Q3 2022 Clean Energy Fuels Corp Earnings Call
Okay.
Good day and welcome to the clean energy fuels third quarter 2022 earnings Conference call Today's conference is being recorded.
At this time I would like to turn the conference over to Mr. Robert Vreeland, Chief Financial Officer. Please go ahead Sir.
Thank you operator.
Earlier this afternoon clean energy released financial results for the third quarter ending September 32022.
Did not received 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 belief.
<unk> 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 or supply new information regarding the circumstances. After the date of this release.
The company's non-GAAP EPS and adjusted EBITDA will be reviewed on this call and exclude certain expenses that the company's management does not believe are indicative of the company's core business operating results.
non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP.
And should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information reasons why management uses non-GAAP information a definition of non-GAAP EPS and adjusted EBITDA and a reconciliation between these non-GAAP and GAAP figures is provided in the Companys press.
Release, which has been furnished to the SEC on form 8-K today.
With that I will turn the call over to our President and Chief Executive Officer, Andrew Little Fair.
Thank you Bob Good afternoon, everyone and thank you for joining us I'm pleased to.
A report that we expanded our leadership as the largest renewable natural gas fueling provider in the United States.
In the third quarter of this year, we sold 54 million gallons of R&D of 28% increase compared to the amount we sold in the same quarter of last year.
Year to date, we have sold 122 million gallons of R&D into the transportation market, which is 18% more than we sold this time a year ago.
Our revenue for the quarter came in at $126 million compared to $86 million in Q3 of 2021 50.
<unk>, 50% increase.
The increase in this quarter's revenue was mostly driven by the growth in our fuels fuel volumes as well as two additional quarters of the alternative fuel tax credit.
We ended the third quarter was $134 million of cash and investments.
This is in addition to the $160 million that we've invested into our jv's for future low carbon RMG supply.
Overall, we find ourselves with a strong balance sheet, a rapidly growing business and a defined pathway to the future expansion of our renewable fuels business.
The feature of that plan for future growth is our relationship with Amazon as it continues to expand its fleet of heavy duty trucks powered by renewable natural gas.
I have mentioned Amazon trucks have been fueling at over 80 of our existing stations around the country for over a year.
The significant milestone was met in this last quarter with the opening of the first station that we built from the ground up as part of our agreement with Amazon.
The station just outside Columbus, Ohio is a state of the art fueling facility that will allow more than 50, Amazon class eight trucks to fuel at the same time.
It also is public ex access lanes for fast fueling for Amazon trucks, and other fleets in the area.
I had the privilege to cut the ribbon at the station with members of Amazon Senior leadership business partners in Ohio, Dairy man, who will be providing <unk> to our fueling network the local congressman and other political and community leaders.
Upon opening 50 feet 53 brand, new Amazon trucks began fueling with R&D at this one station, allowing Amazon to realized huge carbon emissions savings compared to diesel trucks.
It's interesting to note that the other alternatives in the heavy duty vehicles space continue to struggle to rollout that many trucks and total making <unk> the leader in clean fuel transportation.
Plans to expand this site and increase the capacity to be able to accommodate 84, Amazon trucks or already in the works.
This station opening was just the beginning of our execution of the Amazon agreement to build 19, new similar stations around the country.
Stations in Illinois, Pennsylvania, and Florida should be flowing RMG to the Amazon fleet about a month with more by the end of the year and others opening early next year.
Our relationship with Amazon continues to deepen and we are excited about their long range plans for their clean fleet of LNG trucks.
The Amazon stations or only a portion of our active construction portfolio.
Planned to complete 27 station projects this year for our refuse transit trucking and airport customers and an additional 43 stations are in some stage of the construction process.
This is a solid backlog.
In September we signed a three year agreement to expand our relationship.
Our longtime customer waste management for three station projects, where they will fuel their R&D refuse trucks that will bring total stations that clean energy services for waste management to <unk> 96 in the U S and Canada.
