10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 9, 2024
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
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Smaller reporting company |
Emerging growth company |
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As of May 2, 2024, there were
CLEAN ENERGY FUELS CORP. AND SUBSIDIARIES
INDEX
Table of Contents
Unless the context indicates otherwise, all references to “Clean Energy,” the “Company,” “we,” “us,” or “our” in this report refer to Clean Energy Fuels Corp. together with its consolidated subsidiaries.
This report contains forward-looking statements. See the cautionary note regarding these statements in Part I, Item 2.-Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.
We own registered or unregistered trademark rights to Clean Energy™. Although we do not use the “®” or “™” symbol in each instance in which one of our trademarks appears in this report, this should not be construed as any indication that we will not assert our rights thereto to the fullest extent under applicable law. Any other service marks, trademarks and trade names appearing in this report are the property of their respective owners.
2
PART I.—FINANCIAL INFORMATION
Item 1.—Financial Statements (Unaudited)
Clean Energy Fuels Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data; Unaudited)
December 31, |
March 31, |
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2023 |
2024 |
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Assets |
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Current assets: |
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Cash, cash equivalents and current portion of restricted cash |
$ |
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$ |
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Short-term investments |
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Accounts receivable, net of allowance of $ |
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Other receivables |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Operating lease right-of-use assets |
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Land, property and equipment, net |
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Notes receivable and other long-term assets, net |
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Investments in other entities |
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Goodwill |
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Intangible assets, net |
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Total assets |
$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Current portion of debt |
$ |
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$ |
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Current portion of finance lease obligations |
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Current portion of operating lease obligations |
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Accounts payable |
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Accrued liabilities |
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Deferred revenue |
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Derivative liabilities, related party |
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Total current liabilities |
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Long-term portion of debt |
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Long-term portion of finance lease obligations |
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Long-term portion of operating lease obligations |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 17) |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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Total Clean Energy Fuels Corp. stockholders’ equity |
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Noncontrolling interest in subsidiary |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ |
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$ |
|
See accompanying notes to condensed consolidated financial statements.
3
Clean Energy Fuels Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data; Unaudited)
Three Months Ended |
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March 31, |
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2023 |
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2024 |
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Revenue: |
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Product revenue |
$ |
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$ |
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Service revenue |
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Total revenue |
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Operating expenses: |
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Cost of sales (exclusive of depreciation and amortization shown separately below): |
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Product cost of sales |
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Service cost of sales |
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Selling, general and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Operating loss |
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( |
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( |
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Interest expense |
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( |
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( |
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Interest income |
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Other income, net |
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Loss from equity method investments |
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( |
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( |
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Loss before income taxes |
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( |
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( |
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Income tax benefit |
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Net loss |
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( |
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( |
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Loss attributable to noncontrolling interest |
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Net loss attributable to Clean Energy Fuels Corp. |
$ |
( |
$ |
( |
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Net loss attributable to Clean Energy Fuels Corp. per share: |
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Basic and diluted |
( |
( |
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Weighted-average common shares outstanding: |
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Basic and diluted |
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See accompanying notes to condensed consolidated financial statements.
4
Clean Energy Fuels Corp. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Loss
(In thousands; Unaudited)
Clean Energy Fuels Corp. |
Noncontrolling Interest |
Total |
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Three Months Ended |
Three Months Ended |
Three Months Ended |
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March 31, |
March 31, |
March 31, |
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2023 |
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2024 |
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2023 |
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2024 |
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2023 |
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2024 |
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Net loss |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
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Other comprehensive income (loss), net of tax: |
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Foreign currency translation adjustments, net of $ |
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( |
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( |
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Unrealized gains (losses) on available-for-sale securities, net of $ |
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( |
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( |
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Total other comprehensive income (loss) |
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( |
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( |
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Comprehensive loss |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
See accompanying notes to condensed consolidated financial statements.
