Clean Energy Fuels Corp (CLNE) 2014 Q2 法說會逐字稿

Greetings, and welcome to the Clean Energy Fuels second-quarter 2014 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Tony Kritzer, Director of Investor Relations. Thank you. You may begin.

Thank you, operator.

Earlier this afternoon Clean Energy released financial results for the second quarter ending June 30, 2014. 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 this 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 factor section of Clean Energy's Form 10-Q filed August 7, 2014.

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 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 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.

Participating on today's call from the Company is President and Chief Executive Officer, Andrew Littlefair; and Chief Financial Officer, Rick Wheeler.

With that, I'll turn the call over to Andrew.

Thank you, Tony.

Good afternoon, everyone, and thank you for joining us. I'm pleased to review our second-quarter 2014 operating results with you today.

We reported 64.8 million gallons delivered this quarter, up 23% from the 52.6 million gallons we delivered in the second quarter of 2013. We also generated $98.1 million of revenue in the second quarter, up from $88.1 million, or 19%. This is apples to apples when excluding VTEC.

Importantly, this quarter we were negative $4.8 million in adjusted EBITDA, which is a 31% improvement over last quarter. So, we continue to make progress in our path to profitability and are very close to breaking even -- even on adjusted EBITDA.

As I look back over the quarter, I am pleased with the significant milestones we achieved. We were able to open the Interstate 10 corridor from LA to Houston with the opening of our El Paso station to complement our Phoenix and San Antonio stations. We were also able to open the Interstate 40 corridor from LA to Oklahoma City with the openings of our Winslow, Arizona, and Albuquerque stations, along with our previously open Amarillo station.

One quarter at a time, our nationwide network is expanding and changing the way America moves goods. We now have about 100 truck-friendly stations that are open today to support the growing demand for natural gas fuel of the nearly 280 heavy-duty trucking fleet customers we support across the country. This includes 30 LNG stations, 13 of which also have CNG fueling capability, and 70 CNG stations.

Compared to the second quarter of last year, gallons we delivered to our trucking customers increased substantially. We continue to open stations on a regular basis as fleets sign up, and we see this pace picking up in the second half of the year.

While we have more to accomplish, I am pleased with the developments that we've made in the growing heavy-duty truck market. Here are a few highlights from our trucking market this quarter.

As previously reported, Raven Transport deployed 36 LNG trucks that fueled our stations in London and Franklin, Ohio; Walton, Kentucky; and Jacksonville Florida. They have also ordered 33 additional LNG trucks, which we expect to be fueling at our Albany, Georgia, station by December. Combined, they expect to consume about 1.5 million gallons annually at these stations.

Chavez Trucking signed a multi-year fueling agreement to fuel their fleet of LNG trucks that they are scheduled to deploy at our West Sacramento, California, station. The fleet is expected to consume approximately 240,000 gallons annually.

Seaboard Transport deployed 58 CNG trucks that will be fueling at Clean Energy stations in California, Arizona, New Mexico, Colorado, Texas, Illinois, Indiana, Ohio and Virginia. The fleet should consume over 1 million gallons annually.

We entered into a CNG fueling agreement with one of the nation's largest truck leasing companies to fuel their leased and rental fleets across several states in Clean Energy's network. We are seeing growing demand for natural gas trucks from full-service leasing companies, and our nationwide network is well-positioned to support this demand.

We signed a multi-year fueling agreement with Interstate Distributors, who have ordered 20 LNG trucks, which will be split between California and Washington state. And lastly, our long-time customer, UPS, has deployed additional LNG trucks with fuel at our stations in Amarillo, San Antonio, Jacksonville and Oklahoma City.

We continue to see strong growth in transit, refuse, airports and other fleets during the second quarter. This quarter we signed fueling deals with customers for what we anticipate will be 13.2 million additional gallons, which more than doubled what we signed in the second quarter of 2013.

