Clean Energy Fuels Corp. Q1 2010 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2010. Clean Energy Fuels Corp. provides natural gas fueling solutions (CNG and LNG) to fleet customers in the U.S. and Canada, including public transit, refuse, and trucking sectors. The company also operates biomethane facilities and, following the October 2009 acquisition of BAF Technologies, Inc., provides vehicle conversion services.
Key Financial Metrics
| Metric | Q1 2010 | Q1 2009 |
|---|---|---|
| Total Revenue | $38,988,664 | $30,248,144 |
| Net Loss (Attributable to Corp.) | $(24,366,490) | $(6,494,047) |
| Operating Loss | $(25,815,233) | $(6,755,914) |
| Cash and Cash Equivalents | $66,314,935 | $30,920,390 (End of Q1 2009) |
| Working Capital | $76,381,706 | $78,798,814 (End of Q1 2009) |
| Long-Term Debt | $9,565,099 | $9,781,425 (End of 2009) |
| Loss Per Share (Diluted) | $(0.41) | $(0.13) |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased by $8.7 million (29%) driven by a 56% increase in gasoline gallon equivalents delivered (28.6 million vs. 18.3 million) and the inclusion of BAF Technologies revenue ($9.0 million). This was partially offset by the expiration of the federal Volumetric Excise Tax Credit (VETC) on December 31, 2009, which contributed $4.1 million in revenue in Q1 2009 but $0 in Q1 2010.
- Net Loss Expansion: The net loss widened significantly due to a $18.6 million non-cash derivative loss related to the mark-to-market valuation of Series I warrants. This compares to a $0.2 million loss in the same period in 2009.
- Operating Expenses: Selling, general, and administrative (SG&A) expenses rose by $2.0 million, primarily due to increased headcount (from 138 to 267 employees) and a $0.3 million charge for increased contingent consideration on the BAF acquisition.
- Cash Flow: Operating cash flow turned negative at $(0.97) million, compared to positive $1.66 million in Q1 2009, largely due to changes in working capital and margin deposits on futures contracts. Financing activities provided $9.0 million, primarily from stock option exercises.
Guidance, Outlook, and Risks
- Capital Expenditures: The company anticipates $76.1 million in capital expenditures for the remainder of 2010, contingent on the passage of the NAT GAS Act or similar legislation providing incentives for natural gas vehicles. If legislation fails, capex may be materially lower.
- Liquidity Needs: Management expects to need to raise additional capital to fund expansion plans if federal incentives are enacted. Current cash ($66.3 million) and available credit ($20 million line of credit) may be insufficient for the full $76.1 million plan.
- Key Risks:
- Legislative Uncertainty: The expiration of the VETC and uncertainty regarding the NAT GAS Act pose significant risks to revenue and growth.
- Derivative Volatility: Future increases in the company's stock price could trigger additional non-cash losses on Series I warrants.
- Debt Covenants: The company must maintain minimum liquidity ($6.0 million), accounts receivable ($8.0 million), and a debt service ratio (1.5 to 1). Violation could trigger immediate repayment of debt.
- Customer Concentration: Government entities represented approximately 41% of revenue in Q1 2010; budget deficits and competitive bidding pose risks to these contracts.
Investor Verification Checklist
- Verify the status of the NAT GAS Act and potential reinstatement of the Volumetric Excise Tax Credit (VETC).
- Monitor the company's stock price, as increases will directly increase non-cash losses via Series I warrant valuation.
- Review compliance with debt covenants, specifically the $8.0 million accounts receivable minimum and debt service ratio.
- Assess the integration and performance of the BAF Technologies acquisition, noting the contingent liability of up to $11 million per year based on gross profit targets.
- Track the company's ability to secure additional equity or debt financing to meet the projected $76.1 million capital expenditure budget.