Recently signed a new transit customer Valley Regional transit in Idaho, which operates 30 buses.
We also extended our relationship with Santa Monica's Big Blue Transit agency, winning a contract to supply them with $1 8 million gallons of RMG for 177 buses.
Additionally, Amazon's adoption of R&D carriers for other big brands like Mcdonald's and Unilever are ordering R&D trucks.
So it's interesting to note that the carrier, which won the Unilever bid did so by meeting the Unilever biogenic criteria assessment.
That assessment wanted to know three criteria one could the feedstock of the fuel will be used as a few food source.
Two is there a non deforestation and land impact use of the feedstock and three is there a better alternative views of the fuels feedstock.
In the Unilever bid R&D had a perfect score.
We also recently signed a contract with U S foods fueled 14 heavy duty trucks at one of our stations in Sacramento. These.
These companies continue to be focused on reducing greenhouse gas emissions and meeting sustainability goals and are not waiting for other technologies and they are costly and uneconomic fueling infrastructure to be developed.
Program with Chevron at the ports of La Long Beach continues to have success with the total of 850 heavy duty trucks, either already financed or going through the approval process.
And speaking of the ports another exciting event in the third quarter for me was attending a ceremony at the port of long Beach celebrating the first bunkering with liquefied natural gas of patients new container ship.
This is the first shift to use this clean fuel in the west coast of the United States.
300000 gallons of LNG went into the 774 foot chip from our liquefaction plant in boron, California.
Asia will be expanding its fleet with two additional container ships that will travel back and forth from long beach to the Hawaii powered by LNG the.
The second is expected to launch in May of next year, followed by the third ship in October 2023.
In total the three ships are expected to consume 105 million gallons of LNG from our boron plant over the next five years.
They are being the first is not always easy.
Want to congratulate the clean energy team, which worked for years to get the deal done with patient and world fuel services that included providing bunkering support at the dry dock facility in Brownsville, Texas or the new newly built ship was commission.
As you can imagine the demand for bulk LNG continues to grow with volatile global energy markets.
Our two LNG plants in California, and Texas had been very busy in fact with the pace of the LNG.
Fuel deal, we are expanding the capacity at our boron plant.
The third train should be completed in the second quarter of next year and will add 50% more capacity and increase production capability by 90000 LNG gallons for a total of 270000 gallons a day.
Our boron liquefaction plant is the only one of its kind in the state of California, which gives us a competitive advantage as demand increases.
And speaking of production our investment in new R&D sources, primarily of Dairies continues at a healthy clip, we have great partners and total energies and BP that not only bring capital and strong balance sheets, but bring knowhow and major projects like RMG Digesters.
Doesn't seem like that long ago, when I put a shovel in the dirt at del Rio dairy in Texas to break ground for the construction of our first new low carbon R&D digester with great effort from the team. The first R&D molecules are expected to be produced at del Rio in early 2023.
We've all been reading the announcements about the M&A activity in the R&D production space, which we see as a positive because it validates that there is a market and the importance of owning production assets.
This was emphasized during the call with BP CEO Bernard Looney after their announcement to buy our care.
<unk> and BP executive spoke of the value of their marketing relationship with clean energy that gives them access to our fueling infrastructure.
No company is as well positioned as we are by owning and operating the largest fueling infrastructure in the country, where the highest value of their R&D is captured.
I'll close with saying that we are very pleased that the extension of the alternative fuel tax credit was included in the inflation reduction Act.
This is assurance that for the next several years R&D transportation fuel will be rewarded with a <unk> 50, a gallon credit.
This is also a recognition by policymakers that this ultra clean transportation fuel needs to be in the mix of alternatives.
There were other incentives in the IRA, which should help the expansion and adoption of <unk> as well.
A new and significant investment tax credit of up to 30% for qualified biogas projects like our current and future R&D Digesters at dairies was in the legislation.
