Clean Energy Fuels Corp (CLNE) 2016 Q3 法說會逐字稿

Greetings and welcome to the Clean Energy Fuels third-quarter 2016 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 again.

Thank you, operator. Earlier this afternoon Clean Energy released financial results for the third quarter ending September 30, 2016. If you did not receive the release it is available on the investor relations section of the Company's website at www.CleanEnergyfuels.com, where the call is also being webcast. There will be a replay available on the website for 30 days.

Before we begin we would like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words of expression reflecting optimism, satisfaction with current prospects, as well as words such as believe, intend, expect plan, should, anticipate and similar variations identify forward-looking statements, but their absence does not mean that the statement is not forward-looking.

Such forward-looking statements are not a guarantee of performance, and the Company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the risk factors section of Clean Energy's Form 10-Q filed November 3, 2016.

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 the 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.

Participating on today's call from the Company is President and Chief Executive Officer, Andrew Littlefair; and Chief Financial Officer, Bob Vreeland. And with that, I will turn to call over to Andrew.

Thank you, Tony. Good afternoon, everyone, and thank you for joining us. The third quarter of this year was once again a very good one, showing continued growth in volume and revenue. And, more importantly, it was the fifth consecutive quarter in which we reported positive adjusted EBITDA.

Our growth stems from several factors and the most fundamental is that municipalities, states, for-profit companies and other organizations continue to seek an alternative fuel that comes at a stable, low price and, most importantly, is cleaner. Governments continue to strive for ways to clean up the air for their constituents, and companies want to meet their own sustainability goals through the use of alternative fuels. More often than not, that fuel is natural gas because these organizations understand that natural gas fueling is the cleanest, most economical and scalable solution for fleet vehicles available today. And no other company provides them the quality and variety of fuels and services than Clean Energy.

If there is any doubt that the move to natural gas is not continuing to gain momentum, then one only has to look at the number of fueling stations that we have built or expanded in the first three quarters of this year. We have completed 44 station projects thus far and are on pace to complete 19 more by the end of the year.

Allow me to highlight a few of the stations that we opened in the third quarter. In October, I had the honor in participating in the grand opening of the state-of-the-art CMG fueling station we built for FedEx in Oklahoma City. The station is currently fueling 100 of their class VIII CMG trucks, and FedEx has said that they plan to add it least another 75 heavy-duty trucks as they grow their fleet at that location.

This impressive station has four fast-fueling lanes as well as a time fuel station which has six zones and 18 hoses using Clean Energy's new clean CMG compressors. These compressors produce the cleanest downstream gas, ensuring cleaner combustion at the vehicle. It is designed to dispense approximately 2.5 million gallons of CMG per year.

Joining me at the event where Oklahoma Governor Mary Fallin; FedEx chairman and CEO Fred Smith; and our cofounder, Boone Pickens. I believe their attendance signifies the growing importance of natural gas fuel for the state of Oklahoma and FedEx, one of the largest and most sophisticated logistics companies in the world.

Fred has been a leader in pushing for the entire country to become more secure through energy independence and is doing his part by making sure FedEx operates at the most efficient and sustainable level. Transitioning a portion of FedEx freight's fleet to a fuel that will substantially reduce greenhouse gas emissions is an example of that commitment. Additionally, we believe our nationwide network of stations, expertise and skilled service technicians ideally positions us to fully support FedEx as we anticipate their expansion with natural gas fueling in their fleet.

Our public station network is growing. We also opened a new LNG station in Fife, Washington, just outside of Tacoma. The station, located on Interstate 5, completes a key transformation corridor in the Northwest and enables our fleet customers to operate along the entire West Coast from Seattle all the way down to San Diego.

In our core markets we continue to see growth as well. Earlier this quarter we announced that we were awarded a contract for Washington metro area transit authority, which provides transit services for more than 4 million people throughout the nation's capital. We now operate two of their transit stations that fuel over 580 CMG buses and represent about 6 million gallons annually.

2016 is shaping up to be one of our strongest years in the refuse sector. We are on target to complete 34 station projects, and our refuse volume is tracking to grow 16% over 2015.

