Clean Energy Fuels Corp. Q2 FY2024 Earnings Call

Good day and welcome to the Clean Energy Fuels Second Quarter 2024 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Bob Vreeland, Chief Financial Officer. Please go ahead.

Operator. Earlier this afternoon, Clean Energy released financial results for the second quarter ending June 30, 2024. If you did not receive the release, it is available on the Investor Relations section of the company's website at www.cleanenergyfuels.com. For the call, it 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. 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 of 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 exclude 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 regarding 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. I'm pleased to report that we reached the midpoint of 2024 in a strong financial position driven by a very solid second quarter. Following an equally good first quarter, we reported $18.9 million in adjusted EBITDA for the quarter versus $12 million in Q2 of 2023. We sold 57 million gallons of RNG during the second quarter, and revenue was $98 million versus $90 million for the same quarter in 2023. We ended the quarter with just shy of $250 million in cash and investments. I'm going to keep my remarks relatively short today, but I do want to highlight some of our accomplishments during the quarter, which helped to explain the good results. The achievements in Q2 are a great microcosm of Clean Energy's overall business and what sets us apart from virtually any other company in the low-carbon energy sector. This begins with the completion of the expansion to our Boron facility, the only natural gas liquefaction plant in California, increasing its output capacity by 50%. Much of the new demand for LNG has been driven by the commercial maritime industry overall, and Pasha, Hawaii in particular. Pasha is now operating three large container ships on clean-burning LNG between the ports of Long Beach, Oakland, and Honolulu. Fuel volume from these ships has grown from a little over half a million gallons a month in August of 2022 to over 2.1 million gallons of LNG in May of this year. By doing so, patient ships have obtained a 90% reduction in NOx and a 25% reduction in carbon dioxide compared to ships operating on traditional fuels. After years of hard work by our team members, we have constructed an extensive fueling infrastructure across North America that is second to none in the business. We own or operate over 600 fueling stations throughout the US and Canada. While many of these are private, meaning they were built for a single fleet customer, like a transit agency or a sanitation company, over 200 of them are accessible to the growing number of fleets that are testing natural gas trucks or adding trucks to their existing fleets. Because the networks have grown geographically and the environmental benefits of RNG are becoming better known, we’ve strategically located many of these fast-fill stations along interstates in highly trafficked locations where fleet vehicles operate, such as distribution centers. Increased recurring fueling at our existing stations is one of the driving factors of our revenue growth at healthier margins. As we have built 19 of these publicly accessible stations with Amazon as our anchor customer, we are now beginning to see more trucks from other fleets fueling at them as well. We're in the process of executing a similar infrastructure strategy in Canada with our partner Tourmaline, the largest independent gas producer in Canada. Together, we are building a series of stations in Western Canada that will be anchored by existing customers but available for additional new fleets. Because of its range, power, and torque, the new Cummins X15N engine is seen as an excellent fit for the terrain and logistics of Canadian trucking. Second and third stations under our Tourmaline partnership are scheduled to open this fall. Here in the US, the fueling agreement that we signed in the second quarter with Cemex, one of the largest cement companies in the world, is a great example of a fleet that is expanding with natural gas trucks in Southern California and taking advantage of our growing network of RNG stations throughout the region. I have said on these calls many times, we are convinced that the heavy-duty transportation industry, which is looking for ways to decarbonize, can't find a better, more immediate, and affordable solution than renewable natural gas. There's also a growing realization that other new alternatives are years away from being deployed in any meaningful way and could be out of reach for many fleets in the foreseeable future. We've all read numerous stories in the financial media and especially in trucking publications chronicling the footfalls of electric vehicles and the lack of charging infrastructure. On the flip side, after the media spent years writing about other