Genie Energy Ltd. (NYSE: GNE, GNEPRA) reported third quarter 2020 earnings of $0.24 per diluted share on revenue of $96.3 million.
HIGHLIGHTS
(Throughout this release, 3Q20 results are compared to 3Q19 results unless otherwise noted)
- By quarter end, Genie had expanded its global customer base to the highest level in company history. Global RCEs rose to 442,000 and global meters to 558,000, representing year over year increases of 15% and 13% respectively.
- Consolidated revenue increased 12.4% to $96.3 million driven by increases in average electricity consumption in the U.S. and internationally. Gross profit increased 3.7% to $27.3 million while SG&A expense decreased 3.0% to $18.8 million on reduced customer acquisition expense.
- Consolidated income from operations increased 22.2% to $8.5 million. Consolidated Adjusted EBITDA1 increased 18.6% to $9.5 million.
- Genie Retail Energy, Genie's domestic energy supply business, increased income from operations to $12.3 million from $10.9 million and Adjusted EBITDA1 to $12.6 million from $11.2 million.
- Diluted EPS increased to $0.24 from $0.18.
COMMENTS OF MICHAEL STEIN, CEO
"Our strong third quarter results reflect our long-term investments in customer base growth and geographic diversification. International meter acquisitions led the expansion of our global customer base to its highest level in our history.
"In the U.S., our year over year increases in revenue, gross profit and income from operations were driven by increased average per meter electricity consumption. Residential electricity demand in the U.S. has increased in the COVID-19 era while churn and the pace of meter acquisition have slowed.
"After the third quarter closed, we acquired our partner's interest in our U.K. joint venture for $1.7 million. We are excited about the long-term prospects for this business and expect it to become EBITDA accretive within the next two years.
"Our bottom line results further strengthened our balance sheet this quarter even as we continued to invest to grow our international businesses. By the quarter close, we had achieved our highest levels of cash and working capital since 2016."
CONSOLIDATED RESULTS
| $ in millions, except EPS | 3Q20 | 2Q20 | 3Q19 | 3Q20-3Q19Change (%/$) |
| Revenue | $96.3 | $76.1 | $85.7 | +12.4% |
| Gross profit | $27.3 | $19.5 | $26.4 | +3.6% |
| Gross margin percentage | 28.4% | 25.6% | 30.7% | (230) BP |
| SG&A expense | $18.8 | $16.0 | $19.4 | (3.0)% |
| Stock-based compensation included in SG&A | $0.4 | $0.4 | $0.3 | +33.6% |
| Depreciation and amortization | $0.7 | $0.7 | $0.9 | (28.1)% |
| Bad debt expense | $1.0 | $0.6 | $0.1 | +$0.9 |
| Impairment of assets | na | $0.8 | na | na |
| Income from operations | $8.5 | $2.7 | $6.9 | +22.2% |
| Adjusted EBITDA1 | $9.5 | $3.5 | $8.0 | +18.6% |
| Equity in the net loss in equity method investees2 | $(0.1) | $(1.2) | $(0.2) | +$0.1 |
| Provision for income taxes | $(2.4) | $(0.6) | $(1.9) | $(0.5) |
| Net income attributable to Genie Energy common stockholders | $6.4 | $1.6 | $4.9 | +$1.5 |
| Earnings per diluted share attributable to Genie Energy common stockholders | $0.24 | $0.06 | $0.18 | +$0.6 |
| Net cash provided by operating activities | $10.4 | $16.4 | $12.1 | $(1.7) |
| Global RCEs and Meters (in thousands)3 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 |
| Electricity RCEs | 364 | 346 | 325 | 297 | 309 |
| Natural gas RCEs | 78 | 75 | 76 | 77 | 75 |
| Total RCEs | 442 | 421 | 401 | 374 | 384 |
| Electricity meters | 445 | 429 | 421 | 390 | 392 |
| Natural gas meters | 113 | 107 | 111 | 107 | 100 |
| Total meters | 558 | 536 | 532 | 497 | 492 |
| Genie Retail Energy $ in millions | 3Q20 | 2Q20 | 3Q19 | 3Q20-3Q19Change (%/$) |
| Total revenue | $89.5 | $66.5 | $81.7 | +9.6% |
| Electricity revenue | $86.2 | $61.1 | $78.5 | +9.8% |
| Natural gas revenue | $2.7 | $5.4 | $3.2 | (14.1)% |
| Other | $0.6 | - | - | +$0.6 |
| Gross profit | $25.9 | $17.1 | $25.7 | +1.0% |
| Gross margin percentage | 29.0% | 25.7% | 31.5% | (250 BP) |
| SG&A expense | $13.6 | $11.1 | $14.8 | (8.4)% |
| Depreciation and amortization | $0.1 | $0.1 | $0.2 | (37.3)% |
| Income from operations | $12.3 | $6.0 | $10.9 | +13.6% |
| Adjusted EBITDA1 | $12.6 | $6.2 | $11.2 | +13.1% |
- RCEs served at September 30, 2020 increased 6% to 350,000 from 329,000 a year earlier and 2% from 343,000 at June 30, 2020.