You have heard us speak about our renewable natural gas offering, Redeem, for a few years now, but I can't over emphasize the role that it is playing in giving companies, transit authorities and municipalities the ability to achieve their sustainability goals. Because it has 70% less carbon than diesel, customers are increasingly contracting with us to guarantee a supply of Redeem. Redeem's volume doubled from 2014 to 2015 and is on pace through three quarters of this year to grow 20% while contributing $11.3 million in revenue in the third quarter.

We have expanded Redeem's footprint from California to other states and are currently in discussions with some of the country's biggest brands to add their fleets to UPS, city of Santa Monica, Republic Services and others that call Redeem their renewable fuel choice.

As I look at what's happening in the clean air policy arena I cannot help but be impressed. We are at the forefront of several developing public policy initiatives that are very bullish for the advancement of natural gas vehicles as a cleaner alternative. Clean Energy led a coalition effort to help pass SB 32 in California, which not only protects the low carbon fuel standard; it also requires the state to reduce greenhouse gas emissions 40% below 1990 levels by the year 2030. This puts stability in the clean air program for another decade.

We were also successful in helping with the passage of AB-1613, which resulted in the appropriation of $150 million for more sustainable heavy-duty vehicles and off-road equipment, a portion of which will be specifically allocated for low NOx trucks. We are working with the California Air Resources Board on their proposed state implementation plan to promote the adoption of 900,000 medium- and heavy-duty trucks to low NOx over the next 15 years. In addition, 50% of the fuel must be renewable like our Redeem fuel.

This is probably the largest and most significant piece of alternative fuel natural gas-friendly policies to ever be proposed. This plan recognizes the threat NOx poses to air quality and the impact cleaner trucks and fuel could have on it. The good news is the solution is currently available with the Cummins Westport 8.9 low-NOx engine and soon to be followed by the 12-liter and 6.7-liter.

Additionally, even more immediate is the new comprehensive clean-air action plan being developed by the ports of Los Angeles and Long Beach to improve the air quality in one of the busiest port systems in the country. We helped spearhead the initial clean truck program in the port back in 2008 which helped launch natural gas fueling in the heavy-duty trucking market. Now, due to stricter air quality mandates and the aging truck fleet, the ports are embarking on the next phase of the clean air action plan. We anticipate that deploying thousands of new trucks powered by the near-zero-NOx engines and fueled with low-carbon and renewable natural gas will be an instrumental part of this ambitious plan. We will keep you posted as this continues to develop over the next few months.

I'm very encouraged not only by the enormous impact these programs should have on the adoption of cleaner running trucks in California. But as with many other progressive environmental initiatives spearheaded by California, we often see similar clean-air programs adopted in other states.

On the last few earnings calls I told you that our primary focus for 2016 would be to deleverage the balance sheet, conserve cash and grow our volumes. On the last call I reported that we retired the remaining balance of convertible notes that were outstanding and due at the end of August. To date this year, we have reduced our convertible debt by $215 million. We continued our deleveraging effort this quarter by paying down $50 million of the working capital line. At the end of the quarter we had $119 million in cash and short-term investments on our balance sheet and less than $5 million of recurring debt. Our next principal payment on our convertible debt is not until July 2018, and we will continue to look for opportunistic ways to reduce or refinance our debt.

Finally, we continue to be as efficient as possible. We reduced our SG&A by 7% year-over-year while increasing our margin per gallon almost 14% over the third quarter of last year. For the year, our CapEx budget should be less than $25 million, which will be more than a 50% reduction from last year. So I am optimistic as we continue to execute our plan to grow our business, reduce our debt and conserve cash.

And with that, and for more numbers, I will turn to call over to Bob.

Thank you, Andrew, and good afternoon to everyone. Our financial results and volume growth continued on positive trends in the third quarter, and we improved our capital structure. Our financial results continue to trend positively due to the gross margin contributions from our volume-related revenue, our increased station construction project sales and the alternative fuel tax credit revenue, which we refer to as VETC.

Our volume in the third quarter of 84.5 million gallons was an increase of 5% over last year and resulted from growth in CNG gallons offset partially by lower LNG and RNG gallons. For CNG, we saw 9% volume growth, led by our refuse and transit sectors. The LNG gallon decline of 1 million gallons was bulk supply related. Our RNG gallons declined as we continued to sell more RNG gallons as Redeem into our vehicle fueling network, and the Redeem gallons are included in our CNG and LNG gallons. Redeem volume for the quarter was 13.5 million gallons.

