Q2 2021 Clean Energy Fuels Corp Earnings Call

August 5, 2021

[music].

Greetings and welcome to the clean energy fuels second quarter 2021 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

The 1 should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder of this conference is being recorded it is now my pleasure to introduce your host Mr. Robert Vreeland, Chief Financial Officer. Thank you Sir you may begin.

Thank you operator.

Earlier this afternoon clean energy released financial results for the second quarter ending June 32021.

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

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

Words of 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.

Several factors that could cause or contribute to such differences are described in detail in the risk factors section of the clean Energy's form 10-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 of our supply of new information regarding the circumstances. After the date of this release.

The company's non-GAAP EPS and adjusted EBITDA will be reviewed on this call and exclude certain expenses that the company's management does not believe are indicative of the company's core business operating results non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute.

For or superior to GAAP results.

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

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

Thank you Bob Good afternoon, everyone and thank you for joining US this was a great quarter for us in Q2, we signed the most important commercial agreement and the history of our company with Amazon Our business is growing again and surpassing pre COVID-19 levels, we raised $200 million in growth capital our earnings were better than expected.

And there continues to be the increased understanding of the role of our renewable fuel can play in addressing climate change today, notably.

Notably our fuels volume surpassed the 100 million gallons of quarter again.

The healthy 13% increase over the second quarter of 2020, when the pandemic have begun to take hold.

We saw volume bounce back in all sectors and the good news in particular is that airport fleet volumes increased 36% and transit increased 24% compared to a year ago.

Which surpassed our own internal projections.

Our renewable natural gas or LNG volumes grew 19% over the same quarter.

Quarter of year ago, and continues to become a larger share of our overall fuel mix our efforts to accelerate the demand for this ultra clean fuel as the only matched by our focus on bringing on additional LNG supply to meet the growing demand, which I will elaborate on in a minute.

As you know we are focused on providing more and more RMG of fuel that can be rated to have a negative carbon intensity, allowing our customers to meet their transportation still sustainability goals easily.

Medially and affordably.

I'm going to let Bob go into more detail about our strange revenue number of this quarter, but it's not hard to see.

There were accounting related non cash charges that highly impacted the most notably the Amazon warrant charge.

Excluding the noncash charges, our revenues would have been $979 million of 29% increase in the apples to apples comparison to the second quarter of 2020, which was $61 million.

Our balance sheet has significantly improved placing us on solid footing.

During the second quarter of the year, we added $200 million of cash through an at the market equity offering managed by Goldman Sachs. In fact, the demand was so high we raised $100 million in 1 day during the second round of the offering we.

We finished the quarter with $254 million in cash and investments after contributing $50 million into our negative carbon intensity R&D development JV with BP.

Our debt at the end of the quarter was $42 million. This places us in a strong financial position as we expand our fueling infrastructure for our new large anchor customer Amazon and make investments in R&D production to ensure of growing supply of RMG fuel in future years.

Our adjusted EBITDA for the second quarter was $14 million of 51% increase over the adjusted EBITDA in the second quarter of last year overall was a strong quarter financially and operationally.

Regarding the supply of RMG, Let me just quickly report that our efforts to make agreements with dairies is moving along very well no. Other company has as compelling and offers we do with a strong balance sheet supported by our JV with total energies and BP and the largest vehicle fueling infrastructure in the country, which.

<unk> the mechanism to generate the valuable environmental fuel credits dozens of dairies from California to Texas to the upper Midwest or in discussions with us.

We have already signed our first partners and have a robust development pipeline.

But before the LNG from these new partnerships comes online, we're also aggressively and continuously signing RMG supply contracts with third parties to meet today's growing demand.

Since the beginning of the year, we have secured an additional 53 million gallons of <unk> with a healthy pipeline of additional supply agreements.

As I mentioned, our base of existing customers is back to previous levels, and we were adding new businesses as well.

The adopt of Port program, with Chevron, which makes replacing old dirty diesel trucks with clean R&D trucks of affordable for smaller operators in the ports of La and long Beach continues to expand.

Financing for over 485 heavy duty trucks is either closed or is in the contracting phase. These trucks will fuel in the ports at our surrounding network of RMG stations in Southern California.

We're working our way through the additional $20 million of financing the Chevron recently committed to the program and I believe it will accelerate as the state of California. Soon distributes another round of its grants for clean trucks, making the switched R&D all of that more appealing.

On the east coast, our existing customer Manhattan beer distributors recently announced that they would be expanding their natural gas fleet to 29 trucks, which will fuel of our stations in the New York City area.

And in the middle part of the country, we signed a new customer calm energy of large regional fuel provider in Nebraska.

We will be taking over the operation of 3 stations that sell an approximate 900000 gallons of CMG of year, and we forecast that to the.

That to grow as calm ads medium and heavy duty trucks to their fleet.

Another new customer of the city of Fort Smith, Arkansas will begin to fuel of new fleet of natural gas refuse trucks and has plans to convert their entire fleet to natural gas.

These are a sampling of recent agreements but of course, the biggest deal signed during the second quarter of this year well in fact, the biggest deal we have signed since the company began was the agreement with Amazon.

I spent quite a bit of time discussing on the last call. So I won't go into much more detail today.

But since our last call Amazon issued their latest sustainability report and in it they confirmed for the first time that they plan to initially deploy 2700 heavy duty natural gas trucks by the end of the year and all of the fuel we will provide for Amazon will be R&D.

We are making good progress on the additional stations that we plan to construct for Amazon and Amazon continues to deploy is heavy duty truck fleet.

In addition to the fueling infrastructure expansion, we are facilitating training classes with the natural gas vehicle Institute for dozens of maintenance.

Maintenance technicians will be keeping the Amazon trucks on the road.

Our excitement about our new relationship with Amazon has only increased since our last call the.

<unk> fueling agreement and the right to buy clean energy shares provided they purchase hundreds of millions of gallons of R&D demonstrates the overall commitment and strategic alignment that 1 of the world's largest companies, which moves more goods than anyone else has made to renewable natural gas.

We are seeing that message open doors with other fleets, which have been a little hesitant in the past to think about leaving diesel.

And fleets of feeling other pressure points as well I don't have to tell this audience that companies are under increased scrutiny to find ways to reduce their carbon footprint investors regulators and the public are asking to see specific plans to.

The meeting their emission reduction goals.

Im going a little bit off the farm here, but its my belief that our R&D fuels solution has the momentum versus other alternatives.

It's almost becoming of weekly occurrence when we where we see stories about transit agencies, turning back of electric buses because of serious issues.

Clothing thermal events and by the way, where I come from we call those fires.

Or delays in Rollouts of electric heavy duty trucks, and other promises and claims not kept by startup Oems or the lack of charging and fueling infrastructure for large vehicles, the expense of charging and fueling infrastructure and a growing realization that there is no perfect clean solution <unk>.

Highlighted by a recent in depth story by the Los Angeles times about the environmental impacts and problems associated with the mining of minerals for large batteries.

Get me wrong.

<unk> electric and fuel cells will be fine in the light duty space.

I've said before our experience in station construction, along with our access to R&D fuel supply, which can be used as a clean feedstock in time will allow us to expand in other alternatives as our customers day.

In fact, we have recently submitted bids to build the hydrogen stations for transit agencies that we'll be testing of handful of hydrogen buses.

But for fleets of the large vehicles, which are looking for immediate and significant carbon reduction solutions. We think there is nothing comparable to RMG.

It's becoming easier to make our sales pitch.

Our fuel produced from cap, capturing naturally occurring methane of dairies.

Which number in the tens of thousands and then turning it into a transportation fuels display.

Displacing a harmful incumbent fuel is an easy story.

This 2 pronged missions mitigation is why R&D fuel can receive of negative carbon intensity rating and why more fleets like Amazon are realizing is the easiest and most cost effective way to meet their aggressive sustainability goals.

We are already having we already have a nationwide fueling infrastructure in place that is expanding.

The Cummins provides a natural gas engine that performs as well as its diesel counterpart, albeit with 90% fewer tailpipe emissions and the carpet carbon negative fleet can be deployed in short order at much less cost than other untested alternatives.