So, the pipeline continues to be robust. And this quarter our customers deployed 1557 vehicles.

I'll quickly touch on some the highlights from each of these markets. In transit, Dallas-area rapid transit deployed 184 new CNG buses in the second quarter, which fuel at the four stations we built and now operate for them. Dardanelle operates 370 CNG buses over 50 LNG buses, and 112 paratransit vehicles in their natural gas fleet.

We were selected for fueling station operation contracts with Boise-based Value Regional Transit, California's King's County public transit, and Santa Monica's Big Blue Bus, where we also deliver 2 million LNG gallons annually.

Our transit customer in Las Vegas, the Southern Nevada Regional Transit Commission, received another 80 CNG buses this quarter, and we are upgrading their two CNG stations to accommodate the new buses. Last year this customer used about 2 million gallons of CNG, and through the second quarter of this year, they are now on a run rate to be closer to 3 million gallons annually.

In Sacramento, we signed a contract with Paratransit Incorporated, which has about 200 small gasoline buses that it wants to replace with the CNG. They will all be fueled at a public CNG station on Paratransit's property that we are under contract to design, build, own and operate. The first order was for 59 CNG buses.

We are also expanding the station to be able to fuel tractor-trailers to accommodate regional goods movement. We recently signed a contract with one of North America's largest private fleets, who will begin delivering goods with CNG-powered tractors throughout the San Joaquin Valley and Bay Area.

In the second quarter, our transit customers deployed 225 full-size buses and 199 paratransit shuttles, which serve disabled and other on-demand passengers. The transit market continues to grow, and we are the largest in the business, fueling 7200 buses every night at 41 transit properties across the US and Canada.

And now on to refuse. This quarter our long-time customer, Waste Management, celebrated the milestone of deploying their 3000th natural gas refuse truck.

Together with Clean Energy, Waste Management first began their transition to natural gas back in the 1990s, with seven trucks at Palm Desert. We are proud of our sustained partnership with them and look forward to continuing to support their commitment to natural gas.

Republic Services Group is another key refuse partner. Last quarter we built a station for them in Phoenix and upgraded four of their other stations in Arlington, Texas, St. Louis, and two in Indianapolis. In total, we have built Republic 37 stations with IMW equipment, and are in the process of building them 5 more right now.

On the East Coast, All American Waste in New Haven, Connecticut, announced their second natural gas fueling facility built by us. The new facility will start with 40 trucks and have public access fueling.

We were also selected for a CNG station maintenance contract with the city of Ontario, California, which is about 60 CNG refuse trucks and an existing city-owned station that will account for nearly 500,000 gallons a year. We began fueling the city of Mesa, Arizona -- Mesa, Arizona's 14 CNG refuse trucks with a Clean Energy-owned, portable CNG fueling station under a multi-year agreement. We now serve almost 260 refuse customers at 179 locations across the country and look to continue our leadership position in helping grow this important market.

In our airport market, we announced the opening of our third public CNG station serving LAX. Collectively, these three stations serving LAX and the surrounding area are the highest-volume CNG stations in Clean Energy's nationwide network.

In Las Vegas, our long-time customer, Bell Transportation, continued the roll-out by ordering 80 new CNG taxis and new 10 CNG buses in the second quarter. Bell now operate 200 natural gas vehicles in their fleet.

Our Las Vegas market is a good example of the growth we've seen across our trucking, transit, refuse and airport sectors in a single market. We entered the Las Vegas market by acquiring five public CNG stations in two management agreements for the transit agency.

We now operate 12 fueling stations in Las Vegas, including a heavy-duty truck station that is anchored by UPS. And in the five years between 2009 and 2013, we grew our volume by 145%. And we still see tremendous upside in our core market segments there, especially the solid waste segment, where we now fuel nearly 90 CNG refuse trucks.

