Clean Energy Fuels Corp. 2022 Q3 Form 10-Q Summary
Business context and reporting period
Clean Energy Fuels supplies renewable natural gas (RNG), compressed natural gas and liquefied natural gas for medium- and heavy-duty vehicle fleets in the United States and Canada. It also designs, builds, operates and maintains fueling stations; sells environmental credits; provides virtual pipeline services; and develops RNG production projects through joint ventures. The filing covers the unaudited three and nine months ended September 30, 2022, compared with the same periods in 2021.
- As of September 30, 2022, the Company served more than 1,000 fleet customers operating more than 50,000 vehicles.
- It owned, operated or supplied 560 U.S. stations in 42 states and the District of Columbia, plus 25 Canadian stations.
- Fuel volume increased 14.9% to 73.4 million GGEs in the third quarter and 9.6% to 197.7 million GGEs for the nine-month period.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2022 | 9M 2021 | 9M 2022 |
|---|---|---|---|---|
| Total revenue | $86.1 million | $125.7 million | $163.7 million | $306.4 million |
| Product revenue | $74.4 million | $113.4 million | $133.1 million | $271.7 million |
| Service revenue | $11.7 million | $12.3 million | $30.6 million | $34.7 million |
| Operating loss | $(3.1) million | $(8.6) million | $(89.0) million | $(40.6) million |
| Net loss attributable to Clean Energy | $(3.9) million | $(9.0) million | $(90.8) million | $(46.4) million |
| Loss per share | $(0.02) | $(0.04) | $(0.43) | $(0.21) |
| Cash flow from operations | Not provided for quarter | Not provided for quarter | $32.8 million | $31.7 million |
- Q3 operating margin declined to approximately negative 6.8% from negative 3.6%; nine-month operating margin improved to approximately negative 13.2% from negative 54.4%.
- Q3 product cost of sales rose to $79.7 million from $48.3 million, and product cost as a percentage of revenue increased to 63.4% from 56.0%, reflecting higher fuel volumes, natural gas prices and station construction costs.
- Cash, cash equivalents and short-term investments totaled $134.1 million at September 30, 2022, compared with $229.2 million at December 31, 2021. Cash and cash equivalents alone were $23.1 million.
- Net cash used in investing activities was $100.7 million, including $29.1 million for property and equipment and $89.7 million for investments in other entities.
- Total debt, net of financing costs, was $28.6 million, while management reported approximately $31.7 million of consolidated debt and finance leases in principal amount. The Company had $5.1 million of current debt and no borrowings under its $20 million Plains revolving facility, although standby letters of credit reduced availability.
- Total assets were $941.4 million and total stockholders’ equity was $728.7 million at September 30, 2022.
Material changes versus the prior comparable period
- Revenue increased 46.0% in Q3 and 87.2% for the nine-month period, driven by higher fuel prices and volumes, increased RNG and RIN revenue, station construction activity and the reinstated alternative fuel excise tax credit (AFTC).
- The Inflation Reduction Act reinstated the $0.50-per-gallon AFTC retroactively to January 1, 2022 and extended it through 2024. The Company recognized $16.3 million of AFTC revenue for the first nine months of 2022.
- Q3 net loss attributable to Clean Energy increased from $3.9 million to $9.0 million despite higher revenue, primarily because of increased product costs, SG&A and depreciation.
- Nine-month net loss attributable to Clean Energy improved substantially from $90.8 million to $46.4 million, primarily because 2021 included $80.2 million of non-cash Amazon Warrant contra-revenue charges versus $15.5 million in 2022.
- Amazon Warrant charges were $7.0 million in Q3 2022 versus $2.2 million in Q3 2021. The warrant had 42.9 million unvested shares outstanding at September 30, 2022, and up to 58.8 million shares were excluded from diluted loss-per-share calculations as antidilutive.
- Depreciation and amortization increased to $20.5 million in Q3 from $11.1 million, including $8.1 million of accelerated depreciation and $0.7 million of incremental asset retirement obligation charges related to Pilot station equipment removals.
- The Company contributed $51.6 million to the bp joint venture in June 2022 and $38.1 million on September 30, 2022, satisfying its required contributions under two bpJV capital calls.
- NG Advantage refinanced certain obligations with a $14.0 million Berkshire term loan, resulting in a $2.3 million loss on debt extinguishment recognized in the first nine months.
- The Company repurchased 1.2 million shares for $6.1 million during the first nine months and had $26.5 million remaining under its authorized $50 million repurchase program.
Guidance, outlook, management commentary and risks
- Management projected approximately $60.9 million of 2022 capital expenditures and up to approximately $167.8 million for ADG RNG production facilities, including the bpJV contributions made during 2022.
- Management stated that available cash, short-term investments and anticipated operating and financing cash flows should fund expected requirements for at least the following 12 months, but additional capital may be required thereafter or sooner if investment, project development or operating needs exceed expectations.
- The Company expects to make approximately $1.8 million of interest payments in 2022 and believes it can make principal and interest payments due over the next 12 months.
- Pilot station equipment removals began in Q3 2022 and are expected to be completed by the end of Q1 2023.
- Key risks include continued operating losses, dependence on AFTC and environmental credit programs, volatility in RIN and LCFS credit prices, natural gas and labor costs, supply-chain constraints, slower adoption of RNG vehicles, competition from electric, hydrogen and other fuels, and the need for significant capital to develop RNG projects.
- The Company had $50.2 million of outstanding surety bonds, take-or-pay natural gas purchase commitments through June 2023, and a fixed supply arrangement with UPS for 170.0 million GGEs of RNG through March 2026.
- As of September 30, 2022, the Company reported compliance with its debt covenants, no material pending legal proceedings, and effective disclosure controls.
Important facts for investors to verify
- Whether higher fuel volumes and AFTC revenue translate into improving recurring margins and sustainable profitability after excluding non-cash warrant charges.
- The timing, cost and expected returns of bpJV, TotalEnergies JV and other RNG production projects, including future capital calls.
- Cash usage, short-term investment maturities and the potential need for additional debt or equity financing.
- Exposure to RIN and LCFS credit prices, natural gas costs, take-or-pay commitments and derivative valuation changes.
- The financial and operational impact of Pilot station removals and the status of the 26 nearly completed but unopened stations with a carrying value of $47.5 million.
- Potential dilution from the Amazon Warrant, stock options and restricted stock units, as well as the continuation of share repurchases.