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Clean Energy Fuels Corporation (NASDAQ:CLNE)

Q2 2014 Earnings Conference Call

August 7, 2014 4:30 PM ET

Executives

Tony Kritzer - Director, Investor Communications

Andrew Littlefair - President and CEO

Rick Wheeler - CFO

Analysts

Aaron Spychalla - Craig-Hallum

Rob Brown - Lake Street Capital Markets

Noah Kaye - Northland Capital Markets

Caleb Dorfman - Simmons & Company

Andrea James - Dougherty & Company

Operator

Greetings, and welcome to the Clean Energy Fuels Second Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

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

Tony Kritzer

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’s available on the Investor Relations section of the Company’s Web site at www.cleanenergyfuels.com, where the call is also being webcast. There will be a replay available on the Web site 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 Factors 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 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 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.

And with that, I’ll turn the call over to Andrew.

Andrew Littlefair

Thank you, Tony. Good afternoon everyone and thank you for joining us. I’m pleased to review our second quarter of 2014 operating results with you today. We reported 64.8 million gallons delivered this quarter, up 23% from the 52.6 million 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 VETC.

Importantly, this quarter we were negative $4.8 million in adjusted EBITDA which is the 31% improvement over last quarter, so we continue to make progress on our path to profitability and are very close to breaking even on adjusted EBITDA. As I look back over the quarter, I am pleased with the significant milestones we achieved. We’re able to open the Interstate 10 corridor from L.A. to Houston with the opening of our El Paso station to compliment our Phoenix and San Antonio stations.

We were also able to open the Interstate 40 corridor from L.A. to Oklahoma City with the openings of our Winslow, Arizona and Albuquerque stations along with our previously opened 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 17 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 our regular basis as fleet 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 out 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’re scheduled to deploy at a West Sacramento, California station. The fleet is expected to consumer 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 Clear 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 up a multiyear fueling agreement with interstate distributors who have ordered 20 LNG trucks which will be split between California and Washington State. And lastly our longtime customer UPS has deployed additional LNG trucks with fueled our stations in Amarillo, San Antonio, Jacksonville and Oklahoma City. We continue to see strong growth in transit, refuse, airports and other fleet services during the second quarter. This quarter we signed fueling deals with customers with 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. In this quarter, our customers deployed 1,557 vehicles.

I will quickly touch on some of 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 Valley Regional Transit, California’s King's County public transit and Santa Monica's Big Blue bus where we also delivered 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 were 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 in on a run rate to be closer to 23 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 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 7,200 buses every night at 41 transit properties across the U.S. and Canada.

And now on the refuse, this quarter our long time customer, Waste Management celebrated a milestone with 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 in Palm Desert. We are proud of our sustained partnership with them and look forward to continuing the support their commitment to natural gas.

Republic Services Group is another key refuse partner, last quarter we build 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 five 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 has 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’s 14 CNG refuse trucks with a Clean Energy owned portable CNG fueling station under a multiyear 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 in 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 rollout by ordering 83 new CNG taxis and 10 new CNG buses in the second quarter. Bell now operates 200 natural gas vehicles in their fleet. Our Las Vegas market is a good example of the growth we have 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 and two management agreements for the transit agencies. We now operate 12 fueling stations in Las Vegas including a heavy duty truck station that’s 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 nine it already operates. And one of Clean Energy’s construction subcontractors FASTECH recently ordered 50 CNG vans which will fuel in our Southern California public CNG station network. In the Denver area, UPS awarded Clean Energy with a multiyear contract to continue operating and maintaining their CNG station which fuels about 150 step vans.

In Orlando, construction is complete at our new station at the Orlando Airport and should be operational in the next few weeks. And in Chicago we purchased land for 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 and I wanted to provide an update. We have signed two deals, one with Delaware Valley Concrete and one with Schwartz Ready-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 fuelling terminals in Atlanta and Tampa and plan to have additional locations into development by the end of the year.

We continue to be pioneers in developing new business opportunities, in this quarter we announced largest of its kind natural 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. Station is one of the largest we have ever built and should double the CNG fuel volume and currently supplied by Clean Energy’s other high volumes CNG stations.

We have recognized opportunities to build similar CNG stations in many undeserved regions throughout the country so we’re very excited about the potential of this market. To-date, we have completely 27 stations projects for ourselves and our customer in our various market sectors and we have about 45 additional station projects under construction which should be complete by year-end. In our biomethane business, we commenced full-scale operations at our third biomethane facility located outside of Memphis, Tennessee in mid-July. In a month, we should be able produce roughly 80,000 gallons of redeem daily between our three plans.

