Clean Energy Fuels Corp. — Q1 2013 Form 10-Q Summary
Business context and reporting period
Clean Energy Fuels sells CNG, LNG and RNG vehicle fuel and provides fueling-station construction, operations and maintenance, compressor equipment, vehicle conversions, engineering, financing and environmental-credit services. It operated or supplied approximately 358 fueling locations in the United States and Canada. This unaudited filing covers the three months ended March 31, 2013, compared with the same period in 2012.
Financial performance and key metrics
| Metric | Q1 2012 | Q1 2013 | Change |
|---|---|---|---|
| Total revenue | $73.6 million | $93.0 million | 27% increase |
| Gross profit | $17.7 million | $42.3 million | 139% increase |
| Gross margin | 24.1% | 45.5% | Up 21.4 percentage points |
| Operating loss | $(28.8) million | $(1.2) million | Substantial improvement |
| Net loss attributable to Clean Energy | $(31.9) million | $(3.9) million | Substantial improvement |
| Loss per share | $(0.37) | $(0.04) | Improved |
| Net cash used in operating activities | $(16.9) million | $(16.9) million | Essentially unchanged |
- Gasoline gallon equivalents delivered increased from 43.7 million to 49.9 million, including CNG growth from 29.0 million to 34.0 million and LNG growth from 12.6 million to 13.7 million.
- VETC revenue was $26.2 million in Q1 2013, including $20.8 million of retroactive 2012 credits. The filing states that none of the 2013 VETC amounts had been collected by March 31, 2013.
- Cash and cash equivalents were $82.6 million at March 31, 2013, down from $108.5 million at December 31, 2012. Short-term investments were $38.0 million.
- Total debt and capital lease obligations were $314.9 million, including $28.9 million classified as current. Long-term debt and capital lease obligations were $286.1 million.
- Total assets were $964.9 million and total stockholders’ equity was $558.3 million at March 31, 2013.
- Capital expenditures were $21.7 million in Q1 2013, down from $36.6 million in Q1 2012. Investing cash use declined to $2.9 million from $32.0 million, partly due to $6.1 million of proceeds from the sale of the Peru joint venture.
Material changes versus the prior comparable period
- Revenue growth reflected higher fuel volumes, a $4.1 million increase in IMW revenue, $26.2 million of VETC revenue and $0.9 million from LCFS and RIN credits. These gains were partly offset by a $12.2 million decline in station-construction revenue and a $4.1 million decline in BAF vehicle-equipment and emission-control revenue.
- Cost of sales declined by $5.2 million to $50.7 million, primarily because station-construction costs fell by $11.6 million and BAF-related costs declined by $1.8 million. These savings were partly offset by higher IMW costs and increased fuel volumes.
- Series I warrant valuation loss fell to $0.5 million from $13.5 million; this was a non-cash item and materially reduced the reported loss.
- SG&A increased by $8.0 million to $32.9 million because of business expansion, additional personnel, higher professional and occupancy costs, increased stock-based compensation and the absence of the $2.6 million IMW contingent-consideration gain recorded in Q1 2012.
- Interest expense increased by $1.4 million to $5.1 million, primarily because of additional convertible notes issued in July 2012.
- In March 2013, the company sold its 49% Peru joint-venture interest for $6.1 million after receiving a $1.1 million dividend and recorded a $4.7 million gain.
- In January and February 2013, $4.0 million of SLG note principal and accrued interest converted into 268,664 common shares.
Guidance, outlook, commentary and risks
- Management did not provide a formal earnings or revenue forecast in the filing. It planned approximately $139.5 million of capital expenditures from April 1 through December 31, 2013 and stated that additional capital may be required.
- The company expected to build approximately 40–60 additional America’s Natural Gas Highway stations in 2013, subject to natural-gas-truck deployment, LNG demand, site availability and other factors. Approximately 70 ANGH stations had been completed at the end of 2012, but only seven were open and selling LNG.
- Management expected long-term growth from lower natural-gas fuel costs, emissions regulations, RNG development and adoption of heavy-duty natural-gas trucks. It also expected operating costs and capital expenditures to increase as the network and LNG/RNG capacity expanded.
- The principal execution risk for ANGH was the timing and adoption of the Cummins-Westport 11.9-liter natural-gas engine. Delays or weak customer adoption could leave the company with underutilized stations and significant losses.
- Liquidity is pressured by ongoing operating cash outflows, planned capital spending, debt service and acquisition-related obligations. The company stated that it would need to raise debt or equity capital if available cash and operating cash flow were insufficient.
- Convertible notes outstanding totaled $245.0 million at March 31, 2013, and the company expected to issue an additional $50.0 million in June 2013. The notes bear 7.5% interest and may generally be repaid in cash or shares.
- Other risks include government-incentive dependence, competition and pricing pressure, LNG supply constraints and take-or-pay commitments, natural-gas and foreign-exchange volatility, regulatory and environmental compliance, safety liabilities, and continued operating losses.
- Off-balance-sheet arrangements included $54.0 million of surety bonds, two LNG take-or-pay contracts, leases and fixed-price CNG/LNG sales commitments.
- Subsequent events included a non-recourse Mavrix RNG financing with a maximum principal amount of $30.0 million and an initial $5.0 million advance, plus the May 2013 acquisition of Mansfield Gas Equipment Systems for $20.0 million, paid 50% in cash and 50% in company stock.
Most important facts for an investor to verify
- How much of Q1 revenue and gross profit depended on the $26.2 million VETC recognition, including the $20.8 million retroactive component.
- Whether VETC collections, operating cash flow and fuel-credit sales are sufficient to support the planned $139.5 million 2013 capital program.
- The current utilization, opening schedule and expected returns of ANGH stations, and the commercial availability and adoption of suitable heavy-duty natural-gas engines.
- Debt maturities, interest obligations, conversion or dilution potential, and the planned additional $50.0 million convertible-note issuance.
- Exposure under LNG take-or-pay contracts, fixed-price sales commitments, surety bonds and other contingencies.
- The sustainability of improved gross margins excluding retroactive government credits and non-cash warrant valuation effects.
- Progress, financing terms and operating performance of the RNG projects and the subsequent Mavrix financing.