Greetings and welcome to Clean Energy Fuels' Second Quarter 2020 Earnings Conference Call. This conference is being recorded. I would now like to turn the conference over to your host, Mr. Robert Vreeland, Chief Financial Officer. Thank you. You may begin.

Thank you, Operator. Earlier this afternoon, Clean Energy released financial results for the second quarter ending June 30, 2020. If you did not receive the release, it is available on the Investor Relations section of the company's website, at www.cleanenergyfuels.com, where the call is also being webcast. There will be a replay available on the website for 30 days. Before we begin, we'd like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words of expression reflecting optimism, satisfaction with current prospects as well as words such as believe, intend, expect, plan, should, anticipate and similar variations identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. Such forward-looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the Risk Factors section of Clean Energy's Form 10-Q filed today. These forward-looking statements speak only as the date of this release. The company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release. The company's non-GAAP EPS and adjusted EBITDA will be reviewed on this call and excludes certain expenses that the company's management does not believe are indicative of the company's core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBITDA and a reconciliation between these non-GAAP and GAAP figures is provided in the company's press release, which has been furnished to the SEC on Form 8-K today. With that, I will turn the call over to our President and Chief Executive Officer, Andrew Littlefair.

Thank you, Bob. Good afternoon and thank you for joining us. As the world continues to adjust to a pandemic that has stubbornly held on longer than we had hoped, Clean Energy's business of fueling thousands of buses, trucks and other fleet vehicles every day has remained healthy. Also, we have not slowed down our pursuit of new customers, adding additional gallons and expanding the use of our Redeem renewable natural gas during these uncertain times, which I'll expand on in a moment. But not unexpectedly, our volumes of approximately 90 million gallons in the second quarter of this year were 10% lower compared to the same quarter last year due to the overall economic slowdown caused by the pandemic. We are seeing lower volumes in primarily 2 sectors, public transit and especially airports, which have been significantly impacted by the lack of air traffic. The slowdown impacted our revenues in the quarter, which were approximately $60 million, down 17% from 2019. But we continue to retain a healthy balance sheet, with an adjusted EBITDA of $9.2 million for the quarter, an improvement over last year's second quarter, leaving us with $96 million in cash and investments and only $37 million of debt. For those of you who have been following us for a while, you know that we substantially lowered our overhead the last few years and we now have a disciplined, low-cost expense structure. Because of that, we are able to maintain healthy, positive adjusted EBITDA even with the drop in the transit and airport fleet businesses. And at some point, people will start flying again and public transit will resume to more normal levels, whether it be in a specific region of the country or nationwide. Until they do and while our nation recovers, we have a strong underlying recurring business and a healthy balance sheet. We have not taken, nor do we need to, any government assistance due to the coronavirus. Frankly, I am optimistic about our business. ESG investing has continued to be a priority. If not increased, then perhaps the pandemic is forcing companies to question why they continue certain business practices, such as always running diesel trucks when other better alternatives are available. And during this time we all recognize and enjoy the clean air and absence of soot and smog, not to mention we know there has been a reduction in greenhouse gases. Regardless of the reason, we are seeing a renewed interest in natural gas fueling and adding new customers and growing with existing ones, despite our sales force operating via Zoom and phone calls rather than in-person meetings. In fact, we have signed contracts representing 6 million gallons over the last quarter, and we are currently in the process of responding to a record number of RFPs for new or expanded natural gas fleets from municipalities, transit authorities and companies. We believe this is a sign of a pent-up demand and a stronger natural gas fuel market in the months to come. In addition, customers have ordered new station builds, adding to our overall construction pipeline. In the solid waste sector, cities from the East Coast to West, including Lexington, Denver, Scottsdale, Sacramento, Muncie, Redlands, California, and Philadelphia have signed contracts over the last several months to begin or extend fueling for refuse trucks, representing approximately 2.2 million gallons a year. Waste Connections signed a contract to add fueling outside Fort Worth for additional trucks, and Noble Environmental are adding 20 new trucks in Pennsylvania to fuel an existing station. Overall, our refuse business has actually grown during the pandemic. We continue to see new interest by companies and municipalities to switch their diesel fuel refuse trucks to ones equipped with natural gas engines that have proven reliable and dependable over many years, while operating on a fuel that burns over 90% cleaner and can reduce carbon by over 250%. And speaking