Good day and welcome to the Clean Energy Fuels Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Bob Vreeland, Chief Financial Officer. Please go ahead.

Operator. Earlier this afternoon, Clean Energy released financial results for the second quarter ending June 30, 2024. If you did not receive the release, it is available on the Investor Relations section of the company's website at www.cleanenergyfuels.com. For the call is also being webcast. There will be a replay available on the website for 30 days. Before we begin, we'd like to remind you that some of the information contained in the news release and on this conference call contains forward looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance and the 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-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 excludes 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. I'm pleased to report that we reached the midpoint of 2024 in a strong financial position driven by a very solid second quarter. Following an equally good first quarter. We reported $18.9 million in adjusted EBITDA for the quarter versus $12 million in Q2 of 2023. Sold 57 million gallons of RNG during the second quarter, and revenue was $98 million versus $90 million for the same quarter in 2023. We ended the quarter with just shy of $250 million in cash and investments. I'm going to keep my remarks relatively short today, but I do want to highlight some of our accomplishments during the quarter, which helped to explain the good results. The achievements in Q2 are a great microcosm of Clean Energy's overall business and what sets us apart from virtually any other company in the low carbon energy sector. This begins with the completion of the expansion to our Boron facility, the only natural gas liquefaction plant in California, increasing its output capacity by 50%. Much of the new demand for LNG has been driven by the commercial maritime industry overall, and Pasha, Hawaii in particular. Pasha is now operating three large container ships on clean burning LNG between the ports of Long Beach, Oakland and Honolulu. Fuel volume from these ships has grown from a little over half a million gallons a month in August of 2022 to over 2.1 million gallons of LNG in May of this year. By doing so, patient ships have obtained a 90% reduction in NOx and a 25% reduction in carbon dioxide compared to ships operating on traditional fuels. After years of hard work by our team members, we have constructed an extensive fueling infrastructure across North America that is second to none in the business. We…

Thank you, Andrew, and good afternoon to everyone. We had a good second quarter for 2024. We continue to see good results from our fuel distribution business, including good volumes and margins at our station network, plus strong RIN pricing, and our LCFS revenues were back on track, albeit at a lower trending LCFS credit price during the quarter. On a GAAP basis, we reported a net loss for the second quarter of 2024 of $16.3 million, or $0.07 per share, which is the same as last year's GAAP net loss and per share amount. Although we got there in different ways, on an adjusted non-GAAP basis, we reported net income of $2.7 million, or $0.01 per share, in the second quarter of 2024 versus breakeven non-GAAP results last year for the second quarter. And as Andrew mentioned, our adjusted EBITDA was $18.9 million for the second quarter of 2024, compared to $12.1 million the same period in 2023. And just to clarify upfront here, our LCFS revenue of $4.4 million for the second quarter of 2024 includes $2.2 million of LCFS credit revenue that we discussed on our last earnings call where we mentioned that we had transacted our first quarter 2024 LCFS credit sales in April of 2024 due to the Easter holiday. Then for the second quarter, we transacted our second quarter LCFS credit sales in June, so we got back on track there. That was also for about $2.2 million, thus taking our total LCFS to $4.4 million for the quarter. While the added LCFS revenue from the April sales boosted our second quarter results, we still saw incremental gains in our fueling business in the second quarter of 2024 compared to last year, principally due to a better mix of higher margin fuel sales and…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Eric Stine of Craig Hallam. Go ahead, please.

Hi Andrew. Hi Bob. Hey so, you mentioned in the release 7% volume growth at your stations. I'm just curious if you could break down specifically or from a high level by your key end markets, I guess specifically trucking and refuse? And then would love your updated thoughts on timing of the X15N. I know that it's certainly moving towards production and launch but really hasn't gotten going yet in a big way. So just updated thoughts would be great.