The increase in third-quarter revenue over a year ago was driven by higher volumes, increased construction sales and VETC, offset partially by a decline in compressor sales. Our overall gross profit margin improved from a year ago due to a higher effective margin per gallon on higher volumes as well as the benefit of increased construction sales and the addition of VETC in 2016. Our effective margin per gallon was $0.33 per gallon, compared to $0.29 for the third quarter of 2015. Both quarters include the state and federal environmental credits, LCFS and RINs, which continued to favorably impact our effective margin per gallon. Our SG&A of $25.9 million in the third quarter was 7% lower than a year ago. As we have discussed on prior calls, we don't expect significant changes in our current SG&A run rate, but we continually evaluate our SG&A spend.

The other income and expense category for the third quarter of 2016 included a net loss of $700,000 related to debt reductions. In 2015, other income and expense included $2.3 million in gains related to a legal settlement and earn-out associated with our former Dallas biomethane plant.

As I highlight some of our net results, I want to point out when evaluating the three- and nine-month periods between 2016 and 2015, there are some items impacting the comparability, which we've pointed out in prior earnings calls. Specifically, our 2016 results include VETC while 2015 results do not, and our 2016 results include other losses and gains from our debt reductions.

With that said, our GAAP net loss for the third quarter was $12.6 million compared to a GAAP net loss of $23.1 million in 2015, an improvement of 45%. Our adjusted EBITDA was $12.9 million for the third quarter of 2016 compared to $3.1 million in 2015. Our GAAP net loss year to date through September 2016 was $8.3 million versus a net loss of $84.2 million for the same period in 2015, an improvement of $75.9 million. And finally, our year-to-date adjusted EBITDA of $67.4 million through September 2016 has improved by $72.5 million on a year-over-year basis.

From a balance sheet standpoint, as Andrew mentioned, at the end of September our current debt balance was approximately $5 million, compared to current debt of $139 million at the end of June. This reduction was the result of paying off the remaining balance of our SLG convertible notes. We used cash and stock to satisfy that payoff and the paydown of our bank line. In addition to paying down our bank line, we also extended its maturity to September 30, 2018.

With $119 million of cash and investments at the end of September, we remain in a good liquidity position. Our operating cash flow of $43 million for the first nine months of 2016 has improved by $44 million compared to last year.

Looking forward to the fourth quarter, we anticipate continued year-over-year volume growth, and our environmental credits from both natural gas and Redeem will benefit our results and we'll continue to record VETC revenues.

With that, operator, we will open the call to questions.

(Operator Instructions) Eric Stine, Craig-Hallum.

I'm wondering if we can just dig into the Redeem volumes there and just the outlook. How high do you think that that ultimately can go in terms of volumes, and are there limiting factors? Is it needing more third-party supply, or how should we think about that going forward?

Eric, I think that you are just kind of seeing the beginning of this fuel. In my remarks I talked about California. In that SIP plan that I mentioned, it calls for 50% of the fuel. Which, just kind of doing the math here loosely, you are talking about a few billion gallons of fuel just for that one segment a year.

And so there's got to be a lot of this fuel created and developed over time. And we're seeing that. We're seeing sources of renewable natural gas being developed all over the country in digesters and wastewater treatment and other ways. So this is a hot new industry and you'll see a lot more of it. We think we're well-positioned because we have that infrastructure -- nationwide infrastructure of our customer stations and our stations -- almost 600 stations. So we have that pathway to take this fuel and get it into the valuable market.

And so today, as you know by doing the math, we're going to sell somewhere around 60 million gallons or so of Redeem. I think I said on the last call that over the next couple of years we should at least double that, I think. And so we're working hard to do that. We'll have some other announcements coming on how we expect to move forward on developing that business. We're seeing a lot of interest in it from our customers.