alternatives that are now having trouble getting traction, we're seeing more coverage of the Cummins X15N engine, including a recent piece in the commercial carrier journal by Jason Cannon, a well-respected veteran trucking reporter. Indulge me while I read how Jason ended his very thorough review after test driving a Peterbilt truck equipped with the X15N, 'Natural gas lost its seat at the head of the fuel of the future table when the potential of battery, electric, and hydrogen started turning heads. But natural gas right now checks a lot of boxes for fleets looking to reduce emissions without sacrificing payload, fill time, and range.' End quote. Jason chronicles in his review the bumpy ride that natural gas has had in the heavy-duty trucking space over the last 10-12 years. And those of you that have followed Clean Energy and heard me on these calls have lived through it as well. But with the introduction of RNG, a fuel that scores better than any other in reducing carbon emissions, and a new engine that finally checks all the boxes operationally for the industry, we, along with a growing number of experts, believe the time is right for heavy-duty natural gas trucking. To ensure our network of stations has the RNG to put in the tanks of those trucks, we continue to have great success in partnering with a growing number of RNG suppliers around the country for their offtake. As you hopefully saw in a series of announcements over the last few months, we continue to make progress in our own production of low carbon RNG from dairies, with six projects now producing RNG. Daryl Maas is one of the most well-respected developers in the RNG industry, so we were pleased to sign an agreement with this company to build a series of projects utilizing the covered lagoon method that Maas Energy has refined over the years. We've approved a cluster of dairies in Georgia and Florida and other single projects in New Mexico, Nebraska, and South Dakota. Engineering has begun on these projects with completion scheduled in 2025 and 2026. We also recently broke ground for an RNG digester at South Fork Dairy in Texas. The owner, Frank Brand, has rebuilt the 16,000-cow dairy and we couldn't be prouder to call him our partner in the project. Injection of RNG into the pipeline recently began at our Ash Grove Dairy project in Minnesota, one of the projects we developed with our partner BP. Last month we successfully monetized the investment tax credit generated by our first dairy RNG project Del Rio. The credit sale generated approximately $9 million of net proceeds to the project. The plan is to monetize the investment tax credits on our other five currently operational projects over the next 12 months. That is a good segue on how I'd like to close my remarks and address an area that I know we're all watching closely, which is the election in November. I know many of you are attempting to calculate the different outcomes and if or how they will impact the overall energy transition space in companies like Clean Energy. Like most companies in the low carbon energy sector, we fielded many questions from investors. And while I won't speculate on any particular outcome, I will say this. We partner with landfills and dairy farms to deliver low carbon, domestically produced biofuel to commercial transportation customers, produce and deliver sustainable fuel, which generates environmental and financial benefits for the agriculture, municipal waste, and transportation industries. We strongly believe that this will continue to be embraced as a win-win solution by any administration or leadership in Congress. As an example, we will be hosting next week the chairman of the House Ways and Means Committee, Jason Smith, with several other members of Congress, including Representative Brian Fitzpatrick, who is the Republican co-sponsor of the RNG tax credit legislation. These members are coming to our headquarters where we and executives from UPS and WM will show off the latest technology in natural gas trucks and brief them on the benefits of RNG production and fueling to rural America, municipalities, and industries. We were very pleased that the RNG tax credit bill, introduced by Representatives Fitzpatrick and Democrat Linda Sanchez in the House early this year, was recently mirrored in the US Senate with a bipartisan companion bill co-sponsored by Senators Mark Warner and Thom Tillis. I started my career in politics, so I know just enough to be dangerous, but as I said, we feel comfortable that no matter the outcome in November, there is widespread and cross-the-aisle support to produce a fuel that tremendously helps the US agricultural industry both environmentally and financially, including creating jobs in rural America, and decarbonizing heavy-duty vehicles in a way that no other alternative has been able to seriously address. Now I'll hand the call back to Bob, who will go into more detail about our strong quarter. Thank you.

