Clean Energy Fuels Corp. (CLNE) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Clean Energy Fuels Corporation Annual Meeting of Stockholders. I would like to now turn the floor over to your host, Stephen Scully, Chairman of Board of Directors. Sir, the floor is yours.

Thank you, operator. Good morning, ladies and gentlemen. Welcome to the 2020 Annual Meeting of Stockholders of Clean Energy Fuels Corp. I am Stephen Scully, Chairman of the Board of Directors, and I call this meeting to order. Thank you for joining us today. Today's virtual meeting is a live audio webcast. Our director nominees, executive officers and representatives from our registered public accounting firm, KPMG LLP, are attending this meeting through the webcast. We believe in engaging our stockholders and maximizing their ability to meaningfully engage with us. Today's session enables our stockholders to participate in the meeting in a safe manner regardless of their location. After we've concluded the formal business on the agenda, we will hear from Andrew Littlefair, the company's President and CEO. We will then hold a brief question-and-answer session during which stockholders may ask questions in the designated field on the web portal. Before I begin the formal business, I'd like to make some observations as Chairman of the Board. First, I hope that all of you are safe and have been able to endure the incredible impact to our nation from the COVID-19 pandemic. This has been extremely trying for our customers, vendor partners, employees and the world. We are on a path back to rebuilding our economy and clean energy as part of this effort. We are an essential business that is focused, engaged and fiscally strong. Turning to this meeting. We have 2 members of our board that are not standing for reelection. I would like to express the sincere appreciation from our entire Board and from the team at Clean Energy Fuels to our 2 outgoing members, Warren Mitchell, our past Chairman; and Jim O'Connor for their years of service and contribution. Warren and Jim, I thank you personally for your guidance and judgment. I also want to welcome Beth Ardisana and Philippe Charleux, who have been added to the Board since December of 2019. This last year was another important milestone for the company in the development of markets where natural gas is transitioning the United States to a cleaner burning fuel. Since our annual meeting last year, we have been dedicated to growing all sectors of our business, refuse, transit, trucking, renewables, our Zero Now offering are all very well positioned and will be delivering continued growth even in this difficult time, while cementing our dominant position in the country. The company, management, employees are fully committed to our future, you will see this in our growth and our financial performance. You will hear more specifics on this topic from Andrew shortly Let's now turn to the formal portion of the meeting. The Board of Directors set March 25, 2020, as the date of record for this stockholders' meeting. We have at this meeting a record of stockholders as of that date. I've been advised that at least a majority of the company's issued and outstanding shares entitled to vote is represented in person or by proxy at today's meeting. Therefore, a quorum is present, the meeting is deemed duly constituted and the business of the meeting may proceed. There are 4 matters of business before the stockholders today. First, the election of the directors of the company. As indicated in the company's proxy statement, the Board of Directors has nominated Andrew Littlefair, John Herrington, Lizabeth Ardisana, James Miller, Philippe Montantême, Philippe Charleux, Kenneth Socha, Vincent Taormina, and myself, Stephen Scully. The company's bylaws require that a stockholder provide advanced notice to the company if they intend to nominate persons as directors. No such notice was received, so the nominations for directors are closed. Second, the ratification of the appointment of KPMG LLP as the company's independent auditors. Third, to hold an advisory nonbinding vote to approve executive compensation. Fourth, to approve an amendment to the company's 2016 performance incentive plan to increase the aggregate number of shares available under the 2016 plan. No further business is scheduled to come before the stockholders. It is 09:05 a.m. and for stockholders who wish to vote through the web portal, the polls are now open. If you are a stockholder and have previously voted by proxy and do not intend to change your vote, it is not necessary that you submit another proxy or vote online. Your vote will already be counted. If you are eligible to vote and have not submitted a proxy or wish to change your vote, you may now vote your shares online through the web portal any time during this meeting before the closing of the polls. While the ballots and proxies are being counted, we will hear from Andrew. Go ahead, Andrew.

