Clean Energy Fuels Corp. — Q1 2021 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 transportation; develops RNG projects; builds and operates fueling stations; provides operations and maintenance services; and sells environmental credits and related equipment. The filing covers the three months ended March 31, 2021, with comparisons to the three months ended March 31, 2020. The company operated or supplied 570 fueling stations across the United States and Canada and served more than 1,000 fleet customers operating over 48,000 vehicles.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $86.0 million | $77.1 million | Down $8.9 million |
| Gross margin | $33.1 million | $26.7 million | Down $6.4 million |
| Gross margin percentage | 38.5% | 34.6% | Down approximately 390 basis points |
| Operating income (loss) | $2.5 million | $(6.4) million | Declined $8.9 million |
| Net income (loss) attributable to Clean Energy | $1.7 million | $(7.2) million | Declined $8.9 million |
| Basic and diluted EPS | $0.01 | $(0.04) | Declined $0.05 |
| Net cash provided by operating activities | $(4.3) million | $3.3 million | Improved $7.5 million |
- Revenue consisted of $68.1 million of volume-related revenue, $4.5 million of station construction revenue and $4.5 million of alternative fuel excise tax credit revenue.
- Fuel volume declined 7% year over year to 92.4 million gasoline gallon equivalents. RNG delivered increased to 37.0 million GGEs from 36.0 million.
- Volume-related revenue excluding derivative fair-value effects increased $0.7 million, as the effective price per gallon rose to $0.76 from $0.70, partly offset by lower gallons delivered.
- A $2.0 million derivative-related revenue loss in Q1 2021 compared with a $5.6 million gain in Q1 2020 reduced the year-over-year revenue comparison by $7.6 million.
- SG&A increased $3.1 million to $21.4 million, primarily because of higher stock-based compensation. Depreciation and amortization was $11.7 million.
- Cash, cash equivalents and short-term investments totaled $146.2 million at March 31, 2021, including $116.7 million of cash and $29.5 million of short-term investments. Total cash, cash equivalents and restricted cash was $123.7 million.
- Total debt was $86.9 million net of financing costs, including $50.0 million of bp preformation funding, and finance leases totaled approximately $3.5 million in principal. Total indebtedness including finance leases was approximately $90.4 million.
- Total assets were $727.8 million and total stockholders’ equity was $521.1 million at March 31, 2021.
Material changes versus the prior comparable period
- COVID-19 continued to depress airport, fleet-services and public-transit demand. Those markets were down approximately 16% to 22% year over year, while volumes improved 3% from Q2 2020 and March 2021 volumes increased 3% from March 2020.
- Cost of sales declined $2.5 million to $50.4 million, but effective cost per gallon increased to $0.50 from $0.48 because of higher commodity prices.
- Interest expense declined $0.8 million to $1.4 million, primarily from lower average interest rates.
- Cash from operations improved primarily because of working-capital timing. Investing cash flow changed from $30.4 million provided in Q1 2020 to $6.1 million used in Q1 2021, mainly because of lower net maturities of short-term investments and lower bp-related proceeds.
- On March 3, 2021, the company formed a 50/50 Total joint venture to develop U.S. anaerobic-digester-gas RNG facilities. The joint venture contemplates up to $400 million of equity investment, with an initial $50 million commitment from each partner.
- On March 12, 2021, the Société Générale facility was amended to permit up to $45 million for station construction and up to $20 million for Total joint-venture obligations.
- Stock-based compensation increased from $1.1 million to $3.4 million. The company had $30.0 million of unrecognized compensation cost at March 31, 2021.
Guidance, outlook, commentary and risks
- Management expects approximately $20 million of AFTC revenue in 2021, subject to COVID-19-related volume effects. The AFTC is currently available through December 31, 2021 and may not be reinstated thereafter.
- The original 2021 capital-expenditure plan was approximately $27.5 million. The company expects an additional $45 million to $60 million for Amazon-supporting fueling stations and up to approximately $100 million for dairy RNG production projects.
- Management believes liquidity will support expected requirements for at least the next 12 months, but states that significant additional capital may be required in 2021 if planned RNG and station investments proceed. The filing does not provide a formal full-year revenue or earnings forecast.
- On April 13, 2021, bp and Clean Energy formed a 50/50 RNG joint venture. bp’s $50 million loan was contributed to the joint venture and is no longer outstanding debt after the transaction. Clean Energy committed $30 million and may commit an additional $20 million before August 31, 2021.
- On April 16, 2021, the company issued Amazon a warrant for up to 53.1 million shares at an exercise price of $13.49 per share. The initial 13.3 million shares vested upon execution, with additional vesting tied to Amazon fuel purchases. Management expects approximately $76 million of non-cash contra-revenue charges in 2021, with additional charges in later periods.
- On May 1, 2021, the company obtained a $20 million revolving credit facility from PlainsCapital Bank, maturing May 1, 2022, at the greater of the prime rate or 3.25%.
- Key risks include continued COVID-19 effects, slower-than-expected adoption of natural-gas vehicles, competition from electric and hydrogen vehicles, volatility in RIN and LCFS credit prices, expiration or modification of government incentives, RNG project execution and supply risks, commodity and interest-rate exposure, potential additional capital needs, and possible dilution from the Amazon warrant and other equity instruments.
- The company reported compliance with its debt covenants and effective disclosure controls as of March 31, 2021. No material pending legal proceedings were disclosed.
Important facts for investors to verify
- Whether vehicle-fuel volumes and airport/public-transit demand continue recovering from COVID-19 impacts.
- The 2021 availability and realized amount of AFTC revenue, including the effect of its scheduled expiration after 2021.
- RIN and LCFS credit prices, RNG supply availability and the economics of the Total and bp joint ventures.
- The timing, funding and returns of the planned $45 million–$60 million Amazon-related station investment and up to $100 million of dairy RNG investments.
- The accounting and dilution effects of Amazon’s warrant, including future non-cash contra-revenue charges and potential share issuance.
- Cash generation, debt maturities, use of the Société Générale and PlainsCapital facilities, and whether additional capital must be raised.