5
Clean Energy Fuels Corp. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands, except share data; Unaudited)
Accumulated |
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Additional |
Other |
Noncontrolling |
Total |
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Common Stock |
Paid-In |
Accumulated |
Comprehensive |
Interest in |
Stockholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Subsidiary |
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Equity |
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Balance, December 31, 2022 |
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|
$ |
|
$ |
|
$ |
( |
$ |
( |
$ |
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$ |
|
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Issuance of common stock |
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— |
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— |
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— |
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— |
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Shares withheld related to net share settlement |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Stock-based sales incentive charges |
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— |
— |
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— |
— |
— |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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Balance, March 31, 2023 |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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$ |
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Accumulated |
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Additional |
Other |
Noncontrolling |
Total |
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Common Stock |
Paid-In |
Accumulated |
Comprehensive |
Interest in |
Stockholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Subsidiary |
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Equity |
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Balance, December 31, 2023 |
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|
$ |
|
$ |
1,658,339 |
$ |
(929,472) |
$ |
(2,119) |
$ |
6,877 |
$ |
733,647 |
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Issuance of common stock |
|
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— |
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231 |
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— |
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— |
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— |
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231 |
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Shares withheld related to net share settlement |
— |
— |
(304) |
— |
— |
— |
(304) |
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Stock-based compensation |
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— |
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— |
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2,629 |
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— |
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— |
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— |
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2,629 |
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Stock-based sales incentive charges |
— |
— |
12,897 |
— |
— |
— |
12,897 |
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Net loss |
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— |
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— |
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— |
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(18,443) |
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— |
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(173) |
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(18,616) |
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Other comprehensive income (loss) |
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— |
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— |
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— |
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— |
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(875) |
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— |
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(875) |
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Balance, March 31, 2024 |
|
|
$ |
|
$ |
1,673,792 |
$ |
(947,915) |
$ |
(2,994) |
$ |
6,704 |
$ |
729,609 |
See accompanying notes to condensed consolidated financial statements.
6
Clean Energy Fuels Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands; Unaudited)
Three Months Ended March 31, |
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2023 |
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2024 |
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Cash flows from operating activities: |
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Net loss |
$ |
( |
$ |
( |
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Provision for credit losses and inventory |
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Stock-based compensation expense |
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Stock-based sales incentive charges |
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Change in fair value of derivative instruments |
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( |
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Amortization of discount and debt issuance cost |
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( |
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( |
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Loss (gain) on disposal of property and equipment |
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( |
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Asset impairments and other charges |
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Loss from equity method investments |
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Non-cash lease expense |
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Deferred income taxes |
( |
( |
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Accretion of ARO liabilities |
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Changes in operating assets and liabilities: |
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Accounts and other receivables |
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( |
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Inventory |
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( |
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( |
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Prepaid expenses and other assets |
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( |
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Operating lease liabilities |
( |
( |
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Accounts payable |
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( |
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( |
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Deferred revenue |
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Accrued liabilities and other |
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( |
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Net cash provided by (used in) operating activities |
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( |
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Cash flows from investing activities: |
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Purchases of short-term investments |
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( |
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( |
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Maturities and sales of short-term investments |
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Payment and deposits on equipment and manure rights for ADG RNG production projects |
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( |
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( |
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Purchases of and deposits on property and equipment |
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( |
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( |
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Grant proceeds for capital projects |
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Proceeds received for joint development and construction of station projects |
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Disbursements for loans receivable |
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( |
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( |
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Proceeds from paydowns, maturities, and sales of loans receivable |
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Proceeds from settlement of insurance claims |
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Proceeds from disposal of property and equipment |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities: |
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Issuance of common stock |
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Payment of tax withholdings on net settlement of equity awards |
( |
( |
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Fees paid for lender and debt issuance costs |
( |
( |
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Proceeds for Adopt-A-Port program |
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Repayment of proceeds for Adopt-A-Port program |
( |
( |
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Repayments of debt instruments and finance lease obligations |
|
( |
|
( |
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Net cash provided by (used in) financing activities |
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( |
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Effect of exchange rates on cash, cash equivalents and restricted cash |
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( |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
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( |
|
Cash, cash equivalents and restricted cash, beginning of period |
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|
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Cash, cash equivalents and restricted cash, end of period |
$ |
|
$ |
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|
Supplemental disclosure of cash flow information: |
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Income taxes paid |
$ |
|
$ |
|
|
Interest paid, net of $ |
$ |
|
$ |
|
See accompanying notes to condensed consolidated financial statements.