- Meters served at September 30, 2020 decreased 4% to 375,000 from 389,000 a year earlier and increased slightly from 374,000 at June 30, 2020.
- Gross meters added during 3Q20 totaled 44,000 compared to 76,000 in 3Q19 and 40,000 in 2Q20. The year over year decrease is due to COVID-19 related curtailment of certain customer acquisition activities.
- Average monthly customer churn decreased to 3.7% from 5.3% in 3Q19 and 3.9% in 2Q20, reflecting decreased sales activity by competitors and lower rates of gross meter ads in recent quarters – both as a result of COVID-19-related restrictions on customer acquisition in certain channels – as well as the continuing increase in the ratio of fixed rate to variable rate customers, where fixed rate customers generally have lower rates of churn.
- The year over year increase in electricity revenue was driven by a strong increase in average meter electricity consumption reflecting increased residential demand during the COVID-19 pandemic, and, to a lesser extent, a shift within GRE's electricity customer base to meters with higher average consumption.
- The year over year increases in income from operations and Adjusted EBITDA1 were driven by increased per meter electricity consumption and decreased customer acquisition expense, offset by a mild decrease in gross margin.
| GRE International $ in millions | 3Q20 | 2Q20 | 3Q19 | 3Q20-3Q19Change (%/$) |
| Total revenue | $5.8 | $5.0 | $3.0 | +91.9% |
| Gross profit | $1.1 | $1.9 | $0.4 | +175.8 |
| Gross margin percentage | 18.7% | 38.0% | 13.0% | +570 BP |
| SG&A expense | $2.7 | $2.5 | $2.0 | +36.2% |
| Loss from operations | $(1.6) | $(0.6) | $(1.6) | - |
| Adjusted EBITDA1 | $(1.0) | $(1.6) | $(1.0) | - |
| Equity in the net loss in Orbit Energy4 | - | $(1.5) | - | - |
GRE International – KPIs and Take-Aways:
- RCE's served3 at September 30, 2020 increased 69% to 92,000 from 55,000 a year earlier and increased 18% from 79,000 at June 30, 2020 led by expansion in the U.K. and Scandinavian markets.
- Meters served3 at September 30, 2020 increased 76% to 182,000 from 103,000 a year earlier and 13% from 161,000 at June 30, 2020.
- On a pro forma basis5, inclusive of Orbit Energy's revenue, GRE International's revenue increased to $20.9 million from $8.8 million in 3Q19.
- On a pro forma basis5, inclusive of Orbit Energy's loss from operations, GRE International's loss from operations increased to $5.8 million from $4.2 million in 3Q19.
Genie Energy Services (GES)GES comprises Diversegy, a commercial energy consulting business, Genie's interest in Prism Solar, a supplier of solar panels and solutions, and Genie Solar Energy.
- GES' revenue of $1.0 million was unchanged from 3Q19.
- GES' loss from operations was $0.7 million compared to a loss from operations of $0.8 million in 3Q19.
Genie Oil and Gas (GOGAS)
- GOGAS' Afek oil and gas exploration subsidiary initiated its final well test in the second half of October, following the quarter close.
- GOGAS' loss from operations6 decreased to $0.1 million from $0.3 million in 3Q19.
Corporate
- Corporate loss from operations was $1.4 million compared to a loss from operations of $1.3 million in 3Q19. The losses include the impact of corporate stock-based compensation which increased to $0.2 million from $0.1 million in 3Q19.
BALANCE SHEET AND CASH FLOW HIGHLIGHTSAt September 30, 2020, Genie Energy had $148.9 million in total assets. Cash, cash equivalents and restricted cash increased to $49.2 million from $41.8 million at June 30, 2020. Liabilities totaled $62.4 million and working capital (current assets less current liabilities) totaled $54.9 million compared to $49.1 million at June 30, 2020.
Cash provided by operating activities in 3Q20 was $10.4 million compared to $12.1 million in 3Q19.
DIVIDEND ON GENIE ENERGY COMMON STOCKGenie's Board of Directors has declared a third quarter dividend of $0.085 with a record date of December 4, 2020. The dividend will be paid on or about December 11, 2020. The distribution will be treated as an ordinary dividend for income tax purposes.
ABOUT GENIE ENERGY LTD.Genie Energy Ltd. (NYSE: GNE, GNEPRA), is a global provider of energy services. The Genie Retail Energy division supplies electricity, including electricity from renewable resources, and natural gas 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 and industrial brokerage and consultative services company, and Genie Solar Energy and Prism Solar, which design, supply and install commercial solar solutions. For more information, visit Genie.com.
