Such forward looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements.

Factors that could cause or contribute to such differences are described in detail on 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 on.

Operating results.

Non-GAAP financial measures should be considered and 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 and the Companys press release, which has been furnished to the SEC on form 8-K today.

With that I will turn the call over to our President and Chief Executive Officer, Andrew Little Fair.

You, Bob and good afternoon, everyone and thank you for joining us.

I will quickly touch on our financial and operational highlights and then spend some time speaking about are very important and exciting Amazon announcements.

Our new strategic partnership with Amazon is multi pronged and we believe positions clean energy very well for the future and confirms the direction, we set for ourselves a years ago.

As anticipated the COVID-19 pandemic continue to impact our volumes, but with stronger environmental credit pricing, our adjusted EBITDA of $11 7 million was up 4% over last year.

And as with the rest of the country. We are optimistic that the overall economy, including transportation sector, specifically, we will continue to rebound.

Our balance sheet remains healthy with $146 million, and cash and investments and $90 million and debt at the end of the quarter, all and all a good quarter considering the lingering effects of COVID-19 would you have hit two of our sectors, the hardest transit and airport fleece.

But these two sectors have improved from their lows during the pandemic recession as people begin to travel more crosstown via a bus or across the country from one of the airports. We serve in fact, our business continues to expand with new customers demonstrated and in our press release, we distributed yesterday that I hope you saw which highlighted a number of recent.

Selling agreements we have signed.

Now, let's talk about Amazon and.

The recent announcement that we made with them is the most important commercial event and clean energy history.

Not surprisingly for a deal like this we're under a nondisclosure restriction. So we are limited as to what we can say and we don't want to get caught speeding because we don't need to.

Even so I wanted to make sure everyone fully understands the significance to clean energy.

This new strategic partnership with Amazon is based on two different agreements.

One is a commercial deal and and is about Amazon agreeing to buy a substantial amount of renewable natural gas fuel through our stations potentially hundreds of millions of gallons of RMG.

This fuel will be consumed by our fleet of mostly heavy duty trucks, and some midsized trucks at Amazons and the process of deploying with many of the trucks are already operating.

These trucks will fuel at 27 over our existing stations around the country that we own and operate and.

And as Amazon deploys more R&D trucks, they will fuel added 19 additional clean energy stations that we plan to build by the end of the year.

And we've already identified most of the locations for these stations and in some cases have already secured the land.

Clean energy will own the new stations and while it's nice to have a large anchor fleet customers like Amazon. These new stations will be available for other fleets to fuel as well.

You've heard me speak in the past that one of the beneficial aspects of R&D is that it's a drop in fuel and that can be quickly and easily provided to a new customer and any of our fueling stations and the U S.

The Amazon fueling agreement is a perfect example of this and in fact, one on steroids as.

And as they deploy their new fleet of R&D trucks across 15 different states around the country Amazon is immediately operating and the most sustainable way possible.

Fortunately, we were the first to make R&D commercially available and we have continuously work for years to secure a growing supply of RMG.

We have gained a deep knowledge of how to work with the different government agencies and utilities to provide the fuel to designated locations throughout our U S network of over 540 stations.

We also have the experienced and navigate through the federal and state environmental credit procedures, which allows us to provide ultra clean fuel for less and diesel.

As I mentioned because of our customers' wishes I don't speak to the number of trucks at Amazon and deploy.

But it is safe to say that by fueling a 46 different stations with routes Criss crossing the country. It is a substantial commitment.

Another way to judge the scale of the fuel deal is through the lens of the second agreement, which involves our issuing a warrant to Amazon to purchased 53 million shares of our stock.

As you might have read and our 8-K or our proxy statement.

The shares vest and multiple tranches as Amazon continues to purchase more and more R&D and fuel from us up to a total of $500 million.

And that figure excludes any pass through costs, such as gas electricity and transportation. So the actual number to our topline revenue would be considerably higher.

Clean energy his executive team and board looked at the decision to allow Amazon do eventually purchase up to 20% of our outstanding shares very closely.

We concluded that these agreements represent so much of what we have been working towards for the last decade, and and possibly and have the possibility to make a lasting effect not only on our business, but on heavy duty R&D fueling overall.

By linking the fuel purchase agreement to the warrant agreement Amazon is indicating they want a longer term and deeper partnership and just being a customer.

As a strategic partner and potential substantial owner of clean energy. They now have a mistake and our success and are incentivized to purchase more and more R&D from us.

The better we do the better Amazon and our shareholders do Furthermore, if amazon earns into the warrant and exercises it for cash proceeds to clean energy will be more than $700 million.

And we're talking about a strike price of $13 49 per share.

We believe the market share price of our stock at the time of exercise will be significantly higher than the strike price, creating a meaningful incentive and upside for Amazon.

Upside gain for Amazon, which would also mean tremendous upside all clean energy shareholders. This is a great validation of the value of clean energy, especially when looking back to the not too distant past.

In short, we believe the strategic partnership with Amazon could be worth $1 $5 billion or more in gross proceeds between revenue from fuel sales and proceeds from cash exercise of the warrant.

It is an extraordinary statement that one of the largest brands and the world, which has carved out a very impressive leadership position and the drive to address climate change chose RMG as they expand their logistics operations and the heavy duty trucking.

But they are in good company other alternative fuels that might continue to grab the headlines about their potential future but.

But Amazon is now joining the largest logistics company and the world UBS, the two largest waste companies and the U S. Wm and is now officially called and Republic services and the two largest transit agencies and the country and New York MTA and La Metro among many others all of which are operating thousands and heavy duty.

Trucks refuse trucks and buses with RMG every day.

By doing so these fleets of large vehicles are keeping hundreds of millions of tons of greenhouse gas from escaping into the atmosphere.

Does this skeptics that say LNG might be a niche fuel I would say.

It's real and having a significant and profound effect on the climate change today.

And in doing so and easily and cost effectively.

And cost effectively for the operators of these fleets.

Depart here for a second for my script and talk about kind of the context of the way I look at.

Animal waste and as it develops into R&D. If you look at the current studies out there is probably about 30 billion gallons of RMG from all sources, that's available and the United States and Thats on on annual basis and of course that would take into account landfills and wastewater treatment.

And and dairy hubs.

<unk> et cetera, I would like to focus though on the fact of when people think about this cash this might be kind of a niche while I think that when you look at the low hanging fruit and others agree with me on this and factor.

A major energy companies staff agrees, there's probably five to 7 billion gallons of dairy RMG available annually now thats going to take five to 10 years to bring it all online probably 75 to seven years and at the at the cost of $50 billion to $70 billion.

But these these R&D facilities are very economic.

And so you would think well that's kind of a niche $5 to 7 billion gallons after all.

And as states, he's using 35 billion gallons of diesel annually, but when you put that on the carbon scale and you recognize that.

And this fuel is.

And three to four times less carbon than diesel per GAAP.

Gallon.

On the carpet scale, you can see that you're really talking about removing 20 billion gallons of diesel annually from the roads. So it's a huge and very important contribution to our effort to combat climate change and and reduce carbon.

This growing demand for LNG, and particularly R&D from dairies and agricultural facilities, which is rated by the California Air Resources Board as much as two to 335 times cleaner than any other alternative helps to bring into focus the other agreements that we finalized and the first quarter.

The two joint ventures that we now have in place with total on BP to bring more of this ultra clean RMG online is already showing great progress. We are working with multiple dairy owners to construct own and operate digesters and R&D processors at their facilities and in fact, just this morning, we signed an agreement with the family owned dairy to.

The digester, which is expected to add over $1 2 million annual gallons of negative carbon RMG supply when it comes online.

The capital allocated towards these projects and the resulting additional R&D supply will keep us well positioned and meeting the growing demand by Amazon and other new customers.

So thank you for allowing me a little more time to expound on our new relationship with Amazon and think it is important for everyone to know the significance of it and the long term benefits. It has to the upward trajectory of clean energy business.

Particularly if you're a shareholder and as you know a portion of the warrant needs to be approved by our shareholders Clean Energy's Board of directors has already approved the warrant and strongly recommends that our shareholders do the same.

We have never been more excited and optimistic about the future and how clean energy is positioned itself over the last few years to take advantage of the world's heightened awareness of the actions are urgently needed to address climate issues.

And the transportation industry must play a large role on this and we have the solution.

And with that I will hand, the call over to Bob.

Thank you Andrew.

For the first quarter of 2021, our results were in line with our expectations and as we look forward, we're maintaining our adjusted EBITDA guidance of $60 million to $62 million for 2020 one.

We are updating our guidance on GAAP earnings for 2021 to reflect the non cash accounting treatments of the vesting of the warrant we issued to Amazon.

I will speak to that accounting treatment and more detail in a moment.

Continuing with the first quarter total volumes were $92 4 million gallons compared to $99 3 million gallons a year ago. The.

On a year over year decline is directly attributed to the impact of COVID-19 to 2021 compared to the 2021st quarter, which was minimally impacted by COVID-19.

And although our overall volumes declined our R&D volume grew 3% and the first quarter compared to a year ago on.

LNG volumes for the first quarter of 2021 were 37 million gallons compared to 36 million gallons a year ago.

Because we flow RMG to many of our fueling stations the lower fueling volumes due to COVID-19 also impacted our R&D and lowered the year over year growth. However, on the financial side, our rens and else CFS revenues from R&D deliveries increased 63% to $9 5 million from $5.

$8 million, despite there being only a 3% increase and R&D volumes.

