Q1 2022 Clean Energy Fuels Corp Earnings Call
Good afternoon, and welcome to the clear energy two conference call.
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Please note. This event is being recorded I would now like to turn the conference over to Robert Vreeland, Chief Financial Officer. Please go ahead.
Thank you operator.
Earlier this afternoon clean energy released financial results for the first quarter ending March 31 2022.
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 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 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 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 <unk> 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.
Be reviewed on this call and exclude certain expenses that the company's management does not believe are indicative of the company's core business operating results.
non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information reasons why management uses non-GAAP information a definition of non-GAAP EPS and adjusted <unk>.
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 you Bob Good afternoon, everyone and thank you for joining us our fuel volumes in the first quarter of this year grew from 92 million gallons to almost $96 million or three 7%. We had some pretty strong headwinds at the beginning of the year due to AUM.
Cron variant spike most notably in our transit sector.
<unk>, we saw in Q4 of 2021 installed in January and amounted to about a $2 8 million gallons shortfall in transit alone.
We also had some significant winter related commodity supply curtailments at our <unk> advantage subsidiary.
On the positive side. However, our trucking volumes grew led by the additional Amazon trucks that continue to rollout across the country.
We saw a ramp up in overall fuel volumes at the end of the first quarter and into the current quarter.
It seems that we have returned to more normal operation in the transit and airport sectors that were impacted by the latest COVID-19 interruption.
Revenues increased by eight 2% quarter over quarter to $83 5 million from $77 million in Q1 of 2021.
Adjusted EBITDA for the quarter was $3 3 million.
Keep in mind that this quarter did not include any alternative fuel tax credit revenue, which we assume will arrive in the second half of this year.
I wanted to take a minute to expand on the area that I normally don't address but I feel like it's important.
These results were slightly off from our internal budget.
Were it not for <unk> slowdown and the curtailment of <unk> advantage.
We would've been very close to our internal budget.
We recognize that our internal budget is different from the analysts' consensus the biggest difference is being timing principally the FTC and the general volume ramp increasing throughout the year, our quarters are divergent and not smooth. However, when I look at our annual outlook for 2022, and even given the first <unk>.
<unk> results were still within the guidance ranges Bob.
<unk>.
Bob will go over this in more detail during his remarks.
The company remains in very strong financial position with over $228 million in cash and investments with very little debt.
We continue to fund new stations for Amazon as well as our R&D joint ventures, with total energies and BP as we invest in the future of our business and clean transportation.
The momentum and progress of our renewable natural gas supply business continued to pick up steam during the first quarter.
The signing of agreements in 2021 for new RMG supply quickly turned into construction projects around the country in 2022.
Were at the 50% completion Mark on the first R&D supply project, we signed through our joint venture with total energies the del Rio dairy in Texas, which is on schedule to flow of 1 million gallons a year once completed.
We recently signed a partnership with another dairy in Texas, South Fork Heart County, which is expected to produce almost 3 million gallons of RMG when completed.
A group of five dairies in South Dakota, and Iowa that we signed through our joint venture with BP broke ground and are well under construction. When completed these projects will produce $6 7 million gallons annually.
As we announced earlier, we are very proud to have partnered with one of the largest areas in the country Millen cap in Idaho, where construction has begun on the digester that should produce 5 million gallons of R&D a year.
And it's not just dairy cows that are getting into the act of producing the cleanest transportation fuel on the planet, We signed an agreement with O'brien farms, a large swine operation in Kentucky that has the potential of producing at least half a million gallons of R&D a year.
So you can see it's been a busy and productive beginning of 2022 on the R&D supply side and we expect the pace will continue to accelerate through this year and into next year as the demand for R&D intensifies.
Our customers are.
Asking for more of it and the lower the carbon school a score for the fuel the better.
There really is no easier quicker and cost effective way for them to reduce their carbon emissions than by converting their fleets to low carbon intensity RMG.
The demand for R&D continue to increase during the first quarter across all segments, including new customers such as the carrier postal delivery services and national ready mix, which are both deploying their first fleets of heavy duty natural gas trucks in California finance through our zero now program we.
We also saw a strong demand from existing large customers that are expanding their R&D fleets highlighted by the contract extensions, we signed including La Metro North County Transit in San Diego C R&R and the city of Santa Monica, but R&D is just there is not just a California story, where there is low carbon fuel stand.
Third program, we have nationwide RMG customers like Amazon, UBS and Republic services and.
It is equally important that we continue to focus on adding customers and expand with existing customers with regular CMG fuel, which we can convert to RMG as new supply comes online from ourselves and from third parties.
In the first quarter, we signed <unk> contracts with refuse companies transit agencies in heavy duty trucking firms from Arizona to New York to Canada, where we added a waste management site in British Columbia to fuel 73 trucks.
As you know it is our goal to provide R&D to all of our fleet customers by $2025.
One of the many attributes of RMG is that it is a fuel that can be dropped into the existing infrastructure anywhere in the country, allowing us to easily turn the CMG customers into R&D customers.
Earlier this week our participated in a panel discussion at the Milken Institute conference about the future of energy and last week I was in Washington, where I had meetings with members of Congress.
Much of the discussions were around the turmoil in the energy markets that have highlighted how the transition and energy is going to take longer and be more difficult and expensive. The many thought.
We believe this only underscores the requirement of multiple clean transportation technologies and emphasizes the advantage of RMG, which is currently available scalable and economic.
We continue to hear about announcements about new investment going into the development of R&D, which we see as nothing but positive.
These new dollars pouring in confirms that the solution of capturing fugitive methane and Tony and his something good is a positive environmental solution.
It also means all of this new R&D will need to find a market that can maximize its value.
That is where clean Energy's distribution network advantage comes into play.
We stand head and shoulders above any other fuel provider with our extensive station network and years of experience in engineering, constructing and maintaining fueling projects and.