of reducing harmful greenhouse gases, I am excited to let you know that we will be formally announcing in a few days that the New York City Metropolitan Transit Authority has signed a multiyear contract to operate their 800 buses with Clean Energy's Redeem renewable natural gas. This is a significant move by the country's largest transit system, which will mean the conversion of over 8.3 million gallons from regular CNG to renewable CNG, which will eliminate over 25,000 metric tons of harmful carbon emissions from going into the atmosphere every year. New York MTA should be highly commended for this decision, which comes even before the state of New York adopts a low-carbon fuel standard program. As part of the ambitious package on the climate, an LCFS is currently working its way through the legislature and, if made into law, could accelerate the adoption of RNG in New York. While other companies have begun to offer RNG as a transportation fuel, almost all of it has been delivered in California. Clean Energy stands out with an extended geographical footprint of supplying 45 million annual gallons of RNG to customers in almost 30 states outside of California. We picked up another new transit agency, with SolTrans in Solano County, California, which is purchasing 16 new transit buses to run on Redeem. In addition, we renewed significant contracts during the second quarter with Tucson, Arizona; Santa Monica, Norwalk, Southland and Omnitrans, all in California; and ABM, the large shuttle service supporting LAX. We continue to see movement on the heavy-duty trucking front, as well, despite a significant drop in overall truck sales due to the pandemic. Thanks to our Zero Now Financing program, we have recently added the trucking firms Conestoga Logistics, Vernon Transportation, Linden Bulk Transportation and others to our heavy-duty truck roster of customers. Also during last quarter, UPS increased its RNG purchase from us for its heavy-duty truck fleet, by 3 million gallons per year, bringing the current total to 23 million annual gallons. Clean Energy has facilitated over 300 of 580 applications for grants for new natural gas heavy-duty trucks in California over the last 6 months, representing approximately $35 million of grants for trucks that should be hitting the road throughout the remainder of the year. To put that into perspective, we submitted a total of 110 for the entire year of 2019. Most of these will be fueling at our stations in and around the Ports of L.A. and Long Beach. Recently, trucks equipped with the new Cummins Near Zero 6.7-liter natural gas engine will be made available for these grants. We have seen a lot of interest in this engine, and it has been certified to be as clean as the Cummins 12-liter and will be hitting the market later this year. These midsize trucks, such as box trucks, will be able to easily fuel at our existing station network. In Canada, Clean Energy was recently awarded a $6.5 million grant from the Alberta government to underwrite the cost of 100 heavy-duty trucks and several fueling stations to support some of Canada's largest trucking companies, including WestCan and Mullen. It's part of a $30 million investment in natural gas vehicle technology in the region. The Alberta government is targeting to reduce NOx emissions by 20% in the province and sees the conversion of heavy-duty truck market to natural gas as a good start to that goal. As I mentioned, our Zero Now program, which allows firms to get into natural gas trucks at the cost of diesel trucks while saving on Redeem renewable fuel, continues to show results. We were excited to add a dimension to the program with a new partner, Chevron. As you might have read in their announcement, Chevron has begun to make investments into the production of RNG derived from methane from dairies, which has some of the highest levels of atmosphere-harming emissions. But when captured and burned as a transportation fuel, it erases those emissions, turning something that could have been very damaging to the planet into a transportation fuel for heavy-duty trucks that normally run on dirty diesel. The fuel is calculated as carbon-negative and produces 200% to 250% less greenhouse gas than diesel. In this new partnership, called Adopt-a-Port, Chevron is providing funding for truck operators to subsidize the cost of buying new RNG-powered trucks, while at the same time providing a commercial market for their RNG. Clean Energy is already making this carbon-negative fuel and truck purchase incentive available to hundreds of trucking firms that operate in the Ports of L.A. and Long Beach. This is now the third major global energy company that Clean Energy has partnered with to expand the use of RNG. Our joint marketing agreement with BP to source and supply more RNG continues to be strong, and the company's largest shareholder, Total, was instrumental in the creation of Zero Now program by providing $100 million in a line of credit for Truck Financing. It is now hard to ignore that more and more of the world's leading energy experts see RNG as a realistic ultra-clean transportation fuel, especially when it comes to moving large vehicles. And it is Clean Energy that they are looking to, to lead the way in the U.S. As I mentioned, despite all the obstacles presented by the pandemic, Clean Energy has remained steadfast at maintaining great customer service and expanding our business. I want to thank the hundreds of Clean Energy employees who have kept our stations operational, our books in order and all the other functions they continued to perform without a hiccup. And with that, I will hand the call over to Bob.