And the clean fuels production credit in the Bill creates a valuable tax credit for the production of low emissions transportation fuels like R&D.
Those are the highlights of a very productive third quarter I feel good about the last quarter and the progress we've made as a company and I feel even better about the future.
That I will hand, the call over to Bob.
Thank you Andrew and good afternoon to everyone.
We reported solid third quarter results, which benefited from continued growth in RG volumes.
As well as the alternative fuel tax credit that we anticipated despite seeing some pressure from elevated natural gas costs are.
Our results are a testament to the resilience of our diverse business model.
I wanted to take a moment here to discuss improvements.
Vacations, we've made in how we report our volumes.
We are now disclosing two distinct volume categories of fuel gallons and O&M services gallons. These.
These two volume categories aligned with their respective volume related revenue included in our product and services revenue on our income statement.
And you'll notice we've expanded disclosure of our product and service revenues as part of this change.
While disclosing our total gallons has been meaningful and a good metric we feel with our focus on R&D fuel in the divergent economics around fuel gallons versus O&M services gallons that we often talk about that going forward. It will be more beneficial to report fuel volumes fuel volumes and <unk>.
O&M services volumes separately.
Now moving to the third quarter results on a GAAP basis, we reported a GAAP net loss of $9 million for the third quarter on revenues of $125 7 million.
This compares to a GAAP net loss of $3 9 million on revenue of $86 1 million in the third quarter of 2021.
The third quarter of 2022.
<unk> benefited from approximately $10 million in incremental alternative fuel tax credit revenue when compared to last year.
And we also recorded approximately $8 8 million in accelerated depreciation expense related to the removal of equipment at select pilot locations that we talked about on our last call.
On a non-GAAP basis, we reported net income of $12 5 million for the third quarter of 2022 versus non-GAAP net income of $1 6 million in the prior year third quarter. The 2022 non-GAAP income.
<unk> benefited from the incremental alternative fuel tax credit revenue when compared to a year ago.
The year over year growth in revenue as we've mentioned is attributed to the growth in fuel volumes and a rise in fuel prices compared to last year.
As well as the catch up on the alternative fuel tax credit revenue.
Our RIN and <unk> revenues of $11 9 million for the third quarter of 2022 came in where we expected.
Reflecting lower credit pricing, particularly lower <unk> prices.
And really the story on Q3 2022, which we're pleased with the results was really we did see a squeeze on fuel margins due to what some might say was at historic Spike.
And natural gas costs that persisted for two thirds of the quarter.
And since oil and diesel prices were flat to lower in that period.
We did not have as much room to raise our fuel prices so our.
Fuel margins did get squeezed my estimate on that on the squeeze is about $3 million for the quarter.
Thus far in the fourth quarter, we have seen natural gas cost come down from the highs in the third quarter. So we are anticipating an improvement in fuel margins in the fourth quarter. If we continue to see lower natural gas costs, along with the continued elevated fuel prices.
Having said this and looking at our adjusted EBITDA.
Reported $24 1 million of adjusted EBITDA for the third quarter of 2022.
Which also benefited from the incremental alternative fuel tax credit during the quarter of.
The year ago third quarter adjust.
Adjusted EBITDA was $13 $4 million, which had one quarter of alternative fuel tax credit revenue.
Year to date.
Our GAAP loss was $46 4 million.
And adjusted EBITDA is $37 4 million.
And we're guiding to approximately $58 million of a GAAP loss for the year and $60 million approximately $60 million of adjusted EBITDA for the year.
Which implies the fourth quarter needs.
Cooperation from credit prices and fuel margins among others, but given our continued fuel volume growth.
And control on discretionary spend we believe that our guidance can be met.
On the balance sheet and capital front, we remain active in securing a modest level of debt at the corporate level, we're targeting about $150 million as a as a bridge into 2023.
And we are actively in that process as we speak.
And then one last comment on the inflationary on the inflation reduction Act.
Of course, we think this act provides a significant tailwind to further support.
