Greetings, and welcome to the Clean Energy Fuels Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.I would now like to turn the conference over to your host, Mr. Robert Vreeland. Please go ahead, sir.

Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the quarter and year ending December 31, 2019. 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 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 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 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. Before I begin to report on our last quarter and the year, I would like to speak briefly about what is going on in the markets and especially, the global energy market. While all of energy is being hit hard, I’d like to remind everyone how Clean Energy is specifically positioned going forward.Our competition, diesel, is a refined petroleum product, which may not necessarily reflect as a dramatic reduction in prices at the pump, as we’re seeing in the price of oil. Price in natural gas is low, which is good for our customers and much of our growth is coming from Redeem, which is a renewable, sustainable transportation product.And I will discuss in a minute in more detail, we continue to be very bullish about Redeem’s continued growth. Also, and probably most importantly, the company has a healthy balance sheet with plenty of cash on hand to cover our debt payments.And with that, let me jump into the fourth quarter and the year-end results. We closed 2019 very positively with a 10% increase in our volumes over 2018, reporting over 400 million gallons of natural gas fuels sold for the year, the first time passing that mark in the company’s history.For the fourth quarter, we sold 103 million gallons, close to a 5% increase over the same quarter last year. It was the second consecutive quarter that we exceeded the 100 million gallons mark. Growing our fuel volumes will continue to be our priority, as the recently extended federal alternative fuel tax credit, or AFTC, will be applied to fuel gallons through at least the remainder of this year.We reported $344 million in revenue for the year and over $119 million for the quarter that ended in…

Thank you, Andrew. We finished 2019 on a strong note, with the passage of the alternative fuel tax credit through the end of 2020 and achieving 10% volume growth. The AFTC represented $46.7 million in net earnings in the fourth quarter, pertaining to 2018 and 2019 eligible volumes, and we should see approximately $20 million in AFTC for 2020. This provides sufficient cash to pay down our convertible notes coming due in June of 2020, as well as additional discretionary capital to support our business.I’ll discuss our outlook for 2020 in a moment. Apart from the AFTC and its positive impact on our results, we saw continued low RIN prices through the end of 2019, which I mentioned was likely on our previous call. That contributed to a lower-margin per gallon in the quarter.For the year 2019, we were at $0.23 per gallon, or slightly below our guidance of $0.24 to $0.28 per gallon. Construction revenues for 2019 were $23 million, with the fourth quarter trending up from the prior three quarters. And we finished the year slightly ahead of the $21 million forecasts noted in our second quarter earnings call.Our SG&A expense came in at $73.4 million, matching the low-end of our guidance range. And with the help of the alternative fuel tax credit, we ended 2019 with $20.4 million in GAAP net income.As we’ve mentioned, our annual volume growth for 2019 was 10%, with growth in Trucking, refuse and transit, fueled by our Redeem renewable natural gas, as well as NG Advantage. Most of this annual growth was in CNG, with LNG being essentially flat year-over-year.For the fourth quarter, our volume growth was 5% above last year, driven principally by growth in Trucking, as well as NG Advantage, while Transit and Airport Fleet Services were essentially flat in…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question comes from the line of Eric Stine with Craig-Hallum. Please proceed with your question.

Hi, Andrew. Hi, Bob.

Hi.

Hey, Eric.

Hey. So just curious, I know you talked about that you’re having pretty deep discussions with people in the marketplace. Curious, related to Redeem kind of what sort of knowledge levels are you getting from fleets? What the education needs to be there? And then I’d love an update on the Zero Now financing. I know that you had – you were on your way to 2,000-plus trucks there, so an update would be great?