Thank you, Andrew. We ended the second quarter in solid financial shape, having generated $54 million in operating cash flow during the quarter, with only $2.7 million in capital expenditures. Our operating cash flow was helped by the receipt of the Alternative Fuel Tax Credit of approximately $47 million related to 2018 and 2019 as well as cash flow from ongoing operations. And we ended the quarter with $96 million in cash and debt of $37 million, excluding leases. As we addressed on our last call, we anticipated lower volumes and lower earnings as a result of the COVID-19 pandemic. We also anticipated some economic recovery exiting the second quarter, with a gradual ramp-up in the third and fourth quarters. Given the current prolonged nature of COVID-19 and slower economic recovery, we believe our volume growth going into the third and fourth quarter will be at a slower pace than we anticipated back in May. However, on the positive side, we have seen higher RIN pricing as well as lower operating expenses. We expect this trend of lower operating expenses to continue until there is a return to a normal business climate which, along with sustained RIN pricing, will help mitigate any reduction in gross profit margins associated with slower volume growth. As such, we are maintaining our 2020 annual guidance of a GAAP net loss of approximately $11 million and adjusted EBITDA of approximately $45 million, assuming no unrealized gains or losses on our Zero Now fuel hedge and related customer contracts. Our cash position is also expected to remain unchanged from our prior guidance, with operating cash flows exceeding capital expenditures by at least $40 million for 2020. Andrew gave some highlights around our volume for the second quarter. The overall decline in volume of 10% was principally in CNG in our transit and airport fleet services sectors, which experienced year-over-year declines between 25% and 45%, while our refuse and trucking sectors experienced gains of 2% to 7% on a year-over-year basis. Our Redeem volumes for the second quarter were 36 million gallons, compared to 38.9 million gallons in the second quarter of 2019, with the decline primarily due to lower volumes in California, where 100% of the fuel at our stations is renewable Redeem. Our revenue for the second quarter of 2020 was $59.9 million, or a decline of $12.4 million, compared to $72.3 million a year ago. Approximately half of the decline, or $6 million, can be attributed to the lower volumes, and another $8 million attributed to lower prices due to lower natural gas costs and the mix of gallons delivered. We had a noncash negative effect of $2 million from the year-over-year change in the fair value of the Zero Now fuel hedge and related customer contracts and a $600,000 decline in construction revenue. Partially offsetting these declines was our Alternative Fuel Tax Credit revenue of $4.4 million. Our effective price per gallon on volumes delivered was $0.58 per gallon in the second quarter of 2020, compared to $0.66 per gallon in the second quarter of 2019. The $0.08-per-gallon decrease was principally driven by lower natural gas costs impacting our prices by about $0.05 a gallon, with the remaining $0.03 decline coming from the mix of gallons delivered. Our overall gross profit margin in the second quarter of 2020 was $21.3 million, compared to $24.7 million in 2019. The decline is attributed to the lower volumes and a lower effective margin per gallon. Our effective margin per gallon was $0.20 per gallon for the second quarter of 2020, compared to $0.25 per gallon in 2019, with the difference primarily driven by the decline in the gallons in our airport fleet services sector. The Alternative Fuel Tax Credit benefited the second quarter gross margin, along with a better station construction margin, while the change in the fair value of the Zero Now fuel hedge and related contracts was a drag on the gross margin. Our SG&A in the second quarter of 2020 was $16.9 million, which was down $1 million, or 6%, from a year ago and down $1.4 million, or 7%, from the first quarter of 2020. We expected to see declines in SG&A and remain diligent in controlling our discretionary spending, albeit with certain increases in costs related to keeping our employees healthy and our work environments safe. We expect to see similar levels of SG&A going forward until more normal business operations return. Regarding our net results, we have fared well when compared to a year ago, given the circumstances of 2020. Our GAAP net loss for the second quarter of 2020 was $6.7 million, compared to a GAAP net loss of $5.4 million a year ago, or a loss of $0.03 a share in both periods. On an adjusted basis for the second quarter, our net loss was $4.5 million, compared to a net loss of $5 million a year ago, or a loss of $0.02 a share in both periods. And our adjusted EBITDA for the second quarter of 2020 was $9.2 million, compared to $8.9 million a year ago. So all in all, we performed well during the quarter with sufficient liquidity, going forward. And with that, Operator, we will now open the call to questions.

