Greetings. Welcome to Clean Energy Fuels Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded. I’ll now turn the conference over to Robert Vreeland. Mr. Vreeland, you may begin.

Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the quarter and year ending December 31, 2018. If you did not receive the release, it is available on the Investor Relations section of the Company’s website at www.cleanenergyfuels.com where 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 expression reflecting optimism, satisfaction with current prospects as well as words such as believe, intend, expect, plan, should, anticipate and similar variations identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. Such forward-looking statements are not a guarantee of performance and the Company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the Risk Factors section of the Clean Energy’s Form 10-K 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 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 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 Littlefair.

Thank you, Bob. Good afternoon, everyone, and thank you for joining us. I’m pleased to report that with the close of 2018, results of multiple strategic operational and financial initiatives that we put in place, have begun to pay off with positive results. We believe this momentum will continue through 2019, and I will explain why. In the fourth quarter of 2018, we delivered 98.7 million gallons, a 14% increase over the 86.4 million in the same quarter in 2017. And we believe this trend will continue into 2019. For the entire year, we delivered 365 million gallons, a 4% increase over 2017. Our revenues were $96 million in the fourth quarter versus $89 million in the fourth quarter of 2017. Our fuel volume revenue in the fourth quarter increased 21% to $78 million versus $65 million in 2017. Again, we see this as a very positive for our core business, exiting 2018. Where we saw decline compared to last year, although not on the ordinary, was in the station construction sales business, which tend to go in cycles on yearly basis. We did complete 49 station projects in 2019, and we're still actively building and selling station projects for our customers as they continue to invest in natural gas. But, admittedly, our focus continues to be on fuel volume growth and our existing infrastructure, first and foremost. The initiatives that are helping drive much of these solid returns are expanding our leadership position in the rapidly growing renewable natural gas market; leveraging our existing nationwide fueling infrastructure and strengthening our financial position, allowing us to continue to focus on both top and bottom line growth. First, let me talk about our Redeem RNG business. If you follow our Company, you have seen a string of announcements over the last…

Thank you, Andrew. Our financial results for the fourth quarter and full year 2018 were in line with our expectations. We ended 2018 within the range of our guidance on adjusted EBITDA, SG&A and market per gallon and we were better than our guidance on our GAAP net loss, even if you adjust for the unrealized gain on our Zero Now fuel hedge of $10.3 million recorded in the fourth quarter. I'll discuss our 2019 outlook at the end of my remarks. Our volume growth in the fourth quarter of 14% above last year came from CNG and LNG, both benefitting from incremental Redeem gallons related to our expanded BP relationship. CNG volume also increased as a result of growth at NG Advantage and from our refuse sector. In addition, we saw growth in both LNG deliveries compared to a year ago. Redeem volume grew 55% in the fourth quarter to 38.8 million gallons versus 25 million gallons a year ago. Our revenue for the fourth quarter of 2018 was $96.2 million compared to $89.3 million in the fourth quarter of 2017. The 2018 fourth quarter revenue included $10.3 million in unrealized gain on our Zero Now fuel hedge while last year included $5.9 million of revenue from our previously consolidated compressor subsidiary that is now an equity investment and no longer reported in revenue. Volume growth and to a lesser degree, higher effective prices per gallon on the fourth quarter contributed to the 21% or $13.7 million increase in volume related revenue over the last year, noted by Andrew in his comments today. Our overall gross profit margin in the fourth quarter of 2018 was $36.6 million compared to $25 million last year. 2018 includes the $10.3 million of unrealized gains on Zero Now fuel hedge while 2017 includes…

Thank you. [Operator Instructions] Thank you. Our first question today comes from the line of Rob Brown with Lake Street Capital Markets. Please proceed with your questions.

Good afternoon and congratulations on nice growth in the quarter. I just wanted to get a little more clarity, is that growth driven much by the Zero Now program or is that -- growth from that program is still yet to come?

That growth would -- still yet to come. Because remember, those are new contracts with new truck builds and trucks to be delivered. And so, it’s mostly from our core business and from our Redeem.

Okay, great. And then, on Zero Now, what sort of the size of the truck fleets that are looking at this and size of the rollouts that are being contemplated?