This increase and ran and al CFS revenue was primarily from gains and RIN pricing compared to a year ago with modest gains and <unk>.

Overall revenue was $77 1 million for the first quarter of 2021, which was reduced by $2 million due to the noncash change in fair value of our zero and our related hedge and customer contracts.

Exclusive of the $2 million reduction and our revenue amounted to $79 million.

Prior year first quarter revenue was 86 million, which included $5 6 million and non cash gains related to the changes in fair value of the zero and our related hedging customer contracts.

Otherwise the prior year first quarter revenue was $80 four compared to $79 million on.

On less volume.

We benefited in the quarter from a higher effective price on our volume related revenue our effective price per gallon and the first quarter of 2021 was <unk> 76 per gallon compared to <unk> 70 cents, a gallon a year ago.

This reflects generally higher natural gas prices and related prices at the pump.

<unk> station sales and FTC revenues remained steady and within expectations, but also both are still being impacted by COVID-19, particularly when comparing to last year.

Our gross margins improved and the first quarter of 2021 compared to 2020, when excluding the noncash fair value loss of $2 million from 2021, and the noncash fair value gain of $5 6.002 million 20.

Exclusive.

Of these fair value items, our gross margin was $28 8 million and the first quarter of 2021 compared to $27 4 million and the first quarter of 2020.

A big part of this improvement in gross margin was the gains and ran and El CFS revenues previously mentioned.

Our effective margin per gallon for the first quarter of 2021 spiked a bit to 2006 per gallon compared to 22.

Again, a year ago.

Also reflecting favorable RIN pricing and favorable commodity sales during the quarter.

We still believe our margin per gallon will be within our expected range of 22 to 26 for the year.

Our SG&A was $21 4 million and the first quarter of 2021 compared to $18 3 million a year ago and increase of $3 1 million.

Of which $2 3 million relates to an increase and stock compensation as expected and as noted in my annual guidance.

Our GAAP net loss for the first quarter of 2021 was $7 2 million, which also includes the $2 million and non cash losses from the change in fair value of the zero on our hedge items Pri.

Prior year first quarter net income was.

It was $1 7 million, which included $5 6 million and the noncash gains from the zero now hedge items.

Adjusted EBITDA was 11, seven and for $11 7 million for the first quarter of 2021 compared to $11 2 million a year ago, which again highlighted the benefit in 2021 of incremental revenues associated with our R&D deliveries.

Our cash flow provided from operations amounted to $3 3 million for the first quarter of 2021 compared to cash used and operations of $4 3 million and the first quarter of 2020.

Exclusive of changes and operating assets and liabilities operating cash flow was 11 4 million and the first quarter of 2021.

First is $9 1 million in the first quarter of 2020.

Capex spending was $3 3 million for the first quarter of 2021.

And Andrew mentioned, our cash and investments balance of $146 million with debt of $90 million at the end of March 2021.

And in April and subsequent to the quarter, we paid in full the $50 million loan from BP that was associated with funding the initial project costs.

<unk> to our new RMG joint venture with BP.

Looking forward as I mentioned, we are updating our guidance for our GAAP earnings for 2021 to reflect the accounting for the warrant issued to Amazon.

While we believe the warrant has far reaching value implications to clean energy.

The accounting rules fall within the GAAP revenue standard since the warrant is directly related to our fuel agreement with Amazon.

We will be recognizing a contra revenue charge as the warrant verse.

And the warrant shares vest over time based on fuel purchases by Amazon and its affiliates.

We have estimated for 2021 and contra revenue charge of $76 million with approximately $68 million of that being recorded and the second quarter, principally due to the initial vesting of $13 three.

And 3 million warrant shares or <unk> 25 per cent of the possible 53 1 million shares available.

Thereafter, the number of warrants shares vesting will be proportionate to the fuel purchases and recorded as a contra revenue and the periods and the fuel purchases occur and divesting and will continue until all the warrant shares have been invested.

Keeping in mind that if all of the vesting conditions are met by Amazon and they will have purchased hundreds of millions of gallons of RMG from us.

And with that operator, I'll turn the call over for questions.

Thank you, ladies and gentlemen, and we will now be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad and confirmation tone will indicate your line is and the question queue. You May Press Star two and if you would like to remove your question from the Q4 participants using speaker equipment and may be necessary to pick up your handset before.

And the Starkey. Our first question comes from the line of Eric Stine with Craig Hallum. Please proceed with your question.

Hi, Andrew.

Hi, there.

Thank you so just maybe on the Amazon deal and I know that you're limited as to what you can say, but.

And in light and the fact that these are going to be clean.

Oh and stations.

And curious your thoughts if theres anything you can talk about.

And on whether Amazon pushes this to their suppliers I mean, it sounds like.

Youre confident and getting volumes from other fleets wondering if those other fleets would.

And would be those suppliers and.

Yes.

And I don't know if you have a thought on what those volumes could be they would seem to be significant.

Well I don't have anything specific from Amazon to give you at this point on that Eric but I do know that we have had some.

Amazon vendors and suppliers.

Purchasing natural gas trucks.

And arriving at our stations and so.

I don't know how Amazon is looking at this and I haven't.

I can't discuss exactly.

Any program that they might have they will have to do that but.

And I know that as companies like Amazon look at their carbon emissions their supply chain and their suppliers and those coming to and from supplying them goods they get.

They have to account for those emissions and those carbon emissions and so.

It's probably.

Instructive.

That these stations that are.

Are being built at the request of and located with Amazon and mind.

And our being.

Open to the public.

So we'll have to kind of see how that develops but I think thats, probably the significant point there.

Yes, Okay and then.

And I know, it's still early so maybe and this is a question.

Few quarters down the road, but I know when UBS started on their route.

And that was a driver of additional fleet interest.

I'm wondering if it's too early for that if you are seeing it incoming calls on that and then.

And do you feel like people are starting to get the value proposition here I mean, given that truckers.

<unk>.

Half a penny so.

I do Eric we have had inbound calls by large logistics and the large for hire fleets a lot of these fleets.

All for Amazon right and so they are very familiar with what's going on and obviously.

Obviously keenly.

Interested in it and so that's a good thing.

Demo trucks going out to some very significant fleets right now.

And that have tried it and the past and are looking again.

And so say and I've said this before is the as these fleets are facing their ESG goals and their sustainability goals.

The the screws or tightening everywhere and people are taking and having it take this more seriously and as they begin to look at there are other options.

Electric heavy duty trucks and the potential some day of fuel cell trucks, they begin to become familiar with the costs associated with these other options and the R&D looks very favorable and that case.

And it's something that can happen today and can begin can be dropped in today.

Using a power.

A power source, that's very familiar that they are very familiar with Reits Cummins engine and.

So.

Okay.

We are seeing some momentum from this and I hope I hope as this becomes more widely known and people begin to see more tractors on the road that it will just increase the interest.

Got it and then last one for me and I know, maybe not specific to Amazon.

But just more from the clean energy on station standpoint, that's part of this agreement.

I know there's been some confusion over what the margin impact would be.

So just maybe just chat a little bit about the margins at company owned stations.

Which obviously these are at Amazon.

I'll, let Bob maybe fill and air after five bundle this and he wants to embellish it but.

The number that we quote.

<unk> last.

The last quarter and this quarter it was nice.

Nice.

Spike and that up to 26, that's a cost cost across all of the gallons that we sell.

And that would take into account different categories of gallons right on.

Operation and maintenance gallons, where we may not be sell on the fuel, but we're getting paid per gallon to maintain the particular station. So when you blend it all together that's how we arrived at this 26 that was and is one of the numbers that is the number that we cite.

But when you look at stations that we own.

Where we are providing the fuel.

And in control of for instance, our R&D and it would be.

Many many stations in California, and and all across the country.

<unk> margin substantially higher right. So I mean, I've taken I think on this call over the years I've taken you through the buildup. When you look at the price of natural gas and you understand that there are seven gallons of diesel per Mcf and so that means your commodity per gallons 35, or so and then you put on <unk>.

Our $1 20 of cost so youre at the nozzle tip at a dollar and a half and you're competing with diesel at $4. You can see there's a lot of room and there. There's a lot of room to give our customers on discount and there's room for us to have a very nice margin. So we have stations, where we have to consider it will be higher margin than that so these are going to be our stations as you point out.

Eric.

And of course, we're giving.

A good price, but we're also recognize the fact that we're building a station for a customer with a commitment on fuel volume, but it's a it's a much as a much different margin profile than maybe some.

And kind of jump to the conclusion that it was just multiply some of these gallons towards by that 26.

Yes.

Okay. Thanks.

Substantially completed and if not many online by 2021, that's our hope I'd like to have them all day, if if we could.

These stations are gonna be large.

You should there'll be there'll be size, depending on the needs at particular location. So some are larger and others, but I would say in general and you should be thinking that these stations would be sort of truck stop like in terms and being able to fuel.

Two.

Tractors at a time, sometimes three.

At 10 gallons a minute type type speeds, which is good average tractor should take on board about 85 gallons at a Phil. So that's that's a good time in terms of dwell time.

For the feeling and these stations will be sized but I would say if you kind of wanted to use and average they would be able to fuel 100 tractors a day or more.

And some movies.

Significantly larger that have that capability, so they're going to be have room to grow and they'll they're they're not stations of yesteryear for light duty taxi cabs.

They're they're.

Large commercial truck stops.

Okay, Okay, great and and so once they're in place and it's a matter of trucks ramping to get the fuel volume.