Thank you, Andrew, and good afternoon to everyone. We had a good second quarter for 2024. We continue to see good results from our fuel distribution business, including good volumes and margins at our station network, plus strong RIN pricing, and our LCFS revenues were back on track, albeit at a lower trending LCFS credit price during the quarter. On a GAAP basis, we reported a net loss for the second quarter of 2024 of $16.3 million, or $0.07 per share, which is the same as last year's GAAP net loss and per share amount. Although we got there in different ways, on an adjusted non-GAAP basis, we reported net income of $2.7 million, or $0.01 per share, in the second quarter of 2024 versus breakeven non-GAAP results last year for the second quarter. As Andrew mentioned, our adjusted EBITDA was $18.9 million for the second quarter of 2024, compared to $12.1 million for the same period in 2023. Just to clarify upfront here, our LCFS revenue of $4.4 million for the second quarter of 2024 includes $2.2 million of LCFS credit revenue that we discussed on our last earnings call where we mentioned that we had transacted our first quarter 2024 LCFS credit sales in April of 2024 due to the Easter holiday. Then for the second quarter, we transacted our second quarter LCFS credit sales in June, so we got back on track there. That was also for about $2.2 million, thus taking our total LCFS to $4.4 million for the quarter. While the added LCFS revenue from the April sales boosted our second-quarter results, we still saw incremental gains in our fueling business in the second quarter of 2024 compared to last year, principally due to a better mix of higher margin fuel sales and higher RIN pricing that helped to offset some of the lower LCFS pricing that we saw. On a year-to-date basis, our financial results are well above last year, with a GAAP net loss of $34.7 million for the first six months of 2024, compared to a GAAP net loss of $55 million for the six months ending June '23. Adjusted EBITDA for the six months ended June 30, 2024, was $31.8 million versus $8.2 million for the same six-month period in 2023. Last year was negatively impacted by the extraordinarily high gas costs in California in the first quarter of 2023, which did cost us about $10 million last year, but with an improvement in our adjusted EBITDA year-to-date of $24 million, it means that we are seeing marked incremental improvements here in 2024 for the first two quarters beyond the recovery from last year's gas cost anomaly. In fact, on a GAAP earnings basis, our GAAP net loss of $34.7 million year-to-date is running better than planned. As such, we’re updating our GAAP net loss guidance to be in a range of $91 million to $81 million for 2024, versus our previous guidance of a range of a GAAP net loss of $111 million to $101 million, basically an estimated $20 million improvement to our GAAP net loss. We're not changing our 2024 adjusted EBITDA guidance of $62 million to $72 million because the improvement in our GAAP guidance is due to higher interest income, lower depreciation expense, lower stock compensation expense, and lower Amazon warrant charges, none of which impact our adjusted EBITDA. With adjusted EBITDA of $31.8 million for the six months into June 30, 2024, we feel confident in maintaining our annual outlook for adjusted EBITDA of $62 million to $72 million. Finally, I wanted to make a few comments around our RNG volumes and our total revenues for the second quarter of 2024 to provide some more insight on the trends that we saw there. On the RNG volume front, we reported 57.1 million gallons of RNG sold for the second quarter of 2024 versus last year's second quarter of 58.6 million RNG gallons, and the first quarter of 2024 was 58 million RNG gallons. The slight decline in the second quarter of 2024 compared to last year and the first quarter of '24 is the result of about 5 million RNG gallons that we sold outside of our station network a year ago and in the first quarter of '24 that didn't repeat in the second quarter. We anticipated much of this reduction in the RNG volumes when we set our 2024 outlook, where back in February we had identified certain RNG volumes that we had distributed outside of our station network in 2023 that we didn't expect to repeat in '24. And that's really kind of what we saw in this second quarter. Frankly, we were able to make up a lot of that to get to the 57 by distributing RNG into our network. In fact, that change in RNG gallons was part of the reason why our overall fuel margin improved in the second quarter of '24, as we were also then able to pick up the margin on our underlying commodity fuel sale in addition to the RIN and the LCFS. On a year-to-date basis, through June of 2024, we've delivered 115 million gallons of RNG. Now, our target that we estimated back in February of '24 for RNG gallons for 2024 was 245 million gallons. Reaching 245 million gallons will be a bit of a challenge at this point in the year. What we do see, though, is that we really can deliver somewhere between 95% and maybe 100% of that 245 million gallon target for 2024. And I'll just point out that as we're seeing in our financial results, that ultimately that mix of RNG delivered is also an important part of contributions to our bottom-line results. On the revenue front, Andrew noted our revenues for the second quarter of $98 million, compared to $90.5 million a year ago. There was one item that certainly muted that year-over-year increase. It would have been higher. Last year we had $3.6 million in revenue related to the non-cash change and fair value of derivative instruments. In 2024, that number was $100,000. So, you've got about a $3.5 million number in the prior year number change. Apart from that, all the categories, all the sources of our revenue increased. Our fuel sales were greater. This was from higher vehicle fuel sales on higher volumes. We saw higher RIN revenue in the second quarter compared to a year ago, driven by RIN pricing that was up 76%, and higher LCFS revenue, although that was mainly due to the April sales that I mentioned previously. We also had an increase of nearly a million dollars in our alternative fuel tax credit revenue. So, kind of across-the-board increases there. From a more recent standpoint, when we look at our second quarter 2024 revenue compared to our first quarter, that's down approximately 5%. I will say about 30% of that decline relates to the change in the non-cash fair value of derivative instruments. The other reason for the decline from Q1 was largely because of natural gas and that flow-through of the commodity price, that cost that we've talked about before, that impacts revenue and it impacts our cost. We saw dramatic reductions in natural gas from March through June on that. The important part there in terms of that trend is these are normal contributors impacting our revenues that do not have a dollar-for-dollar impact on cash margins at our stations. Nothing that we see in that trend from the first quarter to this second quarter points to any fundamental change or decline in our business. With that operator, we can open the call to questions.