And so I don't have a number for you, Eric, just to let you know how big -- how many billions of gallons ultimately this is over time. But it's going to be a very large market. Remember, it's not just going to be natural gas. Right? You are going to have renewable diesel as well in the future. And we know there's rules coming up with new standards in 2023 by the EPA. And you'll see engine standards and fuel standards that will require increasing levels of renewable fuel. The nice thing is that we're well-positioned. We have a business that does that. We're creating, I think, about 50% of the credits today in our space, and we have to pathway to monetize those. So we're pretty focused on this business.

That's what I was getting at. This is something where you are just starting. I'm wondering if the re-up of LCFS -- I mean, is that something that -- I would assume that means more investment in the market, gives people certainty that they can move forward on this. And then, as you said, you are the transportation pathway for people to monetize those credits.

That's right. And so to answer your question -- I went on a long time -- but, yes, there will be more third-party supplies. And we compete for some of those supplies, but yet we have a little bit of a leg up because we have the pathway. Right? We have the downstream delivery system.

Yes, the AB 32, I think, was really key. The part of portion of that law was going to be done in a couple of years. Now you have another decade. So, yes, you will see more and more -- there's some debottlenecking done for biomethane in landfills in California as well, some money put in place for that. You are going to see more and more supply come in California and other states. But I think you are just beginning to see -- you and I have talked before -- I think this is going to be a big business.

Yes, okay. Maybe just turning to the Clean Air Action Plan -- this current version. Maybe just talk about some of the lessons learned the first go round in 2008, 2009, and maybe as a result how this one looks different and what that could mean in terms of timing of rollout. You did mention a couple thousand trucks, but just maybe how does this one look different than the past go round given lessons learned?

Yes, and it's interesting. Let me give you a little update and some of this is -- first off, this is complicated. Right? You have the largest port complex in the country, Los Angeles and the Port of Long Beach. They compete -- the city of LA is a large city, of course, and Long Beach is a large city. They own those ports, and those are commercial ports and they compete with each other.

But they joined together on this Clean Air Action Plan and they did it once before. This Clean Air Action Plan involves shipping and dockside power and goods movement and locomotives. But a big part of it is the trucks. And, yes, we learned a lot from it once before. You remember we went from a situation where you had really somewhat unregulated old trucks -- kind of vintage trucks in the port, mostly owner-operator. More trucks than are needed -- we're kind of back to that point again -- most of which were pre-2007.

The Clean Air Action Plan really got put in place last time in 2008, I think. And so the goal that time around was to make the new trucks -- because 2007, you remember, was a new emission standard. It was to get rid of these old 2000 and 1999 trucks and get them to be the latest technology.

Well, so here you are today with 16,000 trucks in the port. Most of them are 10 years old. They are coming up on 10 years. In fact, even some of our early natural gas trucks are being retired because they are eight years old, nine years old.

And the goal -- and we think today is there is going to be kind of a draft plan put out, and I don't know when we'll be able to see it. But we know that the ports are going to get together on the 17th, again, to kick off a public comment and a period of a few months, and they are hoping to adopt a new Clean Air Action Plan -- and the truck piece will be the major component of it -- in March of this coming 2017.

The play here is that they want to clean up kind of once and for all these trucks. So we're envisioning -- and there's a tension. Right? There's a tension between not doing anything till there's a new standard in 2023, just allowing people to keep diesel trucks, and using natural gas trucks, low-NOx trucks or -- and which obviously is our preferred plan that we think is most cost-effective and ready today to help the air quality today. Or electric trucks and fuel cell trucks, and we of course don't think those are ready.

But we think what will happen as this all shakes out -- and there is labor unions involved and there is cities evolved and there's environmental justice advocates involved and the people in the community that are all going to weigh in as well as the industry. We think they are going to move to try to put in place a standard that would encourage low-NOx trucks -- before what we think will be a new low-NOx standard sometime in 2023 -- early. And that if you do, you get the incentive dollars to upgrade your truck to a low-NOx truck or an electric truck. And you'll get a certain level of grant money. And if you don't, you are going to end up paying probably some sort of fee to be able to move around the port. And that's what they used last time. And so we're guessing that that the case.

And I think, Eric, that it will probably -- and it is going to take some wrangling here, but I think it will probably -- you'll end up with a plan that will call on -- we look at about there's 7,000 or 8,000 -- maybe 8,000 to 10,000 of the 16,000 trucks that probably need to get replaced in the next three years.