The development of R&D as a transportation fuel the.
The investment tax credit component helps returns, but importantly extends our capital resources frankly, the whole sectors resources to do more R&D projects.
And the production tax credit beginning in 2025.
And add significant incentives to each gallon of R&D that's produced.
We're engaged in all of the feedback and evaluation of what ultimately will come back through the Treasury Department.
And we look forward to getting more definitive guidance as we go forward on that App.
With that operator, please open the call to questions.
Thank you.
If you would like to ask a question. Please press star one on your Touchtone phone.
Please make sure your mute function is turned off to allow your signal to reach our equipment.
Press Star one to ask a question.
We'll pause for just a moment to allow everyone an opportunity to signal for questions.
And we'll take our first question from the line of Eric Stine with Craig Hallum.
Hi, Andrew.
Fair IR.
Hey.
So first of all I really think that the added disclosures are great. I mean these are these.
These are questions that I've gotten from people for a long time and I know, it's in your filing but take some work to kind of flush out still for you to give them is a very good thing so thanks for that.
Maybe first could you just.
Comment on volume growth or volumes that youre seeing across your four main segments.
And I know one of the issues. The industry is having right now is just supply chain and even though the economics are good ability to get trucks.
So maybe volumes now and maybe what you expect as that starts to improve.
Eric It's a good question and we have seen some supply I know our friends in the refuse industry for instance, we're seeing some supply bottlenecks frankly had really nothing to do with the natural gas components. I mean, it was examples given the may work.
Doors.
The.
Locking mechanisms for doors and things like that so we've seen some of that slowed the delivery in the last quarter on refuse trucks that seems to have picked up some.
We've seen the same thing with some of our over the road truck customers on class eight trucks.
I know that there has been some delays.
That I think is really.
Okay.
Not only happen for several.
Several months of this year, but also going into the order book for next year. So we do see some of that I guess im remained to be an optimist I think that will begin to smooth it out.
Catch up.
No I know he was troubling, particularly troubling.
Earlier in the year. So I just I guess, we just have to hope that that gets to be more.
Normalized.
Bob maybe you have.
From the <unk>.
All of our segments, yes from the from the sectors.
We've anticipated all year that.
We would have a ramp up in volumes as we moved through the year.
And we did see that in the third quarter. So.
We were pleased to see that and that was.
Pretty much across the board on between refuse and transit, particularly trucking.
And and fleet services. So it was good to see.
Most of the sector is really all do what we wanted them and thought they would do for this quarter end and frankly looking into Q4 as well.
Eric We've always had good volume growth just the way the cycle works in the refuse sector for instance.
When they order trucks and when they get delivery trucks, we always see begin to see a pickup in volume in the third and fourth quarters.
Sure.
Refuse.
I can't put my finger on what happens on transit often on the delivery of buses.
And of course, we see more trucks being delivered into our system.
Some of our over the road trucking customers.
<unk> increased volume in the fourth quarter.
Okay.
That's helpful. And then certainly hearing I know you've talked about it in the past, but im hearing.
From others.
There is a lot of demand for the 15 liter and I know, it's not coming till early 2020 harvest, that's really not that far off I mean is that any details that you can share in terms of.
I know there are few fleets that are considering some pretty significant.
Rollouts once that Cummins engine is available.
I was last week in South Carolina at the natural gas vehicle Americas Annual conference, which had a very big attendance, which pleased me.
The.
Gentlemen in charge of the.
The 15 liter from Cummins was there and of course, we'd love to have them.
He was he was a hot commodity everybody wanted to know when the engines were going to hit the ground and how many test units and when when does the order book open any.
My job I got there he said don't ask me any more questions but.
There is great interest in that.
As I've said is that engine is the right engine now at the right time.
Sure.
The 15 liter just as an industry goes a 15 liter as a 75% or higher market share. So I mean, thats with diesels are and so I think our industry is very excited about now adding this into the portfolio of the engines. So we will have the 11 989.
