Clean Energy Fuels Corp. — Q3 2021 Form 10-Q Summary
Business context and reporting period
Clean Energy Fuels supplies renewable natural gas (RNG), compressed natural gas (CNG), and liquefied natural gas (LNG) to transportation customers in the United States and Canada. It also develops and operates fueling stations, provides operations and maintenance services, sells environmental credits, and develops RNG production projects.
The filing covers the three and nine months ended September 30, 2021, with comparisons to the same periods in 2020. The financial statements are unaudited and prepared under U.S. GAAP. As of September 30, 2021, the Company operated or supplied 541 U.S. stations and 25 Canadian stations, serving more than 1,000 fleet customers and over 48,000 vehicles.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Total revenue | $86.1 million | $70.9 million | $163.7 million | $216.8 million |
| Gross margin | $30.3 million | $25.6 million | $10.6 million | $80.0 million |
| Gross margin percentage | 35.2% | 36.1% | 6.5% | 36.9% |
| Operating loss | $(3.1) million | $(2.8) million | $(89.0) million | $(7.5) million |
| Net loss attributable to Clean Energy | $(3.9) million | $(2.3) million | $(90.8) million | $(7.3) million |
| Loss per share | $(0.02) | $(0.01) | $(0.43) | $(0.04) |
| Net cash provided by operating activities | Not separately disclosed | Not separately disclosed | $32.8 million | $53.1 million |
Q3 revenue increased 21% year over year, while nine-month revenue declined 24%. The nine-month decline primarily reflected $80.2 million of non-cash Amazon warrant charges recorded as contra-revenue. Excluding those charges and derivative fair-value effects, management stated that volume-related revenue increased $39.6 million for the nine-month period.
Q3 gross margin was approximately 35.2%; the nine-month margin fell sharply because of the Amazon warrant charges, higher commodity costs, and a $6.2 million unfavorable year-over-year change in the fair value of commodity swap and customer fueling contracts. Management reported effective price per gallon of $0.77 in Q3 2021 versus $0.59 in Q3 2020, and $0.73 for the first nine months versus $0.62 in the prior-year period. Effective cost per gallon increased to $0.51 in Q3 from $0.38 and to $0.47 for nine months from $0.42.
- Q3 CNG and LNG delivered totaled 104.2 million GGEs, up from 97.7 million; nine-month volume totaled 298.0 million GGEs, up from 286.5 million.
- Q3 RNG delivered totaled 42.2 million GGEs, up from 40.1 million; nine-month RNG delivered totaled 122.1 million, up from 111.7 million.
- Q3 volume-related revenue was $78.2 million, including $8.1 million of RIN revenue, $5.7 million of LCFS credit revenue, a $0.3 million derivative gain, and a $2.2 million Amazon warrant charge.
- Q3 station construction revenue declined to $2.6 million from $8.7 million. Nine-month station construction revenue declined to $13.2 million from $19.6 million.
- AFTC revenue was $5.3 million in Q3 and $15.0 million for nine months, compared with $5.0 million and $14.8 million, respectively, in the prior-year periods.
Balance sheet, cash flow, debt and liquidity
- Cash and cash equivalents were $139.9 million and short-term investments were $120.2 million at September 30, 2021, totaling $260.1 million, versus $138.5 million at December 31, 2020.
- Total cash, cash equivalents and restricted cash was $146.9 million at September 30, 2021.
- Total assets were $917.5 million, compared with $715.0 million at December 31, 2020. Stockholders’ equity was $754.9 million versus $522.9 million.
- Debt, net of financing costs, was $37.0 million, including $11.1 million current and $25.9 million long term. Management reported approximately $40.3 million of consolidated debt and finance leases in principal amount.
- Operating cash flow was $32.8 million, down from $53.1 million, primarily because 2020 benefited from collection of older AFTC receivables.