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

Rick Wheeler

Thanks, Andrew. Before I review our financial results, I would like to point out that all of 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 the LNG volume 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 a 6 million of volumetric excise tax credits or VETC revenue and the first six months of 2013 included 32.2 million of VETC revenue. We did not record any VETC revenue in 2014 as the law providing for VETC expired on December 31, 2013. Pulling these amounts, revenue increased between periods by 16 million for the quarter and 44.4 million for the six month period.

Adjusted EBITDA on 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 month of 2014, adjusted EBITDA was minus 11.5 million, compared with 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 VETC 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 the non-GAAP basis for the second quarter, we reported a loss of $0.28 per share, this compares with 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 VETC revenue. The second quarter and 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 and non-GAAP EPS are financial measures we develop to highlight our operating results, excluding certain large non-cash or non-recurring 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 I warrants, non-cash stock-based compensation charges of 3 million, 0.3 million weight-up on our holdback share 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 headquarters.

This compares with the 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 I 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 I warrants of 2.2 million, non-cash stock based compensation charges of 6.4 million, 0.3 million foreign currency loss on our IMW purchase notes, 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 I warrants. Non-cash stock based compensation charges of 11.7 million and a 0.4 million foreign currency loss on 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 if VETC 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.

Question-and-Answer Session

Operator

Thank you. At this time, we will be conducting a question-and-answer session. (Operator Instructions) The first question is from Eric Stine of Craig-Hallum. Please go ahead.

Aaron Spychalla - Craig-Hallum

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?

Andrew Littlefair

Sure, Aaron, we are seeing more fleets all the time, maybe a good time to mention, some of them we get to announce when they begin to bring vehicles into the fleet to test. And some frankly, great number of our customers, they really see this as a competitive advantage and they don’t want everybody to know exactly what they are doing. So, we are often, it’s little frustrating for me but often we are not able to necessarily disclose who some of those new fleets are. But as I mentioned in my prepared remarks about 280, we are now working with 280 separate different fleets. I think that there is a trend developing as we are starting to see I think really with just a few exceptions, I mean there is just no doubt about it, they all want to try and test various numbers of these to get some operating experience. And everybody is 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 I was speaking with Jim Harger, our Chief Marketing Office earlier, I guess there is a little trend developing is, we are beginning to see some fleets that maybe first started with five or seven vehicles, begin to kind of now come back after program for the second purchase of vehicles and we are seeing the number kind of creep up to we are now still beginning to put in for three, working with their shippers, their customers, we are starting to see them take larger number. So, that’s a good thing and that’s exciting for us. So, yes, they still are testing them and we are beginning to see the size of the purchase of the numbers of trucks begin to go up. There is still a lot more to do but maybe that gives you a little bit of a color that you are looking for.

Aaron Spychalla - Craig-Hallum

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?

Andrew Littlefair

That number I am using it should be somewhere around, I mean that’s a lot of gallons right, and 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 am headed all the way over into upstate New York and other places. There is a lot of this kind of load. There are lots of customers, industrial customers that use fuel oil and propane and natural gas can be very competitive. So, we other stations like this that we are working with NG Advantage and some of them I think, Aaron, might even be larger than this one. This is though really the largest station we have really ever build and maybe one of the biggest we are hedging our bets here but we think it may be the biggest one that’s been built in North Americas 10,000 SCFM.

So, it’s very large but there appears to be several 100 million gallons of this kind of load in that kind of part of the world and so we’re very excited about potential, now the margins we haven’t disclosed that exactly but let’s just say for this discussion that it’s, 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 customers can still save. The fellow that open -- at the station opening runs the local hospital, it cost his about I think $0.5 million to up fit his hospital to be able to receive the natural gas. And he said that savings to the hospital is going to be some over $400,000 a year. So this is a great opportunity for a lot of these industrial stranded customers around there.

Operator

The next question is from Rob Brown of Lake Street Capital Markets. Please go ahead.

Rob Brown - Lake Street Capital Markets

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?

Andrew Littlefair

No, it’s a good comment and you’d of course. I’d almost break it down even further, I mean won’t you have a station open that maybe base loaded and we’ve been through this discussion that we will open this stations many of them 20 trucks. It does give us an opportunity for other fleets in geographical locations to the stations to add, one or two or three trucks, so that’s sort of the beauty.

In our marketing, our national truck team is being very focused once we have an open station and also corridor, but just think of just more stations then we are 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 kind of at least segments and so that’s really meaningful once we get couple of these quarters opens then we’re able to really sell other fleets that operate there as well.

Rob Brown - Lake Street Capital Markets

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?

Andrew Littlefair

Yes, the market it’s a big market and I have had this very discussion, wish I had an exact number before but I am going kind of ballpark it, then if I way off, we will correct. But I have talked with Michael Mansfield about this. If you just look across the country, there is a lot of people moving gasoline and diesel around. And I asked Michael, how big is that market? Think about it this way, there our refuse market is a couple of billion gallon market. And so 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, 1.2 billion to 1.5 billion gallons market. That’s a big market.