In fact, we now have 66 fueling projects working their way through our 2022 activity board many of which will be new stations anchored by our large customer Amazon.
RMG as the solution that can reduce carbon emissions much more cost effectively and realistically that.
And then other promised alternatives that have been the shiny objects.
But the reality is kicking in and is tarnishing some of those a bit.
We remain very optimistic about the promise of R&D, because everyday tens of thousands of waste management Republic services Amazon.
La Metro New York Transit and other heavy duty vehicles pull up to a dispenser.
Fill up with this amazing fuel that is doing so much to tackle the problem of climate change.
And with that I will turn the call over to Bob.
Thank you Andrew and good afternoon to everyone.
I will discuss our 2022 outlook in a moment.
As Andrew mentioned, our volume came off recovery trends from the fourth quarter.
Due to the omicron surge in its lingering effects now we've taken what we saw in the first quarter relative to this.
Volume recovery in which we feel is mostly ended and we've taken that into consideration as we looked at our 2010 or two outlook and I'll go into that a little bit later.
We delivered $39 7 million gallons or seven 3% increase in R&D volumes in the first quarter of 2022 compared to a year ago and the demand for LNG fuel remains strong.
Revenue of $83 5 million was up eight 2%, which was helped by a higher effective price per gallon on higher volume from a year ago.
The increase in revenue came despite there being $4 $5 million of alternative.
Our talent to fuel tax credit revenue in 2021.
As well 2022 includes $3 8 million.
Dollars in Contra revenue from the Amazon stock warrant incentives.
Our.
Our effective price per gallon, which excludes the Amazon Contra revenue charge.
Was <unk> 88 per gallon in the first quarter of 2022 compared to <unk> 76 per gallon a year ago.
That's about a 13% increase.
At 88, that's coming off of Q4, there was 84. So we're just seeing that kind of go up.
Really kind of in line with what's going on with commodities.
This also though I will say contributing to that from our comparison to a year ago was higher RIN pricing.
Our margin per gallon for the first quarter of 2022 was 25.
Our margin per gallon a year ago was 26.
Our internal target for the first quarter of 2022 was 26.
So we had anticipated a little pullback in the first quarter of 'twenty.
22 from the trends that we were seeing at the end of 'twenty, one, but it pulled back maybe a penny more than what we than what we had planned.
And while the L. CFS pricing was lower than anticipated in the first quarter of 2022, which impacted our <unk> revenues and the margin per gallon the higher RIN pricing offset to lower L. CFS pricing. So when combined the ran and al CFS revenue for the.
Quarter actually came in on plan.
On SG&A most of the increase over a year ago is from stock compensation much of which is attributed to performance based awards and are generally higher stock price. In addition increases in SG&A have been.
Based on our planned execution of our R&D strategy.
Our GAAP loss per share for the first quarter was 11 <unk>.
Compared to a GAAP loss per share of <unk> in the first quarter of 2021.
Remembering that 2021 included $4 $5 million of alternative fuel tax credit earnings.
And 2022 was reduced by $3 $8 million in Amazon stock warrant charges as.
As well stock compensation rose year over year by $4 9 million.
And we've.
Incurred some startup expenses related to our R&D supply operations that didn't exist last year that was about.
$1 2 million.
For the first quarter of 2022.
And then finally, the our interest expense was higher in 2022 by $2 3 million from the write off of debt issuance costs associated with our.
The refinancing of our <unk> advantage subsidiary debt.
Our our adjusted our adjusted non-GAAP loss per share was <unk> <unk> in the first quarter of 2022 compared to <unk> <unk> loss per share last year.
And the comparability here of our adjusted non-GAAP loss per share was also impacted by the alternative fuel tax credit being in 2021.
<unk>.
2022, having some additional expenses related to our R&D.
Strategy as well as the.
Incremental interest impacted.
2022 as well.
The adjusted EBITDA was $3 3 million.
For 2022 versus in 2021, $11 6 million.
Again, 2021 being impacted by the alternative fuel tax credit as <unk> and then 2022.
Having as planned expenses around our R&D activities.
Okay in terms of updating.
2022, we'll move onto that we took.
We took into consideration some of the headwinds that we saw in.
In the first quarter and did our normal sensitivity analysis on our assumptions looking forward and while we still believe that the prior guidance.
Is possible to achieve the events of the first quarter could possibly push out our anticipated ramp up could just push it out from a timing standpoint, so as a result, we've.
Updated our guidance our GAAP loss is estimated to range from $57 million to $65 million, how much of that change there is.
Related to updating stock compensation that is based on performance milestones.
And then at the adjusted EBITDA level, we have.
Made that more of a range of $60 million to $65 million and this change reflects a scenario of possibly lower volumes and the added spend that we've seen.
Around our R&D supply operations.
Ren and L. CFS front for the for our look at 'twenty two we've considered the dynamics that we saw in the first quarter.
And.
Even if we.
Consider and we are considering even a lower <unk> price going forward.
Lower than our prior view.
But we also recognize that the rent is.
It remains strong so when we kind of put those two together.
The dynamics around those credits did not really give rise to a meaningful adjustment to the guidance.
And lastly, I'll emphasize we spoke about this on the last call I would say.
I'll emphasize that our view forward is still weighted heavily toward the third and fourth quarter now one.
One of the big assumptions still is our assumption that the alternative fuel tax credit.
Will.
We will get past this year.
And so there is there are some risk there, but our assumption is that we would see it in the third quarter and if that happens then.
Without anything else we've got.
Our modeling.
At least $15 million.
In the third quarter and now that would be on top of other normal operating results and then the fourth quarter would see.
Maybe about $5 million of that AFDC.
And.
And really I think what's also just was embedded in in our planning is is a ramp up in volume that contributes as Andrew mentioned does contribute to some uneven quarters in more of a building of results each quarter.
