Clean Energy Fuels Corp. Q3 FY2025 Earnings Call

Good day, everyone, and welcome to today's Clean Energy Fuels Third Quarter 2025 Earnings Conference Call. Please note, this call is being recorded. It is now my pleasure to turn the conference over to Robert Vreeland, Chief Financial Officer. Please go ahead.

Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the third quarter ending September 30, 2025. If you did not receive the release, it is available on the Investor Relations section of the company's website, 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. 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, 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. I'm pleased to report that our business delivered another strong quarter. For the third quarter, we posted $106 million in revenue, sold 61 million gallons of renewable natural gas and generated $17 million of adjusted EBITDA. We ended the quarter meeting our expectations in line with the raised guidance for 2025 that we announced in August with $232 million in cash and short-term investments and maintaining a strong balance sheet with ample financial flexibility and capacity to fund growth. Today, I will provide updates on our downstream fueling business, RNG's opportunity in the heavy-duty truck sector, and progress in our upstream RNG production business. I'll let Bob provide more detail on our financials and our reaffirmed full year outlook. Our downstream fueling business continues to perform well. Transit and refuse remain steady contributors, reflecting long-standing customer relationships and our ability to deliver clean, affordable fuel day in and day out. For over two decades, natural gas trucks and buses have delivered cleaner air and lower emissions to these fleets in the cities they serve. On the refuse side, we currently have 140 different companies ranging from national leaders like WM and Republic Services, many regional companies around the country, 309 fueling sites, and we fuel the buses of transit agencies from New York City to L.A. and many in between. We are well-positioned to support additional fleets in their adoption of ultra-clean RNG. Clean Energy also continues to support transit agencies that are following California State incentives to explore hydrogen alongside RNG. In late September, we announced we were awarded the contract to design, build and maintain a second hydrogen fueling station for Foothill Transit. This extends our 20-plus year partnership with the agency and complements the RNG fuel fleet Foothill already operates. The new site will support an initial 19 hydrogen fuel cell buses. We also won awards to build hydrogen stations for the cities of Riverside and Ventura transit agencies. The largest opportunity for our downstream fueling business continues to be heavy-duty trucking. Approximately 250,000 new Class 8 heavy-duty trucks are sold each year in the U.S. and Canada. The heavy-duty sector is tasked with providing critical goods movement services across our economy. Meanwhile, the sector has been facing challenging freight rates, uncertain policy regulations, and continued demand from shippers to lower emissions in this hard to decarbonize segment of the value chain. As you know, overall sales of heavy-duty trucks have been significantly lower over the last year or two compared to most years. Battery electric and hydrogen face significant challenges for heavy-duty trucking. RNG, on the other hand, has low NOx and low to negative greenhouse gas emissions. It does this at a lower cost of ownership than even diesel. The engine technology, infrastructure, and reliable supply of clean fuel are here today. And at Clean Energy, we are pursuing this opportunity on multiple fronts. In September, Pioneer Clean Fleet Solutions launched as the first leasing company focused on low-carbon heavy-duty vehicles with next-generation CNG trucks as the focus. Clean Energy, alongside Cummins and Hexagon Agility, partnered with Pioneer to support another pathway that lowers barriers for fleets to adopt RNG-powered equipment. Just last week, we expanded our Class A demo truck program with a 2026 Freightliner Cascadia Gen 5 day cab equipped with the Cummins X15N. Our truck was unveiled at the American Trucking Association's Conference to high praise from the Senior Editor of Transport Topics, a leading trucking publication who did a test drive. This demo truck will rotate among carriers so they can experience the X15N's performance across real routes in our fueling network. This builds on the success of our first Peterbilt X15N demo launch last year, and that continues to be in rotation around the country. Since Freightliner has the largest overall market share in the heavy-duty space, the demand to get in the queue for this new demo truck has been very high. Turning to our upstream RNG production business. While RIN pricing has stabilized, LCFS credit prices continue to face some headwinds impacting segment profitability. We expect CARB's program changes, which are already in effect, to tighten the market and support gradual price improvement in 2026 and beyond. The 45Z Clean Fuel Production Credit is an important value driver for dairy RNG that recognizes the fuel's negative emissions benefit. We continue to await Treasury's finalization of the 45Z rules and credit values, which we expect in the next few months. We plan to begin to monetize our 2025 45Z credits once those rules are finalized. Meanwhile, we are controlling what we can control: project execution and production improvement. I'm pleased to report that our two largest dairy projects, one in Texas and one in Idaho, have recently begun initial operations. We will be announcing more specifics soon about these exciting developments. This brings our total projects in operation to 8. We continue to be focused on optimizing production across our portfolio to increase our own supply of negative carbon RNG for our network. 100% of the fuel that we sell in California's RNG and the average carbon intensity score of that fuel is a minus 194. So that's impressive. In addition, we broke ground on three new dairy RNG projects under our development agreement with Maas Energy Works. These projects span 6 dairies across South Dakota, Georgia, Florida, and New Mexico and are expected to produce 3 million gallons of RNG annually once fully operational. In summary, our business fundamentals remain solid. The downstream fueling business is steady and well-positioned for growth. And on the upstream side, we're executing and scaling. Clean Energy is uniquely positioned with the largest RNG fueling network, a substantial supply of RNG from our own operations and from third parties, and a team that knows how to deliver for our customers. We believe our formula of practical decarbonization at a lower cost per mile than diesel will continue to resonate with fleets and shippers that need solutions they can deploy today. And with that, I'll hand the call back to Bob.

