Clean Energy Fuels Corp. ($CLNE)

Hello, and welcome, everyone, joining today's Clean Energy Fuels First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this call is being recorded. It is now my pleasure to turn the meeting over to Tom Driscoll, Vice President, Strategic Development and Sustainability. Please go ahead.

Thank you, Dana. Earlier this afternoon, Clean Energy released financial results for the first quarter ending March 31, 2026. If you did not receive the release, it is available on the Investor Relations section of the company's website, 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. 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 of the date of this release. The company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding 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, Clay Corbus.

All right. Thank you, Tom. I want to start by saying that I'm honored to be named CEO of Clean Energy. I've been part of this company for 19 years and have been involved in every major strategic chapter of our evolution from our days building out the fueling network to our initial investments in RNG in 2008 to the integrated platform we operate today. I have a huge amount of confidence in our team and the foundation we've built, and I'm very excited about the opportunity ahead of us. Now as CEO, I plan to focus on growth, strengthen execution and operating discipline and fully leverage the assets, infrastructure and people we have in place. We have a strong balance sheet, recurring cash flow and a very capable team. I also see opportunity to be more technology forward using data and software to improve efficiency across operations, corporate functions, RNG and how we identify new customers and serve existing customers. All of this supports the same objective: deliver value for our customers and stakeholders. At its core, I believe deeply in this business and our products. RNG is domestically produced, lowers fuel costs, reduces greenhouse gas emissions and uses existing infrastructure. Those fundamentals have always mattered, but they are especially relevant today. Beginning in early March, the conflict with Iran caused a sharp rise in crude oil prices, which quickly flowed through to diesel across the U.S. Diesel prices increased by roughly $1.50 to $2 per gallon or more, a 50% increase almost overnight. Fuel is a meaningful component of cost per mile, and this level of volatility strains fleets, carriers and shippers and ultimately leads to higher costs for consumers. This environment reinforces why Clean Energy exists. Compared to diesel, natural gas is cheaper, cleaner, domestic and less exposed to geopolitical events abroad. As you've heard many times before, nearly 100% of the fuel delivered through our stations today is renewable natural gas, which captures all the benefits I just mentioned and helps our customers advance their sustainability goals. Now turning to the quarter. We delivered 67 million gallons of RNG. We generated $16.6 million of adjusted EBITDA, and we ended the quarter with $126 million of cash on the balance sheet. In our downstream business, performance across core markets remained steady. Our transit and refuse sectors continue to be consistent contributors, supported by long-standing customer relationships and the reliability of RNG. We also see underappreciated growth potential in these segments. Over the past 5 years, battery electric and hydrogen solutions have proven costly and challenging to deploy in many locations. As those realities become clear for transit and refuse fleets, RNG offers a practical, cleaner and lower cost alternative to diesel. And many of these fleets already have firsthand experience with RNG. In trucking, the recent diesel price hikes and volatility have brought total cost of ownership back into focus. Heavy-duty trucking remains our largest growth opportunity. Class 8 trucks with the Cummins X15N engine allow fleets to capture RNG's economic and environmental benefits without sacrificing range or performance. The technology works, the infrastructure is in place, the fuel is available today, and it is cheap and less volatile. Quite simply, the case for switching from diesel to RNG has never been stronger. At the same time, to be honest, adoption of the X15N has been slower than we originally expected. Diesel is the incumbent fuel for the vast majority of fleets. In the last 2 years, the sector has faced challenging freight fundamentals, federal and state regulatory uncertainty, particularly in California and frankly, ESG whiplash as companies balance long-term sustainability goals with fluid policies and near-term stakeholder expectations. Even though RNG delivers a lower total cost of ownership, natural gas tractors still carry a higher upfront cost than diesel. In that environment, many fleets have chosen to delay change and stick with the status quo. Our strategy is to be targeted, focusing on applications and fleets where RNG delivers the clearest economic and low carbon advantages. In our upstream RNG production business, we now have eight projects operating and three under construction. The first quarter reflected continued ramp-up at our South Fork project in Texas and our East Valley project in Ohio. The first quarter also had extreme winter weather, which impacted production, particularly in the Upper Midwest. We were able to get our projects back on track and anticipate production and financial results to improve as the year progresses. I'd also like to highlight a positive regulatory milestone. In March, CARB approved the pathway for our Del Rio Dairy project in Texas with a carbon intensity of approximately negative 300. We also continue to await an upgraded GREET model from the Department of Energy for determining 45Z credit values, which is expected to be better -- I'm sorry, which is expected to better reflect the negative carbon intensity of dairy RNG. As we scale the RNG production business, projects have taken longer to develop and ramp up than initially expected and some have faced operational challenges. We responded by taking a more hands-on approach to operations, strengthening internal oversight and replacing vendors where performance fell short. These improvements and transitions take time, but we are making progress. We remain focused on improving performance at our operating sites and executing projects that are under construction. It remains true that Clean Energy is an advantaged owner of dairy RNG production. Customer demand for low-CI RNG remains strong, particularly in California, where we have the largest RNG station network. Now before concluding, I do want to take a moment to recognize Andrew Littlefair. Andrew founded this company. He led it for three decades and built Clean Energy into the platform that it is today. I've had the privilege of working alongside Andrew and learning from him. We are fortunate that he remains actively involved by continuing his work on policy matters in Washington and serving on our Board. On behalf of the entire company, I want to thank him for his contributions and continued commitment to Clean Energy. And with that, I'll hand the call to our CFO, Bob Vreeland, to walk through the financials.