Most of that percentage increase comes from trucking, Eric. And if not almost all of it. And on the Cummins launch I mean let's just kind of review for everybody. You know earlier in the year the early introductory engines were put out some of the nation's largest fleets. It was interesting, Cummins a couple weeks ago mentioned that those test vehicles have accumulated a million miles and the company feedback, driver feedback has been I think just short of tremendous the torque and fuel economy and ride has really been, has come to the surface is, is what we were hoping. The next phase has been the delivery now of kind of pre-production units. These are units that actually got built on the line but before the sort of formal. So, there's been another batch of trucks that have now been delivered. In fact, for instance, we got one. We're very excited about it. It'll go into our demo fleet here next week. Beautiful trucks and so that'll be the next batch that'll be operating. The order book has been opened and I think that opened March or April. But now the orders and purchases is something now at this point as between Cummins and their customers. We are working hard with Cummins PACCAR and the dealership owner groups as we're all kind of working and working with our channel partners to get these orders in. I have heard anecdotally that at some recent industry meetings Cummins has stood by that they still believe that they'll sell 3000 units. Now as we've talked about on these calls for the last six months, we know that these engines are going to, these trucks will, likely get into service latter part of 2024. So not a big volume thing for us. But we're all anticipating, these orders because next year we pick up another OEM. So, you'd have more, more, the engines could go into a greater number of vehicles. So, we're very excited about it so far. I hope we'll begin to see some announcements for some of these fleets, but that's really up to the fleet incumbents at this point. But we're working hard on it and, we're optimistic.

Yeah, but I believe that Cummins recently talked about 8% is where they see adoption going out. A little open on the timing just because of moving parts. But that was good to see. Can you.

Eric, that's. And yeah, I don't know, the timing, that was quote unquote, I think over an extended period of time. So I don't know what that means. Three years, whatever. I've always sort of in, what I heard in those early Cummins discussions is that, there would be 2024 and maybe as many 7025 and then they got, then they started talking about percentages. So, I'm not holding the CEO to it. I love, of course, hearing that the CEO thought enough about this product to talk about in our earnings call. And not knowing the exact timing of it. 8% equates to something close to 20,000 units. Right. 20,000 units translates into somewhere around 300 million gallons of fuel. So, for the industry, for the RNG industry, for those of us in the downstream part of the business is big. And, recall right now we're talking about somewhere around selling 240 million gallons of fuel this year. So, we have the largest market share here by far. So, this is very, this Cummins X15N as we've stressed, is really important for us and the industry.

Yep. Absolutely. Maybe for my last question, just on the upstream or upstream for an update, you talked about the six projects that are operating, that are producing RNG. I mean, still kind of the timeline that you start to see an EBITDA pick up late in '24 and that those start to contribute, I guess, fully in '25 and then maybe what are your plans here for the remainder of the year?

Yeah, Eric, generally, yes, that's correct. I mean, we're still going to be working with inside our guidance that we gave for the RNG JV investments, which was negative 10 to negative 14 million EBITDA. But yeah, working within there contemplates monetizing gas that's being produced, but certainly not at kind of full capacity. And yeah, the goal would be to be as close to full capacity by the end of this year for sure going into '25. So, we're excited about it, frankly. It's good stuff as we, when you finally get to see the fruits of your labor with the pipeline quality gas going into the pipeline, from these projects. So that's the main point. Then, of course, you'll have the Maas projects, but, all of the other projects that are under construction, they're all really late '25. Right. And so, they don't contribute a lot in '25, but they're big for all relatively large projects. So, they'll be meaningful, but they won't come on and begin to really inject until later in the, later in '25.

Right. They'll follow the same timeline as the six that you've got this year where they come on and it takes a bit. Okay. Thanks a lot.

The next question comes from Rob Brown of Lake Street Capital Markets. Go ahead, please.

Good afternoon. First quote, first question is on the non-Amazon fueling. You talked a little bit about those stations or the Amazon stations fueling non-Amazon trucks. Could you give us a little color on how that's ramping and what you're seeing there?

You're saying what's the ramp on Amazon stations?