Thank you, Andrew, and good afternoon to everyone. The third quarter of 2025 was another good quarter on $106.1 million in revenue versus $104.9 million a year ago. Last year's revenue included $6.4 million in alternative fuel tax credit revenues, and the alternative fuel tax credit is not in place for 2025 as it was not extended past 2024. But putting the alternative fuel tax credit aside, the increase in revenues over last year's third quarter was 8%, primarily driven by increases in fuel sales, along with a rise in station construction sales. On a GAAP basis, our net loss for the third quarter of 2025 was $23.8 million versus $18.2 million in 2024, with the 2024 net loss benefiting from the $6.4 million in alternative fuel tax credits not applicable to '25. And as well, our 2025 GAAP net loss included $3 million in net incremental costs for a couple of one-time items, one of those being $5 million in incremental accelerated depreciation expense that was tied to our pilot stations, bringing that total depreciation charge in line with our initial estimates. And the second one-time item was a $2 million non-operating gain from the liquidation of a non-core investment. These two items did not impact adjusted EBITDA. Speaking of which, our adjusted EBITDA for the third quarter of 2025 was $17.3 million and reflects similar and steady trends from our recent second quarter of 2025 with good fuel and service margins plus an improvement in our upstream dairy negative adjusted EBITDA. Last year, adjusted EBITDA of $21.3 million, of course, includes the $6.4 million of alternative fuel tax credits. When excluding the alternative fuel tax credits from '24, the improvements in 2025 over '24 continue to come from greater fuel volumes, including both conventional natural gas and RNG, particularly a higher concentration of low CI dairy RNG, along with lower operating expenses from a year ago third quarter. These improvements helped to offset the effects of lower RIN pricing from a year ago, where you can see the RIN revenue was down $2.8 million versus last year. We generated cash flow from operations again in the third quarter, and our cash and investment balance of $232 million that Andrew mentioned is our balance after making a $12 million contribution of capital into our dairy RNG joint venture with Maas Energy Works in the third quarter. And lastly, you'll note that we maintained our 2025 outlook, which we had raised back in August, and we feel good that we're in good shape in maintaining that outlook. And with that, operator, we can open the call to questions.

We'll take our first question from Eric Stine with Craig-Hallum.

So maybe just starting with the RNG upstream business. So it sounds like you've got 8 operating right now. Can you just give us kind of the thought or target, maybe run rate of volumes that you expect to exit '25? And as you think about this longer term, I know that market has changed a bit. You've got a lot of supply from third-party sources. So just kind of curious how you think about that when you look out multiple years. At one time, you had a pretty high target for what you might ultimately produce upstream. Curious where that stands now.