And.
I think we saw that really kind of come out in <unk>.
Here in the first quarter with us being within striking distance of our internal plan, but.
We feel that.
There was certainly a miss on the consensus so.
Hopefully well.
Do better at that.
And with that operator, we'll open the call to questions.
We will now begin the question and answer session.
A question you May press.
Then one on your telephone.
Okay.
Hey, Chris the cut their headset it progressing the key.
<unk> your question Greg.
Greg Sargen.
At this time, we will pause momentarily to assemble our wealth.
And our first question comes from Eric <unk>, Craig Hallum.
Andrew Hi, Bob.
Hey, Eric.
Hey, so maybe I'll just start with a high level question.
What's gone on in energy markets oil prices I mean.
And diesel 17 this for many years.
Now the economic argument added to the sustainability piece, which has been the case for a number of years just curious.
If you can discuss kind of what youre seeing from fleets as a result type of urgency Youre seeing I know you are having to deal with it on the cost side as well with natural gas but.
But obviously that doesn't impact things as much as the price of diesel one.
Right well, Eric no. It's a good question and I would say that our customers are really watching this right I mean, it does impact our Mr. Among their largest cost and so.
I think any of us in the alternative fuel business, while we believe selfishly love and elevated diesel price like for instance, so im looking at a sheet Thats right in front of me and most people don't think about it this way, but I mean diesel prices and the eastern Seaboard. This last week were up 86 cents.
A gallon.
In Newark and in Boston.
79 out of long island, and so we're seeing that kind of a diesel shock coming through in the price of <unk>.
Diesel is California 60.
$6 55, a gallon so I don't know that thats, essentially healthy environment for people, making choices about their fueling as there is.
Now, they're talking to their customers about surcharges and having to explain themselves.
Don't know that Thats necessarily.
Now the good news from our point of view, obviously, we have a big spread.
And yet on the other hand, we've seen that our commodity price.
Most double.
Right now obviously, we're not buying everything on spot price, but we are seeing that and so that's an advantage for us, but but we lock.
We're in about a month at a time on our spot.
We did see natural gas prices go from essentially in the $4 range to the $6 range and so one would say Wow, that's pretty volatile in terms of your commodity well. The good news there is in the while we're careful about how we prices to our customer insensitive to it we're able to move that cost of that commodity through.
While you we saw a slight almost a penny a little compression there.
We were able to.
Put that cost of commodities through to the customer and still offer almost a dollar to $1 25 savings in certain of our markets.
So our.
Our.
Value added going forward of the price of the cleanest fuel on the planet.
It's still at a substantial savings to our customers and that's not lost on them.
And it is an advantage for us to be able to.
Many of other technologies innovations in advanced technology.
Mobility technologies, they can't speak to that right. There isn't a savings I know people talk about cheap electricity and this and that.
There isn't any of the tubular electricity and so most of our competitors can't talk about having a substantial discount to diesel.
So I would say it's turbulent Eric.
It does give us an advantage, though it creates a little bit of turmoil in the market and our and our customers' out pricing new.
New trucks and fuels.
It means there's a lot of balls in the air, but we've gotten through it fine and.
And we've been able to.
To continue to offer our advantage to our customers in this volatile environment.
Got it no that's helpful.
Maybe just turning to the going back to the R&D, bringing games.
Your targets and you had a number of.
Kind of key pieces to keep liquid loans.
David numbers one.
Maybe the one that we are looking to optimize to RMG and ship fleets from O&M to RMG and I know, we've seen it to some extent with customers.
I'm curious.
How you are feeling about that and then maybe how youre feeling about some of those other objectives I mean realize the minutes five years right.
Yes.
That plan that we unveiled for the market in January of 2006 seems like a long time ago now thats in place at many changes to that yet.
And there is two big components of that.
Eric One was the development of our own R&D supply and the other was third party alright, and it broke down with our own let's call it dairy projects.
That we owned and operate with our partners. Our joint venture partners is also bringing in other third parties and a lot of that being.
Landfill gas right. So it's a blend here of landfill and.
Manure.
Animal manure projects that is on track.
We have nine projects under construction and it's committed capital of $400 million, which is very much in line with what we said on January 26, I think there's actually more now than when we have them.
And at that time, we balance all of these numbers around but you remember we kind of said we had at that point. We said, we had seven projects sort of H five under construction. So we have nine projects underway now we have five more that are in the definitive phases for another $150 million. So I would say that the projects in those joint ventures R. R.
As planned.
And there are many more in the pipeline last time I think we talked I said there was 15 more in the pipeline that number has increased.
So from getting to those numbers over time.
On the on our development side, I like where we stand we have.
Currently our in commercial agreement with another 25 million gallons that will begin flowing for this year a third party.
And those three.
Third party agreement those are multiyear.
So we continue to add I think this quarter, we actually signed one more just here recently for another 3 million gallons. So we continue to add in.
One of the biggest takers right of third party fuel from our landfill of friends and others. So that continues to go strong.
And I'd say at this point, Eric from what you saw on the 26.
Other than there has been a little bit of weakening in low carbon fuel standard pricing on.
On the other hand, there has been a strengthening on the RIN pricing. So as Bob said Thats sort of a net net and thats, all holding up pretty well that plans intact.
Yes, and I'll add on.
Add on to that Eric I mean, with the R&D being.
The demand for it being there.
Yes, we still have.
And we saw a nice bucket of customers that have yet to.
Convert over art, a lot of our O&M gallons.
And that was that was also in our in our plan and that is.
That's certainly in the works as well in terms of optimizing the optimization optimization of of of our O&M customers because.
Many of them.
We'll take it as soon as they can get it.
Not to mention kind of an implicit on that and in all of them a little limited what I can say, but as we add on those Amazon trucks right.
Many of those come to California, right, So Thats increased California volume.
And so.
So.
