Clean Energy(CLNE) - 2024 Q3 - Quarterly Report

Part I: Financial Information Financial Statements (Unaudited) The company reported a reduced net loss for Q3 and the first nine months of 2024, with significantly improved operating cash flow Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash, cash equivalents and current restricted cash | $119,003 | $106,963 | | Total current assets | $442,370 | $470,175 | | Total assets | $1,244,428 | $1,259,458 | | Liabilities & Equity | | | | Total current liabilities | $144,483 | $163,823 | | Total liabilities | $513,292 | $525,811 | | Total stockholders' equity | $731,136 | $733,647 | | Total liabilities and stockholders' equity | $1,244,428 | $1,259,458 | Condensed Consolidated Statements of Operations Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $104,876 | $95,571 | $306,539 | $318,302 | | Operating Loss | $(8,528) | $(21,364) | $(23,431) | $(69,831) | | Net Loss | $(18,322) | $(25,949) | $(53,405) | $(81,267) | | Net Loss per Share (Basic & Diluted) | $(0.08) | $(0.12) | $(0.24) | $(0.36) | Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $42,714 | $783 | | Net cash (used in) investing activities | $(30,553) | $(96,732) | | Net cash (used in) financing activities | $(93) | $(3,028) | | Net increase (decrease) in cash | $12,040 | $(98,851) | Note 1: Business Overview - The company's principal business is supplying renewable natural gas (RNG) and conventional natural gas (CNG and LNG) for medium and heavy-duty vehicles. It also develops, owns, and operates dairy and livestock waste RNG projects[25] - In addition to fuel sales, the company designs, builds, operates, and maintains fueling stations, sells related equipment, and generates revenue from selling government environmental credits (RINs and LCFS Credits)[26] Note 2: Revenue from Contracts with Customers Revenue by Source (in thousands) | Revenue Source | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Fuel sales | $64,116 | $60,006 | $189,717 | $220,168 | | RIN Credits | $11,066 | $6,784 | $29,401 | $16,664 | | LCFS Credits | $1,924 | $2,846 | $6,079 | $7,618 | | AFTC | $6,390 | $5,422 | $17,750 | $14,977 | | Station construction sales | $7,820 | $7,593 | $19,060 | $17,512 | | O&M services | $14,406 | $13,646 | $42,563 | $39,603 | | Total Revenue | $104,876 | $95,571 | $306,539 | $318,302 | - Fuel sales revenue includes significant non-cash contra-revenue charges from the Amazon Warrant, amounting to $15.8 million in Q3 2024 and $42.7 million for the first nine months of 2024[45] - As of September 30, 2024, the company has $33.8 million in remaining performance obligations, primarily from station construction contracts, expected to be recognized as revenue over the next 12 to 24 months[48] Note 3: Investments in Other Entities - The company has 50-50 joint ventures with TotalEnergies and bp to develop, own, and operate anaerobic digester gas (ADG) RNG production facilities[55][57] - In May 2024, the company entered a joint development agreement with Maas Energy Works, LLC, to fund and develop dairy farm RNG projects, contemplating an investment of up to $132.0 million[60][62] - Losses from equity method investments for the nine months ended Sep 30, 2024, were $16.2 million, primarily driven by losses from the bpJV ($8.5 million) and SAFE&CEC S.r.l. ($1.9 million)[59][65] Note 12: Debt - As of September 30, 2024, total debt was $264.1 million, net of financing costs. The primary component is a $300 million senior secured term loan from Stonepeak, entered into in December 2023[113][114] - The Stonepeak Loan Facility includes a $300 million term loan and a $100 million delayed draw commitment. It bears a fixed interest rate of 9.50% per annum and matures in December 2029[114][115] Note 14: Stock-Based Compensation - The company issued a warrant to Amazon to purchase up to 58.8 million shares. Vesting is tied to fuel purchases by Amazon, resulting in non-cash contra-revenue charges of $42.7 million in the first nine months of 2024[124][125][126] - As of September 30, 2024, 32.3 million shares under the Amazon Warrant remained unvested[128] Management's Discussion and Analysis (MD&A) Management attributes improved operating results to lower natural gas costs and increased RIN revenue, with strategic investments in RNG projects underway Performance Overview Key Operating Data (GGEs in millions) | Metric | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Fuel Volume Sold | | | | RNG | 174.7 | 168.7 | | Conventional Natural Gas | 44.2 | 46.6 | | Total Fuel Volume | 218.9 | 215.3 | | O&M Services Volume | 198.9 | 191.7 | - In May 2024, the company entered a joint development agreement with Maas Energy Works to invest up to $132.0 million in dairy RNG projects[189] - A dairy farm partner for an ADG RNG project under construction with the bpJV filed for Chapter 11 bankruptcy in April 2024, creating substantial uncertainty and risk of investment loss[190][191] Results of Operations - Q3 2024 vs Q3 2023: Product revenue increased by $8.6 million, driven by higher bulk fuel sales, increased RIN revenue ($4.3M), and higher AFTC revenue ($1.0M). This was partially offset by lower LCFS revenue ($0.9M)[211] - Nine Months 2024 vs 2023: Product revenue decreased by $14.4 million, mainly due to lower average fuel prices. This was partially offset by a $12.7 million increase in RIN revenue and a $2.8 million increase in AFTC revenue[224] - Nine Months 2024 vs 2023: Product cost of sales decreased significantly by $56.5 million, primarily due to lower average prices of natural gas compared to the prior year, when California experienced a significant price spike[226] - Nine Months 2024 vs 2023: Selling, general and administrative expenses decreased by $3.9 million, driven by a $9.9 million decrease in stock-based compensation expense[230] Liquidity and Capital Resources - As of September 30, 2024, the company had total cash, cash equivalents, and short-term investments of $243.5 million[247] - Net cash provided by operating activities was $42.7 million for the first nine months of 2024, a significant improvement from $0.8 million in the same period of 2023, mainly due to better contributions from natural gas procurement and sales[239] - The company plans approximately $60.0 million in capital expenditures in 2024 for fueling stations, IT, and LNG plant costs. It also anticipates deploying up to $65.0 million to develop ADG RNG production facilities[243] Quantitative and Qualitative Disclosures about Market Risk The company faces market risks from volatile natural gas prices, foreign currency fluctuations in Canadian operations, and interest rate exposure - The company is subject to market risk from volatile natural gas prices. Natural gas costs were $89.8 million of total cost of sales for the nine months ended September 30, 2024[257][258] - Exposure to foreign currency risk is primarily from Canadian operations. A 10% fluctuation in exchange rates would impact the value of net assets by approximately $0.1 million[259][260] - As of September 30, 2024, the company had no debt that bears a variable rate of interest, mitigating near-term interest rate risk on existing debt[261] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal controls - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures and concluded they were effective as of September 30, 2024[264] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[266] Part II: Other Information Legal Proceedings The company is not currently a party to any material pending legal proceedings - In the opinion of management, the company is not currently a party to any material pending legal proceedings[268] Risk Factors The company faces significant risks including fuel adoption challenges, RNG business volatility, financial losses, and adverse regulatory changes - Business Risk: Success depends on the willingness of fleets to adopt natural gas fuels, which has been slower than anticipated, and on a limited number of engine manufacturers like Cummins[270][277] - RNG Risk: The RNG business is dependent on securing sufficient RNG supply and favorable pricing for Environmental Credits (RINs and LCFS), which are volatile and subject to regulatory changes[278][281] - Regulatory Risk: California regulations like the Advanced Clean Trucks and Advanced Clean Fleets rules, which mandate a transition to zero-emission vehicles, pose a significant threat by aiming to phase out internal combustion engines[338][340] - Financial Risk: The company has a history of losses and may incur more in the future. A sustained decline in stock price could trigger goodwill impairment charges[295] - Concentration Risk: Three equity holders (TotalEnergies, Amazon, Stonepeak) have or could have significant ownership, potentially influencing corporate decisions in ways that may differ from other stockholders' interests[348][349][350][351] Other Information Several executive officers adopted Rule 10b5-1 trading plans in Q3 2024, and the board approved new indemnification agreements for directors and officers - In September 2024, CEO Andrew J. Littlefair, CFO Robert M. Vreeland, and SVP Barclay F. Corbus each adopted Rule 10b5-1 trading plans for future sales of company stock[359][360][361][362] - On November 5, 2024, the board of directors approved a new form of indemnification agreement to be entered into with the company's directors and certain officers[363]