We have recently begun an exercise of the dive deep into the large heavy duty truck fleets with specific data that demonstrates the company's how they can reduce their greenhouse gas emissions.

As an example at their request in July we provided 1 of the country's largest fleets, which operates thousands of heavy duty diesel tractors with specific data about how they could achieve their long term carbon emissions reduction goal by replacing only 1200, that's 1200 trucks over 3 years with <unk>.

<unk>.

Using the same California Air Resources Board carbon intensity, scoring this company would have to purchased over 6400 electric heavy duty trucks or 13000 fuel cell trucks to achieve the same carbon reduction as the only 1200 trucks running a negative.

Carbon R&D.

As I mentioned at the top of my remarks of the second quarter was of great..1 for clean energy a recurring business is returning to normal levels and we're beginning to see real growth in our fuel volumes driven by new customers and no small part by 1 in particular the Amazon.

And we are on solid financial ground as we continue to make additional investments for future growth.

And with that I'll turn the call over to Bob.

Thank you Andrew and good afternoon, everyone.

And I'll reiterate what Andrew said, the second quarter was a good financial quarter for US we started to see the anticipated rebound in volumes along with good fuel margins and a continued favorable environmental credit market for <unk> and LTE FFS.

Of course, our GAAP results as reported were significantly impacted by the noncash Contra revenue charges of $78.1 million from the Amazon warrants.

But looking at our non-GAAP earnings we earned a penny a share with adjusted EBITDA of $14 million.

These contra revenue charges related to the Amazon warrants as why we are reporting of revenue number of the half a million dollars for the second quarter.

Without those warrant charges and changes in fair value of our zero now hedge our revenue was $79 million or 29% above 2022nd quarter revenue of $61.3 million on a comparable basis.

The Amazon warrant noncash Contra revenue charges for the second quarter included $76.6 million related to the immediate vesting of approximately 25% of the warrant shares.

And $1.5 million related to ongoing fuel delivery to Amazon under our fueling agreement.

We will continue to record noncash contra revenue charges each quarter that could be in the range of $3 million to $4 million per quarter related to the ongoing spending.

On fuels by Amazon.

Also note the contra revenue charge related to the immediate vesting in the second quarter was higher than our initial estimate of $68 million due to additional warrants being issued in connection with our share issuance from our at the market stock offering program.

As such we've updated our guidance for estimated for our estimated GAAP loss of <unk> $86 million for 2021 to reflect the increased contra revenue charges in the second quarter.

Which has no impact on our cash flows or adjusted EBITDA.

We are maintaining our adjusted EBITDA guidance for 2021 of 60 million to $62 million.

Now continuing on with the second quarter total volumes were 101.4 million gallons compared to $89.5 million gallons a year ago. Andrew noted the big increase is coming from airport fleets and transit sectors, which have been the most impacted by the pandemic trucking and refuse also.

Year over year volume gains and our R&D volume grew 19% to $42.9 million gallons in the in the quarter up from 36 million of R&D gallons in the second quarter last year.

Our effective price per gallon in the second quarter of 2021 was <unk> 67 per gallon compared to 58.

The gallon a year ago.

This reflects generally higher natural gas prices and related prices at the pump as well as significant gains in our <unk> revenue.

Both station construction sales and the alternative fuel tax credit revenues were better than a year ago by 15% and 20% respectively.

Collectively an improvement of $1.7 million for the second quarter compared to last year.

Our overall gross profit margin improved in the second quarter of 2021 compared to 2020 exclusive of the noncash cost of revenue and noncash fair value changes in our zero now hedged.

Exclusive of these noncash items, our gross margin was $32.1 million in the second quarter of 2021 compared to $22.8 million in the second quarter of 2020.

4 of 41% improvement.

Increased volumes together with the rise in our margin per gallon from a year ago were the primary drivers of this year over year improvement in margin.

Our effective margin per gallon for the second quarter of 2021 was 26 cents per gallon compared to 'twenty again.

<unk> a year ago.

Also reflecting the greater fuel volumes and higher RIN pricing.

We believe our margin per gallon will remain within our expected range of 22 to 26 for the year, but as we've seen.

You've been at the high end of that range in our first 2 quarters.

Our SG&A was $21.6 million in the second quarter of 2021 compared to $16.9 million a year ago, an increase of $4.7 million of which 57% or $2.7 million of that increase.

Related to an increase in stock compensation as expected.

Our GAAP net loss for the second quarter of 2021 was $79.7 million, which includes the effects of the noncash warrant contra revenue charges.

On the zero now hedged changes are.

Our non-GAAP net income for the second quarter was $1.8 million or <unk> <unk> per share.

Which we believe is more indicative of our operating results.

Our adjusted EBITDA of 14 million from the second quarter of 2021 compares to $9.2 million.

A year ago, which again highlighted the benefit of increased volumes and improved margins principally associated with our RMG deliveries.

Our cash flow provided from operations amounted to $9.7 million for the second quarter of 2021 compared to $54 million in the second quarter of 2020.

Which of that figure included 2 years of alternative fuel tax credit collections in the second quarter of 2020.

Exclusive of changes in operating assets and liabilities cash flow from operations was $14.3 million in the second quarter of 2021 versus $6.6 million in the second quarter of 2020.

Capex spending was $4.6 million for the second quarter of 2021 of.

Of course, we see that amount increasing as our station building continues and ramps up.

As we accommodate.

Principally Amazon.

And Andrew mentioned, our cash and investments of $254 million with debt of $42 million at the end of June 2021.

We contributed $50 million in June into our R&D investment with.

Our JV with BP and we anticipate funding our R&D JV with total energies.

On a project by project basis as specific projects are approved for funding.

Our share of the net results of these jv's is and will continue to be reflected in our adjusted EBITDA as we progress forward in bringing projects up and producing R&D.

With that operator, we can open the call to questions.

Thank you we will now be conducting a question and answer session. If you would.

Like to ask a question. Please press star 1 on your telephone keypad.

Confirmation tone will indicate your line is in the question queue. You May press star 2 if you'd like some of your question from the queue from participants using speaker equipment, maybe necessary the pickup your handset before pressing the star keys, 1 moment. Please the way Paul for your questions.

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

Andrew Hi, Bob.

Hi, there.

So I know you mentioned that Amazon and not a surprise that it is helping more of.

Broadly in discussions with customers, but maybe could you talk about specifically Amazon suppliers.

Maybe some specific data points as much as you can share traction, you're making there and kind of how you see that overall volume opportunity.

Our stations that we're building for Amazon are going to be open to the public.

And of course.

Knowing our business Eric.

The open to the public that means they are open to other truck companies right and in that case I think it's.

It's likely to be other vendors and suppliers as well as other fleets that operate for Amazon we have seen of few.

The companies that haul for Amazon begin to bring natural gas trucks into their fleet and I think youll see more of that in the future and that's really all I can talk about right now, but I know that is.

Believe that Amazon looks at their <unk>.

Emissions and their goals and the reductions in the future they're going to try to encourage many of the people. They work was to bring on cleaner and cleaner vehicles over time, and we hope to be right in the middle of that and.

Kind of stay tuned.

Yes.

Or maybe just sticking with that.

I mean is there any way obviously as you've got the joint ventures now you've brought on more supply you have had the supply agreements in.

And for some time, maybe the size of the pipeline for redeem.

Whether it's versus a year ago 3 years ago.

Anything along those lines it would be helpful.

Right and I'm going to be a little cagey here Eric.

Because I guess, there's a lot of good news here, but which is the result, there are a lot of competitors that are out there trying to develop.

The dairy projects and 1 way that's really a good thing right because that just confirming for me the theres lot of money and there are some big players with deep pockets.

<unk> that this is of really viable fuel that's economic in that has a great role to play in reducing carbon emissions today. So that's good.

Remember that we're ahead of even even while we're competing.

Let's call it at the dairy location.

Aten.

We're we're.

I don't want to say the only gave until we often get though the supply.

From our competitors as they go as they look to put it into the vehicle tank right because we have the infrastructure. So.

Just because were not developing of dairy farm and harnessing the dairy fuel for our own account that doesn't mean that ultimately bring that loan of carbon negative fuel to our customer of our fueling station.