Well, in terms of the size of the fleets that we're calling on, you could -- as you know Rob, as you could imagine, this is the big fleets, right? So, I mean we're calling on fleets, I think you're asking about the other part of the discussion. But, we're calling on large fleets that have thousands of vehicles. But we're also, we also find interest in fleets that aren’t of the largest of fleets but are very aggressive, right? We often find that those trucking fleets that are trying to gain business from some of the largest fleets are those truck fleets that are between 500 and a 1,000 units. So, we call in those as well, but we're out talking to -- I think we would all considerer to be very large fleet. I think that as you're looking at what is the size of the deals that we're talking about, this is probably your real question is, it’s between 20 trucks and 100 trucks -- 100 units. Let's face it. This is new product, it’s new engine product, it's -0- some trucks by -- some fleets may be purchasing upwards of what I mentioned. It could be upwards of 1,000 units in a year. But, it's unlikely that they're going to take a bite that big out at first. And so, most of the deals we're working on are -- I would say, they're not test -- we've moved beyond the test age. This is commercial, right? And so, they're looking at 20 trucks to 50 trucks, that sort of size, some that we're working on are as large as 100 units.

And then, on your margin per gallon. Does that include this 110 gain or the gain on the -- or was that…

No, it doesn’t.

The next question is coming from the line of Eric Stine with Craig-Hallum. Please proceed with your question.

Hey. Just sticking with the Zero Now program, and I know that this may be plays around a little bit longer term. But, I think if my math’s right, the specific program that Total is backing is 2,500 trucks, given the value proposition there, the interest you've got, can you just talk about their desire or potential to expand that or maybe other financing vehicles that you may use to expand that, given that there might be a significant uptake?

Well, let's fill it up first, right? But, we've always talked about the -- and I've talked with some well-known financial advisors to the company, and it would be kind of household names that basically said, listen, this is really commercial, that this is good paper, that you're doing a commercial truck lease with a very large, well heeled fleets, and that as you begin to fill up this and roll out these, this paper that you -- there will be interest in this kind of financing. And so, I have talked to my partners at Total and try to keep them interested, and once I fill up the first $100 million, I'll be back at their door for another. But, let's see how we do on the first. But I like to think that there is -- this is really rocket science here. I mean, what is new -- financing of the trucks, there's a lot of room in here between the price of natural gas and diesel. And so, it is -- it enables -- it makes this economic. And what is unique and what is very appealing to these fleets is what we have been put in place with our friends at Total as well, which is this fuel hedge. Never really before has anybody put in place a bipad fuel hedge, fuel hedging, diesel bio-area [ph] in United States and natural gas at delivery points, and locking in this kind of discount for an extended period of time would love to five years. That is unique. That is very appealing to these customers. It's a little complicated because it's not exactly the way they buy stuff now and it does require them as they look at let's just say for -- in my example, I was…

Yes, absolutely. Thanks for that. And maybe just turning to the volumes. I think, this is your highest volume level and maybe first double-digit volume year-over-year increase in two years. Obviously, Redeem a big part of that. And I may have missed it. But, did you give a redeem target for 2019 as part of your goal to be 10% plus?

We didn't, but I think unless Bob corrects me here in the public call, I think it's safe to say Rob that we feel like we're going to enjoy good growth in 2019, and it'll probably be in line with what we saw in 2018. So, I think if you use a 40% growth rate for Redeem for 2019, I think we'd be able to make -- Oh, Eric. I'm sorry, Eric. I think, a 40% growth rate for our Redeem in 2019 is probably a good number. I hope we can do better than that but I think that would get us going.

Okay. And then, just last one, I mean, maybe longer term you've got your goal now to be 100% RNG by 2025. I mean, are there any hurdles you see to that now that you've got BP backing that? I mean, is that something where -- that's just based on demand for your customers and I mean, where's your confidence that you will have the supply to handle that?

We’ve talked about this before I think on these calls that I see that as long as the regime and the credit regime stays in place, which we see in California as being locked in for a decade, and I don't see anything really changing at the federal level for quite a while. There's a lot of renewable natural gas coming to market. And I think California alone over the next few years will be able to produce up to a couple of billion gallons of renewable natural gas. That'll take a few years to do. And of course, we're talking about supplying next year 400 some odd million nationwide for whatever it is, if you do the math. So, I think the country can get into the several billions of gallons of renewable natural gas as these dairy farms and wastewater treatment plants and landfills and renewable sources get tapped. It's very viable, and when you start comparing it to what's necessary to do this other stuff that people talk about, there isn't anything that's as commercial and as environmentally friendly and available as this. I hope, as we're beginning to see this down the port of LA -- I'm kind of switching over to trucks, we're seeing more trucks being introduced into the port right now, and they're all getting renewable natural gas. And when you look at that brand new American-made 12 liter engine that's 90% less nocks and is using renewable fuel, which right now is probably 75% less carbon and when low CI gas comes into the port it'll even be better than that, there isn't anything that can touch that for the economics. And I think that as that happens, you're going to -- the light bulb is going to begin to go off on people and say, wow, America's got a lot of renewable natural gas; there's a lot. Look, over time, I think, we'll be ahead of the crowd, and it's our goal to be all renewable. But, the country will benefit, because you can use a lot of this and blend it, right? I mean a lot of others will get to be 50% renewable, and it's still dramatically cleaner than anything else out there.