Our first question comes from Eric Stine with Craig-Hallum.

Encouraged to see the growth in refuse and trucking year-over-year. And maybe just specific to trucking, I'd love your thoughts on kind of how it breaks down there between current fleets driving more miles related to the goods movement versus just more adoption from fleets. And then I would also love to hear your thoughts on just what you're seeing from the small to medium-sized fleets, because obviously the big guys are, they're continuing to do what they've done for many years.

UPS remains a strong customer and has increased its usage, as reflected in this quarter’s results. We secured an additional contract for 3 million gallons for the year, contributing to our trucking growth at UPS. Additionally, in another segment, we're observing an uptick with Zero Now; while the numbers are still small, more entities are starting to order trucks and engage with the Zero Now program, primarily in the western U.S. and California. Furthermore, we've noticed a significant rise in new truck orders, with more trucks on the road and increased activity at the southern Los Angeles ports. Our focus remains steady, and I was somewhat surprised by the recent developments. As I mentioned earlier, we’ve seen a rise in our backlog of stations and an increase in requests for proposals, which is the highest we've had, about 50% larger than the previous record I discussed a quarter ago. This indicates investment in new stations or gallons, which is promising. We also noted heightened interest in the Chevron program at the port and the Zero Now initiative. Whether this increase stems from businesses returning to normal operations or a shift in focus towards sustainability, the strong interest in sustainability is quite evident right now.

Got it. Whatever reason it is, you'll take it. Okay. Well, so just on Chevron, and I know it's still early days, and good to hear there's, obviously, there's interest at the ports. And maybe it's a little bit of time before that starts to have an impact. But just curious on the potential to expand that. Is this something that we should think about, say, if you've got a fleet, for instance, that says we're going to run the West Coast from the ports to Seattle, is this something where you think Chevron, given their interest and focus on this area, that this is something that could be expanded beyond the ports?

I don't want to overstep my bounds regarding Chevron, but they have clearly indicated that they view the biomethane sector as a significant opportunity. They are committing considerable resources to low-carbon fuel investments, particularly in California, as they see it as a vital component of their business strategy. The initiative we announced took some time to develop and aligns with regulations promoting cleaner trucks at the port. It complements existing grant programs. When I refer to the hundreds of trucks at the port, Chevron’s involvement could enhance the progress of these trucks which are currently waiting for contracts to be finalized for deployment this year. Those numbers are becoming a reality. The 550 applications I mentioned earlier represent natural gas trucks that will utilize RNG at the port this year, with Chevron’s funding making it more attractive for fleet owners and beneficial for us as well, as we benefit from the environmental gains of RNG from our stations. It creates a win-win situation for all parties involved, including the ports, trucking fleets, Chevron, and ourselves. Some fleets have already expressed commitment to the program; although those trucks aren’t operational yet, we have identified our customers. One fleet has already signed on for 39 trucks in just a couple of weeks. We see great potential in this initiative. Chevron has suggested we start with several hundred trucks, but there is ample opportunity to expand this program since they are keen to earn more credits needed to meet California's regulations. Therefore, I believe the program could be much larger than we initially anticipated.