Now, obviously, we'd like to get a lot of it on the upstream side, because that makes economic sense for us as well, but just wanted to kind of keep that in mind. So if you go back and look 3 years I mean, there was hardly anything going on in the dairy business. So when you look at the pipeline today is dramatically increased and I've said on a previous call I'm not going to dissect it today.

I said in the previous call that we've got several projects that are either in that we have given the notice to proceed that are either in construction or in the or signed or in our pipeline. That's grown since our last call, but I'll just kind of leave it at that right now.

But yes.

Eric compared to where we were several years ago. I mean remember we are early in this business. We started I guess, we were the first ones to put landfill gas.

And of truck.

10 years ago, right and so up until recently it was all landfill gas and it'll continue there's a lot of landfill gas in the United States and it will continue to be a lot of landfill gas, but you'll also see more and more dairy and farmed hogs coming onboard because of its low carbon.

The nature.

Got it.

For instance, let me give you 1 other little point and I can't go back a few years, but.

Our our carbon intensity is coming down and by the end of this year, our carbon intensity will be.

In the fourth quarter is going to be approaching zero for all for our fuel.

And it wasn't too many years ago that just wasn't it wasn't that way and it's coming out fast because as you bring on this.

The negative carbon fuel.

It's so much lower of carbon that it brings down the other so that's a good thing.

Yes, no that's good.

Maybe last 1 from me just I mean, great to hear of rebound in transit and airport have you seen any.

Any change or with the variance.

Things along those lines or is that something that you kind of feel like those.

Of those 2 areas are back on track and they should continue to grow going forward.

Yes, we're seeing the mall grow I don't think airports aren't fully back I mean, they've come back all the way and I would say theyre back to about.

Where we were before but they are still.

They are still not I don't think there are operating on all cylinders, yet just based on what I know it passenger.

Passenger load, but they're pretty they're essentially back to where we were before but I think there is growth there.

Transit buses and I've said this from the in the kind of the early days of the pandemic they kind of flip the switch right. They went from 100% of 50% of they drop it in the big Big pieces and it doesn't have as much to do necessarily with the passenger load on the given day as it does that they just turn on different routes.

<unk>.

And we've seen the transit back to <unk>.

Back to <unk>.

Pre pandemic levels, so the of transit back.

We have seen transit properties growing we see art, we see transit buses taking delivery of new.

Natural gas transit buses, so I think youll see both those segments continue to grow.

That's good news or that were starting to finally see some growth back now.

Refuse grew last year, Brian I want to say, 8% and is continuing this year along those lines.

Okay. Thanks, a lot.

You bet.

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

Good afternoon.

Rob Hey, Rob.

Just wanted to get a little more color on the Amazon build out where are you at in terms of getting stations completed and do you expect to have really all of them by the end of the year or what's sort of the timeline there.

Right now of course, we told Amazon, we're going to bring those stations down as quickly as we can and of course as you know as we build those stations.

The the toughest part of just Buchanan and where we are with Amazon and other other of our customers noticed the.

Longest lead part of.

Of developing the station is the siting of the land and as the permitting and as of the due diligence on the utility and the.

The.

The utilities.

And the acquisition of land or the leasing of the land that's the longest lead items. The construction is actually the shortest part so we've made very good progress.

Of the new locations.

The.

The majority of them have.

Ben.

We've gotten through the real estate piece of this and you'll begin to see a construction phase of most of these stations being developed in the latter part third and fourth quarters of this year. Some of those will get probably finished.

And next year as well early though.

But we're making good progress on all of them.

We're also making additional investments in adding to existing stations as I think I've set of maybe in the last call. We're currently fueling.

Amazon trucks, and we've seen them at our existing network.

Where we've actually been fueling Amazon trucks of 37 of our different stations already.

And some of those network locations are receiving some.

Increases additional investment to make sure that they are they can.

Serve the Amazon characteristic of the fleet well.

As well as we can and so and so that's what's going on so I feel pretty good we monitor it very carefully.

And look real estate locations in the northeast are not easy to come by there's a lot of there's a lot going on up in certain states.

Right now, but we've made we've made pretty good progress on.

And I noticed that 1 of the changes from the original March version to the.

What's actually going to be voted on is there is some provisions for buses that are low of admission, but not zero emission have you guys looked at whether net gas can be included within that.

Right well, we were heavily involved in there. So you know you go back about.

6 or 8 years when the low no no low program was put in place and it always envisioned low knocks which is natural gas.

Bus, it's just that the Obama administration decided not to ever funded a natural gas buses. So the low no low program was always used as the slush fund for electric vehicle programs.

And it was on the order of 100 million Bucks hundred 50 million Bucks. Some of the scheme of transit it didn't really amount to much dry because that doesn't go very far in the electric world.

And so come this year, there was some United States Senators.

On the Republican side with with some Democrat colleagues in fact, the chairman Brown, the just felt like.

The load the Nolo program should return to the original legislate of 10, which is that if you could put help fund.

Low low knocks buses, especially using orangy on the road with.

Have arguably of lower carbon content and electric.

That that should get put in place and so when you look at the the plus up so the the low no program has gone from on the order of a couple of hundred million Bucks a year to 5 billion.

You know that was a disaster.

And Duluth.

So I don't know I don't know of any others, but those are the ones that come to mind I'm sure. There are others that just haven't had a good experience.

Okay.

Thats helpful. I'm, just trying to kind of visualize how common debt.

Yes, the kind of reversed.

Look I know it always comes across I pick on them, but I.

I do I do in a way but.

You know what.

I sort of recognize that there may be a role for the public funding to sometimes push on these extravagant technologies.

And we saw that 20 years ago with natural gas buses right.

Transit fleets.

Funded natural gas when that wasn't the thing to do right and so.

So occasionally the public monies are being used here to push on the technology side and Thats 1 thing okay.

The <unk>, you and I've talked a lot about over time is that.

When you have something is being funded 93% by the feds.

Okay, but you don't really look at it as the dollar and cents cost effective thing you just don't you don't have to.

But when you start looking at our private sector fleet, then it's totally different.

1 is the 100% your own money than this really does come into play and that's why I always try to let people know as Don don't think because somebody's funding or fielding some electric transit buses does that necessarily translates to.

Private sector.

Trucking company doing the same thing because there's different economics at that point.

And I think that's important for people to understand.

Yes, no I appreciate the perspective, thank you guys.

You bet.

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

Hey, Bob Andrew.

Im trying to understand if you put in about $50 million at the BP JV and then you are seeing.

Total debt is going to be more project by project based and I know you can't get too specific but let's say if youre looking out the ear in 2022, or you think 'twenty going to the 3 like how many days are you targeting would have contracted with you and how many do you think would be online.

Between BP and total just some rough numbers. So we can model those JV the little better.

Hum.

No.

Yes.

The account that you can put in your model.

But what we have said is by 2025 of 100 per cent of our fuel is going to be that way and what we have said is that we're working with very large fleets. The.

If you just think you did it in 1 of your fine notes few kind of run out and use Amazon and do the multiplier on gallons and all of that has to be orange of you can see we need.

We need another 100 million gallons 50 to 100 million gallons of just for them.

So there's gonna be a lot of money put to work here from us our partners and also for others that we're going to have to bring in.

Because of the future is going to be a landfill and dairy projects overtime. That's the future. So I can be the fossil it's going to be this RMG bring coming to bear.

Yeah with with the <unk>.

Significant flow from those investments more in 2023 right.

I mean, I think the point is the.

<unk> is to spend the full amount of capital there there can be leverage at the project level.

So and they're typically would be.

Well in total total energy has indicated their preference to upsize there that shake the and they said that they would like to see that go up to 400 million. So we're not ready to do that right. The second but we know that that's their intent and that's what they they would like to do.

So there'll be a lot of money on our side put put to work.

Perfect I I had of policy question on 1 hand, the all of the C. C. The by the night administration about you know the lowering carbon emissions and everything and then all you see from most members of the of the administration talk about is E V. I think even today. It was all EV, let the then of.

1 or 2 Senate does like Senator of Amy Globe of child, or some other people who are talking biofuels, but most of the time what the him from media at least is just easy and again you guys are very close to all of this like on the ground do you think the current administration is more supportive of Biofuels or do you think.