- Investing cash flow was $(161.8) million, driven by net purchases of short-term investments and $50.2 million contributed to the bp joint venture.
- Financing cash flow was $155.9 million, primarily from approximately $193.5 million of net ATM offering proceeds.
- The Company stated that it expects liquidity to support operations and obligations for at least the next 12 months, while noting that additional capital may be required for expanded RNG projects, fueling infrastructure, debt repayments, investments, or unexpected expenditures.
Material changes versus the prior comparable period
- Revenue increased in Q3 but declined for the nine-month period because of the Amazon warrant accounting charge and lower station construction revenue.
- The Amazon warrant created a significant unusual, non-cash expense: $80.2 million of contra-revenue for the nine months, including $76.6 million from immediate vesting and $3.6 million related to fuel purchases. A $36.4 million customer incentive asset remained on the balance sheet at September 30, 2021.
- SG&A increased $5.7 million in Q3 and $13.6 million for nine months, primarily from higher stock-based compensation and, for the nine-month period, higher legal fees.
- The Company issued 22.8 million shares through two ATM programs for $200.0 million of gross proceeds and $193.5 million of net proceeds after transaction costs. Shares outstanding increased to approximately 223.1 million from 198.5 million at year-end 2020.
- The Company formed 50/50 RNG development joint ventures with TotalEnergies and bp. It contributed $50.2 million to the bp joint venture during the second quarter.
- COVID-19-related volumes improved: Q3 delivered volumes were 7% above Q3 2020 and 1% above Q3 2019. Public transit and airport fleet-service volumes rose 12% and 34%, respectively.
Guidance, outlook, commentary, risks and unusual items
- Management expected 2021 AFTC revenue of approximately $20 million, subject to volume trends. The AFTC was available through December 31, 2021 and may not be reinstated thereafter.
- The original 2021 capital expenditure plan was approximately $27.5 million. Management expected an additional $45 million to $60 million of station capital expenditures to support Amazon-related fueling volume and anticipated up to approximately $100 million for ADG RNG production facilities.
- Management identified higher commodity prices, volatile RIN and LCFS credit prices, COVID-19 uncertainty, slower natural-gas vehicle adoption, and competition from electric, hydrogen, renewable diesel, and other fuels as significant risks.
- The Company had 31 completed stations not yet open for fueling operations, creating potential underutilization, impairment, and additional carrying-cost risks.
- The Company had $36.8 million of outstanding surety bonds, natural gas take-or-pay commitments, fixed-price purchase commitments, and a guarantee of up to $15.0 million plus related fees for NG Advantage obligations to bp.
- The Company was in compliance with debt covenants and reported no material pending legal proceedings. Its $20.0 million Plains revolving facility had no borrowings outstanding, but a $2.0 million standby letter of credit reduced availability to $18.0 million.
- Variable-rate debt exposure was approximately $9.5 million. Management estimated that a 1% annual change in applicable LIBOR or Prime rates would change annual interest expense by approximately $0.1 million.
- A subsequent event disclosed in the filing states that the DR joint venture was deconsolidated on October 12, 2021 after the Company and Total entered into a development agreement for a dairy RNG facility.
Most important facts for investors to verify
- Whether future Amazon fuel purchases justify the substantial station investment and offset the dilution and accounting impact of the Amazon warrant.
- The sustainability of revenue and margin growth after excluding AFTC, environmental-credit volatility, derivative fair-value changes, and non-cash Amazon warrant charges.
- The timing, cost, funding, and expected returns of the Total and bp RNG joint ventures and other ADG RNG projects.
- Whether AFTC and other environmental-credit programs will continue, and the effect of RIN and LCFS credit prices on profitability.
- Whether COVID-19 recovery and fleet adoption trends continue, particularly in trucking, public transit, airports, and refuse markets.
- The Company’s future capital requirements, potential equity dilution, debt maturities, take-or-pay commitments, and ability to fund planned capital expenditures from operations and existing liquidity.