You have a sense on on sort of the timeline of how that rules out and and how you see that wrapping sort of what period.

Well those trucks have been the the trucks and question that we can't we would love to get to the number at some point the trucks and they've been or.

And the first tranche trucks.

Have been built.

And then there's another huge big slug come and and that are being built and will be delivered and the remainder part of the year.

And I think the expectation is those trucks are going to arrive all and 2021.

And and as they do they will fuel on our network and they will fuel at the stations as they open and they will move they'll move trucks around to make sure that they can begin to put those in the in the surface.

But they have the truck slots and they're being and those are.

And ordered.

Okay. Okay, great. Thank you and then on the on the capacity side and thank you talked about adding adding some facilities are starting that process through the jv's that you have but.

How quickly do you need to add orangey capacity to meet Amazon or will those things work and tandem and then I guess, what's your view of of supply capacity that you will add over the next couple of years well.

Well.

This is a it's a little complicated because we want.

As much low C. I a negative carbon fuels, we could get bright because you think about this is because we have a low carbon and fuels standard and California, we can stand and we're selling.

Oh, 100, 1500, 20 million gallons and California's just kind of use that number.

And the ballpark there right this last year.

And and as I've said before we expect to be ramping up or.

Low Ci dairy gas in California.

Somewhere between six to 10 times, what we did last year. This year. So we're starting from a lower a much lower number but my point is is as we bring on dairy gas from around the country it'll come to California first is worse most valuable and.

And it releases.

Other gas to other parts of the country.

Where.

It's not as low carbon.

And so.

Our focus so that's why I was I talked about the five to 7 billion gallons is to bring on the lowest carbon fuel.

And.

And this way the low carbon fuels standard it works ride it encourage you to bring on the cleanest fuels possible capture the most methane.

It's been interesting Robert we've been all reading about some of the major oil companies try and get their arms around sequestration right carbon and that's what we're doing right.

And a way, we're taking net methane before it escapes capturing it and putting it into a vehicle and burning so it's up.

And so we're going to want to do more low ci and and Californian and overtime or plan right now on the supply side. So we're working so hard we haven't origination team that's.

Busy right now we have.

In the pipeline 25 different dairy projects.

We're working through the negotiations with the with the farms, we have seven under Contra seven under way right now and the contracting process.

And I will need all of it plus and as you begin to.

We all begin to understand the scale of the Amazon deal, we need to add significantly to the to the.

The supply I don't think there's a problem of.

Of.

Outpacing and the near term so we've been kind of on the ragged edge of it here lately, but.

Outpacing the demand of RMG, because the industries responding on RMG.

All right, our friends and Chevron and others are busy on these projects.

But the Amazon potential is just going to keep us all very busy but with the landfills and waste water and other things you'll be able to meet the demand and other demand and that will come on.

What you really want immediate with as little as possible. That's our that's our goal because that's the most valuable and is best for all.

Okay. Good thank and we've got to be we've got to be creating over the next few years.

Several hundred million gallons of RMG. In addition to where we are today.

Our next question comes from the line of my non Cooped up with Credit Suisse. Please proceed with your question.

I actually wanted to quickly focus on the upstream versus.

And seem profitability hash. So let's say you have a company on station and let's say, even if it's giving you 30 to 35 cents a gallon what I'm trying to understand is this amazon been giving you the volume to develop the low cir and G. Two yuck upstream partners and the profitability.

Over there is five to $7 again and place you split that half day, that's like $3 again, and so it doesn't really matter if on a downstream bases you make 30 cents a gallon on a 40 cents a gallon the real benefit of this deal and stopped and now you can go back to your partners total IBP and others developed upstream on <unk>, which is like.

Pete on as a guidance on the real benefit from from the upstream site on the margin not really the downstream site and if you can talk about that.

Well.

Yes, and no I mean, there's value on both but you are absolutely correct that the demand that's created.

From a deal like this.

Just completely supports our position on the upstream supply side.

Because.

Look I mean after all the upstream is is being developed.

With.

With the intent.

Of putting it into.

For to get the eyes value to put it into.

Vehicles heavy duty vehicles.

And so when you come to that when you come to the table, where you have that and you have that demand then it's a pretty powerful upstream proposition not not to mention the.

And the economics that then flow into the upstream which is separate from that 30 35 cents you mentioned.

That would be in our case would be and the joint venture now.

Will we will have we will have those economics to the extent that we are the producer and.

And we're using the gas.

From ourselves and but we'll have to get it from other sources as well.

And Ah Manav. We also just on the source I don't want those on the call and go on how are these guys going to develop all this RMG.

We because we are the sort of the chokepoint with the infrastructure and.

And have.

The largest network.

We already take RMG for 40 different sources.

And that that gross all the time.

And it'll that will continue to grow but manav, you're right the upstream very profitable but.

Don't underestimate the value of the downstream per Gal.

And and and dull and dull and and what I say go back go back and look at go back and look at my buildup and you might be surprised that at a station that we own our margin is better than what you're thinking.

No I am not doubting that I'm, just saying some time like I, just try and now I'm just trying to Romano.

Yes, it's it gets confused on the way, we kind of talk about it some time and.

And I'm, just saying save and you put in the reigns thirty-five dollars I'm on <unk>, you put a negative day <unk> credit the magnitude of that can be significant so against the downstream profitability is very important I understand it but if when we're dealing with <unk> because that'll CFS credit itself is so big that.

The profitability could be significantly have that's the only point and I was trying to make just and no I I look it's it's we are great about and no manav I'm not giving it away or just flushing. It out okay I've got on going to sell it on.

A lot of question have and from Amazon you also have programs with people like Chevron on adopt a bold and can you give us an update on that program is going so you're on to understand besides Amazon people like Chevron and running these adopt a boat program. How are those programs also going yes.

Yes.

We're very pleased with the Chevron and I have said on call that we were working upsides that program and we are we're in the process of that.

So standby for that.

We have.

Pipeline of trucks at the port that are in.

In the in the development proposed and contracting phase and the total is about.

Oh Gosh I think it's 518 trucks as of last Friday. So that's.

Potentially really good volume all orangey, all and through our network all in partnership receiving incentive dollars from share.

<unk> with us to use that orangy provided by Chevron and their upstream operation and.

And to our network and so we continue to think that's really a kind of and elegant program and it's kind of a as I've said before it's win win win win for Chevron wind for the farmers went for the port operators that are being forced into cleaner technologies and this is a way for them to do it with some and.

And of dollars and it's still do it at a dramatic discount diesel and it's a win for us.

And one last question is I think yesterday and took a couple of days ago, you announced a number of new contracts. If you could highlight which ones do you think are the most significant which are you on a new customer. So if you could just it on us to very quickly that announcement of multiple contracts and that you are signed.

Yeah, and the reason we did that yesterday was just because it's gotten to be on a it's it's a nice thing is there's so many different deals on this call. It's kind of a laundry list gets a little confused and let me just highlight a couple that I I think are important and and sort of maybe.

A fleet segment.

Cal Portland.

Portland.

Cement mixers.

Very large company.

You know just just I think they have a fleet now are approaching.

220, or 250 mixers and this and this area. They just signed up for and R&D supply agreement for 150 more ready mix trucks.

That will use a million gallons a year.

And we're seeing that industry kind of take off a little bit slower smaller, but it's very similar to the refuse industry and.

And now we're working with.

Really all of the largest.

Ready mixed company. So I wanted to point that went out.

And the pack and anchor one and the port.

Is a is a real good RMG that's those are a heavy duty.

Heavy duty.

<unk>.

In and down in the in the Port and so we're proud of that one I think the Biagi brothers. You know this is a large liqueur distributor 900000 gallons.

Using our zero now program.

But biagi, you know as customers like Amazon Anheuser Busch and Pepsi. So I wanted to highlight of that and then of course.

We continue with like the city of Pasadena.

California.

A new multiyear orangey supply agreement for 1.5 million gallons.

To fuel their fleet of 50, new Rep.

<unk> trucks and transit buses those tend to be long term.

We have those cities for years and years and there are several different sanitation districts. You are beginning to see all of the rep used companies and the country and you know we're not working with 138 different refuse companies, they're all moving to Orangey.

And so those would be just some that I would mention and.

This one is Ah.

A good customer it's part of our postal service.

The males move by a lot of large trucks right I think the postal services, Oh gosh hundreds of contractors and it may totaled 30000 over the road truck they have a requirement.

Loosely enforced.

Enforced I would say at the USPS.

But that they are encouraging their postal haulers.

To use.

Lower carbon fuel and one of the one of the early movers on this has been a trucking company called Matheson.

I think the Matheson family now is up to maybe 35 or 40 tractors. These are really high mileage trucks.

30000 gallons year running up and down and this lane is I think Idaho, Californian, all up and down and California, and so they just took another 16 tractors that use.

Over 200000 gallons a year. So I think that's enough, but it gives you a flavor that we're seeing it kind of and all of our spaces and transit refuse and airports and municipalities.

And well thank you up with an idea of this one thank you for taking on my questions you're Bev enough. Thank you.

Patients with.

A month, where we've we've actually fueled trucks 37 stations.

But the way this will work Craig it's when they get the trucks and when those stations are built and so these trucks are ebb and ordered theyre being built there'll be built the slots or later and later this summer and early fall and so youll see those arrive and so really the.

<unk> commensurate with.

Some of our current stations that are being <unk>.

Adjusted to accommodate.

Amazon and the new stations, it's going to be in the latter part of the year, Alright, and then going forward I'm going to stay away from that because that gets me into the call scale, but but it's.