We will now begin the question-and-answer session. Our first question comes from Eric Stine of Craig Hallam. Go ahead, please.

Hi Andrew. Hi Bob. You mentioned in the release 7% volume growth at your stations. I'm just curious if you could break down specifically or from a high level by your key end markets, specifically trucking and refuse? I'd also love your updated thoughts on timing of the X15N. I know that it's certainly moving towards production and launch but really hasn't gotten going yet in a big way. So just updated thoughts would be great.

Most of that percentage increase comes from trucking, Eric, if not almost all of it. On the Cummins launch, earlier in the year, the early introductory engines were put out to some of the nation's largest fleets. Cummins mentioned a couple of weeks ago that those test vehicles have accumulated a million miles, and the feedback from drivers has been tremendous. The torque, fuel economy, and ride have really come to the surface as we were hoping. The next phase has been the delivery of pre-production units. These are units that actually got built on the line before the formal launch. Now there's been another batch of trucks that have been delivered. In fact, for instance, we received one, which will go into our demo fleet next week. Beautiful trucks and we're very excited about it. So, that will be the next batch that will be operating. The order book has opened since March or April. Orders and purchases are now being worked between Cummins and their customers. Anecdotally, at some recent industry meetings, Cummins stated they still believe they’ll sell 3,000 units. As we’ve discussed on these calls for the last six months, we know these trucks will likely get into service in the latter part of 2024. It may not be a big volume thing for us initially, but we’re all anticipating these orders because next year we’ll pick up another OEM, giving more engines the opportunity to go into more vehicles. We're very excited about it so far. I hope we'll begin to see some announcements for some of these fleets, but that's really up to the fleet incumbents at this point. We are optimistic.

I believe that Cummins recently talked about 8% is where they see adoption going out. A little open on the timing just because of moving parts. But that was good to see. Can you clarify what's the timing?

That was quoted over an extended period of time, so I don’t know what that means: three years, whatever. Earlier discussions indicated that there would be 2024 and maybe as many as 7,000-25,000 units. They then started talking about percentages. So, I’m not holding the CEO to it, but I love hearing that the CEO thought enough about this product to talk about it in our earnings call. That 8% would equate to something close to 20,000 units. That translates to around 300 million gallons of fuel. For the RNG industry, for us in the downstream part of the business, that’s significant. Currently, we're talking about selling 240 million gallons of fuel this year, which gives us the largest market share here by far. The Cummins X15N is a critical product for us and the industry.

Maybe for my last question, just on the upstream update. You talked about the six projects that are producing RNG. Still kind of the timeline that you start to see an EBITDA pick up late in '24 and that those start to contribute fully in '25? What are your plans for the remainder of the year?

Yes, Eric, generally, that is correct. We’re still working within our guidance for the RNG JV investments, which was negative $10 million to negative $14 million EBITDA. This does involve monetizing gas that's produced, but certainly not at full capacity yet. The goal would be to get as close to full capacity by the end of this year going into '25. We’re excited about it; it’s good stuff. When you finally see the fruits of your labor with the pipeline quality gas going into the pipeline from these projects, that’s a major accomplishment. We will also have the Maas projects, but all the other projects under construction are primarily scheduled for late '25. They won't contribute much in '25 but will be significant in the long term.