Yes. So, I think we’ve done a lot of – we did a lot of work in 2019 on Redeem. It’s a little different than the constant media attention about the future is electric and the future is hydrogen and these different things. And so – but, as you know, fleets are pretty practical. And so, as you well know, most of our fleets understand the natural gas story. We do have to educate them some on Redeem.And right now, we can’t offer Redeem everywhere in the United States. I mean, we’re working on supply all the time. I think, we still sell Redeem in 20 different states, but it’s not available everywhere. We’re growing supply all the time.I will say this, though, Eric, our largest fleets that have – that are doing some hauling for some of the companies that are consumer-facing is shippers. The Redeem, the renewable natural gas really gets their attention. That’s why I said it in my remarks is that there really isn’t anything they can do when they really are looking at how to become more sustainable and reduce carbon and hit those targets that are – that they’re putting in their annual reports and such is to move their hauling over to using renewable natural gas. And so it’s one of the strongest offerings we have right now.And I think also, importantly, the big move by UPS, you recall earlier or last year, we entered into a contract to sell them a 170 million gallons of renewable natural gas over six, seven years. That was heard by fleets, and so that got a lot of interest. So it’s a story that’s becoming better known.And once our customers that are using diesel and some natural gas, once they begin to be familiar that they…

Got it. Thanks for that. Maybe just turn into the outlook a little bit. And I can certainly appreciate being taking a conservative view there, especially given what’s even happened in the last couple of days. But just wanted to clarify, so given the the big move in the D3 RINs, when you think about next year, or I’m sorry, for 2020 guidance or the outlook, are you assuming that they stay here? It kind of sounds like you’re assuming that they moderate a little bit?

Yes, probably moderate a little bit. There are certainly – we’re assuming that they’ve come up from the lows of 2019. But we’re being just kind of cautiously positive on those.

Okay.

Yes.

…makes sense. And then on the EBITDA guide, it just caught my eye. Typically, you give a range. And this go around, you gave a specific – approximately I believe it was $56 million, so just…

And Eric, that’s just a little bit of where we’re at today and…

Yep.

…what’s going on in the market. So approximately, there’s a little room below and above that.

Okay, got it.

Yes.

Maybe just last one for me, just at the ports. I mean, I know the port fee, it’s still a bit of a moving target. I mean, is that something that you could provide an update on and maybe whether you think it’s a number that actually is going to have some decent drive adoption at the ports?

Well, I have to say that I’m not altogether thrilled with the number that they’ve come up with. They – the port side of yesterday on a fee now it generates $90 million worth of – $10 per container move. So it generates close to $100 million a year for cleaner trucks. It’s certainly on the low-end of what needed to be done in order to have a large-scale adoption.I think, the Port Commissions hit behind the current trade tension with China and the coronavirus and other things to come up with a light number. I don’t think they really acted in the best interest of air quality. And I think they missed a little bit of an opportunity. Now they’ve said, it’s the beginning that they wanted to go slow and they wanted to launch a program and we’ve adjusted over time. It’s not – Eric, it’s not enough to drive the kind of adoption that the plan itself calls for.So it’s a start. We do have about 365 trucks that have put in for grants that would fund natural gas trucks in the ports. I like that. There’s still a few more pieces to the, what’s called the final program that will take shape over the next couple of months about the adoption dates and exactly, when does the Zero or low-NOx qualify and how long does that get exempted for or not? How that all figures out? So there’s a little bit more to be done.And there’s other moves afoot by the air quality officials to continue to put pressure on the port to be more aggressive than what I think we came up with. So let’s say, it’s – it started in the right direction. It – that container fee that came out yesterday is not one that’s going to overnight change the port to anything. And I have happened to think that more needs to be done in order to make it more bold and to really get rid of the dirtiest polluting trucks down there.

Okay. Thanks a lot

You bet.

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

Good afternoon.

Hey, Rob.

Hi, Rob.

Just a little bit more on the 2020 outlook. You gave a range of growth, I guess, how much is that range sort of already baked in, in terms of the contracts you signed up and how much need to new signups to hit those kind of ranges?

Well, I mean, a good portion is, it’s kind of organic growth, but I don’t know if I would say it’s even 50-50. But – I mean, there’s certainly some organic growth that if you come off of some of our recent run rate and you kind of pencil that out. And no, there’s a little bit of variation in the summer months when the gas use is higher. So…