This is going to play out over time and I'm thinking over time as you as we all watch the volumes you are going to be able to get a sense of which is what's going on.

Fair enough I appreciate it.

I'd like to and then your last question was about the stations and if.

We're doing 100.

It's 100 trucks will Amazon do half of that will they be 50 of the 170 well.

And that's kind of got myself into all of that I mean, some of the stations are being built for 180 trucks.

So I just kind of said that be thinking of a 100 because that gives you an idea of on.

On the station Thats doing.

8500, a day or 10000 gallons a day, but some of them are twice that size. Okay. So.

When I was using that 100, I mean thats sort of gives you. The idea of a lot of that would be Amazon type demand and then on top of that these stations at more capacity right.

And we don't we're not mapping and when I use that kind of under truck.

That station can operate.

Theoretically it 24 hours a day now they don't operate that way. So there is plenty more capacity than that 100.

Let's just say a station was 100 and its.

100, Amazon trucks, what is capacity to do.

100, other trucks or 150 other trucks.

Okay. So these stations and have great great deal capacity.

And an 11 hour day it sounds like the new stations will be mostly utilized by Amazon and is that fair.

Well I don't know, but its not and 11 hour fueling day so.

Let's look we're building these stations of the fuels a commitment from Amazon that justifies building these stations alright.

So.

Theyre not theyre not spec.

But they do have the ability to be added to right by other customers.

Fair enough.

And I understand touchy subject, and we will see more and coming quarters.

I would like to say more but I, just I think I've said enough.

One other area I would like to get into and try and understand.

And on kind of hearing from more and more utilities about trying to get into RMG.

And like Socal gas for example.

And wondering.

On major utility start getting into the dairy market.

<unk>.

And if that kind of throws a bit of a monkey wrench and too.

Apply and demand and the projects and also maybe even.

Such a deluge of RMG.

Isn't hitting your fueling stations and unfortunately, it would be going the pipeline network if it's authorized.

But that might just swamp, the <unk> market and I wanted to get your thoughts on that.

Well, the Lcs first markets and California, right and so.

I don't worry about the utilities that much I mean look utilities are being faced with trying to decarbonize and so you've heard these things about them.

RMG and theyre going to flow it into their into their pipeline system and.

Boy, it's really been on pilot in nature, So far I mean, it's been few and far between and all and when these utilities do it off and its in the regulated house and so they are pretty cautious there.

And sometimes they'll do it and unregulated subsidiaries.

But now remember when youre. So when you have a utility do on it and.

They're going to put it into power Gen right.

And.

It's not get to Pete and my space.

And it brings a and <unk>.

Before and you're right it's substantially cheaper.

And what they are being paid for that.

To make electricity versus.

The vehicle market it's drew.

Dramatically and getting dramatically less for it.

So I just have to believe capitalism, and and I really think that what will happen is it's going to if the demand is there youre going to see a lot of this want to flow towards getting the best price and that'll be in the vehicle transportation now youll have some that could.

Could be stranded or some utilities that just need to do this for their for their particular public utilities Commission and their particular needs.

But I think theres going to be plenty.

For everything.

One.

But vehicle fuels, the highest and best use and so that's where it's going to go.

And when you when you see a lack of demand.

And all of the demand dries up.

And then Youll see it want to go to the stationery, but that's that's.

That's not as a good place to put it.

Understood. Thank you.

Our next question comes from the line of Pavel non Kalvar with Raymond James. Please proceed with your question.

Bob Al you there.

And.

I guess I'm not sure where he is our next question comes from the line of Jason gave them and with Cowen. Please proceed with your question.

And thanks for taking my question.

You guys hear me.

Yes, we can.

Great. So I have two questions.

First on the Amazon deal you mentioned that the deal justifies building the station and then and implies U.

Ill.

Volume committed too.

Fueled trucks to bill distinctions, but can you talk about if you have commitments to our source RMG across the country and what that process is like and if its.

Competitive process or do you think theres enough RMG out there and and how those contracts I guess are on a range.

<unk>.

To supply R&D into the station.

And then my second question is on the upstream build out.

I think you mentioned you're in talks with.

25 different dairy project, seven or and contracting right. Now can you just kind of talk us through what that means from a volume perspective anything you could share on indicative economics on those dairy projects and then more generally just discuss.

What.

I guess landscape right now in terms of building these dairy projects out on the West coast. It seems like there are a lot of players.

Trying to get.

Involved and the upstream business. So do you see it getting more competitive and then getting more difficult to source these upstream projects.

No you've got you've got a lot of things there first off is not just west coast right. So this is nationwide upstate New York, Wisconsin, we have much stuff and Wisconsin.

So remember we got the pipeline system, that's the beauty of RMG. Unlike some of our friends and the alternative fuels space to talk about building out on hydrogen infrastructure, where we have the infrastructure.

It's already in place and it's all cross country. So it's a matter of charting.

The pipelines and the pathway from Wisconsin, and Texas, and California, and we want that dairy stuff to come to California, but there'll be a day not too distant when youll have other states look New York State and the northeastern states are looking at a low carbon fuel standard.

So the market is getting ready to open up dramatically and the.

And I might just mentioned to you.

You probably know this but I learned at a while back so I get the repeat it but there are 40000 dairies in the United States.

And now some of them are small and so they are not the first ones youre going to do right and we're targeting those that are larger and more sophisticated manure handling operations and because that makes them more efficient and some ways.

It may mean that day day there.

Our carbon profile is maybe not as bad as some guys that don't handle and Monroe manure correctly, but.

Youll be kind of focused on those areas that are sort of 7500 and above and theres lots of those so theres lots of competition right. Now there is going to be a lot more competition and and for the for the $5 to 7 billion gallons of dairy I've talked about you need to $50 billion to $70 billion the economics on that.

Look this could change over time, it's about a three year three and a half year payback. So the economics are good on that.

Long life projects.

And youre going to see these deals where it's very profitable for the farmer for the dairy owner and is profitable for us and there is enough room in there for everybody down through the system. The fleet operator as well as is the.

<unk>.

Fuel provider.

Amazon deal all I'll say on that is the requirement is that they are the fuel all of the RMG.

Alright, so so on in terms of our commitment.

I guess, you didn't say, but a take or pay no but.

There is a fuel commitment.

But on the R&D side, there is a demand right.

Because of the SBR and <unk> and so I know by what we are Privy to based on our deal with them as we have to get really busy developing more and more R&D to satisfied just just Amazon and our other customers that want it.

There will be hundreds of these projects.

Underway and.

And the next few years.

And there's been about 400 per.

<unk> dairy projects a lot of it doesn't go into the vehicle market and so and some of them are.

Smaller and some of them are and the stationary so this isn't new either and and it's not inexpensive.

Let's just call it loosely plumbing involved.

And our gathering systems at the dairies because some of these dairies at two and three different sort of farms associated with them and then it's the movement over to the.

The interconnect out to the to the pipeline system, but it's not.

Rocket science right.

In terms of the kind of embedded in your question is well how do these things how does it happen well our most recent ones that took us from.

Introduction to signing the one that we did sign this morning of 75 days.

And so we like that we found a couple of weeks and there that we think next time, we can peel off so that for a long term multimillion dollar project.

That seems reasonable to me that doesn't seem to be too slow seems about right than the construction phase is somewhere between six to nine months.

And the longest piece of this is not so much the.

Construction, because thats fairly straightforward, it's the certification process, it's getting on production to three months to six months and then the nine months. Once you get then you are able to start really generating.

The credit so.

It's an 18 month process 18 months before you really able to now you can be on production before that but you're not collecting.

Certificates until.

And towards the end of that timeframe. So that's why it's important to have as many of these projects begin to queue up and the pipeline because they take oil it get on production.

Great and Thats really helpful.

And I appreciate the color.

There are no more questions and the queue I'd like to hand, the call back over to Mr. Little flare for closing remarks.

Well, thank you everyone I hope.

And commentary on the Amazon deal, maybe brought some more clarity to that exciting opportunity for us and thank you for listening the call. This afternoon, and we look forward to updating you on our progress next quarter.

Thank you.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.

Okay.

[music].

[music].

[music].

Greetings and welcome to clean energy fuels first quarter 2021 earnings conference call.

At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad and as a reminder, this conference is being recorded it is now my pleasure to introduce your host Robert Vreeland, Chief Financial Officer. Thank you you may begin.

Thank you operator.

Earlier this afternoon clean energy released financial results for the first quarter ending March 31 2021.

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, where the call is also being webcast.

And 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 and involve risks uncertainties and assumptions that are difficult to predict words of expressions, reflecting optimism satisfaction with current prospects as well as words, such as believe intend.

Act plan should.

Anticipate and similar variations identify forward looking statements, but their absence does not mean that the statement is not forward looking.

Such forward looking statements are not a guarantee of performance and the Companys 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 on the risk factors.

Section of clean energy and 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 <unk>.

<unk> does not believe are indicative of the company's core business.

Operating results and non.

Non-GAAP financial measures should be considered and addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The.

And the directly comparable GAAP information reasons, why management uses non-GAAP information and definition of non-GAAP EPS and adjusted EBITDA and a reconciliation between these non-GAAP and GAAP figures is provided and the Companys press release, which has been furnished to the SEC on form 8-K today.

With that I will turn the call over to our President and Chief Executive Officer, Andrew Little Fair.

And do you Bob Good afternoon, everyone and thank you for joining us I.