That's that's kind of embedded in those new customers in the new Amazon volume as well so.
All R&D.
Okay.
Okay. Thanks, Matt.
Thanks, Eric.
Our next question comes from Rob Brown Lake Street capital market.
Yes.
Hi, Andrew.
Hey, Rob Hey, Rob just wanted to clarify your comments on the volume.
On the current impacts in Q1, I know, it's normalizing, but would you say, there's maybe some still tail here house, how is the volume normalizing kind of into Q2 are you.
Are you seeing any impact or is it sort of pretty much covered yes, I think what we were trying to say Rob because we were trying to give some clarity that we.
We didn't just wanted to throw I was very big on this today as we were preparing for this call on the last couple of days that I wanted to just try to give as much clarity and transparency as possible. We really did see because you know look a lot of our customers all people.
At airports and transit and that one micron that showed up in right. After Christmas and that January that impacted our business and I tried to identify that it was transit alone was about $2 8 million gallons.
January and there was an airport number thats not wasn't quite that large so it has several million gallons of now.
Thought I said in our remarks, maybe I didn't stress. It enough is that we have seen it coming into this quarter, we have seen that all kind of come back.
So knock on wood, we have another fire up here someplace.
Looks like we're back on kind of.
Normalized volumes at those airports, what we had seen the day that we took in January and the transit.
The transit.
Okay could you give some good updates on the LNG build out efforts.
Have you got more dairies in the pipeline and what's sort of the.
Kind of a project kickoff activity looked like for the rest of the year.
Well, we have five more that are assigned that so I told you just now that we have nine kind of underway. We have five more that are in the kind of in the final stages. The definitive agreements those will all get kicked off this year.
We have a pipeline now.
I think its 18 or or or few more than that.
I don't know as I sit here I might before come back if you listened in a few minutes I'll have no. How many of those would get started this year.
But there'll be more Rob and I'll see if I can't get the exact number.
Sure.
We're busy on that front.
We checked in with our one of our partners got an update on this for this call. This morning.
With the lowering a little bit.
Let's face it some developers that have less capital or less place to put this R&D and a little more concerned about the off takes and less capitalized.
Moving down the curve on the low carbon fuel standard give some of our friends in the development side pause.
However, we checked in with our R. Compadre is at BP their development team that works hand in glove with and they haven't lost we haven't lost any debt.
<unk> that were kind of focused on having lost any enthusiasm for it.
We're generally.
The question will come up we're generally constructive as we look out and theres been a lot of a lot of people are watching this business now and they get very focused on just what is car, we're going to do and what's.
The plan.
The.
Coming forward and that will happen later this year, we happen to think that.
The California Air Resources Board knows that the low carbon fuel standard is a really a bright spot. It has been working and we believe that over time their plan will increase those targets.
And.
<unk> will continue to be that I know theres been a lot of.
Conversation about.
About dairy and this and that but that we know and carb has said that it is a very important part of the plan and we believe that it will continue to be.
And so work, we're relatively constructive over the middle term about the pricing of low carbon fuel standard I think we've seen sort of a.
Bulge, if you will of supply of renewable diesel.
And there is an expectation in the market as people are looking at the generation of credits that.
The price of fuel will dampen the demand.
Sure.
Fuel use in California.
And so therefore generating less credits right. So.
That may be a little bit overstated, but I think that's what the market's seeing so but when we kind of peel that back and we look at the likelihood that <unk> will increase those targets over time here in the next scoping plan.
I feel like we believe that.
Over the next maybe happened next months latter part of this year and early next year, we feel good about the pricing curve for the low carbon fuel standard.
It looks to me like we will have 16 projects in construction by the end of 2022.
So that would be kind of the nine plus the five plus two more so.
Now that doesn't mean that we're done.
This means that.
That's kind of how it will go now the pipeline because.
Being little unclear that I said in the last quarter's 15, the pipeline we have 25 right now.
So there is no shortage of interest on the dairy side.
Our one of our developers was Kansas they've been in Wisconsin, There in Texas or current County, California. This is nationwide.
And we're talking with dairy men and women all over the country.
In fact, I've had some very interesting conversations this is bubbled its way up to as we look at 2023 farm Bill.
The agro coach Agriculture committees of the house and Senate, both want to understand exactly the state of play of RG.
Because they're wanting to look at legislation that might help.
Energy projects that are capturing methane at dairies and so they want to.
Maybe some of their information.
A little behind the curve and I wanted to understand exactly what's going on and so we've had very fruitful discussions with them on just what's happening on the commercial side of this R&D.
Development of dairies.
Okay, great well. Thank you that was very good I appreciate it I'll turn it over to Bert.
Our next question comes from Manav Gupta with credit Suisse.
<unk>.
Hey, Paul Andrew.
Great question and I'm, sorry, you have to understand this a little better I think.
The last <unk> update pause.
<unk> thinking more of.
$10 million in EBITDA.
It's coming a little lighter than expectations.
You help us bridge the gap as to.
Between what was kind of expected on your side and our side 10 versus and I fully understand it's going to be volatile versus three point too.
The major blocks.
Cost of revenue.
That created this.
A delta of about $5, five or $6 million. If you could help us bridge that gap that would help us model it.
Peter.
Yes.
Manav I think.
It kind of goes back to.
I feel like it goes back a little bit too looking at our adjusted EBITDA.
Without an FTC.
And we've talked about that being kind of $44 million for the year and then doing math.
Starts to get you to.
At least without the Mtc start to get you close to $10 million to $11 million a quarter.
And at that point.
Frankly, I could just end part of it is I mean, we're not we don't give the quarterly specific quarterly guidance.
Which would require.
More disclosures and reconciliations on all of that and so it's a little tricky when our internal plan.
Ends up having a significant ramp to.
Basically just without just given the number and so I think it's not an operational matter.
Manav on that in terms of like what happened within the business or.