Six seven so we're we're.
We're pleased with it.
Those test engines as you know I think we discussed and I don't hold me to the exact dates here, but theres going to be a slug of test fleets that will begin to get those those 15 leaders in their hands at the very late part of this year and early into the first quarter and then there are run those engines a lot.
<unk>.
As they say in the business you are trying to break them.
And.
And then they go to they go to school on that and then.
<unk> begin to make the final adjustments and then those.
The order book sometime late in 'twenty.
<unk> three will begin to open so we're excited about it I know the large fleets.
<unk> all talked about the.
<unk>.
Walmart and other fleets of that ilk wanting to be involved in talking about.
Being involved in the test we're also seeing a similar interest in Canada.
Very large trucking fleets up there are very much interested in the 15 liter.
Canada allows for heavier.
Great.
I think it's 100000 pounds or under 10000 pounds sold 15 liters really important there so.
This engine is what the industry needs and with the RMG Youll have.
Really for the first time.
Cleanest lowest carbon engine, providing all the torque and horsepower that you need in the business.
Okay I'll take the rest offline. Thank you.
Okay. Thank you Ed.
We'll take our next question from the line of Rob Brown with Lake Street Capital markets. Please go ahead.
Andrew Hi, Bob.
Hey, Rob Hey, Rob.
On the LNG production.
Production capacity ads that youre doing.
Give us an update of where you think your R&D production.
I guess through JV will be sort of as you get this first wave done what's sort of the gallon volume of production do you think you'd get to.
Well, you know, Rob I think without getting into.
The minutiae of which project is where in the.
In the construction cycle and all of that I mean, we as I've said I'm sticking with the fact that we're on track what we talked about on R&D day.
We've got seven.
And soon to be eight projects actually.
Turning dirt and under construction and a like number of ready to enter into the construction projects. We feel really good about that and then what's different on this call from the last call is that we have seven more projects that have now moved into development.
That's advanced engineering and due diligence before you would actually have them sign that youre spending money. So you should anticipate you're going to bring all of those on so that.
It's increasing the number of projects that we have and then.
As I've talked about before just to kind of try to keep the numbers somewhat.
Same is and then we know.
<unk> to add in addition to those wanting.
Any more in the pipeline so.
I feel very good about where we stand and where we said we would be in terms of the production I will say that.
The construction projects can slip two months from here to there I mean.
Roughly the same amount of time to build as we've always said between the time that you use.
You sign a deal and you bring it on production and beginning begin to go into commercial production and count the R&D gallons.
Part of 18 months, so we've got to get these projects on and we're making good progress on that.
We are also rod if you go back and if you would those on the call look at our R&D day, we've had a very good year in 2022 of adding in our third party R&D and.
And that as you know is an important component to.
To go alongside with the projects that we will have under developed in construction with our partners ourselves.
Okay. Okay, great. Thank you.
And then kind of second question is around the.
The Amazon activity, it's starting nicely.
How is their long range plans changed or are they still sort of on the on track with their plans are they expanding their thinking or just where does that longer.
Longer term.
Well I get in Big time trouble, if I start talking about what their plans are rob, but good try but.
I guess, what I can say is I was very encouraged to meet all of the senior team of transportation.
Out at our growth part of Port.
Ohio station, and we had a dinner and meetings with them in and around that opening.
I think it was really important for them to see those trucks those beautiful.
Amazon Blue trucks, all hooked up and fueling.
They they have ordered a lot of trucks and ill let their numbers in there.
Releases in some of their tweets speak for itself about how many they've done but they have said in their sustainable brew.
Staying ability reporting that.
Upwards of 2000 trucks, and we're seeing those come they've ordered those trucks those trucks. These stations need to to get open to be able to to begin to fill those trucks.
So were were.
Can't be any too soon to get a lot of these stations completed.
So I feel real good about it and I really can't say any more about their next phase III or phase four.