I will quickly touch on our financial and operational highlights and then spend some time speaking about are very important and exciting Amazon announcement.

Our new strategic partnership with Amazon is multi pronged and we believe positions clean energy very well for the future and confirms the direction, we set for ourselves two years ago.

As anticipated the COVID-19 pandemic continue to impact our volumes, but with stronger environmental credit pricing, our adjusted EBITDA of $11 7 million was up 4% over last year.

As with the rest of the country, we are optimistic that the overall economy, including transportation sector, specifically, we will continue to rebound.

Our balance sheet remains healthy with $146 million, and cash and investments and $90 million and debt at the end of the quarter, all and all a good quarter considering the lingering effects of COVID-19 would you have hit two of our sectors, the hardest transit and airport fleets.

But these two sectors have improved from their lows during the pandemic recession as people begin to travel more cross down via a bus or across the country from one of the airports. We serve in fact, our business continues to expand with new customers demonstrated and in our press release, we distributed yesterday that I hope you saw which highlighted a number of recent.

Selling agreements we have signed.

Now, let's talk about Amazon and.

The recent announcement that we made with them is the most important commercial event and clean energy history.

Not surprisingly for a deal like this we're under a nondisclosure restriction. So we are limited as to what we can say and we don't want to get caught speeding because we don't need to.

Even so I wanted to make sure everyone fully understands the significance to clean energy.

This new strategic partnership with Amazon is based on two different agreements.

One is a commercial deal and and is about Amazon and agreeing to buy a substantial amount of renewable natural gas fuel through our stations potentially hundreds of millions of gallons of RMG.

This fuel will be consumed by our fleet of mostly heavy duty trucks, and some midsized trucks at Amazons and the process of deploying with many of the trucks are already operating.

These trucks will fuel at 27% of our existing stations around the country that we own and operate and.

And as Amazon deploys more R&D trucks, they will fuel added 19 additional clean energy stations that we plan to build by the end of the year.

And we've already identified most of the locations for these stations and in some cases have already secured the land.

Clean energy will own the new stations and while it's nice to have a large anchor fleet customer like Amazon. These new stations will be available for other fleets to fuel as well.

You've heard me speak in the past that one of the beneficial aspects of R&D is that it's a drop in fuel and that can be quickly and easily provided to a new customer and any of our fueling stations and the U S. <unk>.

And the Amazon fueling agreement is a perfect example of this and in fact, one on steroids as they deploy their new fleet of R&D trucks across 15 different states around the country Amazon is immediately operating and the most sustainable way possible.

Fortunately, we were the first to make R&D commercially available and we have continuously work for years to secure a growing supply of R&D.

We have gained a deep knowledge of how to work with the different government agencies and utilities to provide the fuel to designated locations throughout our U S network of over 540 stations.

We also have the experienced and navigate through the federal and state environmental credit procedures, which allows us to provide ultra clean fuel for less and diesel.

As I mentioned because of our customers' wishes I don't speak to the number of trucks at Amazon and deploying but it is safe to say that by fueling a 46 different stations with routes crisscrossing the country. It is a substantial commitment.

Another way to judge the scale of the fuel deal is through the lens of the second agreement, which involves our issuing a warrant to Amazon to purchased 53 million shares of our stock.

As you might have read and our 8-K or our proxy statement.

The shares vest and multiple tranches as Amazon continues to purchase more and more R&D fuel from us up to a total of $500 million.

And that figure excludes any pass through costs, such as gas electricity and transportation. So the actual number to our topline revenue would be considerably higher.

Clean energy his executive team and board looked at the decision to allow Amazon do eventually purchase up to 20% of our outstanding shares very closely.

We concluded that these agreements represent so much of what we have been working towards for the last decade, and have possibly and have the possibility to make a lasting effect not only on our business, but on heavy duty R&D fueling overall by linking the fuel purchase agreement to the warrant agreement Amazon is indicating they want a longer.

Term and deeper partnership and just being a customer.

As a strategic partner and potential substantial owner of clean energy. They now have a stake and our success and are incentivized to purchase more and more R&D from us.

The better we do the better Amazon and our shareholders do Furthermore, if amazon earns into the warrant and exercise zipper cash proceeds to clean energy will be more than $700 million.

And we're talking about a strike price of $13 49 per share.

We believe the market share price of our stock at the time of exercise will be significantly higher than the strike price, creating a meaningful incentive and upside for Amazon.

Upside gain for Amazon, which would also mean tremendous upside all clean energy shareholders. This is a great validation of the value of clean energy, especially when looking back to the not too distant past.

In short, we believe the strategic partnership with Amazon could be worth $1 $5 billion or more in gross proceeds between revenue from fuel sales and proceeds from cash exercise of the warrant.

It is extraordinary statement that one of the largest brands and the world, which has carved out a very impressive leadership position and the drive to address climate change chose RMG as they expand their logistics operations and the heavy duty trucking.

But they are in good company other alternative fuels that might continue to grab the headlines about their potential future.

But Amazon is now joining the largest logistics company and the world UBS, the two largest waste companies and the U S. Wm and is now officially called and Republic services and the two largest transit agencies and the country and New York MTA and La Metro among many others all of which are operating thousands and heavy duty.

Trucks refuse trucks and buses with R&D every day.

And by doing so these fleets of large vehicles are keeping hundreds of millions of tons of greenhouse gas from escaping into the atmosphere.

Does this skeptics that say R&D might be a niche fuel I would say.

It's real and having a significant and profound effect on the climate change today.

And in doing so and easily and cost effectively.

And cost effectively for the operators of these fleets.

<unk> departure for a second for my script and talk about kind of the context of the way I look at.

Animal waste and as it develops into R&D. If you look at the current studies out there is probably about 30 billion gallons of RMG from all sources, that's available and the United States and that's on on annual basis and of course that would take into account landfills and wastewater treatment.

And and dairy hubs.

<unk> et cetera, I would like to focus though on the fact of when people think about this cash this might be kind of a niche while I think that when you look at the low hanging fruit and others agree with me on this and factor.

A major energy companies staff agrees, there's probably five to 7 billion gallons of dairy RMG available annually now that's going to take five to 10 years to bring it all online probably 75 to seven years and at the at the cost of $50 billion to $70 billion.

But these these R&D facilities are very economic and.

So you would think well that's kind of a niche $5 to 7 billion gallons after all.

The United States, and using 35 billion gallons of diesel annually, but when you put that on the carbon scale and you recognize that.

This fuel is.

Three to four times less carbon than diesel per.

GAAP.

On the carbon scale, you can see that you're really talking about removing 20 billion gallons of diesel annually from the roads. So it's a huge and very important contribution to our effort to combat climate change and and reduce carbon.

This growing demand for LNG, and particularly R&D from dairies and agricultural facilities, which is rated by the California Air Resources Board as much as two to 335 times cleaner than any other alternative helps to bring into focus the other agreements that we finalized and the first quarter.

The two joint ventures that we now have in place with total on BP to bring more of this ultra clean RMG online is already showing great progress. We are working with multiple dairy owners to construct own and operate digesters and R&D processors at their facilities and in fact, just this morning, we signed an agreement with the family owned dairy to.

And the digester, which is expected to add over $1 2 million annual gallons of negative carbon RMG supply when it comes online the.

And the capital allocated towards these projects and the resulting additional R&D supply will keep us well positioned and meeting the growing demand by Amazon and other new customers.

So thank you for allowing me a little more time to expound on our new relationship with Amazon I think it is important for everyone to know that significance of it and the long term benefits. It has to the upward trajectory of clean energy business.

Particularly if you are a shareholder and as you know a portion of the warrant needs to be approved by our shareholders Clean Energy's Board of directors has already approved the warrant and strongly recommends that our shareholders do the same.

We have never been more excited and optimistic about the future and how clean energy is positioned itself over the last few years to take advantage of the world's heightened awareness of the actions earn urgently needed to address climate issues.

The transportation industry must play a large role on this and we have the solution.

And with that I will hand, the call over to Bob.

Thank you Andrew.

For the first quarter of 2021, our results were in line with our expectations and as we look forward, we're maintaining our adjusted EBITDA guidance of $60 million to $62 million for 2020 one.

We are updating our guidance on GAAP earnings for 2021 to reflect the non cash accounting treatments of divesting of the warrant we issued to Amazon.

I'll speak to that accounting treatment and more detail in a moment.

Continuing with the first quarter total volumes were $92 4 million gallons compared to $99 3 million gallons a year ago.

The year over year decline is directly attributed to the impact of COVID-19 to 2021 compared to the 2021st quarter, which was minimally impacted by COVID-19.

And although our overall volumes declined our RMG volume grew 3% and the first quarter compared to a year ago on.

Engie volumes for the first quarter of 2021 were 37 million gallons compared to 36 million gallons a year ago.

Because we flow RMG to many of our fueling stations the lower fueling volumes due to COVID-19 also impacted our R&D and lowered the year over year growth. However, on the financial side, Rins and <unk> CFS revenues from R&D deliveries increased 63% to $9 5 million from $5.

$8 million, despite there being only a 3% increase and R&D volumes.

This increase and ran and our CFS revenue was primarily from gains and RIN pricing compared to a year ago with modest gains and <unk>.

Overall revenue was $77 1 million for the first quarter of 2021, which was reduced by $2 million due to the noncash change in fair value of our zero now related hedge and customer contracts.

Exclusive of the $2 million reduction or revenue amounted to $79 million.