Some variable that you missed or anyone missed I think.
Ultimately ended up.
Being a little bit of a math exercise and that didn't get there and I think if you were coming off of say Q4, right and even if you take.
Q4, and so whereas that was like 18, and if you had if you take off.
Five for AFDC or at 13, while Q4 also had earn out money in it.
So I almost look back at it.
At Q1 that was <unk>.
11, six and say we'll take off.
Take out the FTC.
That one that would have put you more in the in the seven.
Million category or less $6 million.
So that's really I think where we're.
We were at on that now going forward and look I mean Q1 is kind of in.
In the bag. So our target was closer to six than maybe would be having the conversation. If we came in at nine and kind of blew our own internal target out but.
The omicron.
Action kind of stalled things a little bit there so.
That's what so I think we.
We have a little so.
It's why we wanted to I wanted to highlight this is that.
We all need and all of the analysts looking at this.
Look.
Wish we were giving you.
<unk> guidance maybe at some.
Point, we will we haven't been so.
It's.
I totally understand that.
I'm not suggesting you would necessarily do this but it's kind of easy to divide by four and come up and maybe add a little bit towards the back end of the year and that wasn't what we expected here.
I wanted to we wanted to bring this up because we don't want to have a pulse set of expectations for Q2.
And yet.
Trying to say is that we are still saying that we could be a bit light on the annual guidance, but there is still a range here of 60% to 65 and so what it says is that if the FTC comes in.
No matter when youre going to have that in the back half and you have the ramp that's coming in with these Amazon trucks deploying in other trucks and this really third and fourth quarter event.
So that probably doesn't help you, but but I am glad you raised this because it wasn't that Oh, my God what happened to the business.
10 wasn't our number.
And I Couldnt have where we'd come down.
Yes.
Hi.
Ill call call, we can't we're not allowed to call with analysts and Tellement, you've got 11, there lower that thing.
It's not the way of desktop the way the game works no and so on.
So then you get down to manav than really the.
Then you are back to.
Volume.
For us volume played.
Some in our own.
Kind of a lighter quarter than than we would've liked.
When we have volume come off.
Recover as we.
As we anticipated.
But.
While there were some extra spend.
I also get I'm also encourage win.
If some things happen that are outliers, but I know or not.
Arent issue going forward. So we had a little bit of that when I am referring to the RMG supply.
That is not.
Some of those operating expenses that we saw.
Our.
And I'm going to say more one off type cost that we saw that frankly, we're in budgets, but.
Maybe were viewed more of that they'd be capital but.
And so I don't see that kind of thing recurring.
Going forward, so we had a little bit of that in Q1, but.
Ultimately I think.
We were just at a different starting point.
Perfect guys.
So all of it is not easy sometimes is all of it is not easy so I fully appreciate it my follow up question here is I think.
Trying to understand.
At the start of the call.
It seems that you are a little more bullish on as CFO spicy is really that you were saying.
Between the higher <unk> in the loan as CFS kind of balancing out. But then you have just recently made comments Vince Youre basically, saying look Ken comeback comparable EBIT targets and I think this debate of LNG getting kicked out of car. That's unnecessary debate, it's not going to do but I'm just trying to understand from your perspective are you guys.
Sitting and then these are the CFS spaces that are coming in do you think this is transitory maybe they can go a little lower or do you think this is more permanent.
CFS spices, it would probably be in the range of 100, 120, or whatever but we will probably never see them back at 150, and again I know, it's a little bit of a tricky long question. When you have a lot more visibility and just trying to understand versus the last quarter is there. Any reason you guys are a lot more bearish on the answer.
<unk> devices at this point then you will have problems.
No no, but obviously a very good question no. We were watching it closely we have third party people analyzing it for US I think youre exactly right I don't think we should continue I don't think we have to continue to debate, whether or not somehow dairy farmers are going to get kicked out of low carbon fuel standard. We don't believe that that's going to be the case, we do.
Aleve that.
The targets will increase.
So that's a good thing for prices on the longer term.
That doesn't happen next weekend, that's going to be in the scoping plan Thats a few months out and does take effect right away, but I think that'll be a positive and constructive for increasing prices.
First time I sit here and tell you that I don't think we'll ever go below.
Where it is today it will go below so.
Is there a chance that it could dip down maybe I tend to think you are on the lower part of it now.
And I think there is more of a chance that you would have a 150 that reverse versus 100, okay. So.
I guess, we I don't want to say bullish, but we are constructive on pricing over the.
The medium term.
Biogas and carbon capture and RMG.
<unk>.
It's clear that the march toward more sustainable.
A lower carbon fuels is this isn't there are headwinds with world Energy picture right. This moment.
But.
You are looking at very Smart group of finance here. So we're at this conference and this was something that they continued to talk about for three days.
And the sheer amount of money that's pouring into this is Brett tick.
And Andrew I also heard Bob talk about.
Expanding the reach of methane capture.
I mean, just even even looking at that.
Kind of the market that's out there and.
I think companies are looking at ways to.
To get out there and capture as much of the methane as possible, which I view as a.
It's a great sign toward.
Added supply and just really gives me great confidence because I hear about some of the where would you say the where some of these other technologies are and what is going to be required for them to deploy and develop and where we are.
And where we can deliver and the level of carbon reductions that we can do I mean, frankly, there aren't any others that are really talking about kind of the reduction of carbon that we are in.
We're doing it at a price thats substantially less than those.
So we just stick to it here because we've got a we've got a really.
Tractive solution.
Yes.
Perfectly.
Thank you said, obviously you have the name fueled most pure play <unk> name out there, but youre also doing other stuff for climate.
Looking to fuel ships.
<unk> and you're looking to bring some hydrogen stations and besides LNG initiatives.
Like how are the other things progressing within <unk> as you know.