7
Clean Energy Fuels Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1—General
Nature of Business
Clean Energy Fuels Corp., together with its majority and wholly owned subsidiaries (hereinafter collectively referred to as the “Company,” unless the context or the use of the term indicates or requires otherwise) is engaged in the business of selling renewable and conventional natural gas as alternative fuels for vehicle fleets and related fueling solutions to its customers, primarily in the United States and Canada. The Company’s principal business is supplying renewable natural gas (“RNG”) and conventional natural gas, in the form of compressed natural gas (“CNG”) and liquefied natural gas (“LNG”), for medium and heavy-duty vehicles and providing operation and maintenance (“O&M”) services to public and private vehicle fleet customer stations. The Company is also focused on developing, owning, and operating dairy and other livestock waste RNG projects and supplying RNG (procured from third party sources and from the Company’s jointly owned RNG production facilities (see Note 3)) to its customers in the heavy and medium-duty commercial transportation sector.
As a comprehensive clean energy solution provider, the Company also designs and builds, as well as operates and maintains, public and private vehicle fueling stations in the United States and Canada; sells and services compressors and other equipment used in RNG production and at fueling stations; transports and sells RNG and conventional natural gas, in the form of CNG and LNG, via “virtual” natural gas pipelines and interconnects; sells U.S. federal, state and local government credits it generates by selling RNG in the form of CNG and LNG as a vehicle fuel, including Renewable Identification Numbers (“RIN Credits” or “RINs”) under the federal Renewable Fuel Standard Phase 2 and credits under the California, Oregon, and Washington Low Carbon Fuel Standards (collectively, “LCFS Credits”); and obtains federal, state and local tax credits, grants and incentives.
Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s consolidated financial position as of March 31, 2024, results of operations, comprehensive loss, and stockholders’ equity for the three months ended March 31, 2023 and 2024, and cash flows for the three months ended March 31, 2023 and 2024. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2023 and 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other interim period or any future year.
Certain information and disclosures normally included in the notes to consolidated financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), but the resultant disclosures contained herein are in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as they apply to interim reporting. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2023 that are included in the Company’s Annual Report on Form 10-K filed with the SEC on February 29, 2024.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying condensed consolidated financial statements and these notes. Actual results could differ from those estimates and may result in material effects on the Company’s operating results and financial position. Significant estimates made in preparing the
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accompanying condensed consolidated financial statements include (but are not limited to) those related to revenue recognition, fair value measurements, goodwill and long-lived asset valuations and impairment assessments, income tax valuations, stock-based compensation expense and stock-based sales incentive charges.
Amazon Warrant
The Amazon Warrant (defined in Note 14) is accounted for as an equity instrument and measured in accordance with Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation. This instrument is classified in the condensed consolidated statements of operations in accordance with ASC 606, Revenue from Contracts with Customers, which states that for awards granted to a customer that are not in exchange for distinct goods or services, the fair value of the awards earned based on service or performance conditions is recorded as a reduction of the transaction price. To determine the fair value of the Amazon Warrant in accordance with ASC 718, the Company used the Black-Scholes option pricing model, which is based in part on assumptions that require management to use judgment. Based on the fair value of the award, the Company determines the amount of non-cash stock-based sales incentive charges on the customer’s pro-rata achievement of vesting conditions, which is recorded as a reduction of revenue in the condensed consolidated statements of operations. See Note 14 for additional information.
Tourmaline Joint Development
In April 2023, the Company and Tourmaline Oil Corp. (“Tourmaline”) announced a CAD $
The Company determined that it is the principal for the revenue generated from third parties under this collaborative arrangement with Tourmaline in accordance with ASC 606; as such, the associated revenue and cost of sales generated and incurred are recognized on a gross basis in the condensed consolidated statements of operations. Net participation of profit and loss owed to or from Tourmaline is recorded as an increase or decrease to cost of sales, respectively, as the transaction is not deemed to be with a customer within the scope of ASC 606. Capitalized station costs are presented at half of the total development and construction costs in the condensed consolidated balance sheets, corresponding to the Company’s
Impairment of Goodwill and Long-Lived Assets
Due to a decline in the market price of the Company's common stock subsequent to December 31, 2023, the Company performed an interim quantitative goodwill impairment test as of March 31, 2024 for its single reporting unit. For the quantitative goodwill impairment test, the Company estimated the fair value of its reporting unit based on its market value of invested capital plus a market participant acquisition premium.