The next question is from the line of Pavel Molchanov with Raymond James. Please proceed with your questions.

I know we've talked about this every quarter, and here we are more than a year after the last time Congress extended the tax credit. I know it's not in your guidance and rightly so for 2019. Obviously we saw the Grassley- Wyden bill getting introduced a few weeks ago. Just thought I'd get your latest thoughts on the outlook for that passing and anything you're hearing from the Hill.

You know, Pavel, you follow it as close as anyone and I do too. We're feeling, you know, as I always say, I mean, it's sort of the Wild West out there in Washington. We feel pretty good that the extender package and the alternative fuel taxes in some of those different tax -- extender tax packages. We think it's going to happen. I think, it was -- as you know, for those on the call that actually Senator Grassley and Wyden, so bipartisan, put in on the Senate side, which is not exactly where it would necessarily start, but put in a tax package that had some extenders in it and the alternative fuel tax was in there. So, that's obviously a good sign. We see this increasingly as a bipartisan issue, a recognition at those that we're talking about on the House Ways and Means and also on the Senate side that they need to get this resolved. I think, Pavel, what -- I think it's going to happen in 2019. I'm not sure which vehicle it gets hooked to and when. But, we are very confident, as best we can be that it's going to happen this year. I think what we're probably seeing is that it would be retroactive. Right? So, it would take place for -- what?

2018.

2018 and 2019. I think, there's a sense that, though going forward as Senator Grassley's talked about on the biofuel tax credit as well, this probably needs to be a -- over time a phase-out of this tax credit. We need to get some certainty for the industry to be able to help move these, to help with these fuels, and that my guess is you're going to see that there's going to be a tax bill that will deal with retroactive a year and forward for this 2019. And then there's probably going to be an effort later this year, I think, to look at some sort of five to seven year phase-down, where the alternative fuel tax and some of those other taxes will begin to phase down over time. And that'd be a good thing and would provide certainty for the industry and for our customers, and so, to answer your question, yes, I think we're going to see the alternative fuel tax soon. And then I think stay tuned later in the year. You may see how it gets addressed in the future.

On the service revenue line, obviously there is quarter-to-quarter choppiness always, but it does seem like that's kind of struggled even as your product sales have improved. So any sense of what that picture will look like in 2019? I know you're -- I didn't think you're giving any specific guidance for services, but any color on that would be helpful.

Yes. Well, so part of that choppiness is related to, certainly year-over-year, is related to the fact that our Compressor subsidiary had service, a fair amount of service revenue that was in that number, and so that was in '17 and it's not in '18 because now it's down as an equity investment. And then, as of late, I would say that that service, that quarterly service revenue is, you know, fairly steady, and we would see it being somewhat steady to slightly growing if you will into '19. So there's nothing really notable…

Does he mean construction?

No, service, just O&M, our whole O&M…

It's growing.

Yes, it's growing. But, we've noted in our comments a couple deals that were not renewed, and those were in service-related, but frankly that area is we continue to see good growth because it really involves a lot of the refuse and the transit. And that area is from a volume standpoint is all growing, so that'll come through in the top line as well.

Okay. Just a quick question in the sources of revenue table. What is other that added $2.7 million this past quarter?

Yes. Most of that is, we had some natural gas trucks that we had acquired and sold.

Okay, got it.

Yes. If you recall, back in some filing, we had acquired about 140 natural gas vehicles, and we've put those out into our network.

I want to talk about -- I want to mention that, Pavel, because I think that's kind of interesting because it's something that comes up once in a while. There was an occasion where we saw about 145 trucks that had basically lost the contract that they were operating on, and we moved in and bought those trucks at about $65,000 apiece. They were a couple years old, had a couple hundred thousand miles on them generally, well maintained very largely. We bought all those trucks. And we sold those to, fleets at our fueling network. And what I thought was interesting is that we were able to sell those trucks better than what the residual value would have been. Because there's always a question of what the residual value is of these natural gas trucks, and people that are looking at it say, well, I just don't know if there's going to be a residual value after four or five years. Well, these beat -- and we got, we sold these trucks into our fueling network at the same price that we bought them. We weren't trying to make money. We were trying to get the gallons appropriately put back into our network, which we did, and those trucks brought a very good value.

And we don't have anymore. So, we're out.

Yes, we're out.

We're not expecting that…

Yes. But, that's what that one was.

Thank you. We have reached the end of the question-and-answer session. And I will now turn the call back over to Andrew Littlefair for his closing remarks.

Thank you, operator. I want to thank everyone for participating in today's call. And I look forward to updating you on our progress next quarter.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.