Looking at fueling ships with lower carbon fuels and hydrogen stations and I'm trying to go after that thank you.
Well.
<unk>.
We're a leader on the chip side, I mean, albeit small right.
You're on the West coast.
We're proud of the deal that we've signed with patient they've got their first ship completed second ships being developed that ships coming through the Panama Canal. Shortly so we'll begin to fuel that ship in that does that is for those that aren't familiar that's each out and back to Hawaii on that.
<unk> use the half a million LNG gallons, so it's significant for us.
It fits well with our plant and we will be feeling that in the port of Los Angeles, but manav, just candidly theres a limit to how much we could supply there and how quickly the ships come on.
It's happening around the world of course.
So we feel good about the fact that I still think manav that.
Certainly at the price of oil this is where my friends in the tier one railroad. So you would think would come back into the play I still think LNG makes a lot of sense for railroads.
This would be an LNG play and.
I was told by the CEO of <unk>.
BNS F. One time that hey, it's $60 is where it makes sense for us to begin to convert.
Dual fuel locomotives.
Here, we sit at a $100 I haven't heard much from them right now, but I still think that's a huge opportunity.
We're the leader in that we helped BNS after the open track testing the permitting with the Federal Railway administration on LNG tank cars, we're not doing much on that now, but the natural gas industry, and even putting cleaner fuels like R&D into that I mean thats.
You would receive a credit for that.
So.
It makes sense. So I still think that one is a huge market that could come back into play at some point.
Thank you so much and then the hydrogen we are doing hydrogen we were learning on it.
We just bid the next the second and third hydrogen transit property projects.
As you know we have one under construction.
We learn as we go on those I mean, I still see that as you look on for it we like the notion that you can use RMG.
Through a station to even to have R&D electrons for electricity someday.
Someday, we see that as a pathway or RMG for hydrogen where stand at the ready to do that.
And.
But when I look at the costs associated with those hydrogen refueling stations.
Very very early stages of my view.
A lot of wood to chop on that.
When people talk about nationwide network, so hydrogen fueling.
King.
Thanks.
Again that puts me in a place where I like our position of what we have today with the nationwide delivery system of the drop in fuel that's the lowest carbon fuel on the planet.
Thanks, guys. Thank you.
Thanks Nina.
Our next question comes from the.
Most notably Raymond.
<unk>.
For taking my question.
You touched on.
Neil.
Commodity.
Hearth dimension.
<unk>.
In terms of the construction effort on.
The R&D facilities.
Can you talk about.
Steel labor all of the other inputs and the extent to which youre seeing some.
No contemplation, how youre managing that.
Yes.
Good question, we have seen it.
We think it's stabilized at this point I guess I would say over the last quarter. We've seen it maybe it goes a little bit in the last year. So I would say it was about a 20% uptick.
Uptick steel fab.
Fabrications summit.
I mean concrete so we saw it we haven't in the current bidding thats going on with our contractors right now in our development folks that seems to have stabilized and in fact, we had a meeting on that just this morning, we haven't been seeing that that kind of increase thank goodness.
<unk>.
Seems to have abated.
Not to mean that it's gone down 20%, yet, but it hasnt gone up anymore. So maybe maybe that's a view that we're starting to see that.
Level.
Okay.
And Tim and I would say since we were in the early stages barbell of.
This.
This.
We.
We were able to capture those costs.
Into our original deal so, let's say that we're not going to be unpleasantly surprised upside down on those projects and we've just.
Because of we're just getting going on all of those projects.
The other thing, though that's in your question is kind of the supply chain and we have seen I think everybody would.
We have seen some supply chain is particularly.
Some constraints I'd sort of put it in this.
60, 90 day sort of push out.
Some some components switch gears, we've seen longer but you really go to work on we drag some of that back end, but electrical components.
<unk> have got pushed out some as we're seeing some stress on the supply chain.
Kind of an optimist, I think thats going to get.
Sorted out.
And we've seen that even on our <unk>, we build a lot of stuff. So we're building all these stations and a bunch for Amazon's on right now we are seeing.
180 day extension to lead times on switch gear, well, we started pushing with different suppliers and guess what that came into 30 days. So.
30 days is fine and so I think that will get sorted out, but we've seen some of it.
Right.
You talked about the omicron wave on the and the impact on Q1.
Totally clear at this point.
Two years right.
The kind of the first lockdowns in this country.
Is it fair to say that aviation.
Airport shuttles is the only.
Portion of your sales mix that is still below pre COVID-19 volume level.
Yes.
I think that is safe to say and I would say that having really been able to look at where we are in may exactly week to week or anything, but I mean, we're back we're back to pre COVID-19.
And if we're not maybe were still up 3% or something that would be the.
Negligible, so I'd say its back.
And as long as you don't serve up another little.
Cron omni here should be it should be building.
From there.
It's very close.
Okay.
You didn't ask me about the <unk>.
Alternative fuel tax credit and kind of disappointed me can I go ahead and answer that question you didn't mention that next time.
Okay.
Yes, let me give you a little bit because.
I was just up there and I've talked to some of our friends on both sides of the aisle on that thing.
So it's kind of interesting so.
The reason we we.
Work told all of you that were going to add into our into our 'twenty two budget. The alternative fuel tax credit even though it had been extended just because it was embedded in the build back better.
And not only was it in the area was in there for five years right. So.
Just on the outside so.
That's.
We continue to see bipartisan support now where we stand right at this moment is.
The.
The house and Senate leadership, and the majority side haven't really given up as you know even fully given up on the build back better.
And until they do it as it really unleash the crowd to come up with alternatives now there is a rump group right now.
Led by Senator mansion.
Senator Murkowski.
One other blanking on.
To kind of look at.
Sure.
Modifications to a skinny down BBB.
Yeah.
There is some expectation that the green components, the energy kind of hard to believe but the energy components of the BBB are actually generally considered to be ones that enjoyed the most support.