Right. They'll follow the same timeline as the six that you've got this year where they come on and it takes a bit. Okay. Thanks a lot.

The next question comes from Rob Brown of Lake Street Capital Markets. Go ahead, please.

Good afternoon. First quote, first question is on the non-Amazon fueling. You talked a little bit about those stations or the Amazon stations fueling non-Amazon trucks. Could you give us a little color on how that's ramping and what you're seeing there?

You're saying what's the ramp on Amazon stations? No, the non-Amazon fuelers that are at those stations. Yeah. Well, obviously, once we have more fleets that begin to accept the Cummins X15, that’s really a '25 event. You'll see more of it. But for instance, we have some large fleets like WM, Ecology, and DHL; those are the fleets that are beginning to show up at the public side of these Amazon locations. It’s designed for that; Amazon wanted to have public fueling at those locations because they’re situated perfectly in warehouse and logistic areas. So, this strategy lends itself to a lot of fleets. I hope we're just seeing the beginning of that opportunity.

Okay, perfect. Thank you. And then back to the RNG facilities that have opened and started running. I realize it's early, but what are some of the learnings there in terms of the operations?

We're learning a lot as we go here. The commissioning has taken longer than we initially wanted, but perhaps that was to be expected. After a 60-day commissioning phase, we begin to inject and then tune. All pieces of equipment must be optimized, and we're seeing that in Del Rio. We made some adjustments and had, I think, in June, very nice increases in production. In one of our large projects where we’re handling manure in Idaho, we're managing more manure than we thought was possible. So, while things have been slower than expected, we've been pleasantly surprised by the quality and functionality of these operations. As these last five projects come online, we’re starting to get our arms around everything and are staffing appropriately.

Okay, thank you. I'll turn it over.

The next question comes from Manav Gupta of UBS. Go ahead, please.

Two quick policy questions: first, any timeline we should think about concerning 45Z? When can we get some kind of more guidance from treasury? Similarly, when can we expect some update from CARB on the 7% step-down or 9% step-down?

On CARB, we believe that in the next two or three weeks, CARB should release their 15-day notice. This will be about 30 days before the November 8 hearing. That seems to be on track. CARB is working on that right now. For 45V, I was told by a senior policy person that we should expect something out of treasury, some initial rule sometime at the end of summer, so around September.

The next question comes from Jashant Alyani of Jefferies. Go ahead, please.

Thank you for taking my question. I just have one; could you talk a little about your EBITDA cadence for the second half of '24? Historically, we have seen it kind of ramp up quarter over quarter with 1Q being the lowest. So, if you follow a similar cadence, is it fair to say there's a chance to hit the higher end of the guide? What are some puts and takes there?

Yes, you are correct that we have seen a bit of a ramp-up in that cadence. Generally speaking, we would expect to see that same profile in the second half of the year. There’s always a possibility to get to the high end, and that’s why I have that range there. We're feeling good about where we are right now within that range, and as we’ve always said, it's all about volume. We're constantly looking at recent trends, and there's a chance.

Our next question comes from Matthew Blair of Tudor, Pickering, Holt. Go ahead, please.

Thank you and good morning, and congrats on the solid results. What stood out this quarter was the rising unit margins in your downstream refueling segment. Bob, you mentioned that the mix improved. Does that just refer to the share of RNG versus non-RNG? It did look like that picked up a little bit. Did lower California natural gas prices help out in terms of your unit margins?

Yes. The lower gas costs did help us because we continue to enjoy a pretty healthy spread. As an indicator, we always compare the NYMEX to WTI crude. When that spread is large, like it has been, pricing power at the pump improves. This is especially pertinent to the volume of business we have in California. And on the mix, I am referring to seeing more vehicle fueling at our stations. It's not so much RNG versus CNG or RNG versus nothing as it is the type of gallons. We're seeing increases, particularly in trucking, which is where we emerge with the highest fuel margins. As that goes, you’ll see those improvements.

With the Supreme Court reversing the Chevron decision, are you expecting any impact on the RFS program and any sort of corresponding potential decline in RIN prices?