You could imagine, though that were <unk>.
Staying very close with them as they are developing those plans.
Okay, great. Thank you I'll turn it over.
Thank you. Our next question comes from the line of Sean <unk> with Jefferies. Please go ahead Sir.
Thank you.
So maybe just the first question was a little bit more kind of digging into the demand.
How have your conversations been with customers in terms of deploying capital.
Towards Suvs in the light of maybe potential weakness in the economy. I know you talked about some positives, but is that across the board or how do we think about that.
Well I think.
First off welcome aboard.
I know you are covering us newly covering us so we appreciate it.
I think it's true that these fleets are struggling with lots of things right.
They're looking at the uncertainty of the economy.
Inflation pressures.
Employee shortages and supply chain, so it hasn't been exactly.
This is usual for certainly trucking companies now the good news is.
Freight was up.
The economy was fairly strong.
But theres a lot on their mind and yet at the same so I would say that they are being cautious.
You you have to keep in mind that we're asking somebody to go out and buy brand New truck now good news is these fleets replace.
And are a normal replacement cycle. So it's not like brass and do something they wouldn't otherwise be doing and yet at the same time, they're all facing an ever increasing.
Pressure on.
Their climate reduction goals and sustainability goals and so we find them to be very open.
And we're having very meaningful discussions and we have <unk>.
Large sales force that does nothing but calls on trucks.
Trucking fleets and Lee.
We're making I think very good progress I think some of our fleets are probably really have an eye on what's happening on the 15 liter a lot of them will avail themselves to a 15 later.
Not all need that I mean, Amazon has taken 11 nine liter. So I don't want to give the impression that the.
The business stop and wait for the new engine, but I know a lot of the largest.
For hire fleets.
115 liter as well so theres a little time here I think is what you see.
Understood. Thank you and I think my next question was primarily on how do we think about for the.
Just the level of debt that you'll be taking on how you consider project financing or how do you kind of think about the different avenues.
Yes sure yes.
Yes.
Yeah, Bob why don't you go ahead.
Yes.
Well, it's a little bit of a step process, but yes, we will consider absolutely project financing, our first step being though at at the clean energy corporate level, because we literally have no debt that we can put on and I'll call a $150 million a modest level of debt and so we would do that that kind of bridges us into.
<unk>.
Then further evaluate that project financing.
<unk>.
Alright, and that can come in different flavors, where it goes and what parties get involved.
A lot of interest.
On that front right now.
So it's not at all a lack of interest out there on that.
So it is just.
The time, so were kind of first things first we'll go to shop, we have said that we would put project level debt on as these projects become a little bit more developed we've imagined that that level would be somewhere between 200 $400 million at the project level.
So as Bob says is kind of a step process, we will put it on the corporate debt and then the next piece will be.
Sort of at the project level and you'll see that next year.
The first part of the year, we're considering all everything we're working on all of that right now.
The.
The strategy behind all that.
Sounds good thank you I'll turn it over.
Okay. Thank you.
We will take our next question from the line of Matthew Blair with T. P. H. Please go ahead.
Hey, guys. This is Kevin <unk> filling in for Matthew Blair.
Thanks for taking the questions. So first.
I know maybe too early for this question.
A lot of unknowns, but just curious what your guys thoughts are on.
<unk> being included in the RFS how.
How that might impact <unk> RIN pricing in sealing.
Yes, no. It's a good question.
I guess if I.
Handicap, the upcoming RVO I'm imagining the rent will be in it.
And we have.
We have.
Put out formal comments and met with the EPA.
And I think most of the industry as as saying that we believe that for them to develop a constructive RVO and maintain.
No.
Healthy.
RIN pricing is that they should be thinking of the <unk> to be.
Additive.
To the to the to the upcoming volume obligations.
We will see we will see if it is <unk>.
Clearly additive proportionately additive, but I think you could imagine that it will be I think long term it should be.
In the account and I also think that the.