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In addition, due to a decline in share price of the Company's common stock, the Company assessed whether such triggering event or any other events or changes in circumstances indicated that the carrying value of the Company’s long-lived assets may not be recoverable. Based on the assessment performed, the Company determined that there was
Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-01, Leases (Topic 842): Common Control Arrangements. This ASU permits private entities with common control arrangements that may contain or be leases to use any written terms and conditions between the parties, without regard to their legal enforceability, to identify, classify and account for common control leases. In addition, all lessees (public or private), in general, amortize leasehold improvements related to a common control lease over their useful life to the common control group, regardless of the ASC 842 lease term, as long as they continue to control the use of the underlying leased asset. The ASU is effective for fiscal years, including interim periods within those years, beginning after December 15, 2023, with early adoption allowed. The Company adopted this new ASU in the first quarter of 2024. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements and related disclosures.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves financial reporting by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included with each reported measure of significant profit or loss on an annual and interim basis. This ASU also requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This ASU is required to be applied retrospectively for all prior periods presented in the financial statements and will likely result in additional disclosures when adopted. The Company is evaluating the adoption impact of this ASU on the Company’s consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures. This ASU enhances annual income tax disclosures by requiring entities to disclose specific categories and greater disaggregation of information in the rate reconciliation table and income taxes paid disaggregated by jurisdiction. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the adoption impact of this ASU on the Company’s consolidated financial statements and related disclosures.
In March 2024, the FASB issued ASU No. 2024-01, Compensation-Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. This ASU improves U.S. GAAP by adding an illustrative example to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether profits interest and similar awards should be accounted for in accordance with Topic 718, Compensation-Stock Compensation. The ASU is effective for annual periods, including interim periods within those years, beginning after December 15, 2024, with early adoption allowed. The Company is evaluating the adoption impact of this ASU on the Company’s consolidated financial statements and related disclosures.
Note 2—Revenue from Contracts with Customers
Revenue Recognition Overview
The Company recognizes revenue when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration to which it expects to be entitled in exchange for the goods or services. To
10
achieve that core principle, a five-step approach is applied: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue allocated to each performance obligation when the Company satisfies the performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account for revenue recognition.
The Company is generally the principal in its customer contracts because it has control over the goods and services prior to their transfer to the customer, and as such, revenue is recognized on a gross basis. Sales and usage-based taxes are excluded from revenue. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. The table below presents the Company’s revenue disaggregated by revenue source (in thousands):
Three Months Ended |
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March 31, |
|||||||
|
2023 |
|
2024 |
||||
Product revenue: |
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Volume-related |
|||||||
Fuel sales(1) |
$ |
|
$ |
|
|||
Change in fair value of derivative instruments(2) |
( |
|
|||||
RIN Credits |
|
|
|||||
LCFS Credits |
|
( |
|||||
AFTC (3) |
|
|
|
|
|||
Total volume-related product revenue |
|
|
|||||
Station construction sales |
|
|
|||||
Total product revenue |
|
|
|
|
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Service revenue: |
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Volume-related, O&M services |
|
|
|||||
Other services |
|
|
|||||
Total service revenue |
|
|
|||||
Total revenue |
$ |
|
$ |
|
(1) |
Includes non-cash stock-based sales incentive contra-revenue charges associated with the Amazon Warrant. For the three months ended March 31, 2023, contra-revenue charges recognized in fuel revenue were $ |
(2) | Represents changes in fair value of derivative instruments related to the Company’s commodity swap and customer fueling contracts associated with the Company’s Zero Now truck financing program. The amounts are classified as revenue because the Company’s commodity swap contracts are used to economically offset the risk associated with the diesel-to-natural gas price spread resulting from customer fueling contracts under the Company’s Zero Now truck financing program. See Note 6 for more information about these derivative instruments. |
(3) | Represents the federal alternative fuel excise tax credit (“AFTC”). See Note 19 for more information. |
Remaining Performance Obligations
Remaining performance obligations represent the transaction price of customer orders for which the work has not been performed. As of March 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $
For volume-related revenue, the Company has elected to apply an optional exemption, which waives the requirement to disclose the remaining performance obligation for revenue recognized through the ‘right to invoice’ practical expedient.
11
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) in the accompanying condensed consolidated balance sheets.
As of December 31, 2023 and March 31, 2024, the Company’s contract balances were as follows (in thousands):
|
December 31, |
|
March 31, |
|||
2023 |
2024 |
|||||
Accounts receivable, net |
$ |
|
$ |
|
||
|
||||||
Contract assets - current |
$ |
|
$ |
|
||
Contract assets - non-current |
|
|
|
|
||
Contract assets - total |
$ |
|
$ |
|
||
|
||||||
Contract liabilities - current |
$ |
|
$ |
|
||
Contract liabilities - non-current |
|
|
|
|
||
Contract liabilities - total |
$ |
|
$ |
|
Accounts Receivable, Net
“Accounts receivable, net” in the accompanying condensed consolidated balance sheets includes billed and accrued amounts that are currently due from customers. The amounts due are stated at their net estimated realizable value. The Company maintains an allowance to provide for the estimated amount of receivables that will not be collected. The allowance is based on an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables, and economic conditions that may affect a customer’s ability to pay.