Prior year first quarter revenue was 86 million, which included $5 6 million and non cash gains related to the changes in fair value of the zero on our related hedging customer contracts otherwise.

Otherwise the prior year first quarter revenue was $80 four compared to $79 million on.

On less volume.

We benefited in the quarter from a higher effective price on our volume related revenue our effective price per gallon and the first quarter of 2021 was <unk> 76 per gallon compared to <unk> 70 cents, a gallon a year ago.

This reflects generally higher natural gas prices and related prices at the pump.

The station sales and FTC revenues remained steady and within expectations, but also both are still being impacted by COVID-19, particularly when comparing to last year.

Our gross margins improved and the first quarter of 2021 compared to 2020, when excluding the noncash fair value loss of $2 million from 2021, and the noncash fair value gain of $5 6.002 million 20.

Exclusive.

Of these fair value items, our gross margin was $28 8 million and the first quarter of 2021 compared to $27 4 million and the first quarter of 2020.

The big part of this improvement in gross margin was the gains and rent and El CFS revenues previously mentioned.

Our effective margin per gallon for the first quarter of 2021 spiked a bit to 2006 per gallon compared to 22.

A gallon a year ago.

Also reflecting favorable RIN pricing and favorable commodity sales during the quarter.

We still believe our margin per gallon will be within our expected range of 22 to 26 for the year.

Our SG&A was $21 4 million and the first quarter of 2021 compared to $18 3 million a year ago and increase of $3 1 million.

Of which $2 3 million relates to an increase and stock compensation as expected and as noted in my annual guidance.

Our GAAP net loss for the first quarter of 2021 was $7 2 million, which also includes the $2 million and non cash losses from the change in fair value of the zero on our hedge items prior.

Prior year first quarter net income was.

It was $1 7 million, which included $5 6 million in the non cash gains from the zero now hedge items.

Adjusted EBITDA was 11, seven and for $11 7 million for the first quarter of 2021 compared to $11 2 million a year ago, which again highlighted the benefit in 2021 of incremental revenues associated with our R&D deliveries.

Our cash flow provided from operations amounted to $3 3 million for the first quarter of 2021 compared to cash used and operations of $4 3 million and the first quarter of 2020.

Exclusive of changes and operating assets and liabilities operating cash flow was 11 4 million and the first quarter of 2021.

Versus $9 1 million in the first quarter of 2020.

Capex spending was $3 3 million for the first quarter of 2021.

And Andrew mentioned, our cash and investments balance of $146 million with debt of $90 million at the end of March 2021.

And in April and subsequent to the quarter, we paid and fall the $50 million loan from BP that was associated with funding initial project costs related to our new RMG joint venture with BP.

Looking forward as I mentioned, we are updating our guidance for our GAAP earnings for 2021 to reflect the accounting for the warrant issued to Amazon.

While we believe the warrant has far reaching value implications to clean energy.

The accounting rules fall within the GAAP revenue standard since the warrant is directly related to our fuel agreement with Amazon.

We will be recognizing a contra revenue charge as the warrants vest.

The warrant shares vest over time based on fuel purchases by Amazon and its affiliates.

We have estimated for 2021 and contra revenue charge of $76 million with approximately $68 million and that being recorded and the second quarter principally due to the initial vesting of $13 3 million warrant shares or 25 per cent of the possible 53 1 million shares available.

Thereafter, the number of warrant shares vesting will be proportionate to the fuel purchases and recorded as a contra revenue and the periods and the fuel purchases occur.

And the vesting and will continue until all the warrant shares have been invested keep.

Keeping in mind that if all of the vesting conditions are met by Amazon and they will have purchased hundreds of millions of gallons of R&D from us.

And with that operator, I'll turn the call over for questions.

Thank you, ladies and gentlemen, and we will now be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad a.

A confirmation tone will indicate your line is and the question queue. You May Press Star two if you would like to remove your question from the Q4 participants using speaker equipment and may be necessary to pick up your handset before pressing the star key our first question comes from the line of Eric Stine with Craig Hallum. Please proceed with your question.

Hi, Andrew.

Hi, there.

Thank you so just maybe on the Amazon deal and I know that you're limited as to what you can say, but.

In light of the fact that these are going to be clean.

Oh and stations.

And curious your thoughts if theres anything you can talk about.

And on whether Amazon pushes this to their suppliers I mean, it sounds like.

Youre confident and getting volumes from other fleets wondering if those other fleets would be those suppliers and just.

And I don't know if you have a thought on what those volumes could be they would seem to be significant.

Well I don't have anything specific from Amazon to give you at this point on that Eric but I do know that we have had some.

Amazon vendors and suppliers.

Purchasing natural gas trucks.

And arriving at our stations and so.

I don't know how Amazon is looking at this and I haven't.

I can't discuss exactly.

Any program that they might have.

They'll have to do that but.

And I know that as companies like Amazon and look at their carbon emissions their supply chain and their suppliers and those coming into and from supplying them goods they get.

They have to account for those emissions and those carbon emissions and so on.

It's probably.

Instructive.

That these stations that are being.

Being built at the request of and located with Amazon and mind.

And our being.

Open to the public.

So we will have to kind of see how that develops.

Think that's probably the significant point there.

Yes, Okay and then.

And I know, it's still early so maybe this is a question.

Few quarters down the road, but I know when UBS started on their route.

And that was a driver of additional fleet interest.

I'm wondering if it's too early for that if you arent seeing incoming calls on that and then.

And do you feel like people are starting to to get the value proposition here I mean, given that truckers cariballo itunes download.

Half a penny so.

I do Eric we have had inbound calls by large logistics and the large for hire fleets a lot of these fleets.

All for Amazon right, and so they're very familiar with what's going on in and obviously keenly.

And interested in it and so that's that's a good thing.

Have demo trucks going out to some very significant fleets right now.

And that have tried it and the past and are looking again.

And so say and I've said this kind of before is the as these fleets are facing their ESG goals and their sustainability goals.

The the screws or tightening everywhere and people are taking having and take this more seriously and as they begin to look at there are other options.

Electric heavy duty trucks and the potential some day of fuel cell trucks, they begin to become familiar with the costs associated with these other options and the R&D looks very favorable and that case.

And it's something that can happen today and can begin can be dropped in today.

Using a power.

A power source, that's very familiar that theyre very familiar with Reits Cummins engine and.

So.

We are seeing some momentum from this and I hope I hope as this becomes more widely known and people begin to see more tractors on the road that it will just increase the interest.

Got it and then last one for me.

Maybe not specific to Amazon.

And just more from the clean energy on station standpoint, that's part of this agreement.

I know there's been some confusion over what the margin impact would be.

So just maybe just chat a little bit about the margins at company owned stations.

Which obviously these are at Amazon.

I'll, let Bob maybe fill and air after by bundle this and he wants to embellish it but.

And that number that we quote.

Two last.

The last quarter and this quarter it was nice.

Nice.

Spike and that up to 26 cents that's of course, a cost across all of the gallons that we sell.

And that would take into account different categories of gallons right on.

Operation and maintenance gallons, where we may not be sell on the fuel, but we're getting paid per gallon to maintain the particular station. So when you blend it all together that's how we arrived at this 26 that was and is one of the numbers that is the number that we cite.

But when you look at stations that we own.

Where we are providing the fuel.

And in control of for instance, our R&D and it would be.

Many many stations in California, and and all across the country.

<unk> margin is substantially higher right. So I mean I've taken I think on this call over the years I've taken you through the buildup. When you look at the price of natural gas and you.

We understand that there are seven gallons of diesel per Mcf and so that means your commodity per gallons 35, or so and then you put on a dollar or $1 <unk>.

And of course, so you're at the nozzle tip at a dollar and a half and youre competing with diesel at $4. You can see there's a lot of room and there is a lot of room to give our customers a discount and there is room for us to have a very nice margin. So we have stations, where we have considered it will be higher margin than that so these are going to be our stations as you point out Eric.

And of course, we're giving.

A good price.

But we're also recognize the fact that we are building a station for a customer with a commitment on fuel volume, but it's a it's a much as a much different margin profile and then maybe some.

Kind of jump to the conclusion that it was just multiply some of these gallons towards and by that 26.

Yes, okay.

Okay. Thanks.

Our next question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your question.

Okay.

Hi, Andrew Hi, Bob.

Hey, Rob.

My question first question on the ramp and the rollout plan here I think you said you were going to build the stations in 2021.

And maybe give us a sense of the size of the station and you're building and then how you see the ramp of the.

The project going in terms of gallon sales.

Right.

We're going to build those by 2021, you know theres, a little bit of wiggle room here.

I know Amazon wants them all done tomorrow.

And.

It takes a while to build these stations really the station construction as we've discussed before rod isn't.

And this isn't we've done 718 station projects over time, so we know how to build stations.

It's the permitting right. It's the local permitting we went through our planning Commission last night, and our California City, and and got approved five 5% and nothing so that's good so there's that but yes. The expectation is almost all of these stations will be substantially completed if not many online.

By 2021, that's our hope I'd like to have them all done if we could.

These stations are going to be large.

You should there'll be there'll be size, depending on the needs at particular locations. So some are larger and others, but I would say in general and you should be thinking that these stations would be sort of truck stop.

Like in terms and being able to fuel.

Two.

Tractors.

At a time, sometimes three.

At.

10 gallons a minute type type speeds, which is good average tractor should take on board about 85 gallons at a Phil So that's that.

Good time in terms of dwell time.

Further fueling and these stations will be sized but I would say if you kind of wanted to use on average they would be able to fuel 100 tractors a day or more.