I'm hopeful that they'll move the RVO up.
And.
And I think that should end up in sort of the middle.
Longer term it will all be constructive I think for RIN pricing.
So I think it would be a mistake and I hope.
I can see right now.
The EPA administrator look these are political these are somewhat quasi political decisions and you look out at the expense of gasoline and so they're very sensitive.
I also believe that the EPA.
Believes that they should include the electricity in this and.
I think they will and I think eventually it will it will all end up making for.
An important part of the whole renewable fuel standard.
Thanks for that sounds good.
On the second one just by the way by the way one.
One thing on that just to interrupt I am sorry to interrupt.
We think that there are a lot of dairies in the United States.
I mean literally probably thousands of them.
That are are probably too small.
Four.
<unk> or putting in a digestion than would clean up the gas and put it into a pipeline.
And but we believe there are there.
Lots and lots of dairies thousands of dairies that would end up.
Using the manure and generating power.
And what Youll find is that R&D will be the cleanest feedstock to create.
Low carbon electrons and those will end up participating in the old program and also in the low carbon fuel standard so.
I think that.
It'll it'll be.
It will be constructive for the R&D business.
Yes makes sense.
And so on the second one.
Just noticing that the Amazon warrant charge outlook was reduced to the lower end of the.
Our previous outlook and if I recall correctly those warrant charges are based on Amazon's rollout or have some relation to amazon's rollout and so.
Just wanted to ask if Amazon's rollout at today is trending in line with expectations.
Well, it's trending in line with kind of.
<unk> expectations.
Probably solved.
Back when we kind of move some of our guidance and what.
Earlier in the year, so theyre trending there but.
Our guidance standpoint.
The amount that Youre seeing is really what would.
What factors into being at approximately $60 million of adjusted EBITDA. So it's really not.
It's not really a bring its really coming off of a high range that was in our previous guidance of.
$65 million adjusted EBITDA so.
That really is just.
Probably the more likely number that's why we moved the range to just really approximately $60 million and that's that's a number that's in there so.
So it's meeting.
Expectations with what we've guided to and where we think we'll finish the year.
Sounds good thanks, so much for the firm.
Uh huh.
We'll take our next question from the line of Graham price with Raymond James. Please go ahead.
Hi, Thanks for taking the question.
I guess first one just on the R&D projects.
What kind of ramp up period should we expect for projects to get kind of a steady state operations I was wondering if there's sort of a rule of thumb there.
Well no. It's a good question Graham I mean after you bring after your commission a project there is actually about a six month period as you wait for certification.
The of the pathway of the.
Our.
Carb and fixing your carbon intensity right before you really generate any credits.
So you have to kind of think about it.
The construction period.
On the front end and then the year of construction. So it's <unk> it's <unk>.
2016 to 18 months and then there's been anywhere between four months six months period, while you basically.
Before you really in commercial generation of credits, while Youre, just kind of waiting for the.
Arb too.
To certify your carbon intensity.
The industry is working to see if there isn't any way to speed that up.
So we all think that that could be done faster.
And we hope that that will be the case and then <unk> is working on.
True up period, and this and that so we will see all of that all comes about but we'd like to think that thats more of the administrative and it would be really nice if that could be tightened some.
Got it thank you that's clear.
<unk>.
And then.
Switching gears, a little bit on the new fuel and service volumes breakout that you provide.
You indicated that certain gallons are included in both fuel and service volumes.
Just wondering if it would be possible to get.
The number of gallons that are kind of being counted in both of those buckets.
Yeah, so they're.
There are.
What that what that relates to us.
Really in the past we had a.
Category volumes, where we provide fuel and we do the services.
And so.
We're giving.
Our comment there is giving you a heads up that there that that is going on and that was really.
So that may be because those that have followed us for a long time would may be naturally just add these together in some and then maybe try to get to a total volume and.
We're cautioning on that now.
Now the reason I'm not jumping out with a with a number per se on that is because our focus is on.