Thank you, Clay, and good afternoon to everyone. Overall, our financial performance was in line with our expectations with normal variations within our integrated businesses. For example, while extreme cold weather impacted upstream RNG production, we were able to monetize a larger-than-expected amount of RIN and LCFS credits from our East Valley dairy in Idaho, which was placed into service in March. Increased RNG volumes delivered by our fuel distribution business drove higher RIN revenues, and we were able to optimize our gas costs in this volatile commodities market. To a lesser degree in the quarter, but still ongoing today, we enjoyed the dynamics of higher retail fuel prices, while our natural gas commodity costs did not increase proportionately at the same level of oil and diesel prices. In fact, despite increases in our natural gas costs and retail prices, we maintained a large discount on our fuel price compared to diesel. Consequently, one of the effects we see of elevated commodity and retail prices is higher revenue. Coupled with higher fuel volumes, which drive both base fuel sales revenue as well as RIN and LCFS revenues, we reported $117.6 million in revenue for the first quarter of 2026 compared to $103.8 million last year. RNG volumes delivered in the first quarter of 2026 were strong. In addition to our normal recurring volumes, we saw higher demand from customers outside our network of stations needing RNG for transportation. We've seen this before, and it's nice to have the supply to accommodate those deliveries. We believe we'll come off the first quarter RNG volumes by a few million gallons or so as we look forward, but remain confident in achieving our annual guidance of delivering 250 million gallons or more given the first quarter of RNG for the year. GAAP net loss was $12 million for the first quarter of 2026. Certainly, there was a return in 2026 to more normal operations versus a year ago in the first quarter where we reported a GAAP net loss of $135 million, which included a couple of large noncash charges totaling $115 million. Adjusted EBITDA of $16.6 million in the first quarter of 2026 compares to $17.1 million of adjusted EBITDA a year ago. In addition to the normal variations I mentioned previously for the first quarter of 2026, we also saw lower, albeit still very adequate base fuel margins, which we anticipated in our outlook for 2026 and as well and also anticipated in our 2026 outlook, we lowered SG&A expenses in the first quarter of 2026. One reporting comment I'll make is a change in where the noncash Amazon warrant charge is recorded in our financial statements. You'll notice in 2026, a portion of the warrant charge is included as a charge against our O&M service revenue, whereas previously 100% of the charge was in our products revenue. And there's more detail on the Amazon warrant charge. It's just a different place in the income statement that you're seeing this year. There's more disclosed in our 10-Q. In addition to the $126 million in cash and investments on our balance sheet, there is another $46 million in cash off balance sheet at our dairy RNG joint ventures. And during the first quarter, we contributed $12 million to our Maas Energy Works JV with another $12 million that was contributed in April. Maas Energy Works continues to make good progress toward completing the three dairy projects under construction. And with that, operator, please open the call to questions.