You're mentioning the production rates of the Renuco projects that have recently started up. By the end of the year, we expect to produce between 5 million and 6 million gallons, with plans to nearly double that next year. Eventually, as all projects come online, we anticipate reaching about 20 million gallons, particularly once the Maas projects are operational, which I'm projecting for 2027. Referring back to our initial goal from around 4.5 years ago of 100 million gallons, achieving that would require an additional $1.2 billion to $4 billion, a target we reassessed given current credit pricing and market conditions. However, we are satisfied with our current fuel control and our prominent position in the industry, as we work with 80 to 90 different suppliers and transport around half of all RNG produced. Everyone requiring RNG for transportation frequently collaborates with us, which we appreciate. We've made strategic investments that we're confident will pay off, as we're seeing improvements in production rates. Our first project in Del Rio is performing exceptionally well and meeting its production targets. Significant production increases are beginning to occur in our other projects as well. As I mentioned earlier, our two largest projects are now starting to inject fuel; one is expected to produce about 5 million gallons, while the other will generate around 3.6 million gallons. We are pleased with our progress, and we'll continue to monitor developments through 2026 and 2027.

Yes. You mentioned last quarter or earlier this year that improving plant performance was a goal, and you've made progress. You've noted there are still a few steps to take. Can you provide any clarity on this? Should we expect these steps to primarily take time rather than requiring a significant investment?

That's correct. It involves fine-tuning and collaborating with the farmer. There aren't significant capital expenditures needed to optimize things. It's more about gradually getting everything in sync with the team. Going through the first winter, figuring out what additional items require winterization, may seem mundane, but it's crucial. Interestingly, when they initially start, they only produce about half of what was expected. However, over time, they typically reach around 70 or 75 percent and will eventually improve to full capacity.

Got it. Last one for me. I know it's early days still, but what are your thoughts on the initial interest in Pioneer Clean Fuel Solutions and how you think it might encourage the adoption of X15N? I'd like to hear your initial impressions.

I'm excited to have another party actively engaging with our current and potential customers. This collaboration is significant for us. We're familiar with this team, and I appreciate that they're partnering with Cummins and Hexagon Agility. It's a solid alignment. They are reportedly working on their first deal and have started circulating some initial paperwork. They've already met with 20 different fleets and made a notable impression at the ATA event in San Diego. I value that we have a dedicated team focusing solely on renewable natural gas and natural gas trucks, understanding the specific details involved in leasing. Our sales team is closely working with them, as well as with Hexagon and Cummins, so we’ll see how it all unfolds.

Our next question comes from Rob Brown with Lake Street Capital Markets.

Sticking with the 15-liter kind of ramp rates and how that's developing in the market. Good to see the Pioneer project. But what's sort of the other sort of timeline and development of the 15-liter ramp? How do you see it at this point with sort of the market environment?

I believe the market has not been very favorable, especially concerning freight rates, which continue to pose challenges for the trucking industry and have impacted new truck purchases. It would be ideal if this situation could be resolved soon. I expect to see some softening in rates that could eventually stabilize, but according to my observations, this might take much of 2026. This presents some challenges that I'd prefer to avoid. It's difficult to encourage people to invest in new equipment or technology when they are concerned about tariffs, import duties, supply chains, and freight rates. Nonetheless, I think many in the industry are recognizing a shift. From what transpired at the ATA Conference in San Diego, it’s evident that the technology landscape is evolving. I don't wish for anything negative to happen, but I believe that electric and hydrogen technologies have been somewhat set back due to their dependence on certain regulations, particularly at the federal level. Currently, truckers have three clear options: diesel, renewable diesel, or RNG. There is a strong demand for sustainability and a green approach, but it must be economically viable. The key difference now is that technology solutions must be cost-effective on their own. Fortunately for us, we have a technology and an engine available right now that can deliver returns. With our fuel pricing and the associated economics, we can offer fleets a two to two-and-a-half-year payback on their equipment, leading to substantial savings over a typical five-year truck usage. We feel confident about our position in the market. Notable fleets like Walmart, Amazon, UPS, FedEx, Saia, Knight-Swift, and Food Express have all purchased our new X15N. I appreciate the diversity of our customer base, but we need more engagement from these fleets. We're witnessing an increasing number of companies adopting our technology and becoming comfortable with it. We anticipate that as these fleets experience the benefits of our offerings, there will be greater adoption in the upcoming years. We are diligently ensuring that we gain strong exposure to the X15N with the largest fleets across America, and thus far, most have embraced our solutions.

Okay, great. And then on the Maas Energy Development Agreement, how much is the CapEx requirement on your side for the three facilities? And then I guess, what's sort of the pipeline on the Maas side that you could see additional facilities on?

We had about $35 million. We've spent $12 million in the third quarter.