New customers continue to add vehicles that will use our public stations. At our Ontario, California airport station, Airport Mobil Towing ordered 23 CNG tow trucks, in addition to the 9 it already operates. And one of Clean Energy's construction subcontractors, FastTech, recently ordered 50 CNG vans, which will fill in our Southern California public CNG station network.

In the Denver area, UPS awarded Clean Energy with a multi-year contract to continue operating and maintaining their CNG station, which fuels about 150 step vans. In Orlando, construction is complete in our new station at the Orlando airport, and should be operational in the next few weeks. In Chicago, we purchased land for a CNG station at Midway Airport, and construction should begin soon.

Last quarter I highlighted attractive new markets that we are pursuing; the ready-mix truck market and the bulk fuel hauling market. I wanted to provide an update.

We've signed two deals -- one with Delaware Valley Concrete and one with Schwartz Redi-Mix to build each of them a station, which combined, should add about 1.6 million gallons annually. We expect this to be a promising market.

We are also expanding our relationship with our partner, Mansfield Energy, to form a joint venture, which will focus on the bulk fuel hauling truck market, which I mentioned last quarter. We currently have two fueling sites in development, and construction near fueling terminals in Atlanta and Tampa, and plan to have additional locations in development by the end of the year.

We continue to be pioneers in developing new business opportunities. In this quarter we announced the largest-of-its-kind natural gas fueling station in North America with NG Advantage in New Hampshire. We will be delivering CNG to their customers by a virtual pipeline consisting of a fleet of high-tech tractor trailers, which will serve manufacturing facilities, hospitals, education institutions, and other energy-intensive customers beyond the reach of a natural gas pipeline.

This station is expected to sell about 10 million gasoline gallons of CNG per year to stationary customers, and it will also fuel heavy-duty trucks. The station's one of the largest we have ever built and should double the CNG fuel volume currently supplied by Clean Energy's other high-volume CNG stations.

We have recognized opportunities to build similar CNG stations in many underserved regions throughout the country, so we are very excited about the potential of this market. To date, we have completed 27 station projects for ourselves and our customers and our various market sectors, and we have about 45 additional station projects under construction, which should be complete by yearend.

In our biomethane business, we commence full-scale operations in our third biomethane facility located outside of Memphis, Tennessee, in mid-July. In a month, we should be able to produce roughly 80,000 gallons of redeem daily between our three plants.

And with that, I'll turn the call over to Rick.

Thanks, Andrew.

Before I review our financial results, I would like to point out that all my references to our results will be comparing the second quarter of 2014 with the second quarter of 2013, and the first six months of 2014 with the first six months of 2013, unless otherwise noted.

Volumes rose to 64.8 million gallons during the quarter, up from 52.6 million gallons a year ago. For the quarter, our CNG volumes were 43.5 million gallons, our RNG volumes were 3 million gallons, and our LNG volumes were 18.3 million gallons. For the first six months of 2014, volumes increased to 124.1 million gallons, up from 102.5 million gallons.

For the quarter, revenue increased to $98.1 million, up from $88.1 million. For the first six months of 2014, revenue increased to $193.4 million, up from $181.2 million a year ago. When comparing our numbers between periods, please note that the quarter ended June 30, 2013, included $6 million of volumetric excise tax credits, or VTEC revenue, and the first six months of 2013 included $32.2 million of VTEC revenue.

We did not record any VTEC revenue in 2014, as the law providing for VTEC expired on December 31, 2013. Pulling these amounts out, revenue increased between periods by $16 million for the quarter, and $44.4 million for the six-month period.

Adjusted EBITDA in the second quarter of 2014 was minus $4.7 million, which compares to adjusted EBITDA of $11.1 million in 2013. For the first six months of 2014, adjusted EBITDA was minus $11.5 million, compared to $31.2 million last year. Please remember, the second quarter and first six months of 2013 included $6 million and $32.2 million, respectively, of VTEC revenue.