No, the non Amazon fuelers that are at those stations.

Yeah. Well, obviously once we have more fleets that begin to accept, Cummins X15. So that's really a '25 event. You'll see more of it. But like, for instance, we have some large fleets and if I WM, ecology, DHL, I mean, those are the kinds of fleets that are beginning to show up at these, at the public, let's call it the public side of these Amazon locations. So large fleets that have a lot of trucks. Kenan group. And so, that was as designed, right. We knew. And Amazon wanted to have public fueling at those locations. They're in perfectly located warehouse and logistic areas. And so, they really lend themselves to a lot of fleets. And I hope we're just seeing the beginning of that problem.

Okay, perfect. Thank you. And then on the kind of back to the RNG facilities that have opened and started running, I realized it's early, but how are you, what are sort of learnings there in terms of the operations? Are you seeing the flows that you want and the margins you want and how's the operations looking there?

Well, I think we're learning a lot as we go here. And the commissioning seems to have taken, as we've talked about on these calls, a little longer than we've all wanted. But maybe that, in retrospect, maybe that's to have been expected. We, after a 60-day kind of commissioning phase, we begin to inject and then we tune. Right. I mean, that's kind of what's happening is we begin to get all the pieces, the upgrading equipment, the compressors, we get the kicks out and we see the uptime come up and we're seeing that in Del Rio. We've made some adjustments and some pipelines and some different things, and we've had, I think it was in June, very nice increases in production. So I think that's where all these will go. And in one of our large projects where we're handling manure right now in Idaho, we're handling more manure than we thought was possible. So, just when we think things sometimes are slower and a little more difficult, we're pleasantly surprised on the quality and how these things are working. I think, Rob, generally, while slower operating has been good, we'll continue to in house operations, more, we know a lot about operating stuff, and we're going to continue that. We've now really fully graded, fully integrated our engineering teams and some of our operation folks and some of our SCADA systems in, and we're trying to bring some efficiencies that we've learned through operating, several hundred fueling stations and some LNG plants to this. And I think, I think we'll be pleased that we're doing that. And that's sort of new and as these last five projects come on, we're beginning to kind of get our arms around it and staffing up.

Okay, thank you. I'll turn it over.

The next question comes from Manav Gupta of UBS, go ahead, please.

Two quick policy questions, and ask them upfront. First, any timeline we should think about on terms of 45Z. When can we get some kind of more guidance from treasury? And on a similar line, when can we expect some kind of update from, carb on the, whether it's a 7% step down or 9% step down, and I'll turn it over. Thank you.

Yeah, Manav, on Carb, we believe that in the next two or three weeks, carbs should release. This is kind of funny. Release their 15-day notice, which, I don't know, best we can all tell, it's going to be about 30 days before the November 8 hearing. So, I mean, that seems to be on track. I think Carver's working on that now. So, we should see the agenda and the items on it here in the next couple, three weeks is what I'm being told. And that's for November 8. And that's still, there's always time for that to be changed, I guess, but that still seems to be on track. 45V that, I think we're still kind of assuming what I was told from sort of a senior policy person that would know about this, that, we should expect something out of treasury, some initial rule sometime in, at the end of the summer, so, like in September. And so I kind of think and that's the way that's going to go, but we got some more time to wait on that.

The next question comes from Jashant Alyani of Jefferies. Go ahead, please.

Thank you for taking my question. I just have one maybe could you talk a little bit about your EBITDA cadence for the second half of 24? Historically, we have seen it kind of ramp up quarter over quarter with 1Q being the lowest. So, if you follow a similar cadence, and is it fair to say that there's a chance to hit the higher end of the guide? What are some puts and takes there?

Yes, you are correct that we have seen a bit of a, kind of a ramp up in that cadence. And generally speaking, we would expect to see some of that general, same profile as we look at the second half of the year. But in terms of getting to the high end, oh, gosh, there's always a possibility. That's why I have that range there. We're feeling good about where we are right now within that range. And as we've always said, it's kind of all about volume. So we do the best that we can to predict that volume. And we're constantly looking at recent trends, so there's a chance.