The fuel gallons that are generating our fuel revenue or volume related fuel revenue and service gallons that are generating are volume related service revenue.
And to know if there are some that are in both is not necessarily relevant at this point. What you want to know is what are your fuel volumes that drive before fuel revenue and what are your service.
Hi.
Volumes did that drive service revenue.
Now now.
We've made this change a bit overnight, if you will new quarter.
Cold Turkey.
All I'll say is if you look back.
It kind of prior quarters that category.
Was around 20 million gallons.
That you would say Oh, you do both fuel and.
Services on.
And that's probably in the ballpark of what this what this quarter was but I. Appreciate the question on it just to clarify.
That aspect of us looking at the volume set distinctly somewhat separate and really we've always talked about it and we've always gone through and talked about our volumes in may make folks aware that there was a service.
Volume and economics associated with that as well as fuel.
Some that where we do both I mean, we love the ones, where we do both I mean, that's typically.
Well, we're going to get some of our highest margins because we are doing.
Both service and fuel and so we make a lot.
I'd just make mention there one of the one of the reasons that we continue to go out and do service.
For our customers somewhat say gosh, when you make a lot less on those gallons that you do on providing the fuel is because often.
New York City Transit is a good example, we were doing the service on those gallons and then one day, they called US up and said Hey could you provide us RG and now we do.
Provide them R&D, so we're doing.
We're fueling them now so that's why it's important for us to continue to be able to provide that as well to our customers because someday, we will be able to since we are the leader in their R&D, we'll end up converting those to RG fuel gallons.
Got it understood.
That absolutely makes sense.
You very much.
Okay. Thank you for the questions.
Our next question comes from the line of Betty Chen with Scotia Bank. Please go ahead.
Thank you.
First question is going to be on del Rio you mentioned in your prepared remarks that the first the molecules are especially coming in early 'twenty two 'twenty three.
Is that a bit of a delay from previous guidance for fourth quarter of <unk>.
Sure.
Could be causing that.
Betty first off welcome to your bank. Thank you.
Coverage.
We figured we would get that project on and be in commercial operations very tail end of 2022 and it looks like now it's going to be in the very front end of 2023 and that some supply chain things.
I mean there is.
I think a couple.
Components. If you will that are that will get here, but just are going to move that schedule of commissioning and kind of getting into commercial operation.
Into the first part of 'twenty three.
So.
That's it I mean that that project's going that projects are going well.
And it's very exciting.
There's a lot going on to gear up for the for everything maintenance in the gallons.
The Darin minutes I mean, if you are out there Betty we just add a bunch of people tour at the other day I mean, you would look at it and say Wow. This thing is done so it's very it's getting there it's very close.
It's impressive.
Got it okay. Thank you.
And the next question is.
On BT.
Bp's acquisition of Archaea unit.
Mentioned this a bit in Europe .
Remarks, but I wanted to dig in a bit more how does it impact your existing JV with them and then they also did mention wanting to expand their distribution footprint with you guys. What do you think that could entail.
Yeah, we're very excited for that.
I don't want to speak too much for BP BP, though I think it's been fairly public in saying that.
They believe that RMG in the transportation sector is our highest use.
For RMG.
They are I think they said on their call that they envision that some of that R&D from the landfill projects. The current ones in the future ones would find its way to the transportation sector and of course when that happens.
Most of not all of that would come through our marketing agreement. So we're very.
Cited about it we see it as a big new source for us.
Very very pleased with that partnership and.
No.
Happy that they are bringing all of that into the into the marketing agreement as it comes.
Got it thank you.
And there are no further questions at this time I'd like to turn the call back over for additional or closing remarks to Mr. Little Sir.
Well. Thank you operator, thank you everyone for joining today's call I look forward to updating you on our progress in the next quarter.
Afternoon.
Okay.
This concludes today's call. Thank you for your participation and you may now disconnect.
Okay.
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