It's just the support of just E V and nothing really has changed even from the sound better.

Oh, I think it's been E Z as frankly easy for politicians to just at this point just kind of lump it all in and you know it's gotten to be very comfortable to sort of talk about.

And in in E Solar N E V future I mean, that's kind of what the environmental community like Sears, that's kind of what the they've adopted now if you press and that's why you see that's why you see that that bill the <unk> I just talked about all of a sudden there was of 25 per cent carve out for low knocks which is natural gas.

The natural gas there is of recognition that you should try to do whatever you can today to lower emissions and not wait casino that and we don't really get any pushback from either side of the aisle as 1 you really address it.

As you know there isn't of fuel cell truck today, there isn't the height that you can buy and frankly, there's not really an electric. So you know so that is code for if you don't do something that's available today, you're just allowing that to go the diesel.

And and that's why you just you just saw this carve out in this low note program.

I would call your attention Manav and the others on the call and it may be a little hard to find but the the executive officer of the South Coast Air quality management, just just wrote a really compelling.

I guess, we're about to the environmental Justice community and some of the health of the communities that were kind of roughing the South coast Air quality Management District, who is responsible for the air quality in southern California, and frankly of been on the leading and bleeding edge of the air quality issues for the last <unk>.

50 years and.

And his name's Wayne Nasty and I would encourage U N. A S. T R I and if you'd like we will send it to you if it's so hard to find but if you go online he <expletive> out yesterday or the day before.

A 6 page single spaced a written letter where he calls out that low knocks natural gas is gotta be part of the equation.

To do what you can do today for air quality, because frankly, when he look and when his as much as they've spent $350 million on the electric technologies in.

In the last few years, probably done more than any other local agency.

Supporting electric they are the first to admit that they have to do other things to continue to bring down and improve the air quality in tailpipe emissions and carbon emissions and.

And so what Wayne was arguing is that this idea that it's natural gas or it's low knocks or it's R. G versus the electric as of foolish thing to get engaged in that you have to keep them you have to employ all of these technologies otherwise you get diesel.

And that's in so this long winded, so I would encourage everybody to look at that because the here as a professional officer in charge of the air quality that makes the case for why you need to be doing.

<unk> and natural gas technologies right now.

Doesn't mean you are against the electric just means that's what you have today and you need to do it and that's the same thing that we'll see.

In the federal level when it all shakes out there you know for instance, natural gas is in the corridor of program.

So all you are going to read about as an electric charging stations in this new corridor of program on the others natural gas is funded in that too. It's just not as environmentally politically correct to talk about that.

Perfect Uhm My last question is.

He is currently the quarterly 42.9 million gallons of hunting tela supplied health.

Help us understand how much of type of <unk>.

First on I guess this margin range that you've provided can you just help us understand what's kind of driving the potential for it to come in at the high end versus the low end is it just.

RIN volatility is that kind of the main factor.

And if so what's the sensitivity there.

If the.

Some of that Jason, but it's not all.

Not all banked on that so it's also just in anticipation of volume rebounding from the pandemic. So.

I think Eric out of question 2 on that.

We all know there's various steps going on but frankly.

We're not seeing anything like that right now.

Impacting our volume so we still are anticipating that we're going to gradually recover and so as we put on more fuel volume and grow volumes that really also is the.

A driver to our margin per gallon.

Along with the.

Of the Rins Thats helpful. But you know the <unk> has been.

Is lower than when we started the year right so that.

Hasnt necessarily been off the charts, it's still strong and by no means.

Not good but.

That's kind of off the Rins picked up so theres always a little bit of this and that that goes on it but then the fuels and theres a little mix in there to the increase of fuel volume was greater.

Mix and looking at the <unk>.

Amazon fueling those types of volumes help in that.

Absolutely because those are.

Those of our core fuel volumes so.

We see that increasing.

Okay.

Great and.

Then I guess just more broadly on the volume outlook now that they've kind of rebounded 2019 levels I think your.

<unk> was flat with where 2019 was could you give us a sense of the volume trajectory moving forward.

Into next year.

And if you expect kind of and within that I guess, the RMG volume growth as well.

Yes, I think.

That said at the beginning of the year that we had.

We've kind of we've come out of Q4.

A round of 12% kind of middle of middle of 12% year over year, 12% to 15%.

And volume growth so.

Uh huh.

That will get there with our Q4 <unk>.

Q3 of <unk>.

We will be not at that level, but it will rise and then Q4 will kind of.

Be it maybe 12% to 15% above what it was a year ago and then.

Assuming there is no real set back from what's going on out there.

Will.

We should be in.

Solid double digit volume growth.

But thats.

We still want to see.

Now all of the various steel shake out before we give too much guidance toward the 20.

22 volume, but.

It should be north of 10%.

As we go into all of it.

Great and then of the last 1 just on the equity raise you did in the quarter did you consider.

The other channels of financing.

I guess the equity more attractive then.

What are the other options that you could have pursued.

Sure Jason we are always looking at different things right in our history. We've done we've we've had.

Convertible notes and so we're always looking for what we think the best in.

We're not we're not.

Yes.

Because we did of the sweat.

Just a couple of rounds of equity I mean, I don't think 1 should assume that that's the only thing we're going to do there is probably the time when some other debt.

On these projects and.

Would would make some sense, but we felt like with what was happening in the in the market at the time.

And the need for growth capital that it was prudent for us to put some on the balance sheet when we had a chance.

Alright, great. Thanks, a lot of I appreciate the answers.

You bet okay.

Thank you. Our final question comes from the line of Todd Firestone with Evercore ISI. Please proceed with your question.

Hi, good afternoon. Thanks, Thanks for taking my question.

I had a couple of questions..1 was maybe that could come out of it a little different angles.

Are you able to disclose or hub, maybe internal estimate of what 1 of the Amazon.

Trucks would use them annually.

On a gallon basis.

Oh, I don't know that we've ever really said exactly but look.

Shouldn't be I'm, not divulging any Amazon secret when you look at kind of normal over the road trucks that kind of operate like Amazon I think and I've been saying this for years right its somewhere between kind of depending if there.

Regional or a little more superregional day.

They tend to anywhere between 12500.20000, right. So I mean, I think if you were to use the number in the 14.15000, GAAP that's sort of a good.

Good placeholder for 4 of them.

And over the road truck J B Hunt type truck those kind of those kind of big over the road trucks in that neighborhood.

Great.

The second.

Second question is.

Just on the number of stations.

The logistics around that and I apologize if you've disclosed the prior call but is there.

I mean, the hard or soft cost contingency.

Built into.

Building all of these stations of what I'm really trying to get out of are you seeing trouble getting you know workers and crude to build the station.

Is there any reason to be concerned about the.

Well, we've seen like everybody else, we've seen some cost increases I don't know that its been ex.

I don't know that we've been phase.

Faced with horror stories on that but the concretes up a little bit.

Some of the our steel.

Cylinders.

Okay.

Okay. Thanks.

[music].

Greetings and welcome to the clean energy fuels second quarter 2000 of 'twenty 1 earnings conference call. At this time all participants are in a listen only mode. A brief 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 of this conference is being recorded it is now my pleasure to introduce your host Mr. Robert Vreeland, Chief Financial Officer. Thank you Sir you may begin.

Thank you operator earlier this afternoon clean energy released financial results for the second quarter ending June 32021.

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 or.

The call is also being webcast there will be a replay available on the website for 30 days.

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

Such forward looking statements are not a guarantee of performance and the 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 in the risk factors section of the clean Energy's form 10-Q filed today.

For or superior to GAAP results.

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

Bob Good afternoon, everyone and thank you for joining US this was a great quarter for us in Q2, we signed the most important commercial agreement and the history of our company with Amazon Our business is growing again and surpassing pre COVID-19 levels, we raised $200 million in growth capital our earnings were better than expected.

And there continues to be the increased understanding of the role of our renewable fuel can play in addressing climate change today.

Notably our fuels volume surpassed the 100 million gallons of quarter again.

The healthy 13% increase over the second quarter of 2020, when the pandemic have begun to take hold.