And there are thousands of those trucks for instances here just in worked on this upon a time with South Coast Air Quality Management District -- there's a couple of thousands of those trucks just here in LA base, so it’s a big market. We are just scratching the surface. We’ve a first station that’s almost complete. These trucks, the bulk hauling trucks they all go to these terminals get their fuel and so it’s sort of nicely set up for natural gas. We like it and I know our team right now the Mansfield and Clean Energy team assigned to this bulk hauling fueling, they’ve got 12 different locations that they’ve got right on the short list to work on try to bring alone.

Operator

The next question is from Colin Rusch of Northland Capital Markets. Please go ahead.

Noah Kaye - 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?

Andrew Littlefair

Sure, I think we have a one fellow here that focuses on our LNG supply and as you know we have two plants, we take all of the fuel from the third plant, but today now we were actually sourcing from 13 other plants really scattered around the country and theses are often peak shavers. We have some kind of short-term contracts with some of those peak shavers. We don’t have whole a 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 of about 400 million gallons annually of LNG and so we’ve got a couple of year running room I think from our company point of view on LNG supply.

But if it goes away that we think it is you’re going to be run shorter that supply and you will need more LNG liquefaction capability. Now when you say small scale, in the industry we talk a small scale we are thinking of a plant that can do a couple of hundred thousand gallons a day. We still are watching closing and looking all the time is real small scale doable, can you make LNG in batches of 10,000 gallons or less or will that work. And I think our conclusion so far is that’s very difficult to make that economics so that pay and so you really need larger scale couple of hundred thousand gallons a day liquefier and they need to be near the load, so you don’t really want to add a much more than 150 to 200 miles away.

So, other plants will need to be built, there has some as you know been announced and they will take a couple of years to build. So, I would say in the next year or so you are going to need to start seeing some of these liquefaction plants begin to be build and I there will be a need for them. So, we are keeping a close eye on it and as you know we have to deal with GE to build a couple ourselves. So, we don’t need them right this second but we will be at a point in the next year or so where we will have to begin to move forward on those.

Noah Kaye - Northland Capital Markets

Okay, great. And I think sort of implicit in that is a very positive outlook on uptake for LNG, as have been sort of 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 the kind of LNG versus CNG mix?

Andrew Littlefair

Yes, as you know awful lot has been said and written about this particular item and we are at the center of that a lot but we do both and it’s kind of 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 have that discussion today. We keep it very close to them and we are still seeing the break of around 50-50. We see sort of an even split on that and I don’t I think it’s little early to see if one fuel will be little bit more than the other but we are still seeing kind of, sort of a split so we are glad we are in both camps. We are glad we have got the LNG capacity in LNG stations. We think you are going to need it and we are 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, we do LNG but we are kind of seeing it so far kind of along those lines around an even split.

Noah Kaye - Northland Capital Markets

And then finally I think for both fuels, question I would like to ask about margin splits basically. How are you contracting experience is evolving and as you kind of go back for that second quarter with multiple fleets as you look to expand. Are you seeing trends on margin sharing that maybe you didn’t anticipate before, can you kind of give us a bit of thought on that?

Andrew Littlefair

Look these trucking companies and the shipping companies are smart purchasers, right and they drive on a tough bargain. And so depends on who the customer is, depends if you are building them stations and if they are accessing retail locations, it depends on the length of the contract. I would say our margins haven’t changed much yet. There some competition from time to time on certain bids and there is certain RFPs that are more competitive than the others, just the way that they go through the procurement process. I don’t know that we have seen any dramatic change in the margins yet so far. It’s about similar to what we have experienced before.

Operator

Next question is from Caleb Dorfman of Simmons & Company. Please go ahead.

Caleb Dorfman - Simmons & Company

I guess my question is going back to margins, volume margin in the quarter was $0.29 a gallon and 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?

Andrew Littlefair

I mean $0.30 is kind of where we have been tracking to at the end of the year kind of by the time we normalized everything, so the fact that we are back to $0.29 we feel good about, you are right. The biggest piece of that increase from last quarter was just the reduction of gas prices is obviously the extreme cold temperatures in the first quarter, increased those prices significantly and we took a little hit on that. So, we are kind of back to where we think we and thought we would be. I mean the one thing that has helped us in the past is our renewable fuels business. They just had a few issues with their plants as they kind of brought on some additional capacity and expanded and they added various pieces of equipment here and there but we are kind of working through and it’s been taken a little bit of a hit on the margin line as they kind of try to fine tune that and repair that and do all that good stuff.