So when you think about what we're doing today with new natural gas trucks in the marketplace, this would be huge. And it would be 2,000 to 3,000 a year over the next few years. Obviously very important because we have the fueling infrastructure and we're the largest in the market here.

And I think that's what you're going to see. And I think the port will be better off for it. I think it will be really helpful to drive down the cost, the incremental cost. I think it will be good for the industry. And so that's what I think is going to happen, but there will be some ebbs and flows in this whole thing before it gets adopted in March.

Okay.

But I think it's pretty big and you multiply that times 10,000. Right? So you are talking about a lot of fuel right here in our backyard. And I think probably one of the most important things is it's a precursor to what -- the policy you are going to see adopted later this year and early in January of the state implementation plan, which is where -- we're talking about hundreds of thousands of trucks. And that plan is calling for low NOx and renewable. And we're well-positioned for that.

So I see this as really important to get it right. And it's potentially over the next few years, it's 100 million gallons. I'd say over three years, it's 100 million gallons worth of natural gas volume if it goes the way we think it probably will.

Right. Okay. Thanks for all that detail.

Rob Brown, Lake Street Capital.

Feel free to provide as much detail as you want. On FedEx, the expansion -- you've got a station going now. What -- I guess could you lay out what your thoughts are on FedEx's expansion or what their plans might be on expanding with natural gas?

Well, you know, I am kind of limited, Rob, on what I can really say. Let me just say that we're encouraged. We're encouraged with the way this rollout went. We're encouraged that we are having more meetings with FedEx to look at other locations. I was encouraged that we had the senior leadership of FedEx in many (inaudible).

You know, and I've learned a lot of this over time because we've worked with them for about the last four years to launch this project, but there's FedEx Express, there's FedEx Freight, there's Ground. We're working with really all of their companies in different ways. FedEx Freight is their big heavy-duty outfit that has about, I think, 16,000 trucks. So that's the one that I'm really talking about on heavy-duty.

So we're working with them. That's really all I can say right now is we're working with them to kind of roll this out. I was encouraged that we had, of course, Fred there and also Mr. Mike Tucker, who is President of FedEx Freight. And really senior management in terms of fuel, procurement and trucks and facilities that were all there that day. And those conversations continue, and that's really all I can say right now.

These are big outfits. I'm so impressed with FedEx. They have 460,000 employees, so they're big. And of course, when you have a big company like that you have some processes that you've got to go through to keep all the trains running on time. And so we are working with them. We're working with Freight, we're working with Express and we're working with Ground, and we have natural gas product for each of those right now. In fact, we had a meeting going on today with FedEx.

So we're optimistic, but that's really all can say right now, Rob.

Okay. Thanks for the overview. And I think you said you had 19 stations still going on for the end of the year. Is that Q4 -- kind of all booked in Q4? Is that right?

Yes. I always give a little wiggle room here, as occasionally you will have something that will flop into the first week of January. But it looks like -- we just had a meeting on this a day or two ago -- it looks like we should complete 63 stations. There's a chance we may even slip one in.

What I always look at at this time of year is how many we have in the queue for next year. And I'm not going to give you a number right now, but it is tracking to kind of what we did this year in terms of the backlog or those that we already have under contract moving forward.

You know, that's one of things we've talked about on these calls before is in a challenging oil environment of time, though these are checkpoints for us we're still able to look at how are our customers doing. Are they wanting more stations? Are we needing to build more stations for them? And that's holding up, so it's a very good barometer for us as we look forward.

The 63, other than the year when we had a big spike when we built out our highway, is about as many as we've ever built -- within a couple here and there. So it's still tracking kind of to about as many as we've built. And that's about more than -- what is that -- that's a little over one a week, so we're busy.

Pavel Molchanov, Raymond James.

While we're a week ahead of the election, I want to ask you about the topic that always comes up right before the end of the congressional session, which is what's going to happen with the VETC. So you guys have pretty good DC sources. Is there some sort of omnibus or a consensus bill that we might get an extension passed in?

