Genie Energy Ltd. Reports First Quarter 2019 Results

5/6/19

Genie Energy Ltd. (NYSE: GNE, GNEPRA) reported first quarter 2019 net income of $0.21 per share on revenue of $86.6 million.

FINANCIAL AND OPERATIONAL HIGHLIGHTS (Throughout this release, 1Q19 results are compared to 1Q18 results unless otherwise noted)

  • Genie Energy's global customer base increased by 77 thousand RCEs during 1Q19 to 333 thousand at March 31st. Global meters served climbed by 76 thousand to 399 thousand;
  • Genie Energy continued to expand its global footprint, closing on the acquisition of Finnish retail energy provider Lumo Energia and launching operations in Japan;
  • Consolidated revenue decreased to $86.6 million from $89.3 million;
  • Consolidated income from operations increased to $9.8 million from $7.1 million. Consolidated Adjusted EBITDA* increased to $10.4 million from $8.6 million;
  • Earnings per share decreased to $0.21 per basic and diluted share from $0.24;
  • Genie Energy's Board of Directors has declared a first quarter 2019 dividend of $0.075 per share.

COMMENTS OF MICHAEL STEIN, CEO OF GENIE ENERGY"Genie Energy had an excellent first quarter. Income from operations and Adjusted EBITDA both increased significantly even as we continued to invest in expansion of our customer base and building out our solar solutions business. These investments also further mitigate our commodity and geography-linked risks.

"Looking ahead, we are working to further expand our domestic meter base and expect to launch service in Texas in the second quarter. Internationally, our customer acquisition programs are progressing in the U.K, and Japan while our Finnish retail supplier business provides a platform to address additional markets in Scandinavia."

CONSOLIDATED RESULTS

$ in millions, except EPS 1Q19 4Q18 1Q18 1Q19 -1Q18Change (%/$)
Revenue $86.6 $62.8 $89.3 (3.0%)
Gross profit $25.6 $14.7 $24.5 +4.6%
Gross margin percentage 29.5% 23.5% 27.4% +210 BP
SG&A expense (including stock-based compensation) $15.8 $15.2 $17.1 (7.8)%
Stock-based compensation included in SG&A $0.4 $0.8 $1.3 (66.7)%
Exploration expense - - $0.2 $(0.2)
Depreciation and amortization $0.9 $0.4 $0.6 +53.3%
Equity in the net loss of joint ventures * $(0.8) $(1.3) $(0.5) $(0.3)
Income (loss) from operations $9.8 $(0.5) $7.1 +37.9%
Adjusted EBITDA** $10.4 $(0.6) $8.6 +$21.3%
Benefit from (provision for) income taxes $(2.9) $14.1 $(0.8) $(2.1)
Net income attributable to Genie Energy common
stockholders 		$5.7 $12.3 $5.8 $(0.1)
Earnings per share attributable to Genie Energy
common stockholders 		$0.21 $0.47 $0.24 $(0.03)
Net cash provided by (used in) operating activities $7.0 $(0.9) $8.6 $(1.6)
* Genie Energy accounts for its investments in Orbit Energy, its joint venture operating in the UK and Atid, a drilling services business based in Israel, in which it holds a minority stake, under the equity method of accounting. Under this method Genie Energy records its share in the net income or loss of the venture. Therefore, revenue generated, and expenses incurred are not reflected in Genie Energy's consolidated revenue and expenses.* *Adjusted EBITDA for all periods is a non-GAAP measure intended to provide useful information that supplements the core operating results in accordance with GAAP of Genie Energy or the relevant segment. Please refer to the Reconciliation of Non-GAAP Financial Measure at the end of this release for an explanation of Adjusted EBITDA and reconciliation to the most directly comparable GAAP measure.

METERS AND RCEs

Genie Energy's global customer base increased sequentially and year-over-year driven by the acquisition of Finish electricity provider Lumo Energia during the quarter, the expansion of Orbit Energy, a joint venture supplying electricity and natural gas in the UK, and robust domestic customer base growth driven, in part, by a municipal aggregation agreement in New Jersey. Genie Energy's global RCE and meter totals are provided in the chart below.

Global RCEs and Meters
at End of Quarter (in
thousands)* 		March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018
Electricity RCEs 271 197 216 219 218
Natural gas RCEs 62 59 59 64 67
Total RCEs 333 256 275 283 285
Electricity meters 322 249 269 282 284
Natural gas meters 77 74 73 81 89
Total meters 399 323 342 363 373
*Includes RCEs and meters acquired and served by Genie Energy's domestic and international retail energy provider businesses including its JV operating in the UK, Orbit Energy.Consolidated Take-Aways
  • Consolidated revenue decreased to $86.6 million from $89.3 million in 1Q18. The change reflected the year over year decrease in domestic retail energy revenues substantially offset by revenue contributions from Prism Solarand Lumo Energia, acquired in 4Q18 and 1Q19 respectively.
  • Genie Energy's gross profit increased to $25.6 million from $24.5 million in 1Q18 primarily from increased margins on domestic gas sales and the impact of the Prism Solar acquisition.
  • SG&A expense declined to $15.8 million from $17.1 million in 1Q18 reflecting decreases in domestic customer acquisition expense and corporate-level stock-based compensation.
  • Consolidated income from operations increased to $9.8 million from $7.1 million in 1Q18 and Adjusted EBITDA increased to $10.4 million from $8.6 million.