The second quarter and the first six months of 2013 also included a $15.5 million gain on the sale of our vehicle conversion subsidiary, BAF, and the first six months of 2013 also included a $4.7 million gain on the sale of our ownership interest in our Peruvian joint venture.

On a non-GAAP basis for the second quarter, we reported a loss of $0.28 per share. This compares with a non-GAAP loss of $0.07 per share in the second quarter of 2013.

For the first six months of 2014, our non-GAAP loss per share was $0.58, and was a loss of $0.03 per share in the prior period. Again, please remember the second quarter and first six months of 2013 included $6 million and $32.2 million, respectively, of VTEC revenue.

The second quarter and the first six months of 2013 also included a $15.5 million gain on the sale of our vehicle conversion subsidiary, BAF. And the first six months of 2013 also included a $4.7 million gain on the sale of our ownership interest in our Peruvian joint venture.

Adjusted EBITDA, non-GAAP EPS are financial measures we developed to highlight our operating results, excluding certain large, non-cash or nonrecurring charges or gains, which are not core to our business. Adjusted EBITDA and non-GAAP EPS are described in more detail in the press release we issued earlier today.

Our net loss on a GAAP basis for the second quarter was $32.3 million, or $0.34 per share, which included a non-cash loss of $2.3 million related to valuing our Series 1 warrants, non-cash stock-based compensation charges of $3 million, a $0.3 million write-up on our hold-back shares we received from Westport Innovations related to our sale of BAF, and $0.8 million in additional lease exit charges related to the relocation of our corporate headquarters.

This compares with a net loss of $11.9 million, or $0.13 per share, in 2013, which included a non-cash loss of $40,000 related to valuing our Series 1 warrants, non-cash stock-based compensation charges of $5.5 million, and foreign currency losses of $0.2 million on our IMW purchase notes.

For the first six months of 2014, our net loss on a GAAP basis was $60.9 million, or $0.64 per share, and included a non-cash gain related to valuing the Series 1 warrants of $2.2 million, non-cash stock-based compensation charges of $6.4 million, a $0.3 million foreign currency loss on our IMW purchase notes, a $0.1 million write-down on the holdback shares we received from Westport Innovations related to our sale of BAF, and $0.8 million in additional lease exit charges related to the relocation of our corporate headquarters.

For the first six months of 2013, our net loss on a GAAP basis was $15.8 million, or $0.17 per share, and included a non-cash charge of $0.5 million related to valuing the Series 1 warrants, non-cash stock-based compensation charges of $11.7 million, and a $0.4 million foreign currency loss on our IMW purchase notes.

Our interest expense was up between periods, primarily due to the interest charges we are incurring on our additional draws we made on our Mavericks notes in September and December of 2013, and the convertible notes we issued in July and September of 2013.

Our gross margin this quarter was $24.9 million, which compares to $26.2 million in 2013. For the first six months of 2014 our gross margin was $48.5 million, compared to $68.5 million in 2013. The gross margin for the second quarter and the first six months of 2013 included $6 million and $32.2 million of VTEC revenues, respectively.

Our margin per gallon on our fuel sales this quarter was up $0.02 from last quarter, to $0.29 per gallon. Our cash balance, including restricted cash and short-term investments, totaled $289.1 million at June 30, 2014, which we have available to fund our future cash needs.

With that, operator, please open the call to questions.

(Operator Instructions)

Eric Stine, Craig-Hallum Capital Group.

Hi, guys. It's Aaron Spychalla.

First, could you maybe give us an update on the fleets that are testing the 12-liter, some of the movement that you might be seeing there? And what you guys think we need to see happen for these to turn into some larger orders here going forward?

Sure, Aaron. We're seeing more fleets all the time. Some of -- it's maybe a good time to mention -- some of them we get to announce when they begin to bring vehicles into their fleet to test. And some -- frankly, a great number of our customers, they'd really see this as a competitive advantage, and they don't want everybody to know exactly what they're doing it.