Hi, Pavel. As you know, we have a fellow that runs that effort for us up there, and we've been working hard on this. We have reason to believe -- of course, this has been a pretty wild political season. We think that the tax -- you remember that there has always -- there has been a stated interest in tax reform -- big-time tax reform. So that always had us wonder whether or not these tax things, like the VETC is a part of, would get somehow re-done, and that would morph into tax reform. Well, as we know, there has not been a tax reform this year.

It looks like the coalition of tax businesses that would have these different tax credits and tax bills that we've always called the tax extenders -- it looks like that group of tax credits and such are still in play. And it looks to us like that is likely to be acted on in the lame-duck session. There's a chance that it might not be. We sort of think as an industry that our VETC is in place. And there will be some things -- Pavel, maybe you've seen where there's been some people saying that certain renewable tax deals shouldn't be acted upon. Well, we're not in that category. There were some others that were in that category. We're kind of in that overall tax extender package. And it looks to us like that there's a good chance that that will be addressed in the lame-duck. And if not, in the next Congress. But I'm still kind of thinking it will be dealt with in the lame-duck session.

Okay. And remind me -- I know every quarter it's a function of your sales mix. But what's kind of the average run rate of VETC? I know it's been having $6.7 million for Q3. Is that fairly standard, or was there anything unusual about that number?

That's fairly -- this is Bob -- that's fairly standard. It will move up a little as volume moves, but not all volume is VETC-eligible and that sort of thing. But that's fairly standard number.

Okay. Appreciate it, guys.

John Rosenberg, Loughlin Water Partners.

A small housekeeping thing -- probably not much of anything, but I noticed that your LNG volumes dropped off it seems like a volatile number quarterly. But could you talk a little bit more about specifically the LNG market? Are there other players? Is it a matter of share? I can't quite see a seasonal pattern either.

Well, I can let Andrew speak a little bit maybe broadly to LNG. But specifically to the decline, that was really kind of related to timing of bulk supply. And our numbers can get a little lumpy between quarters because we will have, as an example, big utilities that may take bulk supply, and we kind of blow that out. But maybe that doesn't happen again exact same timing the next year.

And that was the case on this.

And that was, yes. So it was about 1 million gallons that was different because we had a deal back last year for bulk. And on the bulk stuff, that can move a little bit. The rest of it is staying pretty steady.

John, I would say that the growth on the -- as the oil market tightened -- and we've seen the heavy-duty market come under some pressures really because of fuel price, and we have been -- I think we've been competing with pretty well as a Company. We've seen the heavy-duty market slow some because of the fuel pricing. And the LNG market as the -- we always believe that sort of the longer-haul, irregular route type business really favors LNG. And we have some big customers that like that. That new station up there that we just opened in Fife, that's a big LNG station for a big West Coast LNG trucking fleet.

But when the market sort of tightened down here, there's more CNG business than there is LNG business right now. And so that's the LNG market is tougher for us.

I understand that you guys have had a lot more success in CNG adoption and that Class A trucks haven't come online. I just would've thought -- and, again, I'm not aware of the bulk stuff, so thank you very much for clarifying that. But I would've thought that even with a static -- with some kind of installed base and then some slight growth in that market, I wish we would see that number inching up.

Yes. And I would think you're right. One of the other little facts that factors in on specifically on the LNG side -- and I mentioned it earlier in the comments here about the port of LA -- we've seen some port trucks -- LNG, some of our first biggest deployments of LNG trucks begin to retire LNG trucks in the port. And that's been significant. So those trucks are the ones that we bought in 2008, 2009, and some of those are coming off.

So we've been adding LNG customers but we've had some retire here in the port. And really right now we haven't seen any add back in because they are kind of waiting to see what's going to happen in this Clean Air Action Plan in the port.

With NOx and new standards coming down the line?

Yes, well, they figure there's a bunch of money coming. Right? Incentive dollars and rules, so they are not going to replace their LNG trucks right now.

Okay. Great.

And yet they've retired some, John.

So they are running diesel right now?

Well, yes, I guess in the port of LA only 15% of the trucks down there are natural gas -- right now.

Okay. Great. Thank you very much for the clarification.

Okay.

That does conclude our Q&A session. At this time I will now turn it back to Mr. Littlefair for closing remarks.

Well, thank you, everyone, for listening in on the call this afternoon, and we look forward to updating you on our progress in the next quarter. Good day.

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