Our next question comes from Matthew Blair of Tudor, Pickering, Holt. Go ahead, please.

Thank you and good morning, and congrats on the solid results. I think what stood out this quarter was just the rising unit margins in your downstream refueling segment. So, I was hoping we could dig into that a little bit. Bob, you mentioned that, that the mix improved. Does that just refer to the share of RNG versus non-RNG? Because it did look like that picked up a little bit. And then I was also hoping you could talk about did lower California natural gas prices also help out in terms of your unit margins? Thanks.

Okay. Yeah. Right. Matthew, I will say that the lower gas costs did help us because we continue to enjoy a pretty healthy spread. As an indicator, we're always kind of comparing the, say, NYMEX to your WTI crude. And when that spread is large, like it has been, it just means that we've got some pretty good pricing power, if you will, at the pump. So that helps us. And particularly with the amount of volumes we have in California, when California moves like it did, that's helpful. And then on the mix, I am referring to the fact that as we see more vehicle fueling kind of at the stations, it's not really RNG versus CNG or RNG versus nothing as much. It's the type of gallons. And look, as we're, we're seeing some increases. That's why we indicated that part of that increase was in trucking. And that's an area where that's your kind of sweet spot of fuel margins. So as that goes, you'll see those improvements.

Okay. Okay. And then with the Supreme Court reversing the Chevron decision, are you expecting any impact on the RFS program and any sort of corresponding potential decline in RIN prices?

You know, Matthew, I'm not a scholar on all that, but I followed some of this. And, a lot of the underpinnings on the, for instance, on the laws passed by the Congress. It's not that every law passed by Congress is the same as what might be applicable to what happened in the Chevron deal. And I think that the RFS, the way I've been following the trades and some of the people that been following it, I think the RFS is in pretty good footing. And so, I don't know that that's in, let's call it in immediate jeopardy. Not sure about that. I'm sure there will be those that will try to don't like the RFS might try to work on that. But I'm thinking the RFS and the way that came through Congress and the way it's been dealt with over time, I'm thinking it's on more sure footing. But, there'll be a lot of tests on some of these things. I mean, for instance, there have been those that have thought that, the republican controlled house might try to put a congressional review act in to try to undo some of the IRA. And I'm sure there are those, though. About an hour ago, I saw 18 republican members of the House put a letter into the speaker saying, hey, as you look at repealing the IRA, there's a lot of stuff in there that we like. So this isn't, occasionally when people look at this, they think this is all going to, get poured out. This is all very simple. And it's not, it's a little more complicated than that. I would say that on, for instance, on the congressional Review act, things like that, that takes the Senate as well. So that means you'd have to clear the 60 votes there. So that's why that's not used that often. Now a new administration could certainly impound certain funds that have been put through and make it difficult to spend them, in different categories. And so, we'll see how all goes. There's a lot of water coming under the bridge before that all happens.

Great. Thank you.

Hey, Matthew. Well, one of the, was that, that was Matthew, was it? One other thing is since I've followed the RFS now, I don't know how long that's been in law. 12 years. A long time now, that particular law is really bipartisan. You know, you have the ethanol producing states and you, I mean, you have a lot of, 10 years ago there was talk that a Republican Congress might try to unwind the RFS, and I really do believe the RFS is on a lot more solid footing today than it's ever been before. We see really bipartisan participation on supporting a renewable fuel standard. Sorry. Go ahead, operator.

Okay, thank you. Our next question comes from Craig Shere of Tuohy Brothers. Go ahead, please.

Good afternoon. Thanks for taking the questions. Did I hear correctly that the first upstream JV project recovered $9 million for your portion of the ITC? And how much total do you expect from the other five projects? And using that as a backdrop, can you kind of opine more generally on how you feel about capital funding into 2025, 2026?

Well, the $9 million is total project. And Bob, I don't know that I have a number on top of my head on.