So we're often -- it's a little frustrating for me, but often we're not able to necessarily disclose who some of those new fleets are. But, as I mentioned in my prepared remarks, about 280 -- we're now working with 280 separate different fleets.

I think if there's a trend developing as we're starting to see -- I think, really, with just a few exceptions, I mean there's just no doubt about it, they all want to try and test various numbers of these to get some operating experience. And everybody's a little different, but often that is four to six months to really conclude what they think is a meaningful test to get some experience.

Generally it's gone pretty well, I think. And what we're -- I was speaking with Jim Harger, our Chief Marketing Officer, earlier.

I guess if there's a little trend developing, is we're beginning to see some fleets that maybe first started with 5 or 7 vehicles, begin to now come back at the program for the second purchase of vehicles, and we're seeing the number creep up to where now they're beginning to put in for 30 -- working with their shippers -- their customers -- we're starting to see them take larger numbers. That's a good thing, and that's exciting for us.

Yes, they still are testing them, and we're beginning to see the size of the purchase -- of the number of trucks begin to go up. There's still a lot more to do. But maybe that gives you a little bit of the color that you're looking for.

No, that's good color. Thanks.

Maybe a second question on the NG, or the station that you opened for NG Advantage. How big could that get from a volume standpoint?

I think you mentioned starting at 10 million gallons eventually here. Is that more akin to retail or O&M margins?

And then maybe could you talk about some of the other opportunities that there are out there that are like this?

That number I'm using -- that will -- it should be somewhere around -- I mean that's a lot of gallons, right? You know, probably -- I wouldn't expect it to go much over -- that particular station to go much over 10 million gallons. If it's doing well, it should be somewhere between, I think, 10 and 12.

The real opportunity is in the region, and I'm headed all the way over into upstate New York and other places. There's a lot of this kind of load. There are a lot of customers, industrial customers that use fuel oil and propane, and natural gas can be very competitive.

We see other stations like this that we're working with NG Advantage. And some of them, Aaron, might even be larger than this one.

This is, though, really the largest station we've really ever built, and maybe one of the biggest -- we're hedging our bets here -- but we think it may be the biggest one that's been built in North America. It's 10,000 SCFM, so it's very large. But there appears to be several hundred million gallons of this kind of load in that part of the world, and so we're very excited about the potential.

Now, the margins, you know, we haven't disclosed that exactly. But let's just say for this discussion that it's better than O&M margin and it's not retail, okay? So it's somewhere in between.

We can do well there and our customer can still save. The fellow that opened -- at the station opening, runs the local hospital, it cost him about, I think $0.5 million to upfit his hospital to be able to receive the natural gas.

And he said the saving to the hospital is going to be somewhere over $400,000 a year. This is a great opportunity for a lot of these industrial stranded customers around there.

Good. Thanks for the color. Nice job on the quarter. I'll hop back in the queue.

Rob Brown, Lake Street Capital Markets.

Good afternoon. Now that you've got a couple quarters running, are you seeing fleets in those areas starting to increase demand, or what's your experience once you get a corridor running? How does that impact demand?

It's a good comment, and of course, I'd almost break it down even further. Once you have a station open that may be base-loaded -- and we've been through this discussion -- that we'll open these stations, many of them with 20 trucks. It does give us an opportunity for other fleets in geographic location to those stations to add one, or two, or three trucks.

That's the beauty. Our marketing and our national truck team is being very focused on, once we have an open station, and also corridor -- but just think of it just more stations -- then we're able to really sell in that area to somebody as few as one or just a handful of trucks.

But, you're exactly right. These corridors, most vehicles operate in these segments, and so, yes. It's really meaningful once we get a couple of these corridors open, then we're able to really sell into other fleets that operate there, as well.

Okay, good. Thank you. And then, on your Mansfield deal for bulk fuel, you got a couple stations you're working on. But what's the opportunity there? How does that work? And what ultimately is the gallon opportunity of that market?