[Operator Instructions] Our first question comes from Eric Stine with Craig-Hallum.

Clay, you touched on it a little bit just for the X15N. I mean I know that now there are two OEMs in the market and prior to Freightliner entry, pricing was an issue. So incremental cost has come down some. And obviously, we've all read the glowing feedback of fleets that have been testing this. But I mean, the market conditions, as you've said, you've got a more difficult environment, but obviously highlights the price benefit. I mean is this something where -- I know you're taking a targeted approach. I mean, do you kind of view this as this is just going to make it all the more likely that it's going to be the large fleets rather than the small kind of one-off adoption stories? Or how do you view that? I mean, is this the kind of thing that if it persists, it could be what actually jump starts this market? Because as you've said, it's -- although Cummins view of it hasn't changed in terms of the overall opportunity, it is well behind schedule?

Yes. Well, Eric, it's what we spend a lot of time thinking about and focused on. I don't think anybody really thinks that diesel is going to stay at these prices forever. But I do think that the -- this run-up in diesel has really heightened the awareness of the volatility. And we were at the ACT conference the last few days, and what a lot of people are talking about is, hey, if you just do a -- just take the last 5 years and do a regression analysis on what the price of diesel has been and then you compare that to the price of natural gas, it is just higher overall. And when fleets are trying to plan going forward what their fuel costs are going to be and their total cost of ownership, they're factoring that into those decisions. So it certainly helps us because it helps us with the total cost of ownership and the payback period for that incremental cost. I would also say that I don't know that it changes the types of fleets we're looking at, whether they're large fleets or small fleets because even with the large fleets, they're not looking -- to be honest, they're not going to change 2,000 trucks overnight. But I think what we are seeing is that as -- and as we heard from some of the fleets that are transitioning, hey, start out with five trucks, start out with 10 trucks. Let's sort of dip our toe in the water, get our mechanics used to it, get our drivers used to it, get our routes used to it. And then from there, go ahead and expand it into larger numbers within the fleet. And I think that, that combined with that sort of -- let's dip our toe in first, combined with the price advantages that we're seeing now in the total cost of ownership will result in incremental adoption as we go forward. But it's not -- it's a long sales cycle. It takes a long time to get the trucks ordered. It takes a long time to get them on the road. So it's not something that we -- people can see high diesel prices today and they're going to order a truck tomorrow. It's a longer decision process than that. But certainly, the fundamentals behind it, I think, are reopening a lot of discussions that we're excited to stay part in.

Got it. That's very helpful. And then maybe just my second one for Bob. So you mentioned lower base fuel margins and something that was kind of the expectation. And I just want to clarify, I mean, was that commentary for Q1 or early in the year? Because if I think about -- especially in trucking, when you've got high diesel margins, you can still offer a pretty healthy discount, and it's a pretty good margin environment for you. So just maybe clarify that statement and maybe how you're thinking about that for the remainder of the year?

Yes. Eric, that comment there is kind of looking at the full year. I mean when we gave our guidance, back in February, we talked about some of the dynamics that could impact what our guidance for 2026 and the possibility of lower margins from a variety of reasons within the mix, and it's really kind of throughout the year. But I will say to the point you're making is we have numerous levers. And so while maybe that -- while the margin gets impact from one area, the fact that we're enjoying this kind of the higher prices with our costs remaining pretty stable helps offset some of that. But it's kind of a go-forward look, but certainly in our plan.

We'll now go to Rob Brown with Lake Street Capital Markets.

On kind of the RNG volume you talked about in the quarter from kind of third parties, could you just kind of clarify how that works and maybe sort of visibility on that?