Well, I would say that the, the other five are generally speaking in around the same size, if you will. So, they probably will. They may have some of the same qualified assets in that ballpark. So it shouldn't be too much different than that. But there's a number of things that can go in there with pricing in the market and all that. But that's in the ballpark. And, I mean, we'll use that capital at the project level, if you will. New projects maybe right at the same project, I mean, depending. But.

And then our cap, our capital for the projects that we've talked about, Maas and a couple of our other projects are, yeah, we're covered right now.

We either have the money at the JV, we have the capital. So, the projects that we talked about on these calls, we've got the capital committed in the peg.

And available to us. I mean, we have 100 million.

Additional, so we're good on that. Craig?

Gotcha. And separately, a diversified peer company with landfill RNG exposure just announced their first discretionary institutional fixed price contract with a public utility. It was over five years or I'm sorry, it was just five years, but they expect future agreements, a longer tenure. Now I know this is not the market for your ultra-low CI dairy gas, but as landfill gas is pulled out of the system, if this becomes a trend, especially if that happens, just as all these 15 liter trucks hit the market, demand for dairy is going to go up dramatically. So maybe you could opine about what you see as supply and demand for RNG these days?

Supply and demand currently is in pretty good balance. There's a lot of RNG projects coming on, lot of landfill projects and low CI projects. I don't anticipate a real problem. I hope we get into a real problem, right? I hope we start creating, we hit that 8% number and we need $300 million a year. The industry has a tough time keeping up with that because that's every year, right. You need to create that. But let me remind you that, Bob and I talk about it quite a bit. You probably heard us talk about it. Right now, you're dispensing that you're in California at our 140 or 50 stations, I think somewhere around a -140 to 150 on the CI index. And I don't know that you need to supply someone fuel at -150. So, my point is that as you blend that fuel, you can fuel more vehicles. We have a very significant fleet where their fuel, just by the way it works in the contract, I think they're getting -353. Well, that's unusual. And other fleets won't get that. So, my point is you're going to be able to have plenty of RNG to get customers at either just, a negative fuel number or zero number. So you'll have plenty of RNG, Craig, as you go forward here. Don't sweat that. And I also happen to think that as the 15 liter comes on, the market's going to move, continue to move. Look, 80% of the RNG today in America goes into transportation because it's where you get rewarded for it the best. So, yeah, look, I'm all for it. If somebody wants to do whatever they want to do, is okay by me. But you watch, most of it will end up going…

Thank you.

Our next question comes from Pavel Molchanov of Raymond James. Go ahead, please.

Thanks for taking the question. Maybe kind of macro question. First, price of oil is at the lowest level in about 24 months. And I think there's some fear in the market about kind of recessionary pressures potentially impacting demand. And obviously you have a useful channel check on certain use cases. So, are you seeing demand softening in recent weeks and months?

On our transportation? No, but I don't know that we are the best check on that. But while we have a pretty good feel for how our fleets operate and we haven't seen any decline there, but, we don't see people sidelining, transit buses or refuse trucks or the delivery, type fleets trucking that we, that we fuel. I guess I thought where you were headed is do we see a decline in oil? Are we concerned that, you're going to have wake up that it's going to be $50 oil and, I guess I'd be curious your thoughts on this. I'm kind of thinking that you're going to bounce along the lower part of the $65 to $75. And if you are, you'll have three dollar gas versus $65 oil. And for us that would be very, that'll be very constructive. Right now, you're trade, right now between natural gas today at $209 and oil at $75. I mean you're 36 to one on a BTU equivalency. So you're really at the high end. And of course we like that, but we don't need that. We were happy for a long time at 15 to 16 to one. Right. So, there's a lot of room. There's a lot of room kind of there, I think.

Okay. You know, we talk a lot about the drivers of your product margin, not as much about the service line item. And when I look at your service business, revenue kind of has this very consistent growth. But it looks like the margin has come down maybe over the last couple of years from 40 ish percent down to closer to 30, three zero. Any reason for that?