Yes, the market -- it's a big market. And I've had this very discussion -- I wish I had an exact number for it, but I'm going to ballpark it, and then if I'm way off, we'll correct -- but, I've talked with Michael Mansfield about this. If you just look across the country, there's a lot of people moving gasoline and diesel around.

I asked Michael, how big is that market? Think about it this way, that our refuse market is a couple billion gallon market.

We were talking about it, and he said he thought it was somewhere between about 1.2 to -- it's hard to get his arms around -- 1.2 to 1.5 billion gallon market. It's a big market. There's thousands of those trucks.

For instance, here, just in -- I worked on this once upon a time with Southco Share Quality Management District -- there's a thousands -- a couple thousand of those trucks just here in the LA basin. It's a big market; we're just scratching the surface. We've got our first station that's almost complete.

These trucks, the bulk-hauling trucks, they all go to these terminals and get their fuel. So it's nicely set up for natural gas, we like it. And I know our team right now, the Mansfield and the Clean Energy team assigned to this bulk-hauling fueling, they've got 12 different locations that they've got right now on the short list to work on to try to bring along.

Okay, great. Thank you. I'll turn it over.

Colin Rusch, Northland Capital Markets.

Hello, gentlemen. This is Noah Kaye in for Colin.

Just a question, first of all, on the LNG liquefaction market. With increasing adoption, how are you thinking about the adequacy of LNG supply, and how are you thinking about opportunities for additional, small-scale liquefaction. How are you thinking about that?

Sure. We have one fellow here that focuses on our LNG supply, and as you know, we have two plants. We take all the fuel from a third plant. But today now, we're actually sourcing from 13 other plants, really scattered around the country and these are often the peak shavers.

We have some short-term contracts with some of those peak shavers. We don't have a whole lot of take-or-pay with some of those sources. We do with a few.

If you were to look at it, we probably today feel like we have a handle on about 400 million gallons annually of LNG. We've got a couple year run -- running room, I think, from our Company point of view on LNG supply. But if it goes the way that we think it is, you're going to be -- run short of that supply, and you will need more LNG liquefaction capability.

Now when you say small-scale -- when -- in the industry we talk a small-scale, we're thinking of a plant that can do a couple hundred thousand gallons a day. We still are watching closely and looking all the time at -- is there -- is real small-scale doable?

Can you make LNG in batches of 10,000 gallons or less, and will that work? I think our conclusion so far is that's very difficult to make the economics of that pay.

You really need larger scale, couple hundred thousand gallons a day liquefiers, and they need to be near the load. You don't really want to have it much more than 150 to 200 miles away.

So, other plants will need to be built. There's some, as you know, have been announced. They'll take a couple years to build.

I would say in the next year or so, you're going to need to start seeing some of these liquefaction plants begin to be built, and I think there will be a need for them. We're keeping a close eye on it, and as you know, we have a deal GE to build a couple ourselves. We don't need them right this second, but we will be at a point here in the next year or so where we'll have to begin to move forward on those.

Okay, great. And implicit in that is a very positive outlook on uptake for LNG, as have been asked about earlier. And maybe you can give us an update on that, how you're seeing now for new sales in heavy-duty space that LNG versus CNG mix -- (multiple speakers)

As you know, an awful lot's been said and written about this particular item. We're at the center of that a lot. We do both, and it's hard to get your arms around it exactly.

It's hard to get that information from Cummins and even from Westport, and certainly from the customers, but we had that discussion today. We keep a very close tab on it.

We're still seeing the cut -- the break at around 50-50, we see an even split on that. I don't know -- I think it's a little early to see if with one fuel it will be a little bit more than the other, but we're still seeing a split, so we're glad were in both camps.

We're glad we've got LNG capacity and LNG stations. We think you're going to need it. And we're also glad that we have a compressor company and we do CNG.