Contract Assets
Contract assets include unbilled amounts typically resulting from the Company’s station construction sale contracts, when the cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are classified as current or noncurrent based on the timing of billings. The current portion is included in “Other receivables” and in “Prepaid expenses and other current assets” and the noncurrent portion is included in “Notes receivable and other long-term assets, net” in the accompanying condensed consolidated balance sheets.
Contract Liabilities
Contract liabilities consist of billings in excess of revenue recognized from the Company’s station construction sale contracts and payments received from customers in advance of the satisfaction of performance obligations and are classified as current or noncurrent based on when the revenue is expected to be recognized. The current portion and noncurrent portion of contract liabilities are included in “Deferred revenue” and in “Other long-term liabilities,” respectively, in the accompanying condensed consolidated balance sheets.
Revenue recognized in the three months ended March 31, 2023 relating to the Company’s contract liability balances as of December 31, 2022 was $
12
Note 3— Investments in Other Entities and Noncontrolling Interest in a Subsidiary
TotalEnergies Joint Venture
On March 3, 2021, the Company entered into an agreement (the “TotalEnergies JV Agreement”) with TotalEnergies S.E. (“TotalEnergies”) to create 50-50 joint ventures to develop anaerobic digester gas (“ADG”) RNG production facilities in the United States. Pursuant to the TotalEnergies JV Agreement, each ADG RNG production facility project will be formed as a separate limited liability company (“LLC”) that is owned 50-50 by the Company and TotalEnergies, and contributions to such LLCs count toward the TotalEnergies JV Equity Obligations (as defined below). The TotalEnergies JV Agreement contemplates investing up to $
The Company accounts for its interest in the LLC using the equity method of accounting because the Company does not control but has the ability to exercise significant influence over the LLC’s operations. The Company recorded a loss of $
bp Joint Venture
On April 13, 2021, the Company entered into an agreement (the “bp JV Agreement”) with BP Products North America, Inc. (“bp”) that created a 50-50 joint venture (the “bpJV”) to develop, own and operate new ADG RNG production facilities in the U.S. Pursuant to the bp JV Agreement, bp and the Company committed to provide $
On December 20, 2023, the bpJV issued a capital call in the amount of $
As of March 31, 2024, the Company and bp each own 50% of the bpJV, and all of the RNG produced from projects developed and owned by the bpJV will be available to the Company for sale as vehicle fuel pursuant to the Company’s marketing agreement with bp. The Company accounts for its interest in the bpJV using the equity method of accounting because the Company does not control but has the ability to exercise significant influence over the bpJV’s operations. The Company recorded a loss of $
13
SAFE&CEC S.r.l.
On November 26, 2017, the Company, through its former subsidiary, IMW Industries Ltd. (formerly known as Clean Energy Compression Corp.) (“CEC”), entered into an investment agreement with Landi Renzo S.p.A. (“LR”), an alternative fuels company based in Italy. Pursuant to the investment agreement, the Company and LR agreed to combine their respective natural gas compressor fueling systems manufacturing subsidiaries, CEC and SAFE S.p.A, into a new company, SAFE&CEC S.r.l. (such combination transaction is referred to as the “CEC Combination”). SAFE&CEC S.r.l. is focused on manufacturing, selling and servicing natural gas fueling compressors and related equipment for the global natural gas fueling market. At the closing of the CEC Combination on December 29, 2017, the Company owned
The Company accounts for its interest in SAFE&CEC S.r.l. using the equity method of accounting because the Company does not control but has the ability to exercise significant influence over SAFE&CEC S.r.l.’s operations. The Company recorded a loss of $
NG Advantage
On October 14, 2014, the Company entered into a Common Unit Purchase Agreement (“UPA”) with NG Advantage, LLC (“NG Advantage”) for a
The Company recorded a loss attributable to the noncontrolling interest in NG Advantage of $
Investments in Equity Securities
For investments in equity securities of privately held entities without readily determinable fair values, the Company measures such investments at cost, adjusted for impairment, if any, and observable price changes in orderly transactions for the identical or similar investment of the same issuer. As of December 31, 2023 and March 31, 2024, the Company had an investment balance recorded at cost of $
Note 4—Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash as of December 31, 2023 and March 31, 2024 consisted of the following (in thousands):
|
December 31, |
|
March 31, |
|||
2023 |
2024 |
|||||
Current assets: |
|
|
|
|
||
Cash and cash equivalents |
$ |
|
$ |
|
||
Restricted cash - standby letter of credit |
|
|
|
|
||
Total cash, cash equivalents and current portion of restricted cash |
$ |
|
$ |
|
||
Total cash, cash equivalents and restricted cash |
$ |
|
$ |
|
The Company considers all highly liquid investments with maturities of three months or less on the date of acquisition to be cash equivalents.