And some of these.

Significantly larger that have that capability, so theyre going to be.

Room to grow and they're.

Theyre not stations of yesteryear for light duty taxi cabs.

They're <unk>.

Large commercial truck stops.

Okay, Okay, great and so once they are in place and it's a matter of trucks ramping to get the fuel volume.

Do you have a sense on on.

And the timeline of how that rolls out and how you see that ramping over what period.

And those trucks have been.

The trucks and question that if we can't we would love to get to the number at some point the trucks and they have been ordered.

And the first tranche and trucks.

It had been built.

And then there is another big slug come and that are being built and will be delivered and the remainder part of the year.

And I think the expectation is those trucks are going to arrive all in 2021.

And and as they do they will fuel on our network and they will appeal at the stations as they open and they will move they will move trucks around to make sure that they can begin to put those into and to surface.

But they have the truck slots and there'll be and those are have been ordered.

Okay. Okay, great. Thank you and then on the capacity side I think you talked about adding adding some facilities and are starting that process through the JV that you have but.

Good.

And how quickly do you need to add LNG capacity to meet Amazon or will those things work in tandem and then I guess, what's your sort of view of supply and capacity that you'll add over the next couple of years.

Well.

This is a it's a little complicated because we want.

As much low Ci and negative carbon fuels, we could get right because think about this is because we have the low carbon fuels standard in California, we can stand and we're selling.

So 115 120 million gallons in California is just kind of use that number.

And the ballpark there right this last year.

And as I've said before we expect to be ramping up our.

Low Ci dairy gas in California at somewhere between six to 10 times of what we did last year. This year. So we're starting from a lower a much lower number but my point is is as we bring on dairy gas from around the country it'll come to California, <unk> most valuable.

And it releases.

Other gas to other parts of the country.

And where.

It's not as low carbon.

And so our.

Our focus and Thats why I talked about the $5 to 7 billion gallons is to bring on the lowest carbon fuel.

And in this way the low carbon fuel standard it works right at it.

Courage you needed to bring on the cleanest fuel possible capture the most methane.

It's been interesting Rob and we've been all reading about some of the major oil companies try and get their arms around sequestration right carbon seal.

And that's what we're doing right.

And a way, we're taking net methane before it escapes.

Capturing it and putting it into a vehicle and burning so it's up.

And so we're going to want to do more low Ci and California and over time, our plan right now on the supply side, we're working so hard we have and origination team thats.

Busy right now we have.

In the pipeline 25 different dairy projects.

We're working through the negotiations with the with the farms, we have seven under contract.

And under way right now and the contracting process.

We will need all of it plus and as you begin to.

I'll begin and understand the scale of the Amazon deal, we need to add significantly to the to the.

The supply I don't think there is a problem of.

Of.

Outpacing in the near term, though we've been kind of on the ragged edge of it here lately, but.

And outpacing the demand of RMG, because the industry is responding on R&D.

Alright are friends and Chevron and others are busy on these projects.

But the Amazon potential is it's going to keep us all very busy but with the landfills and wastewater and other things you'll be able to meet the demand and other demand and that'll come on but you really want immediate with as low as possible.

And that's our goal because that's the most valuable and its.

Best for all.

Okay, great. Thank you and we've got it and we've got to be creating over the next few years.

Several hundred million gallons of R&D, and addition to where we are today.

Our next question comes from the line of Manav Gupta with Credit Suisse. Please proceed with your question.

I actually wanted to quickly focus on the upstream versus downstream profitability here. So let's say you have a company on station and let's say you believe it's giving you with 30% to 35 cents per gallon.

Trying to understand is this Amazon been giving you the volume to develop the low Ci R&D.

Upstream partners and the profitability over there is five to $7 per gallon you split that half a day, that's like $3 again, and so it doesn't really matter if on our downstream basically as you make 30 cents per gallon on a 40 cents per gallon.

Benefits of this deal is stopped and now you can go back to your partners BP and others developed upstream on LNG, which is like Pete on the guidance. So the real benefit will come from the upstream side on the margin not really the downstream side and if you can talk about that.

Well manav.

Yes, and no I mean, there is value on both but youre absolutely correct that the demand that's created.

From a deal like this.

Just completely supports our position on the upstream supply side.

Because.

Look I mean after all the upstream as is being developed with gas.

With the intent of.

Putting it into.

To get the highest value to put it into <unk>.

Vehicles heavy duty vehicles and.

And so when you come to that when you come to the table, where you have that and you have that demand then it's a pretty powerful upstream proposition not not to mention the day.

Economics that then flow into the upstream which is separate from that 30 35, you mentioned.

That would be and in our case would be and the joint venture now.

Will we will have we will have those economics to the extent that we are the producer and.

And we're using the gas.

From ourselves and but we'll have to get it from other sources as well.

Manav. We also just on the source side I don't want those on the call is and then go out and how are these guys going to develop all of this R&D.

And we because we are the sort of the choke point with the infrastructure.

And half.

The largest network.

We already take R&D for 40 different sources.

And that that grows all the time.

And that will continue to grow but manav, you're right. The upstream is very profitable but.

Don't underestimate the value of the downstream per Gal.

And and and don't and dull and and what I say go back go back and look at.

Go back and look at my buildup and you might be surprised that at a station that we own our margin is better than what youre thinking.

No I am not doubting that I'm, just saying some day just trying to help I'm just trying to run that.

Yes. It gets confused on the way, we kind of talk about it sometimes.

And I'm, just saying save and you put and the Rins and $75 I'm MB deal you put on negative Daddy Cir, Indeed, CFS credit and the magnitude of that can be significant so.

And then the downstream profitability is very important and I understand it, but if and when dealing with data and pharma R&D because sales CFS credit itself is so big that.

The profitability could be significantly and that's the only point I was trying to make just to.

Look it's we.

Great, but no manav I'm, not giving it away or just flushing it out okay.

Sell it on okay.

And.

And one question from Amazon.

You also have programs with people like Chevron adopt a boat and can you give us on update on that program is going on to understand besides Amazon people like Chevron and we're running this adopt a port program how are those programs also going.

Yes.

We're very pleased with the Chevron and I have said on call that we were working upsides of that program and we are we're in the process of that so standby.

That.

We have.

Pipeline of trucks at the port that are.

In the in the development proposed and contracting phase and the total is about.

Oh Gosh I think it's 518 trucks as of last Friday. So that's.

Potentially really good volume all RMG, all and through our network all in partnership.

And receiving incentive dollars from <unk>.

Ron with us to use that RMG provided by Chevron and their upstream operation.

And into our network and so we continue to think Thats really a kind of and elegant program and its kind of and as I've said before it's a win win win win for Chevron win for the farmers when for the port operators that are being forced into cleaner technologies and this is a way for them to do it with some.

And of dollars and still do it at a dramatic discount to diesel and it's a win for us.

Okay. One last question is I think yesterday.

On a days ago, you announced a number of new contracts. If you could highlight which ones do you think on the most significant which are you on new customers. So you could ask it on us to very quickly that announcement of multiple contracts that you signed.

And the reason we did that yesterday was just because it's gotten to be and onwards.

It's a nice thing is there's so many different deals on this call. It's kind of a laundry list gets a little confused and let me just highlight a couple of that.

Think are important and and sort of maybe.

As our fleet segment.

Cal Portland.

Cal Portland.

Cement mixers.

Very large company.

Just just I think they have a fleet now are approaching.

220, or 250 mixtures and this and this area. They just signed up for RMG supply agreement for 150 more ready mix trucks.

That will use 1 million gallons a year.

And we're seeing that industry kind of take off a little bit slower and smaller, but it's very similar to the refuse industry.

And now we're working with.

Really all of the largest.

Ready mix company, so I wanted to point that one out.

The Pac anchor one and the port.

Is a is a real good R&D those are heavy duty.

Heavy duty.

Trucks.

And in.

Down in the in the Port and so we're proud of that one I think the Biagi brothers. You know this is a large liquor distributor 900000 gallons.

That's using our zero now program.

But beyond as customers like Amazon, Anheuser Busch and Pepsi. So I wanted to highlight that and then of course well.

We continue with like the city of Pasadena.

California.

A new multi year RMG supply agreement for $1 5 million gallons.

And to fuel their fleet of 50, new.

Refuse trucks, and and transit buses those tend to be long term.

We have those cities for years and years and there are several different sanitation districts.

And beginning to see all of the refuse companies and the country and you know we're now working with 138 different refuse companies. They are all moving to R&D.

And so those will be just some that I would mention and.

This one is oil.

Good customer, it's part of our postal service the males move by a lot of large trucks right I think the postal service is Oh gosh, one hundreds of contractors and that it may totaled 30000 over the road trucks they have a requirement.

So loosely enforced.

Enforced I would say at the USPS.

But that they are encouraging their postal haulers to use.

Lower carbon fuel and one of the one of the early movers on this has been a trucking company called Matheson.

And I think the Matheson family now is up to maybe 35 or 40 tractors. These are really high mileage trucks.

30000 gallons, a year running up and down and this lane is I think Idaho, California, and all up and down and California, and so they just took another 16 tractors that use.

Over 200000 gallons a year. So I think that's enough, but it gives you a flavor that we're seeing it kind of and all of our spaces and transit refuse and airports.

Airports and municipalities.

And well thank you that because of ADT on this one thank you for taking on my questions you bet. Thank you.

Our next question comes from the line of Craig here with can we brothers. Please proceed with your question.