You could tell by my comments, we have a lot more CNG truck-friendly stations than we do LNG. But we're seeing it, so far, along those lines around an even split.

And then finally, for both fuels a question I'd like to ask about margin splits, basically. How are your contracting experiences evolving at all?

As you go back for that second round with multiple fleets, as you look to expand, are you seeing trends on margin sharing that maybe you didn't anticipate before? Can you give us a bit of a thought on that?

Well, these trucking companies and these shipping companies are smart purchasers. Right? They drive a tough bargain. So, it depends on who the customer is, it depends if you're building them a station or if they're accessing retail locations. It depends on the length of the contract.

I'd say our margins haven't changed much yet. There's some competition from time to time on certain bids. And there's certain RFPs that are out that are more competitive than others, just in the way that they go through their procurement process.

I don't know that we've seen any dramatic change in the margins yet. So far, it's about similar to what we've experienced before.

That's extremely helpful. Thanks so much.

Caleb Dorfman, Simmons & Company.

Good afternoon.

Hey, Caleb.

I guess my question is going back to margins. Volume margin in the quarter was $0.29 a gallon. Obviously, that was up quarter on quarter, but I know Q1 had the high gas prices.

What do we need to get back to those margins that we had, looking back last year in the $0.30-plus a gallon range? Was there any specific drag on margins again this quarter?

It was up.

$0.30 is where we have been tracking to, with the end of the year, by the time you normalized everything. So the fact we're back to $0.29, we feel good about.

You're right, the biggest piece of that increase from last quarter was just the reduction of the gas prices, because obviously, the extreme cold temperatures in the first quarter increased those prices significantly and we took a little hit on that. So we're back to where we think we and thought we would be.

The one thing that will help us, that has helped us in the past, is our renewable fuels business. These had a few issues at their plants as they've brought on some additional capacity, and expanded, and have added various pieces of equipment here and there that we've just been working through. And it's been taking a little bit of a hit on the margin line, as they've tried to fine tune that and repair that and do all that good stuff.

One thing I would say that, to the extent that they -- knock on wood -- it seems like they're getting there. We should see a little uptick from that going forward.

And then the other thing that will just help us is, we've talked about before, is just adding on more trucking volumes, which, in theory, will fall into the retail sector more than the O&M sector, which should be good for us. Then the more that happens, it should start pulling that number up

That's helpful. I guess going back to the ANGH segment. Andrew, do you have any idea how many trucks are fueling at the ANGH station, and how that has trended, both quarter on quarter and year on year? And if you have any insight into actual consumption per truck and how that's trended, that would be helpful, as well.

I don't know that I have all those numbers. We know that most of these early adopters tend -- tend -- it's not always the case -- those that are out there on the highway -- at the highway stations tend to be the higher users, usually. And it's somewhere between 15,000 to 20,000 gallons a year per truck is where they're ending up.

We have some customers that are significantly over that. We have a couple customers that I mentioned earlier, they use 30,000 gallons per truck annually so -- I would say the number that we've always guided to you about 20,000, that's still a pretty good number.

I don't have a number off the top of my head to tell you at those stations, how many hundreds or several hundreds of trucks that have made their way to those. I just don't have that. Maybe we'll try to get that for you next time.

I mean, you know, we know there are a couple thousand of these -- few thousand of these trucks are out there. We're fueling a lot of them. But I don't have that broken down.

I can help you steer you toward the fact that we're not opening these stations typically until we have 20-some odd trucks, so you know that if we've got an open node on the system, it has at least that many. I'm sorry. I wish I could give you the full number.

I do know that we have 280 fleets. Some have seven trucks, and some have 40 trucks. But I don't have a number.

Okay. And one final question. I know last quarter you gave the number on how many incremental gallons you think that you would need to get to EBITDA breakeven. Do you have any update on that, or any update on the number of additional gallons you'd need to get to cash flow breakeven, assuming a flat capital (inaudible)?