Okay, good. And then just in terms of the additional potential projects with Maas, is there still a pipeline there or do you feel like this is sort of it from what you see right now?

Daryl is quite busy. We have the three projects I mentioned, and we're consistently collaborating with Daryl to assess a few others we considered closely. However, due to the current credit situation, they didn't meet our preferences, and Daryl recognized that. We will keep exploring these options. We appreciate that he is an excellent operator and is able to deliver these projects quickly and efficiently. So, we will see what happens.

Yeah. For this year, we had anticipated $35 million, but we now expect a total of $85 million for the plan ahead with him.

Our next question comes from Derrick Whitfield with Texas Capital.

Congrats on a solid update, guys. Maybe starting with the downstream. You guys announced a flurry of supply agreements last week. Could you speak to what led to that step change in activity and when those volumes will directionally start to flow through?

We have many customers, and while we don’t always announce all of them since some may not seem as impressive, each year we see a couple of hundred customers expanding their fleets and renewing contracts with us. This contributes to the overall activity we experience. Currently, we have around 800 to 900 customers under contract, which results in constant activity. We recently added some extra transit properties and gotten several new refuse customers and upcoming additions. I wouldn’t say there has been a significant change; this is just how our cycle generally moves. I do appreciate the level of activity we are seeing, and it gives us optimism about the fleets as they continue with the program.

Great. Understood. And then regarding the two larger projects that you guys have just brought on, could you offer maybe some directional thoughts on the timing of certification of environmental attributes, including rents, LCFS and 45Z credits? I know that the LCFS backlog was quite extensive at one point, but just where is that? Where does that sit?

Let me address it this way. If I stray too far, someone will step in. These processes take time to ramp up, so there's a sequence involved in moving into revenue generation. We're just starting the commissioning phase, with the Texas property progressing a few weeks ahead of the Idaho property after about a month of operations. The EPA typically responds quickly, and within two to three weeks, we can start certifying to obtain the RINs. The LCFS involves both provisional and final certifications, and we start receiving credits at a certain level, increasing over time. For the Del Rio project, it has taken close to two years to navigate this process. We believe some of that backlog has improved, but by the time everything is fully certified and operational, it will likely be around 2026 before these projects are completely settled. Although you will start receiving credits and monetizing them, it won't be at their maximum potential just yet.

Our next question comes from Matthew Blair with TPH.

Congrats on the strong results in the third quarter. You mentioned that you kept your 2025 EBITDA guide intact, which if I'm doing the math right, implies, I think it's $8 million to $13 million for the fourth quarter, even though the fourth quarter tends to be pretty strong for Clean. So I guess how should we think about this? I think in the past you've been reluctant to change your guide to late in the year and effectively provide single quarter guidance. But I guess, is it fair to think that there might be some upside to the 2025 targets or how should we think about that here?

It seems like we're doing well. I don't think we're ready to raise our expectations just yet. However, it's reasonable to believe that we'll be at the higher end of our guidance or potentially exceed it. We'll see how things unfold since there are many factors at play, but that's my perspective.

We agree that at this point, it may seem like we're micromanaging a quarter. However, we feel positive about the range we've provided and our current position, and we won't micromanage it.

Sounds good. And then just looking at your RNG volume growth this year, it's been a little variable. I think in the first quarter, it was down 13% year-over-year, second quarter up 8% this quarter, up 3%. I guess could you help us understand like why has it been so variable? Is that due to the supply that's coming to Clean that there's some variability in those volumes or?

In the first quarter, there were cold spells across the country, which caused execution challenges for RNG and dairy producers, leading to a drop in performance. However, there was a rebound in the second quarter. Gas held at year-end contributed to this change, resulting in an uptick in the second quarter primarily due to the cold weather effects experienced earlier. This growth appeared slightly distorted. The third quarter performance seems to be more normalized, indicating some fluctuations throughout the year.

Our next question comes from Betty Zhang with Scotiabank.

I wanted to ask if you could provide some preliminary expectations for 2026, particularly regarding volumes. Should we anticipate a significant increase given the ramp-up in your RNG production? Also, should we factor in the X15 gallons, or is it still too early for that?