Thank you, Steve. I will jump right into the slides to cover what -- and review what happened in 2019. This of course, is my obligatory statement required by the SEC about our forward-looking statements. Again, thank you, Steve, and good morning, everyone. I thought, first, I would like to mention before I talk about specific metrics, how COVID-19 virus has affected clean energy. First and importantly, we are an essential business. So we remained open during the last 2 months. Stations are all open, technicians are in the field, and they really haven't missed a beat. 85% of our workforce worked remotely. And as of April 27, 72% of our employees at headquarters have returned. June 1, we anticipate having about 90% of our employees in return. We've put in place safety measures, temperature checks, spacing requirements, masks and gloves and have tried to create a safe environment for our employees. The virus and shutdown has been tough on our customers, as Steve indicated. Transit volume has been off of approximately 30%, airport volume closer to -- down 50%, as flights, as you well know, have been down as much as 95% in certain airports. Refuse and trucking, though, have only seen modest declines, ranging between 5% and 8%. And so as we put this all together, our April volume was off close to 20%. We believe we should see some improvement in our transit first as the country begins to reopen, then airports will come back more slowly over the next several months. However, during all of this, we are still obtaining new business. Request for proposals, RFPs, as we call them, we submitted a record 9 just this last week. Well, now let's move on to the metrics and volume. As you know, volume is a very important measurement for us. 2019 saw a double-digit growth of 11% to just over 400 million gallons. For 2020, we saw the same and believed that we would have a low double-digit growth, but have indicated publicly that COVID-19 will impact our expected double-digit projection. As I said, while revenue is -- as I've said, we really stay very focused on volume, but revenue is obviously an important metric. Our revenue can swing from year-to-year despite steady volume growth. And why is this? 2019 was a good example, a year where we saw lower natural gas prices, which is good for us, but it effectively lowers our revenue. However, we still made $0.23 per gallon on all our volumes. So volume is very important and keeping good margins on that volume is key. Our revenue also contains -- continues to benefit from the alternative fuel tax credit. And especially in 2019, we captured 2 years of the AFTC. We will see more alternative fuel tax credit, AFTC, in 2020 as we discussed on our earnings call. Station construction is a piece of the revenues and continued in 2019, about $23 million, which represents -- importantly, which represents investment by our customers into natural gas fueling infrastructure. We have mentioned construction revenue could be closer to $30 million for 2020. For the first quarter of 2020, we had revenues of $86 million. You can see our renewable natural gas, Redeem, continues to ramp nicely. We had a 30% growth in 2019. Our customers like the low carbon fuel and the sustainability characteristics of Redeem. The industry is responding with over 110 production facilities in operation, and we are working on more supply and driving demand for Redeem. Fully now, and I think maybe not so well known, 70% of our fuel sales are RNG. CapEx spending. We have built our national our -- we have built out our national network and have paid off our convertible debt as of today, which was associated with the build-out. Therefore, our CapEx remains low. For 2020, it could be closer to $16 million to $20 million. An important point is we are in a very unique and enviable position with hundreds of unencumbered station assets that can take more trucks, driving more volume, so our focus remains on loading our existing stations and spending limited CapEx to fill in on any spots or lanes to support specific customer growth and needs of our customers. Adjusted EBITDA. 2019 was another solid year of adjusted EBITDA coming off of a good 2018. And as we have said, we will see the effects of COVID-19 in 2020, but most of our business is tied to essential businesses. So we expect good performance of our adjusted EBITDA in 2020 as the U.S. and global economies rebound. First quarter 2020 adjusted EBITDA was $11.2 million. SG&A reduction. We have lowered our SG&A to a level, which supports our current business. In fact, our SG&A was slightly down in the first quarter as well. Please note that at the same time, our SG&A has declined, our stations, customers and volumes are growing, which was the case in 2019. So importantly, our profit margin from added volume is not being reduced by added operating costs. In fact, our SG&A per gallon has gone from $0.36 per gallon in 2015 to $0.18 per gallon in 2019. Let's look at the balance sheet highlights. And there's a lot of numbers on here, but if I focus you to the right-hand column, most recently, 12/31/19, we ended the year with more cash than debt. And as of yesterday or today, as I've said, we have paid off our convertible debt of $50 million, leaving us only $42 million of debt associated with vehicle financing at NG Advantage, our subsidiary. Thus, this retiring $545 million of convertible debt is a very important milestone for us, and we're proud of it. We are in a strong financial position, which is allowing us to focus on the growth of our business and the exciting growth opportunities looking forward. Renewable natural gas. We are the U.S. leader. Clean Energy and UPS are long time RNG, renewable natural gas, collaborators, and we are working to expand RNG and UPS' natural gas vehicle footprint. In 2019, we signed a fuel agreement deal to provide UPS with 170 million gallons of RNG over the next 7 years. Currently, we are delivering RNG in 13 states. And recently, and this is new, this quarter, we expanded our UPS agreement for RNG by an additional 18 million gallons over the next 3 years to accommodate demand growth of UPS at the sites we serve. Let's talk a little bit more about RNG. This is probably a slide that you haven't quite seen, but most of the R&G traditionally came from landfills and wastewater treatment plants. But watch over time because you'll see more and more RNG being brought from agricultural waste, dairy farms, for instance. And the reason is, is because this dairy farm biomethane RNG is much lower in carbon intensity. We call that low CI gas. And as I said, we are the leaders in RNG, but RNG is moving to be even cleaner, less carbon. Low CI gas is coming, as I said, from dairy farms, but it's more valuable. And you can see on this slide that it creates up 6x more environmental credits versus landfill gas. So we're focused on more RNG supply and more of it will come from low carbon sources -- low carbon-intensity sources. 2019 successes and 2020 and beyond. Our Redeem, as I said, has grown 30% year-over-year in 2019 from 2018. Redeem now is being delivered to 220 unique locations, Clean Energy and customer CNG and LNG stations. Clean Energy represents 55% of RNG delivered in the U.S. market. RNG, as a whole, is poised for significant growth, and in 2019, represented 39% of all the NGV uses. So we have great -- we feel that the renewable natural gas is the future, and we have great -- we're the leaders in it, and we have -- we believe in great promise of it going forward. Steve, that concludes my presentation. All along during this pandemic, we have been open for business, we're growing our volumes. Customers are somewhat challenged, and these are challenging times, but we have met that challenge. We have never been in such a solid financial position. And with that, I'll turn it back over to you for questions.

Thank you, Andrew. All right. It is 9:17 a.m., and the polls are now closed. I've been advised that on a preliminary basis that the proposals before us today have carried. The formal portion of the annual meeting has ended, and we now have time for a short orderly question-and-answer session. As a reminder, validated stockholders may submit questions at any time before the end of the Q&A session. I'd like to open the floor to questions.

Steve, I'm being advised right now here at headquarters that we do not see any questions. We'll give it another few seconds. And then if hearing no questions, we'll turn it back to you for adjournment.

Okay. Perfect. I appreciate that. So -- okay. Well, thank you. I'd like to thank everybody, and then this brings our 2020 annual meeting to a close. And again, I -- we all appreciate your participation. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may now disconnect your lines, and have a great day.