Clean Energy Fuels Corp. — Q1 2022 Form 10-Q Summary
Business context and reporting period
Clean Energy Fuels Corp. sells renewable natural gas (RNG), compressed natural gas (CNG), and liquefied natural gas (LNG) as vehicle fuels; provides station construction and operation and maintenance services; develops RNG production projects; and monetizes renewable fuel and low-carbon fuel credits. The filing covers the unaudited three months ended March 31, 2022, compared with the three months ended March 31, 2021.
- As of March 31, 2022, the Company owned, operated, or supplied 579 U.S. stations and 25 Canadian stations, serving more than 1,000 fleet customers and over 48,000 vehicles.
- Total GGEs delivered increased 3.7% to 95.8 million from 92.4 million; RNG GGEs delivered increased 7.3% to 39.7 million from 37.0 million.
Financial metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $83.5 million | $77.1 million | +$6.4 million, 8.2% |
| Volume-related revenue | $79.9 million | $68.1 million | +$11.8 million |
| Station construction revenue | $3.3 million | $4.5 million | -$1.2 million |
| AFTC revenue | $0.2 million | $4.5 million | -$4.3 million |
| Gross margin | $19.3 million; 23.1% | $26.7 million; 34.6% | -$7.4 million; margin down 11.5 points |
| Operating loss | $(20.1) million | $(6.4) million | Loss increased $13.6 million |
| Net loss attributable to Clean Energy | $(24.2) million | $(7.2) million | Loss increased $17.0 million |
| Loss per diluted share | $(0.11) | $(0.04) | Worsened by $0.07 |
| Cash from operating activities | $4.8 million | $3.3 million | +$1.6 million |
| Capital expenditures and project investments | $11.9 million | $3.3 million | Increased |
Revenue growth reflected higher gallons delivered, higher effective pricing, and improved derivative valuation effects. These benefits were partly offset by a $3.8 million non-cash Amazon warrant contra-revenue charge, lower station construction revenue, and the expiration of the federal alternative fuel tax credit after December 31, 2021.
- Effective revenue per gallon increased to $0.88 from $0.76, while effective cost per gallon increased to $0.64 from $0.50, primarily because of higher commodity and transportation costs.
- Product cost of sales increased to $57.6 million from $44.8 million, and selling, general and administrative expense increased to $27.9 million from $21.4 million.
- Stock-based compensation increased to $8.3 million from $3.4 million. The Amazon warrant produced $3.8 million of non-cash contra-revenue in Q1 2022.
- Interest expense increased to $3.1 million from $1.4 million, including a $2.3 million loss on extinguishment of NG Advantage debt.
Balance sheet, cash flow, debt, and liquidity
- Cash and cash equivalents were $108.0 million at March 31, 2022, compared with $99.4 million at December 31, 2021. Short-term investments were $120.6 million, producing combined cash and short-term investments of $228.5 million.
- Total assets were $932.7 million and total stockholders’ equity was $738.3 million at March 31, 2022.
- Total debt, net of financing costs, was $35.6 million, including $10.0 million current and $25.6 million long-term. Total debt and finance lease obligations were approximately $38.9 million in principal.
- The Company reported $10.9 million of current debt and stated that it expected to fund principal and interest payments due over the next 12 months.
- Operating cash flow was positive at $4.8 million. Investing cash flow was positive at $1.4 million, mainly because investment maturities exceeded purchases. Financing cash flow was negative $4.8 million, primarily due to debt repayments, debt extinguishment costs, and $3.0 million of share repurchases.
- The Company had an undrawn $20.0 million Plains revolving facility, reduced to $11.0 million of availability by $9.0 million of standby letters of credit. No amounts had been drawn under the letters of credit.
Material changes versus the prior comparable period
- Fuel volumes recovered as COVID-19 restrictions eased: public transit volumes increased 12% and airport fleet-services volumes increased 31% year over year.
- Higher fuel and environmental-credit pricing increased volume-related revenue, but higher commodity and transportation costs materially compressed gross margin.
- AFTC revenue declined sharply following expiration of the credit after 2021. Q1 2022 AFTC revenue was only $0.2 million versus $4.5 million in Q1 2021.
- NG Advantage refinanced $14.0 million of debt in January 2022, repaid certain prior financing obligations, and recorded a $2.3 million extinguishment loss.
- The Company contributed $20.0 million toward the bp joint venture’s $71.6 million capital commitment. A further $51.6 million was due by June 30, 2022, and a second $38.1 million contribution was due by September 30, 2022.
- The Company repurchased 511,010 shares for $3.0 million during the quarter. Approximately $29.6 million remained available under the $50.0 million repurchase authorization.
Guidance, outlook, risks, contingencies, and unusual items
- Management planned approximately $70.9 million of 2022 capital expenditures and anticipated deploying up to approximately $195.0 million for anaerobic-digester RNG production facilities, including the bp joint venture commitments.
- Management expected approximately $21.2 million of 2022 AFTC revenue, assuming reinstatement and retroactive application of the credit. The filing states there is no assurance that AFTC will be reinstated; failure to do so would materially reduce expected revenue.
- Management stated that cash, short-term investments, operating cash flow, and available financing were expected to satisfy business requirements for at least the next 12 months, but additional capital may be required thereafter or if project spending and operating needs exceed expectations.
- Key risks include volatility in RIN and LCFS credit prices, natural gas and diesel prices, reliance on government incentives, slower adoption of RNG and natural-gas vehicles, competition from electric and hydrogen vehicles, project permitting and construction delays, COVID-19 effects, and the need to fund substantial RNG joint-venture commitments.
- The Company had $47.7 million of outstanding surety bonds, take-or-pay natural gas purchase commitments, fixed-price purchase contracts through June 2023, and a fixed RNG supply arrangement with UPS covering 170.0 million GGEs through March 2026.
- The Company stated that it was in compliance with its debt covenants as of March 31, 2022, and that no material legal proceedings were pending.
- Derivative liabilities related to commodity swaps increased to $8.6 million from $4.4 million at year-end 2021, while derivative assets increased to $9.9 million from $6.8 million.
Important facts for investors to verify
- Whether AFTC legislation is reinstated and whether the anticipated $21.2 million of 2022 AFTC revenue is realized.
- Actual cash requirements and funding sources for the $51.6 million and $38.1 million bp joint-venture contributions and the broader RNG development plan.
- Whether higher commodity costs continue to outpace pricing improvements and further pressure gross margin.
- RIN and LCFS credit prices, RNG production volumes, project permitting status, and the timing of station and RNG facility openings.
- The vesting, dilution, and revenue impact of the Amazon warrant, including the 43.5 million unvested warrant shares outstanding at March 31, 2022.
- Liquidity after capital expenditures, joint-venture contributions, debt maturities, lease obligations, and any additional investment in NG Advantage.