And ours would be in that as well so keep your eye on does does anything happen with senator mentions sort of effort to try to move a skinny down build back better.
Now at the same time, we've been told by both from on the Senate side and the outside of some of our long time supporters that it is likely in the third and fourth quarters, maybe even after the election. So we may have to wait here, a little bit kind of depending on what happens and what happens with the election.
So there's likely to be an omnibus bill.
<unk> likely to have other tax titles were.
Taxes extenders would end up being in place in which case that.
Where the alternative fuel tax credit would be so we're going to continue to believe that that is something that enjoys bipartisan support.
It's not going to happen probably.
I wouldn't guess barbell it will happen until.
Yeah.
Maybe even after a summer recess and then of course, you have the elections honest so it may not happen until after the election.
And you often see that then in a lame duck because thats when the stuff will move.
So we're going to be a little patient.
For sure.
Great.
But I have no reason really to believe I mean.
Haven't had one members and Oh by the way, that's we're putting that over the side, that's not going to have so I'm feeling good about it so far.
Yeah.
Okay operator.
Yes.
Our next question comes from.
Macro.
Total recurring.
Hey, Andrew.
By your mention of a wind project that you're investing in and.
With the understanding that each of these projects are going to be really really different and unique could you talk about the general differences.
And just overall contrast, swine dairy RMG opportunities maybe in terms of things like average size capital costs.
It scores and just overall returns in each space.
Okay, now youre going to test Bayer I'm pretty good on the dairy the swine is fascinating right. So the swine you had much different gestation period litters kill ratio I mean, these things these things turnover. So it is not for the faint arts.
So.
Derek.
Farm that were working on the pig operation I mean, they literally produce.
Yes.
In the eight or nine months and there is kind of a dark period and they're obviously like 280000 pigs.
So.
The Ci scores lower.
The lower I think that has mostly to do.
The method.
The process that they collect.
How they've been handling their waste and just.
Kind of.
Sheer magnitude of it.
What they eat.
So it's a little bit more.
A lot more to it let's put it on the swine now theres a lot of swine in the country and there are some very big operators and so we're looking at a lot of them.
The chickens will come into play at some point too.
But it's a little different and I don't think they enjoyed the low carbon fuels that I don't think they enjoy it.
The inclusion of <unk>.
The low carbon fuel credits that probably should at some point, but they don't right now.
Great. Thank you.
And then Youre RMG volumes.
It came off versus Q4 levels.
Both in terms of.
Just the absolute number and as well as the percentage drop in fact, it was even more than the drop in your non R&D volumes.
So was hoping you could talk about that.
When you do get into these periods of slower volumes and demand getting hit do you have the ability to.
Shift your mix and pull more R&D volumes or are you constrained on that to just really hoping to understand how your R&D volumes could come off 12% quarter over quarter, but youre non RMG volumes won't come up 6%.
Yes.
Really what you are.
Matthew what Youre seeing there is that the dynamic that we've been referring to sum up with the omicron.
And the slower recovery in.
And particularly in kind of the transit World, we have some big transit customers.
That take.
R&D and so MTN, yes, absolutely so.
<unk>.
That was probably the the bigger.
The bigger driver of that.
And then you have to because.
I mean, you do have to have pathways throughout the whole country and that sort of thing. So it wasn't quite as correct me if I'm wrong, Bob I know this from La MTA was a.
Downtick in the quarter of $1 8 million gallons at least that's our albeit there are huge huge that would thats, what Matt that's part of what message that's it.
That's a big chunk of it Matthew.
Because there is nothing.
It has to come through on that demand and then you've got to be able to.
I mean, you also have to have other places too.
To put it.
So.
The R&D gets a little tricky there because it's not.
Hi.
Yeah.
<unk> spread at all over the place.
Got it thank you very much.
Okay.
Our next question comes from Craig sharing.
Brian .
Hi, Thanks for taking the question a lot of my questions have been covered I just wanted to ask something about.
Both on the downside protection and upside opportunity for our CFS. One one thing I had heard and correct me if I'm wrong.
The renewable diesel is not like R&D and that it has to physically delivered not just sure pathway and get into some FERC.
CRC regulated pipeline system.
CFS gets low enough.
Some of that renewable diesel the cost of transport may not be justified and so we can have a little supply come off creating a bit of a natural floor.
Is that true.
Yes drew and true.
Great, Yes, Youre right Youre right Youre right, Craig It's got to go into the tank molecule.
Liquid.
And then on the upside opportunity.
I think we all understand the ins and outs with.
Carbon maybe going from 20% to 30% standard for emission reduction but.
What are you hearing around the country at other major state.
States in locales that could have new standards.
CFS systems has anything changed since your last call Thats worth.
Noting.
Oh.
Yes.
Eight or 10 states that are kind of playing around with this is kind of going through the let's say the study in the legislative process, we kind of came close to New York.
And I.
I guess since my last call.
It almost the low carbon fuel standard almost passed new Mexico.
Mexico is kind of a colorful place where.
<unk>.
We have we have one voter one legislator or sort of get in trouble on the night of the vote. So that one didn't go through.
And then New York.
I think they really held it over what ended up happening.
Look.
And maybe since we last talk Craig.
Had a conversation.
Take this training any confidence we added probably public we had a we had a conversation with the.
Acting.
Acting administrator in charge of air and radiation and her team.
At the EPA to look at as the.
RFS kind of begins to get looked at being redone.
Kind of next the next year.
Is there is there.
Still kind of the.
The current situation sort of sunsets and how it might be re up.
Should there be a low carbon fuel standard national low carbon fuel standard.
This is complicated and I think it's clear to say what I learned from that conversation, which is something we're looking at that they sort of get it they know that it's working in California.
I don't think Thats anything thats likely happen overnight and I think thats more likely to be a two year type thing even at the EPA and.