SEGMENT RESULTSGenie Energy's segment reporting in 1Q19 and prior periods has been revised to reflect recent changes in its business operations and structure:

  • Genie Retail Energy (GRE) comprises domestic retail energy supply businesses;
  • Genie Energy Services (GES) comprises Genie Solar, Prism Solar Technologies, and Diversegy, a retail brokerage and advisory business;
  • Genie Retail Energy International (GRE International) comprises overseas retail energy supply businesses including interests in Lumo Energia (Finland), Genie Energy Japan and results from Orbit Energy, a joint venture operating in the UK;
  • Genie Oil and Gas (GOGAS) comprises Afek's currently suspended oil and gas exploration venture in Israel (formerly a separate segment), a minority stake in a drilling services company based in Israel and inactive legacy exploration ventures;
  • Corporate is Genie Energy's corporate overhead.

Genie Retail Energy (GRE)

  • Gross meter adds during the quarter totaled 85 thousand including a municipal aggregation deal in New Jerseywhich added approximately 34 thousand meters;
  • Average monthly average churn decreased to 5.3% from 7.1% in 4Q18. Churn was favorably impacted by the municipal aggregation agreement as these meters are typically characterized by relatively low rates of churn, and by relatively low rates of new customer acquisition in recent quarters. The churn rate in the prior quarter was negatively impacted by the expiration of a municipal aggregation agreement. Excluding the impact of that expiration, average monthly churn for the prior quarter would have been approximately 6.1%. Average monthly churn in the year ago quarter was 7.6% including the impact of a regulatorily mandated relinquishment of low-income customers in New York.
  • GRE increased income from operations to $13.5 million from $11.0 million in 1Q18. Adjusted EBITDA increased to $13.8 million from $11.6 million in 1Q18. The increases reflect margin improvement on natural gas sales and decreased customer acquisition expense.

GRE's financial results are summarized in the chart below:

Genie Retail Energy

$ in millions

1Q19 4Q18 1Q18 1Q19-1Q18Change (%/$)
Total revenue $76.5 $58.8 $88.8 (13.8)%
Electricity revenue $57.8 $46.7 $65.3 (11.5)%
Natural gas revenue $18.7 $12.1 $23.4 (20.2)%
Gross profit $24.7 $14.5 $24.2 +2.1%
Gross margin percentage 32.3% 24.7% 27.2% +510 BP
SG&A expense $11.2 $11.2 $13.1 (14.9)%
Income from operations $13.5 $3.4 $11.0 +22.3%
Adjusted EBITDA $13.8 $3.8 $11.6 +18.9%

Genie Energy Services (GES)

  • GES revenue increased to $5.3 million from $502 thousand in 1Q18 reflecting the impact of the Prism Solar acquisition in 4Q18;
  • GES' loss from operations was $232 thousand in 1Q19 compared to a loss from operations $92 thousand in 1Q18.
  • GES generated positive Adjusted EBITDA of $45 thousand compared to negative Adjusted EBITDA of $85 thousandin 1Q18.

Genie Retail Energy International (GRE International)

  • GRE International served 33 thousand RCEs and 55 thousand meters at March 31st, compared to 4 thousand RCEs and 8 thousand meters at December 31st. The increases resulted from the acquisition of Lumo Energy and organic growth at Orbit Energy;
  • GRE International's revenue increased to $4.8 million compared to nil in 1Q18 on the Lumo Energia acquisition;
  • Equity in the loss of Orbit Energy was $1.1 million compared to $506 thousand in 1Q18;
  • GRE International's loss from operations increased to $1.7 million from a loss from operations of $91 thousand in 1Q18. Negative Adjusted EBITDA was $2.3 million compared to $597 thousand in 1Q18. The increased losses reflect increased meter acquisition expense at Orbit Energy and Lumo Energia and buildout operations at Genie Japan.

Genie Oil and Gas (GOGAS)

  • Operations at Genie Energy's Afek oil and gas exploration subsidiary remain suspending pending the permitting required for final testing on an existing well;
  • Exploration expense was nil in the 1Q19 compared to $227 thousand in 1Q18;
  • Loss from operations was $163 thousand compared to a loss from operations of $1.4 million in 1Q18. Adjusted EBITDA was $124 thousand compared to negative Adjusted EBITDA of $1.2 million in 1Q18. The improvements reflect the suspension of oil and gas exploration activities at Afek and a positive equity contribution from Genie's minority stake in drilling services company Atid.

Corporate

  • Corporate loss from operations was $1.5 million compared to a loss of $2.4 million in 1Q18. The loss narrowed on a decline in corporate stock-based compensation, which decreased to $238 thousand dollars from $1.2 million in the year ago quarter. Negative Adjusted EBITDA was $1.3 million compared to $1.1 million in 1Q18.

BALANCE SHEET HIGHLIGHTS At March 31, 2019, Genie Energy had $154.2 million in total assets, including $44.5 million in cash, cash equivalents and restricted cash. Liabilities totaled $55.9 million and working capital (current assets less current liabilities) totaled $51.7 million.

DIVIDEND ON GENIE ENERGY COMMON STOCK Genie Energy's Board of Directors has declared a 1Q19 dividend of $0.075 per share of Class A and Class B common stock with a record date of May 20, 2019. The dividend will be paid on or about May 31, 2019. The distribution will be treated as an ordinary dividend for income tax purposes.

ABOUT GENIE ENERGY LTD. enie Energy Ltd. (NYSE: GNE, GNEPRA), is a global provider of energy services. The Genie Retail Energy division supplies electricity and natural gas primarily to residential and small business customers in the United States. The Genie Retail Energy International division supplies customers in Europe and Asia. The Genie Energy Services division includes Diversegy, a commercial brokerage and marketing services company, and Genie Solar Energy, a provider of solar generation systems. For more information, visit Genie.com.