Okay. Good. And maybe last one for me, and this is very high level, but lately hydrogen is getting a lot of attention as a possible transportation fuel, despite that it's likely many, many years away. But if there does come a time where hydrogen has a place in the market, I'd just love your thoughts on whether it's natural gas or renewable natural gas, how that plays into it, and then also how you might play into it with your station network?

Sure. I want everyone in the alternative fuel industry to succeed. Remember, about 98.5% of the market is still relying on diesel, which leaves a lot of potential for growth. Our CFO, Bob, often reminds us that no single fuel will dominate the market. There is ample opportunity for various fuels to thrive. This market is at least 35 billion gallons in size, so it's possible for many different technologies to succeed. We have a focus on natural gas and renewable natural gas, which is currently available nationwide. We also have experience with hydrogen; we've operated a hydrogen fueling station for over a decade, built alongside General Motors. It was a significant investment, around $2.3 million, and it produces 68 gallons of hydrogen daily. However, hydrogen fueling can be costly. Producing hydrogen through electrolysis requires a significant amount of water—about 20 gallons for every gallon of hydrogen created. If scaled nationwide, this presents a challenge. The costs associated with establishing hydrogen stations could range from $15 million to $20 million each, necessitating the creation of a new infrastructure. Most successful hydrogen stations today use natural gas for reforming, which leads me to say that our focus on RNG is crucial. We're optimistic about developing technologies that could reform natural gas onboard to generate hybrid electricity or potentially hydrogen in the future, but that’s still quite a way off. Our renewable feedstock has the advantage of existing scale and a delivery system already established across the country, which means RNG can be provided anywhere in the U.S. The real challenge will be reforming it. I believe this transformation will occur onboard vehicles rather than through an entirely new hydrogen network, which would be prohibitively costly. Historically, the Department of Energy indicated that large-scale hydrogen production would benefit from nuclear energy, but building new nuclear plants seems unlikely. There’s a lot to consider in this space, and I wish everyone the best as it’s going to be challenging.

Our next question comes from the line of Rob Brown, with Lake Street Capital Markets.

I just wanted to follow-up on the New York MTA deal. You talked about it, about converting it to RNG. Is this existing CNG business you have that's going to be converted to RNG? I think that's right. And then is there an opportunity for some of the remaining diesel volume to go RNG in that market?

Rob, it's new gallons to us, right? So that's an 8.3 million to 10 million gallon pickup for us. So it's a good new announcement that I'm making this afternoon. So it's a good one for us. And by the way, it already started 4 or 5 years ago. Okay? So it's in process. But those CNG gallons that those buses were using were not our gallons, all right? But now they are with the RNG.

Thank you for clarifying that. That's great news. Regarding the Chevron deal, I know it’s still early, but how has the response been? How do you see that developing over time? Are you currently involved in the financing flow, or is it direct from Chevron to the truck owner?

I'm pleased you brought that up. The financing differs from the Total-sponsored program we have with Zero Now. This financing is sourced from Chevron, not us. Currently, we're in the midst of it, as we are responsible for marketing and delivering it to customers, which means we are customer-facing. However, it’s Chevron’s capital and RNG that we’re utilizing through our infrastructure. We have just started rolling it out over the last couple of weeks and already signed one customer for 39 trucks. We're seeing some traction because it makes a lot of sense to everyone. It is very beneficial for the customer, making it an obvious choice for them. I anticipate we should see strong interest in it. We've had only seven days of sales so far, and selling has been challenging since we can't just approach potential customers directly. Nevertheless, we have already presented this to 15 or 20 fleets, and we've secured one order for 39 trucks, which is quite promising.