We saw volumes bounce back in all sectors and the good news in particular is that airport fleet volumes increased 36% and transit increased 24% compared to a year ago, which surpassed our own internal projections.

Our renewable natural gas or LNG volumes grew 19% over the same.

As you know we are focused on providing more and more RMG of fuel that can be ready to have a negative carbon intensity, allowing our customers to meet their transportation still sustainability goals easily.

Medially and affordably.

I'm going to let Bob go into more detail about our strange revenue number of this quarter, but it's not hard to see.

There were accounting related non cash charges that highly impacted the most notably the Amazon warrant charge.

Excluding the noncash charges, our revenues would've been $979 million of 29% increase in the apples to apples comparison to the second quarter of 2020, which was $61 million.

Our balance sheet is significantly improved placing us on solid footing.

We finished the quarter with $254 million in cash and investments after contributing $50 million into our negative carbon intensity R&D development JV with BP.

Our adjusted EBITDA for the second quarter was $14 million of 51% increase over the adjusted EBITDA in the second quarter of last year overall was a strong quarter financially and operationally.

Regarding the supply of RMG, Let me just quickly report that our efforts to make agreements with dairies is moving along very well no. Other company has as compelling and offers we do with the strong balance sheet supported by our JV with total energies and BP and the largest vehicle fueling infrastructure in the country, which.

<unk> the mechanism to generate the valuable environmental fuel credits dozens of dairies from California to Texas to the upper Midwest or in discussions with us.

We have already signed our first partners and have a robust development pipeline.

But before the RMG from these new partnerships comes online, we're also aggressively and continuously signing RMG supply contracts with third parties to meet today's growing demand.

Since the beginning of the year, we have secured an additional 53 million gallons of RMG with a healthy pipeline of additional supply agreements.

As I mentioned, our base of the existing customers is back to previous levels, and we were adding new businesses as well.

The adopt of Port program, with Chevron, which makes replacing old dirty diesel trucks with clean R&D trucks of affordable for smaller operators in the ports of La and long Beach continues to expand.

<unk> financing for over 485 heavy duty trucks is either closed or is in the contracting phase. These trucks will fuel in the ports at our surrounding network of R&D stations in Southern California, We're working our way through the additional $20 million of financing the Chevron recently committed to the program and I believe it will accelerate.

<unk> is the state of California soon distributes another round of its grants for clean trucks, making the switched R&D all of that more appealing.

On the east coast are existing customer of Manhattan beer distributors recently announced they would be expanding their natural gas fleet to 29 trucks, which will fuel of our stations in the New York City area.

And in the middle part of the country lose sight of new customer calm energy of large regional fuel provider in Nebraska.

We will be taking over the operation of 3 stations that sell an approximate 900000 gallons of <unk>, a year and we forecast that to the.

That to grow as calm adds medium and heavy duty trucks to their fleet.

Another new customer of the city of Fort Smith, Arkansas will begin to fuel of new fleet of natural gas refuse trucks and has plans to convert their entire fleet to natural gas.

I spent quite a bit of time discussing on the last call. So I won't go into much more detail today.

We are making good progress on the additional stations that we plan to construct for Amazon and Amazon continues to deploy is heavy duty truck fleet.

In addition to the fueling infrastructure expansion, we are facilitating training classes with the natural gas vehicle Institute for dozens of maintenance.

Maintenance technicians, who will be keeping the Amazon trucks on the road.

Our excitement about our new relationship with Amazon has only increased since our last call the significant fueling agreement and the right to buy clean energy shares provided they purchase hundreds of millions of gallons of RMG demonstrates the overall commitment and strategic alignment that 1 of the world's largest companies which moves more.

<unk> than anyone else has made to renewable natural gas.

We are seeing that message open doors with other fleets, which have been a little hesitant in the past to think about leaving diesel.

And fleets are feeling other pressure points as well I don't have to tell this audience that companies are under increased scrutiny to find ways to reduce their carbon footprint investors regulators and the public are asking to see specific plans.

To meeting their emission reduction goals.

Im going a little bit off the farm here, but its my belief that our RMG fuel solution has the momentum versus other alternatives.

Almost becoming of weekly occurrence, when we where we see stories about transit agencies, turning back of electric buses because of serious issues.

Including thermal events and by the way, where I come from we call those fires.

Or delays in Rollouts of electric heavy duty trucks, and other promises and claims not kept by startup Oems or the lack of charging and fueling infrastructure for large vehicles the.

The expense of charging and fueling infrastructure and a growing realization that there is no perfect clean solution.

Highlights by a recent in depth story by the Los Angeles times about the environmental impacts and problems associated with the mining of minerals for large batteries now don't get me wrong.

<unk> electric and fuel cells will be fine in the light duty space.

I've said before our experience in station construction, along with our access to RMG fuel supply, which can be used as a clean feedstock in time will allow us to expand in other alternatives as our customers do.

In fact, we have recently submitted bids to build the hydrogen stations for transit agencies that we'll be testing of handful of hydrogen buses.

But for fleets of the large vehicles, which are looking for immediate and significant carbon reduction solutions. We think there is nothing comparable to R&D.

It's becoming easier to make our sales pitch of fuel produced from cap capturing naturally occurring methane of dairies.

Which number in the tens of thousands and then turning it into a transportation fuels displacing.

Displacing a harmful incumbent fuel is an easy story.

This 2 pronged missions mitigation is why <unk> fuel can receive of negative carbon intensity rating and why more fleets like Amazon are realizing is the easiest and most cost effective way to meet their aggressive sustainability goals.

We are already having we already have a nationwide fueling infrastructure in place that is expanding.

We have recently begun an exercise of the dive deep into the large heavy duty truck fleets with specific data that demonstrates the company's how they can reduce their greenhouse gas emissions.

As an example at their request in July we provided 1 of the country's largest fleets, which operates thousands of heavy duty diesel tractors with the specific data about how they could achieve their long term carbon emissions reduction goal by replacing only 1212.100 trucks over 3 years with <unk>.

<unk>.

Carbon R&D.

As I mentioned at the top of my remarks of the second quarter was of great..1 for clean energy a recurring business is returning to normal levels and we are beginning to see real growth in our fuel volumes driven by new customers and no small part by 1 in particular the Amazon.

And we are on solid financial ground as we continue to make additional investments for future growth.

And with that I'll turn the call over to Bob.

Thank you Andrew and good afternoon, everyone.

Of course, our GAAP results as reported were significantly impacted by the noncash Contra revenue charges of $78.1 million from the Amazon warrants.

But looking at our non-GAAP earnings we earned a penny a share with adjusted EBITDA of $14 million.

These contra revenue charges related to the Amazon warrants as why we are reporting of revenue number of the half a million dollars from the second quarter.

Without those warrant charges and changes in fair value of our zero now hedge our revenue was $79 million or 29% above 2022nd quarter revenue of $61.3 million on a comparable basis.

The Amazon warrant noncash Contra revenue charges for the second quarter included $76.6 million related to the immediate vesting of approximately 25% of the warrant shares.

And $1.5 million related to ongoing fuel delivery to Amazon under our fueling agreement.

We will continue to record noncash contra revenue charges each quarter that could be in the range of $3 million to $4 million per quarter related to the ongoing spending.

On fuels by Amazon.

As such we've updated our guidance for estimated for our estimated GAAP loss to $86 million for 2021 to reflect the increased contra revenue charges in the second quarter.

Which has no impact on our cash flows or adjusted EBITDA.

We are maintaining our adjusted EBITDA guidance for 2021 of 60 million to $62 million.

Now continuing on with the second quarter total volumes were 101.4 million gallons compared to $89.5 million gallons a year ago. Andrew noted the big increase is coming from airport fleets and transit sectors, which had been the most impacted by the pandemic trucking and refuse also saw.

Year over year volume gains.

And our R&D volume grew 19% to $42.9 million gallons in the in the quarter up from 36 million of R&D gallons in the second quarter last year.

Our effective price per gallon in the second quarter of 2021 was <unk> 67 per gallon compared to 58.

A gallon a year ago Mr.

This reflects generally higher natural gas prices and related prices at the pump as well as significant gains in our <unk> revenue.