Betty, we’re not going to provide guidance for 2026 today. Based on what I mentioned earlier on this call, I provided about as much insight as we’re willing to give on our RNG. There’s a nice growth outlook from where we are now to where we expect to be next year, but it’s not a drastic change. We anticipate exiting this year with growth around 4% to 5% to 6%, and it could nearly double from our RNG production. That should give you some context. However, predicting adoption rates is challenging, and I can’t provide a definitive forecast at this moment. Historically, we’ve aimed to be in the high single digits, but it’s tough to predict exactly what the adoption rate for the X15 will be next year. Over the past years, we’ve seen significant adoption rates with the 9-liter at Cummins, but that process takes time. We’re still in the early stages with the X15N, and there’s uncertainty due to regulatory issues in California and at the federal level. We’re optimistic that the right fleets are trying it, which should lead to increased adoption rates. So, while I can’t give you an exact growth number, we do expect to see higher adoption rates in 2026, albeit from currently low levels with the X15N.

Okay. Fair enough. For my follow-up, I wanted to ask about the fuel margin. Looking forward to the next several periods, our view is that the WTI to Henry Hub spread should narrow or may narrow. So I just wanted to get a sense of how Clean Energy is able to kind of manage the fuel margin, what levers you guys could pull on that end?

Bob and I closely monitor the fuel margins. As you know, there has been a solid fuel margin throughout most of 2025, but it has started to narrow. It has diminished from the historical differentials between oil and gas, where currently gas is priced at $4.25 and oil at about $60, leading to a ratio of $15.1. We believe that a ratio in the mid-teens to 15:1 is likely a good spread for us and allows us to maintain the favorable fuel margins we've experienced this year. The challenge arises if oil were to drop to $40 while natural gas remains around $4 or $4.50, or if crude were to go to $35. Our outlook suggests that the oil and natural gas relationship will remain around this 15:1 spread. It’s possible for oil prices to decrease a bit, but right now we are observing winter pricing for gas, which should lead to lower gas costs. Overall, we think the 15:1 spread is a reasonable expectation.

Along with the other drivers that we have within our margin of RIN and LCFS pricing around that. So we don't have everything all concentrated in one of the areas.

No, we have a lot of the West Coast, the refined products and diesel. I mean diesel today in California is $5.25. That has to get factored in, too.

Next question comes from Dushyant Ailani with Jefferies.

I just have one quick one. I know that as you guys kind of ramp your RNG upstream next year, 2026. I know there are a bunch of puts and takes, 45Z, LCFS, D3. Just trying to figure out what are some of the sensitivities to think about for that segment to get to EBITDA positive. Any kind of thoughts, color that you can share? Is that a 2026 story, 2027, or do we need to see D3 or LCFS or 45Z to kind of get to those levels?

We have a lot to discuss. Let me start, and Bob, feel free to jump in if I miss anything. We believe that the LCFS program, as outlined by CARB, will lead to a stronger LCFS price over time, particularly next year. While we can't predict the exact price, our partners and we anticipate that 2026 will be an improvement over 2025, and 2027 will be better than 2026. CARB thinks that by 2028 or 2029, the LCFS could return to the range of $120 to $135 to $150, which would be favorable for our business. We believe we may have already hit the lowest point, which bodes well for our operations. It's crucial for us to control our capacity and production levels at the plants, and we feel confident that we have improved our management of operations to achieve this. It's essential for these projects to perform well, which is nearly as important as the environmental pricing aspects. We are optimistic about the two large projects we recently initiated since they have commissioned successfully, and we have learned from previous projects to ensure all of them operate more effectively moving forward. With improved performance, we expect to see LCFS prices strengthen over time. Regarding RINs, the cautious perspective is that they have stabilized, but I'm unsure how the small refinery exemptions may influence potential changes in the RVO. Some speculate this could lead to an increase in RIN prices, but we are comfortable with the current stabilization around $2.30, as it works well for us. We're focusing on enhancing productivity at our plants, and we see the potential for stronger LCFS credits in the future.

If the production tax credit, 45Z, changes in our favor and guidance comes from the treasury, there could be some upside. However, as you mentioned, Andrew, these projects are moving past the ramp-up phase, and it's really about timing to get through this period. By 2026, many of them are expected to be in better shape, and we should see improvements in volume production.

It appears we have no further questions at this time. I will now turn the program back over to Andrew Littlefair for any additional or closing remarks.

Thank you, operator. Thank you, everyone, for joining us today, and we look forward to filling you in on the next quarter next year. Thank you.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.