Good afternoon.

Was that correct details without details of course could you provide a little color on how you might expect the Amazon related volumes to ramp this year and next.

No specifics, but would you expect a relatively smooth or lumpier quarterly.

Growth and how long might it be until you.

See the full expected contracted volumes.

Kind of reach their expected limit.

And as to the new stations built I think you had mentioned 100 truck fuel and capacity on average a day.

And when the Amazon agreement is kind of at the full initial expected run rate would.

Would you expect them to consume less and half of the new.

100 per day stations or the majority of it.

I'm not sure I got the last very part of your question. So you might you might have to help me on that one again, but the very end but.

Well look I have to be careful here so.

Fuel and some Amazon trucks, now alright, and that was from an earlier order and those.

Actually those trucks.

And being a phased in now and.

And.

We're actually feeling those and our network at a bigger number than I am.

I've cited today.

And it's.

On occasion.

We've had a month, where we've we've actually fueled trucks 37 stations.

But the way this will work Craig it's when they get the trucks and when those stations are built and so these trucks are ebb and ordered theyre being built there'll be built the slots or later later this summer and early fall and so youll see those arrive and so really the.

It's commensurate with.

Some of our current stations that are being.

Adjusted to accommodate.

Amazon and the new stations, it's going to be in the latter part of the year, Alright, and then going forward I'm going to stay away from that because that gets me into the call scale, but.

Got it.

This is going to play out over time and I'm thinking over time as you as we all watch the volumes are going to be able to get a sense of which is what's going on.

Fair enough I appreciate that I would like to and then your last question was about the stations and.

And if we're doing a 100.

And if it's 100 trucks will Amazon do half of that will they be 50 of the 100 or 70 well.

That's kind of got myself into all of that I mean, some of the stations are being built for 180 trucks.

So I just kind of said.

Thinking of 100, because that gives you an idea of.

On the station and Thats doing.

8500, a day or 10000 gallons a day, but some of them are twice that size. Okay. So.

And I was using that 100, I mean thats sort of gives you. The idea of a lot of that would be Amazon type demand and then on top of that these stations have more capacity right.

We don't we're not mapping when I use that kind of a 100 truck.

And that station could operate.

And we're radically at 24 hours a day now they don't operate that way. So there is plenty more capacity than that 100 list.

Let's just say a station was 100 and its 100 Amazon trucks, what is capacity to do.

100, other trucks or 150 other trucks.

Okay. So these stations have great great deal capacity.

And then 11 hour day, it sounds like the new stations will be mostly utilized by Amazon and its out there.

Well I don't know, but its not and 11 hour fueling day so.

Well look we're building these stations of the fuels our commitment from Amazon that justifies building these stations alright.

So sure.

Theyre not theyre not spec.

But they do have the ability to be added to right by other customers.

Fair enough.

I understand and touchy subject, and we will see more and coming quarters, yes.

Well I'd like to say more but I'd just.

I've said enough.

One other area I would like to get into and tried to understand on.

And on kind of hearing from more and more utilities about trying to get into RMG.

And like Socal gas for example.

And wondering if on <unk>.

Major utilities start getting into the.

Dairy market.

If that kind of throws a bit of a monkey wrench and to.

The supply and demand the projects and also maybe even.

Such a deluge of RMG.

Isn't hitting your fueling stations and unfortunately, it would be going the pipeline network if it's authorized.

But that might just swamped the LCR first Margaret and I wanted to get your thoughts on that.

Well, the Lcs first markets and California, right and so.

I don't worry about the utilities that much I mean look utilities are being faced with trying to decarbonize and so you've heard these things about them on.

And they are going to flow into there and to their pipeline system and.

Boy, it's really a bit on.

Pilot in nature, so far I mean, it's been few and far between and all and when these utilities do it off and its in the regulated house and so they are pretty cautious there.

Sometimes they'll do it and the unregulated subsidiaries.

But now remember when youre. So when you have a utility due on it.

We're going to put it into the power Gen right.

And.

It's not going to compete and my space.

And it brings a in California, right, it's substantially cheaper.

And what they are being paid for that.

To make electricity versus.

The vehicle market, it's a dramatically and getting dramatically less for it.

So I just have to believe and capitalism and and I really think that what will happen is it's going to if the demand is there youre going to see a lot of us wanted to flow towards getting the best price and that'll be in the vehicle transportation now youll have some that could.

Could be stranded or some utilities that just need to do this for their for their particular public utilities Commission and their particular needs.

But I think theres going to be plenty.

For every day every.

<unk>.

But vehicle fuels, the highest and best use and so that's where it's going to go.

And when you when you see a lack of demand.

And all of the demand dries up.

And then Youll see it want to go to the stationery, but that's that's.

That's not as a good place to put it.

Understood. Thank you.

Yes.

Our next question comes from the line of Pavel <unk> with Raymond James. Please proceed with your question.

Bob are you there.

I guess I'm not sure where he has our next question comes from the line of Jason gave them and with Cowen. Please proceed with your question.

And thanks for taking my question.

You guys hear me.

Yes, we can.

And Greg So I have two questions.

First on the Amazon deal you mentioned that the deal justifies building the station and then you can apply as you.

And.

Volume committed too.

Fueled trucks to build the stations, but can you talk about if you have commitments to source RMG across the country and what that process is like and if it.

And competitive process or you think theres enough.

RMG out there and and.

And how those contracts I guess are are.

Arranged.

And the supply R&D into the station.

And then my second question is on the upstream build out.

I think you mentioned you're in talks with.

25 different dairy project seven are and contracting right. Now can you just kind of talk us through what that means from a volume perspective anything you could share on indicative economics on those dairy projects and then more generally just discussed.

What.

I guess landscape is right now in terms of building these dairy projects out on the West coast. It seems like there are a lot of players.

And trying to get.

Involved and the upstream business. So do you see it getting more competitive and getting more difficult to source. These upstream projects.

So you bet, you've got a lot of things there first off it's not just west coast right. So this is nationwide upstate New York with Scott, we have much stuff and Wisconsin.

And so remember we got the pipeline system, that's the beauty of RMG. Unlike some of our friends and the alternative fuels space to talk about building out a hydrogen and infrastructure, where we have the infrastructure.

It's already in place, it's all across the country. So it is a matter of charting.

The pipelines and the pathway from Wisconsin, and Texas, and California, and we want that dairy stuff to come to California, and there'll be a day not too distant when youll have other states look New York State and the northeastern states are looking at a low carbon fuel standard.

So the market is getting ready to open up dramatically and the.

And I might just mentioned to you.

You probably know this but I learned it awhile back so I get the repeat it but there are 40000 dairies in the United States now.

Now some of them are small and so they are not the first ones youre going to do right and we're targeting those that are larger and more sophisticated manure handling operations and because that makes them more efficient and some ways.

It may mean that day.

Our carbon profile is maybe not as bad as some guys that don't handle and we're norm and are correctly, but.

You'll be kind of focused on those areas that are sort of 7500 and above and theres a lots of those so theres lots of competition right now there's going to be a lot more competition and and for the for the $5 to 7 billion gallons of dairy and I've talked about you need to $50 to $70 billion of the economics on that.

Look this could change over time, it's about a three year three and a half year payback. So the economics are good on that.

On a long life projects.

And youre going to see these deals where it's very profitable for the farmer for the dairy owner and is profitable for us and there is enough room in there for everybody down through the system the fleet operator as well as the.

And <unk>.

Fuel provider.

Amazon deal all I'll say on that is the requirement is that they are the fuel all be RMG.

Alright, so so on in terms of our commitment.

I guess, you didn't say, but a take or pay no but.

There is a fuel commitment.

But on the R&D side, there is a demand right.

Because of the SBR and <unk>.

And so I know by what we are Privy to based on our deal with them as we have to get really busy developing more and more R&D and satisfied just just Amazon and our other customers that want it.

There'll be hundreds of these projects.

Underway.

And the next few years and there's been about 400 projects dairy projects a lot of it does it go into the vehicle market and so and some of them are.

Smaller and some of them are and the stationary. So this isn't new either and and it's not inexpensive theres. Some let's just call. It loosely plumbing involved and gathering systems at the dairies because some of these dairies at two and three different sort of farms associated with them and then it's the movement over to the.

The interconnect out to the to the pipeline system, but it's not.

Rocket science right.

In terms of the kind of embedded in your question is well how do these things how does it happen.

Well, our most recent ones that took us from.

Introduction to signing the one that we did sign this morning and 75 days.

And so we like that we found a couple of weeks and there that we think next time, we can peel off so that for a long term multimillion dollar project.

That seems reasonable to me that doesn't seem to be too slow seems about right than the construction phase at somewhere between six to nine months.

And the longest piece of this is not so much the.

Construction, because thats fairly straightforward it's the.

And the certification process its getting on production to three months to six months and then the nine months. Once you get then you are able to start really generating.

The credit so.

It's an 18 month process 18 months before you really able to be.

And be on production before that but you're not collecting certificates until.

Towards the end of that timeframe. So that's why it's important to have as many of these projects begin to queue up and the pipeline because they take oil it get on production.

Great.

Really helpful.

I appreciate the color.

There are no more questions and the queue I'd like to hand, the call back over to Mr. <unk> for closing remarks.

Good well, thank you everyone I hope.

And the commentary on the Amazon deal, maybe brought some more clarity to that exciting opportunity for us and thank you for listening the call. This afternoon, and we look forward to updating you on our progress next quarter.

Thank you.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.