Well, Caleb, the math we've given is, if you take our $0.30 per gallon margin, which again is just what's out there -- hopefully, we can do better than that, depending on the mix of our sales going forward. But if you take that, you can just do backwards math to figure out how many more gallons we would need to get basically adjusted EBITDA breakeven or any profitability measure you want to look at.

If you just divide the $4.7 million by $0.30, that will tell you I think it's about 15 million gallons or so would cover up the adjusted EBITDA shortfall. And then however you want to figure -- you basically could do that same math to figure out whatever other profitability metric you just listed there.

I see I missed what you were asking for after the adjusted EBITDA, I want to start doing math in my head. But that's just the way we look at it.

We're hopeful we'll do better, right, because that assumes there's no growth or anything at IMW, or any other positive things that impact our results. That's just a figure that we gave people so that they would understand that we're getting close to adjusted EBITDA breakeven.

And we're hopeful that some of the other businesses will kick in, we're watching our SG&A line. Those types of things, hopefully, will help out. And hopefully, we'll get there faster than you would think by adding those 15 million gallons.

If you think back, so in the first quarter is was 59 million gallons, and this quarter it's 64.8 million gallons. So we added -- if you agree with us on our math, that we needed the 23 million or 1 million gallons, we took care of 5 million of it this last quarter. So we're headed that way and feel pretty good that we're getting kind of close.

Thank you. That's helpful.

Andrea James of Dougherty & Company.

Hello, good afternoon, thanks for taking my questions. Did you guys see -- how long does it take for you guys to see the impact, like when oil prices start lagging up, such as they did in June? Do your phones start ringing more often? I know it probably happens more on the engine side, but I'm just curious about what you guys see in terms of fueling?

You know, I don't know, Andrea. I guess -- I don't know if it happens that dramatically.

I know that when you're in a high oil price environment, the -- I go back to almost a few years ago -- several years ago. There was a time when we would get our salesmen, and myself included, we'd get into arguments with our customers that you'd get in an argument with a trucking guy, and he would tell you that diesel was always going to be a $1.20 a gallon. We don't have that argument anymore.

I think that people understand that there's pressure on diesel around the world, and that you're in a high oil price environment. Here in Los Angeles, diesel's $4.08 a gallon. Nationwide, the average, I think, is at $3.83.

So there's still a lot of pressure there, still a lot of cost there. Our customers understand that it's likely that they're going to be faced with higher priced diesel for a long time to come, and it's always going to -- and it's going to be more expensive a lot.

We have a pretty compelling economic -- if you look at the spread right now between oil and natural gas, it's wide. We don't see much really change that.

Now oil may come -- it's coming down a little bit. At the pump, we're still able to offer that $1.40, $1.50 a gallon savings. It's still pretty compelling.

I appreciate that. And then just on housekeeping. I might have missed them, you guys might have already said them. Your IMW sales, and then your price per gallon -- you gave the margin per gallon, but what was the price per gallon?

I have to pull out my 10-Q and look at it. I don't have that right off the top of my head.

IMW, and this is in the queue, also as IMW sales for the quarter, but I'll give it to you. It was $21.7 million. And, if you give me a second here -- $0.89 a gallon for the quarter.

The price per gallon, okay. So, the margin was $0.29 on that?

Yes.

Okay. So your costs have come down a bit, then. Is that the cost to deliver?

Yes.

What drives that? (multiple speakers) Go ahead.

The last quarter, the biggest chunk of that was just the reduction of natural gas prices between quarters. Just because it was really high last quarter with the high -- or with the increased prices due to the extremely cold weather. That's obviously gone away and prices have subsided and come down.

Got it. Thank you so much.

Sure.

There are no further questions at this time. I will hand the call back over to Mr. Littlefair for any closing comments.

Thank you, everybody, for listening today, and thank you for your continued support. We look forward to reporting to you on our progress next quarter.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.