I'm not a scholar on all that, but I’ve followed some of it. Many of the underpinnings for instance of the laws passed by Congress aren’t directly correlated with what happened in the Chevron deal. I think the RFS is in pretty good footing, and I don't see it being in immediate jeopardy. There might be attempts to work on it, but I'm thinking the RFS is on more solid footing now than in the past. Of course, there is always the possibility for challenges, but there’s bipartisan support for the renewable fuel standard.

Great. Thank you.

Sorry, one other point is since I’ve followed the RFS for about 12 years now, that law has really been bipartisan. You see that across the states that support ethanol, etc. A lot of discussions suggest that a Republican Congress might try to unwind the RFS, but it’s now seen as more secure.

The next question comes from Craig Shere of Tuohy Brothers. Go ahead, please.

Thanks for taking the questions. Did I hear correctly that the first upstream JV project recovered $9 million for your portion of the ITC? And how much total do you expect from the other five projects? Can you opine, in general, about how you feel about capital funding into 2025 or 2026?

The $9 million is total project. Bob, I don't know if I have a specific number on that right now.

I would say that the other five are generally in the same size ballpark. They will likely have some of the same qualified assets in terms of returns, so it should be somewhat similar. We will use that capital at the project level depending on new projects.

Our capital for the projects we’ve discussed, including Maas and a few others, is covered right now. We either have the money at the JV, or we have the capital committed. We have $100 million additional as well.

Okay, thank you. A diversified peer company with landfill RNG exposure just announced their first discretionary institutional fixed-price contract with a public utility. If this becomes a trend, especially if it happens as these 15-liter trucks hit the market, demand for dairy RNG is going to go up dramatically. Can you discuss supply and demand for RNG?

Supply and demand are currently in pretty good balance. A lot of RNG projects are coming online, including landfill projects and low CI projects. I don't anticipate a problem here. In fact, it would be a great issue if we reach that 8% demand rate. I hope we start producing enough to keep up with that. The industry needs to create at least $300 million a year for that to be feasible, but with RNG being the highest quality feedstock out there, I feel confident in our future.

Thank you.

The next question comes from Pavel Molchanov of Raymond James. Go ahead, please.

Thanks for taking the question. A macro question: the price of oil is at a 24-month low, and there's some fear about potential recessionary pressures impacting demand. Are you seeing any demand softening in recent weeks and months?

In our transportation segment, no. We have not seen any decline there. We have a good feel for how our fleets operate, and they are not sidelining transit buses, refuse trucks, or delivery type fleets. While we don’t have insight into other market segments, we feel stable. You pointed to concerns about oil prices dropping to $50; however, I think we will remain in the $65-$75 range. If that holds, we could see more favorable pricing for natural gas compared to oil, which provides us with the advantage in the market.

Since we haven't addressed this in a while, is there anything happening with the Long Beach Adopt the Port initiative with Chevron you had two years ago?

We keep at it, Pavel. We're expanding the funds from Chevron to continue putting more trucks into service. Some regulations at the port have made it daunting for smaller fleet operators to meet compliance standards, and the grant process has been challenging. However, we’re still working with our sales team, and we have many trucks in the process of acquiring new vehicles through Chevron grants.

The next question comes from Betty Zhang of Scotiabank. Go ahead, please.

Thanks. Hi, Andrew. Hi, Bob. Just one question. When you talked about RNG volumes, in previous quarters it seemed you discussed selling 5 million gallons outside of your station network, presumably into non-transportation markets. Given that the economics are better in transportation markets, what was the thought process there, and if there’s an opportunity to do more, would you take it?

It's all about supply-demand optimization in a quarter. Our primary delivery point is always our stations for the highest economics. Occasionally, we see opportunities where there’s a need for RNG, and we may satisfy that need when we have surplus. That’s what happened last year. We made some RNG deliveries outside our station network, and we have repeat opportunities in the first quarter but not in the second quarter. We will continue to evaluate as these opportunities arise. First and foremost, we always aim for our own clean energy stations, but in the short term, we may make those other deliveries for customer satisfaction.

In fact, I think most of it will end up in transportation.

This concludes our question-and-answer session. I would like to turn the conference back over to Andrew Littlefair, CEO, for any closing remarks.

Thank you, operator. Thank you, everyone, for participating in the call, and we look forward to updating you in the next quarter. Have a good evening.

The conference is now concluded. Thank you for attending today’s presentation; you may now disconnect.