Both station construction sales and the alternative fuel tax credit revenues were better than a year ago by 15% and 20% respectively.

Collectively an improvement of $1.7 million for the second quarter compared to last year.

Our overall gross profit margin improved in the second quarter of 2021 compared to 2020 exclusive of the noncash Contra revenue and noncash fair value changes in our zero now hedge ex.

Exclusive of these noncash items, our gross margin was $32.1 million in the second quarter of 2021 compared to $22.8 million in the second quarter of 2024.

4 of 41% improvement.

Increased volumes together with the rise in our margin per gallon from a year ago were the primary drivers of this year over year improvement in margin.

The effective margin per gallon for the second quarter of 2021 was 26 cents per gallon compared to <unk> 20.

A gallon a year ago.

Also reflecting the greater fuel volumes and higher RIN pricing.

We believe our margin per gallon will remain within our expected range of 22 to 26 for the year, but as we've seen we've been at the high end of that range in our first 2 quarters.

Our SG&A was $21.6 million in the second quarter of 2021 compared to $16.9 million a year ago, an increase of $4.7 million of which 57% or $2.7 million of that increase.

Relates to an increase in stock compensation as expected.

Our GAAP net loss for the second quarter of 2021 was $79.7 million, which includes the effects of the noncash warrant contra revenue charges and the zero now hedged changes.

Our non-GAAP net income for the second quarter was $1.8 million or <unk> <unk> per share, which.

Which we believe is more indicative of our operating results.

Our adjusted EBITDA of $14 million for the second quarter of 2021 compares to $9.2 million.

A year ago, which again highlighted the benefit of increased volumes and improved margins principally associated with our RMG deliveries.

Our cash flow provided from operations amounted to $9.7 million for the second quarter of 2021 compared to $54 million in the second quarter of 2020.

Which of that figure included 2 years of alternative fuel tax credit collections in the second quarter of 2020.

Exclusive of changes in operating assets and liabilities cash flow from operations was $14.3 million in the second quarter of 2021 versus $6.6 million in the second quarter of 2020.

Capex spending was $4.6 million for the second quarter of 2021.

Of course, we see that amount increasing as our station building continues and ramps up.

As we accommodate.

Amazon.

And Andrew mentioned, our cash and investments of $254 million with debt of $42 million at the end of June 2021.

We contributed $50 million in June into our R&D investment.

Our JV with BP and we anticipate funding our R&D JV with total energies on a project by project basis as specific projects are approved for funding.

Our share of the net results of these jv's is and will continue to be reflected in our adjusted EBITDA as we progress forward in bringing projects up and producing R&D.

With that operator, we can open the call to questions.

Thank you we will now be conducting a question and answer session.

I would like to ask a question. Please press star 1 on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star 2 if you'd like from all of your question from the queue for participants using speaker equipment, maybe necessary the pickup your handset before pressing the star keys, 1 moment. Please the way Paul for your questions.

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

Andrew Hi, Bob.

Hi, there.

So I know you mentioned that Amazon and not a surprise that it is helping more broadly and discussions with customers, but maybe could you talk about specifically Amazon suppliers.

Maybe some specific data points as much as you can share traction, you're making there and kind of how you see that overall volume opportunity.

Our stations that we're building for Amazon are going to be open to the public.

And of course.

Knowing our business Eric.

Opening of the public debt means that we're open to other.

Truck companies right and in that case I think it's it's.

It's likely to be other vendors and suppliers as well as other fleets that operate for Amazon we have seen of few.

Emissions and their goals and the reductions in the future they're going to try to encourage many of the people they work with to bring on cleaner and cleaner vehicles over time, and we hope to be right in the middle of that and.

Kind of stay tuned.

Yes.

Okay, or maybe just sticking with that.

I mean is there any way obviously as you've got the joint ventures now you've brought on more supply you have had the supply agreements in.

In the hands for some time, maybe the size of the pipeline for redeem.

Whether it's versus a year ago 3 years ago.

Anything along those lines would be helpful.

Right and I'm going to be a little cagey here Eric.

Just because I guess, there's a lot of good news here, which is there is there are a lot of competitors that are out there trying to develop.

The dairy projects and 1 way Thats really a good thing right because that just confirming for me the theres lot of money and there are some big players with deep pockets.

<unk> that this is a really viable fuels thats economic and that has a great role to play in reducing carbon emissions today. So that's good.

Remember that we are ahead, even even while we're competing.

Let's call it at the dairy location.

Aten.

We're we're.

I don't want to say the only gave until we often get though the supply from.

From our competitors as they go as they look to put it into the vehicle tank right because we have the infrastructure. So.

I've said on a previous call I'm not going to dissect. It today I've said in the previous call that we've got several projects that are either in that we have given the notice to proceed that are either in construction or in the or signed or in our pipeline that has grown since our last call, but I'll just kind of leave it at that right now.

But yes.

Eric compared to where we were several years ago. I mean remember we are early in this business. We started I guess, we were the first ones to put landfill gas.

On a truck.

10 years ago, right and so up until recently it was all landfill gas and it will continue.

A lot of landfill gas in the United States and it will continue to be a lot of landfill gas, but you'll also see more and more dairy farms of coming onboard because of its low carbon.

The nature.

Got it.

Brent is let me give you 1 other little point and I can't go back a few years, but.

Our our carbon intensity is coming down and by the end of this year, our carbon intensity will be.

In the fourth quarter is going to be approaching zero for all for our fuel.

It wasn't too many years ago that just wasn't it wasn't that way and it's coming out fast because as you bring on this.

The negative carbon fuel.

It's so much lower of carbon that it brings down the other such good day.

Yes, no that's good.

Maybe last 1 from me just I mean, great to hear of rebound in transit and airport have you seen any.

Any change or with the variance in <unk>.

Things along those lines or is that something that you kind of feel like those.

Those 2 areas are back on track and they should continue to grow going forward.

Yes, we're seeing the mall grow I don't think airports aren't fully back I mean, they've come back all the way and I would say theyre back to about.

Where we were before but they are still.

They are still not I don't think they are operating on all cylinders yet.

So on what I know it passenger.

Passenger load, but they're pretty they're essentially back to where we were before but I think there's growth there.

Transit buses and I've said this from the kind of of the early days of the pandemic they kind of flip the switch right. They went from 100% to 50% of they drop it in the big Big pieces and it doesn't have as much to do necessarily with the passenger load on the given day as it does that they just turn on different routes.

And we've seen the transit back to back.

Back to the.

Pre pandemic levels the of transit.

Back.

We have seen transit properties growing we see art, we see transit buses taking delivery of <unk>.

Natural gas transit buses, so I think youll see both those segments continue to grow.

It's good news or that were we're starting to finally see some.

Both back now.

Refuse grew last year, Brian I wanted to say, 8% and is continuing this year along those lines.

Okay. Thanks, a lot.

You bet.

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

Good afternoon.

Hey, Rob Hey, Rob.

Right now of course, we told Amazon, we're going to bring those stations down as quickly as we can and of course as you know as we build those stations.

The the toughest part just Buchanan and where we are with the Amazon and other other of our customers notice the.

Longest lead part of the.

Developing of station is the siting of the land and as the.

Permitting and as of the due diligence on the utility and the.

The utilities.

And the acquisition of land or the leasing of the land that's the longest lead item the.

Construction is actually the shortest part so we've made very good progress.

Of the new locations.

Yeah.

The majority of them have been.

I have.

We've gotten through the real estate piece of this and Youll begin to see construction phase of most of these stations being developed in the latter part third and fourth quarters of this year. Some of those will get probably finished.

The next year as well early though.

But we're making good progress on all of them.

And we're also making additional investments in adding to existing stations as I think I've set of maybe in the last call. We're currently fueling.

Amazon trucks, and we've seen them at our existing network.

Where we've actually been fueling Amazon trucks of 37 of our different stations already.

And some of those network locations are receiving some.

The increases.

Additional investment to make sure that they are they can.

Serve.

Of the Amazon characteristic of fleet well.

As well as we can and so and so that's what's going on so I feel pretty good we monitor it very carefully.

And look real estate locations in the northeast are not easy to come by there's a lot of Theres a lot going on up in certain states.