And the reason I mentioned that Craig is because I think that while a lot of states will look at this.
Thank <unk>.
I think these are not easy right.
We're putting a lot of interests here industrial interests in motoring public and.
There's a lot of.
Work to be done at the legislative level.
On these things and so.
I guess, if there is sort of good news on that of any of them passed since we last spoke no.
A couple of them, but very close to passage seem to have support in fact overwhelming support but just didn't fit for whatever reason that the governor's particular.
The governor of New York's got other things that she's worried about right now.
It didn't make it into her budget, but none of them pulled down right. None of those states have said look let's forget it we're not going to do this.
I see this probably is a multi year.
Californians ahead by a long time, but I think this is a multiyear program.
Process.
Great. Thank you.
Our next question comes from Haynesville, Dave on the call.
<unk>.
Yes.
Hi, Thanks for taking my questions.
Wanted to clarify a few numbers that you mentioned on the call so far.
You mentioned there were 66 fueling projects on the board on those new.
<unk> stations, because you mentioned 19 last call and if so.
What would be the capital involved with that.
And then on.
On the upstream side on the R&D production side 16 projects.
Construction by the end of 2022.
How much volume is that.
And does that kind of get you in line with what you forecast at the R&D day.
I guess 8 million gallons in 'twenty, three and then 54 in 2024.
Let me see on your second question, let me see if I can come up with that but but I don't have all that handy, but I do have somebody sitting here in the room is looking at it but let me just say this because I can kind of help on that.
Jason.
What I tried to say in maybe two casually is that our.
Development of dairy products call them dairy projects and third party is on track.
Right. So we Havent had any reason to say whoops were going to be three years lay it on that on the volumes that we talked about bringing forward. So one of my guys down here is working on a number of those projects will all come out, but I mean, so far it's kind of moving ahead of where we thought it would be.
Okay.
The the.
Okay.
'twenty three the $8 million is on track.
And of the 16 projects US 25 million gallons.
Got it.
Okay.
Now there was another part of the question which was.
Okay I'm glad you brought that up so 66, so when we talk about fueling projects do not.
They all are related to fueling.
Some of them may be like a doubling of compression at a particular station so using a little license on that.
Some of them are Amazon projects.
That is a parking lot that as fueling for 200 trucks on it.
So theyre not all kind of freestanding beautiful little stations with the canopy. Okay. So don't be thinking almost 66 discrete projects Budd.
<unk> of them are.
But there is kind of little bit pieces of different things in there, but there.
They are significant projects for fueling fleets. All 66 are now when you use 1919 as Rod My number 19 was the number that we publicly said related to the Amazon.
And I have an updated.
Think of ever used a different number than that this 66 would include those 19 and be in addition to and some of us for our customers. Some of it is for our own accounts some of them for Amazon.
And so you can't you can't necessarily say well, that's three times 66, and Thats under $8 million.
And I don't know that we publicly said what the capex is associated with that but.
No we've just given our capex.
Capex for the year, the year of which a lot of that <unk> and the 66 will grow this year.
Get all 66 of those completed either.
But I would say, it's safe to say that as I go back. It was only about in 2014 13 14, when we're building a nation highway pilot flying J as where we are building 80 projects year.
Probably never really had 66 in the pipeline in the construction pipeline we call it the carpet.
Like this so.
That's good so there are transit properties in there.
Refuse properties in there we're building for our customers and there is Amazon properties.
Got it thanks.
You bet.
Our next question comes from Paul Hi.
With Evercore.
Hey, guys. Thanks for taking my questions just about everything has been answered I was just curious.
There's been some talk that.
I'll CFS at the federal level in Canada.
Could be.
Near term possibility I was just wondering how you kind of view the Canadian market, and then whether that would be an opportunity for clean energy.
Well look I think so I mean, it's in Western Canada already BC.
I don't know if its actually can you generate credits in VC or it's kind of in the it's like Washington State where they are you can you can NBC you can't so that active.
Well I know that so I mean look I, usually think that if you've see in one of those is likely to be in the other provinces as well, but I don't know exactly on top of my head, where they stand in Quebec versus someplace else I don't know.
Is it likely that Canada, we're seeing some uptake of the business in Canada.
Right now in Calgary and development stations in fleets and so.
That's probably bodes well for the kind of political support needed for this kind of thing.
That's great color I am sorry, but I don't know exactly I can't tell you exactly where it stands in Winnipeg or something I. Just don't know I was just curious if that was on the long term kind of.
Other expansion market for dairy they haven't.
It's a little more fragmented and I guess, the dairy industry up north.
I didn't know if that was kind of on your radar at something that come across the transom.
Canada certainly is on our radar, we fuel all bunch of stuff in Canada, all over Canada.
The corridor on the east and over in the West.
We've had meetings with our friends up in the west in British Columbia about RMG.
No we ever made anything happen there but.
So we work, Canada, and we have a long history, one point, we sold out to the Canadians 15, 18 20 years ago. So we're all.
Here with Canada, we have been poisoned Canada so were.
We stay close to it.
Canada and Canada also has a good view.
In general just on the fundamental of.
Even fossil natural gas I mean, they really they really see even just that fundamental cleaner difference between that and diesel as I mean, if you take it to the R&D.
Very exciting, but they actually.
<unk>.
Natural gas burning near.
Near zero engines to be much better than.
And then the diesel that's going on and so there they seem to be quite bullish. So we've got a lot of activity going on in Canada.
Bill that's a pretty good market for growth.
Great. Thanks, I appreciate it.
Yeah.
That concludes our question and more for <unk> I would like to turn the conference Mark over four and a little flat.
On the call with remarks.
Alright, well, thank you operator, and thank you for those good questions and we appreciate you for joining us joining us today and we look forward to updating you next quarter. Thanks.
The conference has now.
Conclude thank you for attending today's presentation.
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