Clean Energy Fuels Corp. — Q2 2022 Form 10-Q Summary
Business context and reporting period
Clean Energy Fuels supplies renewable natural gas (RNG), compressed natural gas (CNG), liquefied natural gas (LNG), environmental credits, station construction, and operation and maintenance services primarily to medium- and heavy-duty vehicle fleets in the United States and Canada. The unaudited filing covers the three and six months ended June 30, 2022, compared with the corresponding 2021 periods.
- As of June 30, 2022, the Company operated, owned, or supplied 558 U.S. fueling stations and 26 Canadian stations, serving more than 1,000 fleet customers and over 50,000 vehicles.
- Total GGEs delivered increased 5.4% to 106.9 million in Q2 and 4.6% to 202.7 million for the six-month period.
- RNG GGEs delivered increased to 50.0 million in Q2 from 42.9 million and to 89.7 million for the six months from 79.9 million.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $97.2 million | $0.5 million | $180.7 million | $77.6 million |
| Gross margin | $25.2 million | $(46.4) million | $44.4 million | $(19.7) million |
| Gross margin percentage | 25.9% | Not meaningful | 24.6% | Not meaningful |
| Operating loss | $(11.9) million | $(79.4) million | $(31.9) million | $(85.9) million |
| Net loss attributable to Clean Energy | $(13.2) million | $(79.7) million | $(37.4) million | $(86.8) million |
| Loss per share | $(0.06) | $(0.38) | $(0.17) | $(0.43) |
| Cash flow from operations | Not provided for quarter | Not provided for quarter | $32.2 million | $12.9 million |
- Revenue consisted primarily of volume-related revenue of $91.2 million in Q2 and $171.2 million for the six months. Station construction revenue was $6.0 million and $9.3 million, respectively.
- Revenue included $4.8 million in Q2 and $8.5 million year-to-date of non-cash contra-revenue charges related to the Amazon warrant, compared with $78.1 million in the comparable 2021 periods. Excluding these charges, reported revenue growth was substantially lower than the headline increase.
- Cost of sales was $72.1 million in Q2 and $136.3 million for the six months. Management reported effective cost per gallon of $0.63 in both periods, up from $0.41 in Q2 2021 and $0.45 in the six-month 2021 period.
- SG&A increased to $26.5 million in Q2 and $54.4 million year-to-date, primarily from higher stock-based compensation, salaries, benefits, travel, and general business expenses.
- Cash, cash equivalents, and short-term investments totaled $187.5 million at June 30, 2022, down from $229.2 million at December 31, 2021. Cash and cash equivalents alone were $57.5 million.
- Total debt was $32.4 million net of financing costs, including $7.3 million current debt and $25.1 million long-term debt. Including finance leases, principal indebtedness was approximately $35.5 million.
- The Company had an undrawn $20.0 million Plains revolving facility, reduced to $11.0 million by outstanding standby letters of credit. Management stated that all debt covenants were satisfied.
Material changes versus the prior comparable period
- Reported revenue increased by $96.7 million in Q2 and $103.1 million for the six months, primarily because the 2021 periods included a $78.1 million Amazon warrant charge versus $4.8 million in Q2 2022 and $8.5 million year-to-date.
- Underlying volume-related revenue, excluding Amazon warrant charges and derivative fair-value changes, increased by $29.4 million in Q2 and $44.0 million for the six months. Management attributed the increase to higher volumes and higher effective prices per gallon, supported by higher RIN and natural gas prices and favorable fuel mix.
- AFTC revenue declined by $5.2 million in Q2 and $9.5 million for the six months because the federal alternative fuel excise tax credit expired after December 31, 2021. Only $0.2 million of AFTC revenue was recognized in the first six months of 2022.
- Operating losses narrowed materially, although the Company remained unprofitable. The improvement primarily reflected the lower Amazon warrant charge and higher volume-related revenue.
- Operating cash flow increased by $19.3 million year over year to $32.2 million, while investing cash use declined to $70.4 million from $150.4 million. Financing cash flow changed from $158.4 million provided in 2021, largely from equity issuance, to $10.7 million used in 2022.
- On June 30, 2022, the Company paid $51.6 million to satisfy its remaining contribution under the first bp joint venture capital call. A second bpJV capital call requires an additional $38.1 million contribution by September 30, 2022.
- NG Advantage refinanced obligations with a $14.0 million Berkshire term loan, resulting in a $2.3 million debt extinguishment loss during the first quarter of 2022.
Guidance, outlook, commentary, risks, and unusual items
- Management expects approximately $63.5 million of 2022 capital expenditures, primarily for fueling stations, information technology, equipment, and LNG plant costs.
- The Company anticipates deploying up to approximately $195.0 million in 2022 for ADG RNG production facilities, including the $51.6 million bpJV payment and the additional $38.1 million due by September 30, 2022.
- Management expects approximately $21.2 million of AFTC revenue for 2022, assuming the credit is reinstated retroactively. The filing emphasizes that reinstatement is uncertain; failure to obtain it would materially reduce revenue and liquidity.
- Management believes existing liquidity and expected operating and financing cash flows will satisfy requirements for at least the next 12 months, but additional capital may be required thereafter or sooner if capital deployment, operating costs, debt repayments, or RNG development spending exceed expectations.
- Inflation, labor shortages, supply-chain disruption, material availability, higher commodity and transportation costs, and interest-rate increases pressured costs. Management stated that price increases have only partially offset these pressures.
- RIN and LCFS credit prices remain volatile and materially affect revenue and project economics. The Company also faces risks from slower fleet adoption, competition from electric, hydrogen, renewable diesel, and other fuels, and regulations favoring zero-emission vehicles.
- On July 7, 2022, the Company agreed to decommission and remove certain Pilot fueling stations. The work is expected to occur from the third quarter of 2022 through the first quarter of 2023, with estimated costs of approximately $8.7 million, including asset retirement and accelerated depreciation charges.
- The filing identifies 30 nearly completed stations with a carrying amount of $54.2 million that were not open for fueling operations as of June 30, 2022, creating potential impairment, delay, and additional cost risk.
- Outstanding off-balance-sheet arrangements included $47.7 million of 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.
- The Company repurchased 1.19 million shares for $6.1 million during the six months ended June 30, 2022. Remaining authorization was $26.5 million at quarter-end.
Most important facts for investors to verify
- Whether the AFTC is reinstated for 2022 and the timing and collectability of the expected $21.2 million benefit.
- The cash impact and funding source for the $38.1 million bpJV capital contribution due by September 30, 2022 and the broader planned RNG project investment.
- Underlying revenue, gross margin, and cash generation excluding Amazon warrant charges, derivative fair-value changes, and government credits.
- The sustainability of higher fuel volumes and effective prices per gallon amid commodity inflation and volatile RIN and LCFS credit prices.
- Whether the Company can execute its capital expenditure and RNG development plans without materially increasing debt or issuing dilutive equity.
- The financial and operational impact of the Pilot station removals and the potential impairment or delayed opening of the 30 nearly completed stations.
- Exposure to zero-emission vehicle mandates, slower natural-gas vehicle adoption, RNG supply and project execution risks, and competition from electric and hydrogen alternatives.