Right now, but we've made we've made pretty good progress on.

Okay, great great. Thank you for the color and then in terms of the.

The fuel volume or the the accounting of the the revenue I think Bob you mentioned, some some offsets going forward could you just give some color on sort of is that volume driven or is that kind of of fixed fixed amount.

Yeah.

Volume spend.

Driven.

So.

Amazon Vest.

And the warrants as they spend.

Theres thresholds and milestones frankly.

But from an accrual accounting standpoint.

You assume no.

The various thresholds so it's kind of.

We're going to record those as <unk>.

As the spend occurs and.

And that's how that all of that's where those.

1 of those will come from.

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

Okay. Thanks, Rob.

Thank you. Our next question comes from the line of Pavel motion of with Raymond James. Please proceed with your question.

Thanks for taking the question.

So we're obviously waiting for the infrastructure Bill.

Built the path and I noticed that 1 of the changes from the.

The original March version to the.

Whats actually going to be voted on the is the risk.

Probation for buses that are <unk>.

Lower mission, but not net.

CRO of mission have you guys looked at whether net.

The net GAAP can be included within that.

Right. Although we are heavily involved in that so you go back about.

6 or 8 years when the low no no low program was put in place and it always envisioned low Nox, which is natural gas.

Bus its just that the Obama administration decided not to ever fund any natural gas buses and so the low no low program was always used as the slush fund for electric vehicle programs.

And it was on the order of 100 million Bucks that are 50 million Bucks of in the scheme of transit it didn't really amount to much right because of that doesn't go very far in the electric world.

And so.

This year there were some.

United States Senators.

The Republican side.

What's the Democratic colleagues in fact, the chairman Brown, the just felt like.

The load no low program should return to the original.

The Legislative 10, which is that if you could put help fund.

Low <unk>.

Knox buses, especially using RMG on the road.

Which have arguably of lower carbon content in the electric.

That should get put in place and so when you look at the the plus up so the the low no or low program has gone from on the order of a couple of hundred million Bucks of year, 2.5 billion.

Alright 525 billion.

There is a 25% carve out of that $5 to $5 billion per.

The low Nox buses, which would be natural gas buses.

So it's a big it's a big record for me, it's a big recognition and it's the carve out right is solid.

So you got a $1 billion basically there that's going to be for natural gas buses.

And so we're real pleased about that and when you kind of compare that versus the other $3 billion is kind of go to electric youre going to get on a bus and bus comparison youll have about as many natural gas buses funded as you will electric.

So yes, we're on top of that 1.

Okay. Okay, no I appreciate the detail gross.

Back to your comment.

In the intro about.

Certain municipal Buffly debt.

That are unhappy with their electric purchase do you know of any.

Specific examples of our city fleet that.

Date of pilots or initial deployment of electric.

And then essentially gave up on it and said work on the go back to what we had before.

You mean like Foothill you mean.

Well I.

Yeah.

The in transit transit of properties that try at it does it set up no. Thank you exactly and actually walked away from from electrification entirely.

Well I think.

I know you fall of this so you may note, but I believe the Albuquerque did.

<unk>.

I imagine there is still running some but.

Pretty sure of Foothill Transit has decided that the fact foothill transit is going to.

Now.

I'll go with the I guess theyre going to take a swing at the hydrogen.

Indianapolis.

That was a disaster.

And Duluth.

So I don't know I don't know of any others, but those are the ones that come to mind I'm sure. There are others that just haven't had a good experience.

Okay.

That's helpful. I'm, just trying to kind of visualize how common debt.

Yes kind of reversed.

Look.

I know it always comes across I pick on them, but.

And I do I do in a way but.

You know what.

I sort of of recognize that there may be a role for the public funding to sometimes push on these extravagant technologies.

And and we saw that 20 years ago with natural gas buses right.

The transit fleets.

Funded.

Natural gas when that wasn't the thing to do right and so.

So occasionally the public monies are being used here to push on the technology side and Thats 1 thing okay.

<unk>.

The <unk>.

You and I've talked a lot about over time is that when you have something is being funded 93% by the feds okay.

Don't really look at it as a dollar and cents cost effective thing you just don't you don't have to but.

But when you start looking at our private sector fleet, then it's totally different.

Private sector.

The trucking company doing the same thing because there's different economics at that point.

And I think that's important for people to understand.

Yes, no I appreciate the perspective, thank you guys.

You bet.

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

Hey, Bob Andrew.

I'm trying to understand if you put in about $50 million at the BP JV and then you were saying.

Total debt is going to be more project by project based and I know of Youll get too specific but let's say of Youre looking out the EBITDA in 2022, or you think <unk> like how many days are you targeting would have gone.

Contracted with you and how many do you think would be online with the.

The BP and total just some rough numbers. So we can model of those JV the little better.

Okay.

Yes.

Well in the Navajo.

Good question, but.

There's all of these.

The dairy projects.

Very kind of so much with the size and.

What we have.

That is.

Generally speaking in Europe.

We were talking about it in and gallons and youre going to spend on the on the negative.

Carbon the dairy youre going to spend maybe $20 million.

To.

Per million gallons.

And so.

When you start to do that math I mean, our intent is to spend.

The full $100 million in the BP deal in the $400 million in in the in the total energy deal and it could go bigger, but let's just say.

Well, we'll go through both of $100 million, so that would be.

Kind of $200 million.

At the JV level of 100, each and that might be leveraged. So so I don't know that were going to youre going to get from us today, a dairy cow and head count gallon count of low Ci count.

You can put in your model.

But what we have said is by 2025 of 100% of our fuel is going to be that way and what we have said is that we're working with very large fleets debt. If you. Just think you did it in 1 of your find notes few kind of run out and use the Amazon and due to the multiplier on.

Gallons and all of that as of the R&D you can see we need.

We need another 100 million gallons 50 to 100 million gallons just for them.

So there's going to be a lot of money put to work here.

From Us our partners and also for others that we're going to have to bring in.

Because of the future is going to be a landfill and dairy projects.

Over time, that's the future so that going to be the fossil it's going to be this RMG bring coming to bear.

Yes.

With <unk>.

Significant flow from those investments more in 2023 right.

I mean, I think the point is the <unk>.

Is to spend the full amount of capital there there can be leveraged at the project level.

And there typically would be.

Well in total total energy has indicated their preference to upsize there.

That JV and they've said that they would like to see debt go up to $400 million. So.

Not ready to do that right. The second but we know that that's the intent and that's what they they would like to do.

So there'll be a lot of money on our side put to put to work.

Perfect.

Of the C question on 1 hand, we all D. C day by day, not administration about lowering carbon emissions and everything and then all of you see from most members of the of the.

Administration talk about EV I think even today.

The other 1 or 2 Senate does lake Senator Amy Global true all or some other people were talking biofuels, but most of the time, what we hear from media at least is just EV and again you guys are very close to all of this I think on the ground do you think the common administration is more supportive of Biofuels.

Or do you think is just the support of just EV and nothing really has changed even from the from data.

Oh, I think it's been easy as frankly easy for politicians to just at this point just kind of lump it all in it's gotten to be very comfortable to sort of talk about.

And each of the solar and EV future I mean, that's kind of what the environmental community likes the here that's kind of what the they've adopted now a few press and Thats why you see it's why you see that that build the <unk> and I just talked about all of a sudden there was a 25% carve out for low Nox, which is natural gas.

The natural gas there is a recognition that you should try to do whatever you can today to lower emissions and not wait casino that we don't really get any pushback from either side of the aisle is when you really address it.

There isn't a fuel cell truck today, there isn't the Hyatt that you can buy and frankly, there is not really an electric.

<unk>.

So that is code for if you don't do something that's available today.

Allowing that to go to diesel.

And that's why you just saw this carve out in this low note program.

I would call your attention Manav and the others on the call and it may be a little hard to define but the the.

The executive officer of the South Coast Air quality management, just as just wrote a really compelling.

I guess robust to the environmental Justice community and some of the health <unk>.

Communities that were kind of roughing, the south coast Air quality Management District, who is responsible for the air quality in Southern California, and frankly have been on the leading and bleeding edge of air quality issues for the last 50 years.