14
The Company places its cash and cash equivalents with high credit quality financial institutions. At times, such balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) and Canadian Deposit Insurance Corporation (“CDIC”) limits. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. The amounts in excess of FDIC and CDIC limits were approximately $
The Company classifies restricted cash as short-term and a current asset if the cash is expected to be used in operations within a year or to acquire a current asset. Otherwise, the restricted cash is classified as long-term. The Company deposited $
Note 5—Short-Term Investments
Short-term investments include available-for-sale debt securities, excluded from cash equivalents, that have maturities of one year or less on the date of acquisition and certificates of deposit. Available-for-sale debt securities are carried at fair value, inclusive of unrealized gains and losses. Unrealized gains and losses on available-for-sale debt securities are recognized in other comprehensive income (loss), net of applicable income taxes. Gains or losses on sales of available-for-sale debt securities are recognized on the specific identification basis.
The Company reviews available-for-sale debt securities for declines in fair value below their cost basis each quarter and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable and evaluates the current expected credit loss. This evaluation is based on a number of factors, including historical experience, market data, issuer-specific factors, economic conditions, and any changes to the credit rating of the security. As of March 31, 2024, the Company has not recorded a credit loss related to available-for-sale debt securities and believes the carrying values of its available-for-sale debt securities are properly recorded.
Short-term investments as of December 31, 2023 consisted of the following (in thousands):
Gross |
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Amortized |
Unrealized |
Estimated |
|||||||
|
Cost |
|
Gain (Loss) |
|
Fair Value |
||||
U.S. government securities |
$ |
|
$ |
|
$ |
|
|||
Certificates of deposit |
|
|
|
|
|
|
|||
Total short-term investments |
$ |
|
$ |
|
$ |
|
Short-term investments as of March 31, 2024 consisted of the following (in thousands):
Gross |
|||||||||
Amortized |
Unrealized |
Estimated |
|||||||
|
Cost |
|
Gain (Loss) |
|
Fair Value |
||||
U.S. government securities |
$ |
|
$ |
|
$ |
|
|||
Certificates of deposit |
|
|
|
||||||
Total short-term investments |
$ |
|
$ |
|
$ |
|
Note 6—Derivative Instruments and Hedging Activities
In October 2018, the Company executed
15
of these derivative instruments are recognized in “Product revenue” in the accompanying condensed consolidated statements of operations.
The Company has entered into fueling agreements with fleet operators under the Zero Now truck financing program. Certain of these fueling agreements contain a pricing feature indexed to diesel, which the Company determined to be an embedded derivative and is recorded at fair value at the time of execution, with the changes in fair value of the embedded derivative recognized in “Product revenue” in the accompanying condensed consolidated statements of operations.
Commodity swaps and embedded derivatives as of December 31, 2023 consisted of the following (in thousands):
Gross Amounts |
Gross Amounts |
Net Amount |
|||||||
|
Recognized |
|
Offset |
|
Presented |
||||
Assets: |
|
|
|
|
|
|
|||
Fueling agreements: |
|||||||||
Prepaid expenses and other current assets |
$ |
|
$ |
|
$ |
|
|||
Notes receivable and other long-term assets, net |
|
|
|
||||||
Total derivative assets |
$ |
|
$ |
|
$ |
|
|||
Liabilities: |
|
|
|
|
|
|
|||
Commodity swaps: |
|||||||||
Current portion of derivative liabilities, related party |
$ |
|
$ |
|
$ |
|
|||
Total derivative liabilities |
$ |
|
$ |
|
$ |
|
Commodity swaps and embedded derivatives as of March 31, 2024 consisted of the following (in thousands):
Gross Amounts |