Yes. I think it was a strong growth quarter, particularly when you compare it against last year. But I think we want to be careful on that because part of that growth was that last -- the first quarter of last year, we did see our volumes trend down. If you remember, we have the biogas reform that sort of pushed a lot of our volume into Q4 of 2024. So Q1 of 2025 was lower. And then, of course, we always have bad weather in the first quarter, but last year, it was really spread throughout the country. And so we had more -- we had fewer -- we had less -- I should say, we had less RNG from our third parties in addition to our own production that was down. So I think we're really -- while this -- we're very pleased with the first quarter, a lot of it really was that we were comparing against a very easy comp in Q1 of 2025.

Okay. And then just to clarify getting the CARB pathway certification Fred, it sounds like that's great. How does that sort of flow through into the ability to get credit?

Well, it basically just -- it almost doubles the value of the LCF or doubles the number of LCF credits we can generate. When we're at 150 versus the 300, you are just able to generate more credits off the same fuel that's coming through.

We'll now go to Matthew Blair with TPH.

Could you talk a little bit more about the -- the comment where you talked about higher demand from customers outside of your network, could you unpack that a little bit? Do you think you are taking share from some of your competitors? Or was it just a situation that these customers were utilizing their existing CNG trucks a little bit more and just need more fuel given rising diesel prices? And could you also talk about what end markets you saw increased demand from?

Yes. So Matthew, that it is -- there's other folks out there with CNG fueling stations. And there are instances where based on supply availability and that sort of thing, where we will flow our RNG into those stations. And it's really kind of supply/demand. And I couldn't necessarily tell you what's going on with their demand, but I just -- but I know that they do need the supply. And so we're able to move the supply. We've done it before. It's not necessarily routine, but that's what that looks like is we have the RNG and then we can flow it to other places. It's kind of the beauty of the distribution model.

Sounds good. And then could you talk about the fuel distribution guide for 2026? It looks like you did not change it, still $67 million to approximately $70 million despite the good result in the first quarter, $19 million. I think you mentioned that you would expect things to roll off a little bit in Q2. I guess just to clarify, are you already seeing softer conditions so far in the second quarter? Or is that just your general expectation?

Well, I won't comment on necessarily what I'm seeing in the second quarter is not really softer or consistent. I think it's more of a comment relative to the volatility and the strength that we saw in the first quarter and that we may not see that level of strength as we go forward.

We had some unique opportunities to sell some RNG to some of our customers that is probably not going to be repeated. So while it was a good result. I think like we said, it was an easy comp against last year. And then I think as you try to do a -- don't just multiply it by four for the full year because there were some unique opportunities in Q1 that we took advantage of.

We'll go next to Betty Zhang with Scotiabank.

I wanted to ask about kind of Amazon and that relationship. So earlier, Amazon announced its logistics services. Do you think there'll be an opportunity to leverage that existing relationship and maybe increase some RNG volumes to them? And then for my follow-up, also related to Amazon, on those warrant charges, -- you mentioned it's now kind of shared between the fuel and services. Is this a change in the contract with Amazon? Or how would you describe that change?

So Betty, I'll take the first comment. We do not comment specifically on Amazon. We want to be very careful that, that is not -- we just can't and don't and won't do that. I think that -- across our customers, though, every single customer, we do look at those that have existing trucks, whether they're 12-liter, 9-liter, wherever they are, we work with all of our customers to try to increase the penetration into their fleet with the X15N. So like I said, I'm not going to speak specific to Amazon, but it's just good business sense to try to do that, work with customers that you have already and see if you can continue your growth with them. As far as the Amazon warrant charge, I'll let Bob take that one.

Yes. And Betty, I'll just say because I really can't say that much. But it was not an arbitrary change. I mean any kind of change like that is typically going to be kind of contractually the reason is contractually on that front. So we are just basically doing the appropriate accounting based on the contract that we have.

Thank you. At this time, there are no further questions in the queue. I will now turn the meeting back over to Clay Corbus.

All right, Dana, thanks very much, and thank you, everybody else for joining us. We look forward to speaking with you next quarter. Thank you.

This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.