I mean, Rob, we’re not hedging. It’s, I guess, well, just to think about it this way is, there – that isn’t a sandbag number, right? There’s a lot of work to be done and all. We have to sell, right, and we have to work with fleets all the time. We know, for instance, that certain of our customers are probably going to buy more refuse trucks next year, right? So you kind of look our embedded volume and we have a lot of refuse customers.And so we tend to think that we know that there’s probably going to be an addition of trucks, but they’re not in the bag and they’re not under contract necessarily. So, there’s some of that, but there’s still probably half of that. If we thought going a month or so ago, we were kind of thinking that we were going to see growth in the low double digits.And so we brought it in here a bit, because we know. We have experience to say that if you have a prolonged period of $30 oil, it’s going to dampen down the growth rate here, just because the economics get tougher and, of course, if we have some economy that really slows down, people begin to put off purchases of trucks and refuse trucks and everything else.So – but when you – if we were thinking 2020 should, we have – we felt pretty good about low double-digit growth. And I would say, of that, we probably – you could probably bank on about 5% of it. We felt pretty good about. And the other 7% or so of that, we’ve – we had a very good line on and that’s kind of how we got to that number. So we brought in a little hair. Now, we’re still adding when you think about the size here, we’re still adding a lot of new gallons, even with the guidance we’re providing today. And so it’s still significant growth, that’s a few million gallons every month. So it adds up and it’s important for us. Does that help?

Yes. No, that was a great discussion. Thank you. Yep, it is. It really gives clarity there. Thank you.

Okay.

And then kind of back to the Redeem environment, is it – you’ve talked about UPS driving a fair amount of interest. Just wanted to get a sense of sort of big fleets, small fleets sort of where’s that interest coming? Is it concentrated in a certain area, or do you really see it across the Board?

Well, I think I’d be safe in saying that really. Now, we provide all of our customers in California, renewable natural gas. Sure, they like it or not, right? So they’re all – they all benefit from it and they’re all thrilled to have it. Okay. And it’s – so it’s important. I would say there really isn’t – there isn’t a customer that tells us they don’t want the renewable natural gas.I mean, it’s the most potent thing that we have. So, Kroger and Republic, Republic wanted it in 20 states and Waste Management and UPS wanted it for seven years. So this is the most potent fuel that’s out there and the fleets all know it and they all want it. And so all of our refuse customers want. And, in fact, you go to the – Rob, you probably been, but you go to the – one of the big refuse shows, there’s all sorts of stuff there on digesters and renewable natural gas at the trash, because the trash guys are involved in many ways in landfills and such.So our refuse clearly wanted. The Transits love it. Our LAMTA that runs the largest natural gas fleet in the United States public transit fleet, all of them are on natural gas except a handful of electric buses here in Los Angeles. It’s largely and I think I’m right about this, if it’s not 100% renewable, it’s darn close. It’s mostly renewable natural gas.I mean, they run a fleet that’s cleaner than if they were to switch over to electric today. So they get that and it’s super powerful. And they get to do it at a discount to diesel and on parity with natural gas. So it’s a really powerful tool for us and our customers love it.

Yes. I mean, it’s absolutely a solution to address the sustainability and that’s becoming more evident.

When you sleeve it into the existing network that we – we’ve already spent the money to build these stations across the country, eventually, all of our customers will be getting the renewable.And over time, what’s happening is, you’ll move more and more to the low CI, and I think for those – some of you on the phone understand. But we’ll migrate from methane that’s cleaned up out of a landfill to methane that’s taken out of a digester of a dairy farm. And that – but that fuel the ladder that I’ve talked about the dairy farm is dramatically less – 300% less than diesel.So it’s really a carbon sink. So it’s hard for other alternative fuels, no matter how exotic and how space stage they are to get to where we are on that. We don’t always fit the environmental communities’ desire or some of our regulators out here. But when you – when the – kind of the rubber meets the road, to be able to do it in an economic way and do it efficiently. It’s really kind of what the private sector showing you how this thing can work and it’s pretty powerful.

Yes. Yes. And on that point, is it the – does the private sector, when the regulators sort of set these rules, do they take into account the private sector view, or are these rules going to sort of clash with that private sector view and the economic sort of that makes sense and drive some disruption there?

So which rules are you talking about? Rules to push everybody to an electric truck you mean, or bus…?

Yes, sort of the proposed, I would say, proposed discussions if that really rules yet, but sort of some of the proposed discussions around zero emission at the…?