Our next question comes from the line of Pavel Molchanov, with Raymond James.

I remember when we did our webinar right after Memorial Day we talked about the kind of disconnect between recovery in municipal transit fleets versus private sector trucking and the impact of social distancing on the consumer. I'm curious if you're seeing any further recovery in transit in terms of customer kind of receptiveness to getting on a bus in the last 100 days or so?

Pavel, every area is a bit different, and we've noticed some unique changes. After our call, we experienced about a 5% or 6% increase in transit volume. Then we had to lock down again, particularly in Texas where we have significant transit operations and in California. Routes are still operational, and I track progress by fuel usage, which is currently at about 75%. The routes continue to operate, but there's simply less demand because there are fewer people commuting to work. We did witness a slight recovery from previous lows with a 5% increase in those markets, although we faced another lockdown. Since then, the numbers have not dropped again; we’ve seen a slight decrease of about 5%. Overall, while there's been some improvement, it seems to have stabilized, sitting around 20% lower than usual.

And then in terms of aviation, I'm guessing that's the weakest part of the revenue right now.

It's currently our weakest area. If any of you have traveled recently, you know that the situation at the airports remains extremely quiet. Our core customers are the airport shuttles, rental car shuttles, and employee airport shuttles. These are currently down, but they are operating at a reduced capacity. We've seen a decline of nearly 45% and not much increase lately, just a slight improvement. It will recover, but that process is taking longer, which poses challenges for us. It's interesting to note that we operate around 40 airport stations, mainly at the largest airports in the country. The core business is centered around these airports. Despite the decline, approximately 50% of our business at these locations comes from the private sector, which hasn't decreased as significantly as the core business. These locations are crucial because they typically yield higher fuel margins and qualify for Alternative Fuel Tax Credits, making them very valuable for us. Therefore, considering this specific segment's decline and our overall performance for the quarter, we feel relatively positive about the outcome, as it has had a noticeable impact on us.

Last thing I wanted to ask about is the Advanced Truck rule in California. Obviously, a big market for you. That doesn't take effect for, I guess, 4 years, or so. But your thoughts on that in terms of kind of electrification of truck fleets?

I've been quite vocal about this issue. The natural gas vehicle sector has initiated a lawsuit against the Air Resources Board regarding this rule. They argue that the Board hasn't considered the relevant regulations and mission that guide their actions to ensure air quality benefits in both the short term and near future. Essentially, it seems they are ignoring air quality and health responsibilities while delaying effective measures. Moreover, by maintaining diesel usage for 85% of the trucking industry even in the coming years, we believe they've overreached. They've issued an electric mandate instead of establishing emissions standards that would allow for cleaner fuel alternatives. This approach appears somewhat misguided, reflecting a narrow political perspective that favors electric, solar, and wind energy exclusively. The reality is that many other fuels will continue to be utilized long into the future. We believe renewable natural gas, which is cleaner than electricity in California, should be considered. This aligns with the prevailing attitude in California. Furthermore, the availability of electric vehicles is a concern, starting with mandates that are tough to implement. While companies like Tesla will likely produce advanced electric vehicles with unique features and cost implications, the challenges lie in establishing the necessary refueling or charging infrastructure for heavy-duty vehicles, which is vastly different from a typical light-duty Tesla at home. For instance, a recharging facility in Los Angeles was projected to cost $5.5 million to recharge 24 heavy-duty trucks within a day, using enough electricity for 44,000 homes, yet Southern California Edison couldn't meet that demand. This issue remains unaddressed and poses significant challenges for the heavy-duty electric vision, making it costly. Ultimately, I don't foresee a system powered by municipal and government utilities being capable of supporting America's goods movement effectively. Much needs to change before that becomes a viable approach.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn this call back over to Mr. Littlefair for closing remarks.

Thank you, Operator. Well, we want to thank everyone for listening to the call this afternoon, and I look forward to updating you all on our progress next quarter. Stay safe.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great day.