You know, Pavel, I'm going to, I'm going to put this out there and call it inflation. You know, it's just a bit more, yeah, it's just a bit more costly on all of this. We're still okay with our margin. We're not okay with it kind of coming down. But we do know why it's come down. Sometimes it can ebb and flow a little bit because just based on the types of maintenances that are done. But I think fundamentally, we see that. But it's still, it's still good, still good service, recurring revenue on it. But it's, I'm just going to say it's a little bit more on the cost front. Now we're, we're looking at where, as we renew contracts and that sort of thing. I can tell you in this day we are, we're certainly getting our fair share as things come up for renewal to address the pricing versus what it's costing all across the board with wages and materials and that sort of thing to support it. So, we're kind of addressing it as well.

Okay. We haven't touched on this maybe a year or so now. Is there anything interesting happening with the Long beach adopt the port initiative that you guys had with Chevron a couple years ago?

Well, it's kind of, we just keep at it, Pavel. We've actually expanded it kind of re, if you will, refill or refilling up the bucket of funds from Chevron to continue to do more trucks. Some of the regulation at the port, the electric push for electric and some of the new fleet rules have made it somewhat daunting for those small fleet operators down there to kind of, shoot the, shoot through the needle on what's required in order to, put in for grants, timings. I mean they made it, they made it kind of a mess down there in terms of regulations. But Chevron and our sales team, we're still working and we have a whole bunch of trucks that are kind of in the process to buy new trucks with the, Chevron grants. And so, I don't know there's been any change other than we've continued just slowly but surely add trucks into the port and even in other areas around southern California is really, it doesn't, it doesn't have to be. It doesn't really, we called it adopter port because we were very clever on the naming, but it's really that that program could be anywhere in the state of California. And in fact, I think the other day we talked about a fleet up in the Central Valley that was a trucking fleet that's putting in for those grants right now. So, it's still in the, it's still in the offering.

All right. Thanks very much.

The next question comes from Betty Zhang of Scotiabank. Go ahead, please.

Thanks. Hi, Andrew. Hi, Bob. Thanks for the update. Just one question for me. When you guys were talking about RNG volumes, it seemed like in previous quarters you talked about having sold 5 million gallons outside of your station network. So, I assume that would be into non transportation markets. But you guys talked about how clearly the economics are better in transportation markets. So, I'm just wondering what the thought process was like there, and if there's opportunity to do more, would you take it?

Yeah, Betty, it's all, kind of factors into the whole supply demand optimization of what goes on in a, in a quarter. And so kind of our first area of delivery is always our stations and for the highest economics. And then just on occasion, if we see an opportunity where, because we have so much supply, folks will maybe get into a predicament, if you will, where they need RNG. And so, we take that opportunity to do it. So that's kind of where that happens. And, yes, it's not over. It's just last year we had done some that was fairly regular, and we weren't clear on whether that was going to necessarily happen again, although a little bit of it did happen in the first quarter, which is why we still saw it. And then really in the second quarter, it wasn't needed. And so that's what we. But we'll continue. That'll always be potentially on the table. It always is. Yeah, it is. So, first and foremost, we go to clean energy stations and all throughout our network. And it's probably, I don't know if this is the right way to categorize it, though, Betty. It's more short term, than it is, that we're making a long-term play of moving RNG into the, the data center type thing that we talked about. This is where a particular. Yeah, I would say, yeah. To satisfy a customer, and we're able to wholesale it over to.

Got it. Thank you.

So it could very well end up, in transportation.

In fact, I think a lot of, most of it.

Operator.

Okay, this concludes our question-and-answer session. I would like to turn the conference back over to Andrew Littlefair, CEO, for any closing remarks.

Thank you, operator. Thank you, everyone, for participating in the call, and we look forward to updating you in the next quarter. Have a good evening.

The conference is now concluded. Thank you for attending today’s presentation, you may now disconnect.