And his name's Wayne Nasty and I would encourage you in a S. T R I and if you'd like we will send it to you it's hard to find but if you go online.

As of yesterday of the day before.

The 6 page single spaced.

The written letter where he calls out that low Nox natural gas has got to be part of the equation.

To do what you can do today for air quality, because frankly, when he look and when his as much as they've spent $350 million on the electric technologies.

In the last few years has probably done more than any other local agency.

Supporting electric they are the first to admit that they have to do other things to continue to bring down and improve the air quality in tailpipe emissions and carbon emissions and.

And so what Wayne was arguing is that this idea that it's natural gas or it's low nox or its RFG versus the electric is a foolish thing to get engaged in that you have to keep them you have to employ all of these technologies of.

Otherwise you get diesel.

And so.

So this is a long winded so I would encourage everybody to look at that because here is the professional officer in charge of the air quality. It makes the case for why you need to be doing.

RMG and natural gas technologies right now.

Doesn't mean that you are against the electric just means that's what you have today and you need to do it and Thats. The same thing that we'll see.

And the federal level when it all shakes out there for instance, natural gas is in the corridor program.

So all you're going to read about as an electric charging stations in this new corridor program will know there is natural gas is funded and that too is just not as environmentally politically correct to talk about that.

Okay. My last question is.

You have currently in the quarter of $42.9 million gallons of other anti Lissa flight held.

Help us understand how much of that was planned.

And listen as the dairy farm and how that has tracked over the last month or so.

While you are consistent.

<unk> of on that.

I don't know that were going to break that down for either but we are increasing our dairy farm and if you kind of look back last year, you were at 2% dairy and by the end of this year, you'll be up to 10% debt.

Gary and so thats kind of way to think about it and of course, we will continue to bring on dairy at a higher.

More and more as we go.

Because of what it does for US Bob I don't know if you have another way to well.

We've delivered we have taken supply of more dairy through the first 6 months than we did all of last year.

Okay, and we were probably we were probably almost up.

Close to 100% from 1 quarter to the next so.

That is.

So the dairy is growing as expected.

But there is still plenty of room kind of good news bad news thing because frankly, the numbers that we see in front of us that was the very good quarter.

Are not heavily weighted toward dairy, yes, R&D right there.

There are some in there for sure and we also had some very nice RIN pricing.

So we just have we continue to have the upside in the replacement.

To your question that.

Those stats should tell you some of at least in terms of that pace is going with the growth rate of the dairy.

Thank you so much for taking my questions.

You bet. Thank you thank.

Thank you. Our next question comes from the line of Jason <unk> with Cowen. Please proceed with your question.

Hey, guys.

Thank you I wanted to ask Hey, I wanted to ask first on I guess this margin range that you've provided can you just help us understand what's kind of driving the potential for it to come in at the high end versus the low end is it just.

RIN volatility.

Is that kind of of the main factor.

And if so what's the sensitivity there.

It's the it's some of that Jason, but it's not all.

Not all banked on that so it's also just in anticipation of volume rebounding from the pandemic.

I think Eric out of question 2 on that but.

We all know this variance stuffs going on but frankly.

We're not seeing anything like that right now.

Impacting our volume so we still are anticipating that we're going to gradually recover and so as we put on more fuel volume and we grow volume that really also is the draw.

River to our margin per gallon.

Along with the.

The rent that's helpful, but the <unk> has been.

It is lower than when we started the year right so that.

Hasnt necessarily been off the charts, it's still strong and by no means.

Not good but.

That's kind of off the Rins picked up so theres always a little bit of this and that.

Goes on it but then the fuel and.

And there's a little mix in there too yeah, the increase of fuel volume was greater.

Mix and looking at the Amazon fueling those types of volumes health in that.

Absolutely because those are those of our core fuel volumes.

So we see that increasing.

Okay.

Great and.

Then I guess just more broadly on the volume outlook now that they've kind of rebounded 2019 levels I think you are.

<unk> was flat with where 2019 was can you give us a sense of the volume trajectory moving forward.

Into next year.

And if you expect kind of and within that I guess, the RMG volume growth as well.

Yes, I think we.

That said at the beginning of the year.

We've kind of we've come out of Q4.

A round of 12% kind of middle of the middle of 12% year over year, 12% to 15%.

And volume growth so.

I think that we'll get there with our Q4 <unk>.

Q3 of <unk>.

We will be not at that level, but it will rise and then Q4 will kind of.

Be it maybe 12% to 15% above what it was a year ago and then.

Assuming there is no real set back from what's going on out there.

Will.

We should be in of <unk>.

Solid double digit volume growth.

But thats.

We still want to see.

See how all of the various steel shake out before we give too much guidance toward the 20.

<unk> 22 volume, but.

<unk>.

It should be north of 10%.

As we go into all of it.

Great and then the last 1 just on the equity raise you did in the quarter did you consider.

The other channels of financing.

I guess the equity more attractive then.

What are the other options that you could of pursuit.

Sure Jason we are always looking at different things right in our history. We've done we've we've had.

Convertible notes and so we're always looking for what we think the best in.

We're not we're not.

Because we did of the split.

Just a couple of rounds of equity I mean, I don't think 1 should assume that thats. The only thing we're going to do there is probably a time when some other debt.

On these projects and.

Would would make some sense, but we felt like with what was happening in the in the market at the time.

And the need for growth capital that it was prudent for us to put some on the balance sheet when we had a chance.

Alright, great. Thanks, a lot of I appreciate the answers.

You bet.

Thank you. Our final question comes from the line of Todd Firestone with Evercore ISI. Please proceed with your question.

Good afternoon, and thanks, Thanks for taking my question.

Couple of questions..1 was maybe that could come out of it a little different angles.

Are you able to disclose or hub, maybe internal estimate of what 1 of the Amazon.

Trucks would use them annually.

All of them.

Gallon basis.

Oh, I don't know that we've ever really said exactly but look it wouldn't be I'm not divulging any Amazon secret when you look at kind of normal over the road trucks that kind of operate like Amazon I think and I've been saying this for years right its somewhere between kind of depends.

If the re.

Regional or a little more super regionals.

The tender anywhere between 12500.20000, right. So I mean, I think if you were to use the number in the 14.15000, GAAP that's sort of a good.

Good placeholder for 4 of them.

And over the road truck J B Hunt type truck those kind of those kind of big over the road trucks in that neighborhood.

Great.

The second question.

Just on the number of patients.

And the.

This logistics around that and I apologize if you've disclosed on the prior call but is there.

I mean, the hard or soft cost contingency.

Built into.

Building out the stations 1 of them.

Really trying to get out of are you seeing trouble getting.

Workers and crew per barrel the station.

Is there any reason to be concerned about.

Well, we've seen like everybody else, we've seen some cost increases I don't know that it's been ex.

I don't know that we've been phase.

Faced with horror stories on that but the concretes up a little bit.

Some of the our steel.

Cylinders.

We have seen now we are lucky in that we kind of preordered, some and we were able to get some of the supply that will take us through I think of.

Almost all of our first initial build for Amazon.

But.

We always put of contingency on the construction here of somewhere between 10% of little bit more so we will probably eat up some of that I would guess, but we havent seen anything thats been.

Completely off scale, I wouldn't say, alright, and I think labor wise.

We're active in station builds.

Have been right. So we've been keeping a lot of people employed and.

So that kind of remains the case.

On that front and we've got good.

Contract, we have good subs that had been continuing through kind of thick and thin they worked with us last year. This year. So we're not seeing we're not having to go out hire.

Dozens and dozens of new construction guys are true I think what could be a little of daunting, we of some pretty well squared away firms that have a long history with us.

Okay.

I appreciate the color.

Yes, that's all I have.

Hum.

Okay. Thanks, Scott thank.

Thank you we have reached the end of our question and answer session I would like to turn the floor back over to Mr. Little fair for any closing remarks.

Good well, thank you operator, and thank you everybody for.

Dissipating and listening in today, and we will keep you posted as we go forward on R&D and our station build out and growth plans talk to you next time. Thank you.

This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

Q2 2021 Clean Energy Fuels Corp Earnings Call

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