Yes. I think there’s just and I know it doesn’t sound avant-garde. But I think there’s this kind of this somewhat religious sort of fervor that somehow has gotten into the sort of the view that it has to be electric or hydrogen or wind and solar, and those are the only particular things that really fit. And it’s kind of funny.A few years ago when that was getting a little ahead of steam, we didn’t have really renewable gas. We didn’t have the pathway for it. And now that we have it, it’s a little bit of a fly in the ointment. And so I think that the regulators, as usual, are a little out of sync on what the market is now beginning to show you.I think some of our legislators – regulators in California are a little behind the times and clinging to what they think people want to hear. And I think they’re out – frankly, I think they’re out of step. And so far what they’re having to do is, they’re having to pay for it all and they don’t have the money to pay for it all. They came up with a proposed rule for Los Angeles International Airport that will require everything to go to electric. It’s a few billion dollar. They don’t have the money for. There isn’t the money in the private sector to pay for.So I think once all of that becomes to be figured out, let alone, the couple of thousand transit buses at LAMTA to switch over from low emit – super low, ultra low renewable natural gas today running the low-NOx engine here in Los Angeles to go over to electric. That’s a $5 billion program to get something that’s not as clean as what they have right now.I think once that kind of stuff begins to be figured out, people are going to say what in the world are you guys doing? So I feel pretty good about that we have the right fuel that is actually economic and there can be a lot of it in the country. So I don’t know, how long it all goes to some of the regulations creator on themselves, but they will at some point.

Okay, great. Thanks for that overview. I’ll turn it over.

And yet, at the same way, Rob, I don’t think that the movement is going backward. I just think some of the – kind of some of this bind, command and control, it has to all be technology forcing is not going to fly –it never really has.

Okay, great. Thank you.

Your next question comes from the line of Pavel Molchanov with Raymond James. Please proceed with your question.

Thanks for taking my question. LNG volumes, I – were down, I think, third year in a row. And I’m curious kind of what the headwinds are and what you’re doing to address that?

CNG is working well in trucking. And I think, until the – you see a more wide spread adoption, now that you have better tank packages on trucks until you see wider, more dispersed deeper penetration and over the road trucking in North America, I think, you’ll see the split being heavily weighted towards CNG, not LNG.Now you’ll have LNG in certain places. I think, you’ll still see some LNG when you see some longer range trucking that does sleeper cabs and some of that. But you’ve got some range now on CNG vehicles, where you get 600, 700 miles of range. That’s a lot of range. We didn’t have that several years ago.So I don’t know that there’s anything to be addressed here, it’s to be able to provide what the customer needs. I think, as you begin to see some longer range stuff that, you’re still sort of seeing super region, of course, that the industry is going more towards super regional. But until you meet a lot of the demand on super region, you get to be some really longer route stuff, maybe heavier duty will you move to LNG.

What’s the difference between your margins between the material fuel types kind of on average?

Better on CNG. I don’t know, off the top of my head.

Okay, used to be the opposite, right?

I’m not sure it ever really was.

Okay.

Either side, you will – by the time you liquefy it and haul it, its – CNG is pretty hard to beat.

Okay. Well, last question. Even after paying down the 7.5% notes in June, you’re going to have a pretty, pretty good cash balance with the $40 million-plus of tax credit you’re going to get this quarter. I’m curious, are there any kind of M&A consolidation opportunities, particularly if some of the smaller players in the space end up running into trouble in this $30 a barrel oil world?

Pavel, we look at that all the time. And you know, we’ve done it before I’ve – we’ve – over the years, we’ve acquired different franchises from utilities and others. We’ve looked at a lot of them that have been consolidated in more recent times. We have a pretty robust network. And so, nodes on the system is not really that necessary for us.I mean, the last thing we need is a whole bunch of more under – underutilized fueling stations. And so we always look at them and we talked all to our competitors, and we talked to customers that might have customer stations. And so, we’ll look at them from time-to-time. There’s not a whole lot of networks out there that are that advantageous for us. And if there are they don’t have the volume.

Right.

We work hard at picking off that volume over time. So we’re a good competitor, too.

I appreciate it.

And you know – yes, okay. So I don’t see any real big M&A activity out there.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to management for closing remarks.

Good. Well, thank you, operator. Well, thank you, everybody. I appreciate you attending our call today and we will keep you updated and – on next quarter’s call. Thank you.

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