So, one thing I would say that to the extent that they knock on wood, it seems like they are getting there, we should see a little uptick from that going forward. And then the other thing which will just help us as we have talked about before is just adding on more trucking volumes which in theory fall into the retail sector more than the O&M sector which should be good for us and the more that happens should start pulling that number up.

Caleb Dorfman - Simmons & Company

That's helpful. Then 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.

Andrew Littlefair

I don’t know that I have all those numbers. We know that most of these early adaptors tend now is the case, but those are out there on the highway stations tend to be the higher user usually and it is somewhere between 15,000 to 20,000 gallons a year per truck kind of where they’re ending up. We have some customers that are significantly over that. We have a couple of customers that I mentioned earlier they use 30,000 gallons per truck annually, so I would say the number that we always kind of guided to you about 20,000 that’s still a pretty good number. I don’t have a number on the top of my head to tell you at those stations how many hundreds or several hundreds of trucks that have made the way those, I just don’t have those. Maybe we’ll try to get that for you next time. I mean, we know there are a couple of thousands of these few thousands of these trucks are out there, we’re fueling a lot of them, but I don’t have that kind of broken down. I can help you steer you toward the fact that we’re not opening these stations typically until we have 20 some old trucks, so you know that if you got an open on the system that has leased that many, so I am sorry I wish I could you give the full number.

Rick Wheeler

I do know that we have 280 fleets some have 7 trucks and some have 40 trucks, but I don’t the number.

Caleb Dorfman - Simmons & Company

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?

Andrew Littlefair

Caleb the math we’ve given is if you take our $0.30 per gallon margin which again is kind of just what’s out there, hopefully we can better than that depends on the mix of our sales going forward. So if you take that, you can just do backwards math to kind of figure out how many gallons we would need to get basically adjusted EBITDA breakeven or any I guess profitability measure you want look at. So if you just divide 4.7 million by $0.30 that will tell you I think it’s about 15 million gallons or so would cover up these adjusted EBITDA shortfall and then have -- you basically do that thing math, if you’ve got whatever profitability metrics you’ve just listed there.

I see what you’re asking for after the adjusted EBITDA. I want to start doing math in my head, so but that’s the kind of the way just to look at it and we’re hopefully we’ll do better, right. Because assumes, there is 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 other businesses will kick in, we’ll watch in our SG&A line, those type of things hopefully will help out and hopefully we’ll get there faster than you would think by adding those 15 million gallons.

Rick Wheeler

If you think back, the first quarter’s 59 million gallons and this quarter’s 64.8 million gallons, so we added if you agreed with us on our math and we need the 23 million or 1 million gallons, we took 5 million out of this last quarter, so we’re headed that way and feel pretty good that we’re getting kind of close.

Operator

Next question is from Andrea James of Dougherty & Company. Please go ahead.

Andrea James - Dougherty & Company

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?

Andrew Littlefair

I don’t know Andrea. I don’t know if that happens that dramatically. I know that when you’re in a higher oil price environment and I kind of go back to almost a few years ago several years ago, there was a time where we would get our salesmen and myself included, we get in arguments with our customers that you get in agreements with the trucking guy and he would tell you that diesel was always going to be the dollar $0.20 a gallon. And so we don’t have that argument anymore. I think that people understand that there is pressure on diesel around word and that you’re in kind of higher oil price environment.

Here in Los Angles, diesel $4.08 a gallon, nationwide I think the average is 3.38, so there is a still a lot of pressure there still a lot of cost there. So I think our customers understand that it’s like that they’re going to be faced with higher price diesel for a long time to come and it’s always going to be and is going to be more expensive. So we have a pretty compelling economic, if you look at the spread right now between oil and natural oil I mean it’s wide and we don’t see much really change that. And oil has come down a little bit, but at the pump we’re still able to offer that dollar $1.40 to $1.50 a gallon savings. It’s still pretty compelling.

Andrea James - Dougherty & Company

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?

Andrew Littlefair

I have to pull out 10-Q to look at it. I don’t have that right off top of my head. IMW is in the queue also as IMW sales for the quarter what I will give it to you was 21.7 million, and please give me second here $0.89 a gallon for the quarter.

Andrea James - Dougherty & Company

Is the price per gallon, okay and the margin was $0.29 on that?

Andrew Littlefair

Yes.

Andrea James - Dougherty & Company

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

Andrew Littlefair

Yes.

Andrea James - Dougherty & Company

What drives that?

Andrew Littlefair

Last quarter biggest chuck of that was just the reduction in natural gas prices between orders, really high last quarter, went high with the increased prices due to the extremely cold weather, that’s obviously gone away and prices have slightly come down.

Operator

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

Andrew Littlefair

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.

Operator

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

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Source: Clean Energy Fuels' (CLNE) CEO Andrew Littlefair on Q2 2014 Results - Earnings Call Transcript

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