Q1 2020 Earnings Call

Good day, and welcome to Genie Energys first quarter twice, what the earnings call.

Participants will be in listen only mode.

The need assistance. Please welcome specialist.

First of all the silicon carbide.

Well this presentation.

Oh, Geez management will discuss financial and operational results.

Three month period ended March 31st.

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Any forward looking statements made during this conference call are there in the prepared remarks on the Q Sachin well the general or specific in nature are subject to escalate certainties that may cause actual results to differ materially from those what's the company.

Great.

These risks and uncertainties.

But not limited to.

Well I'm not certain matters discussed in the reports.

Energy files periodically what the L. Simpson.

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So no obligation other to update any forward looking statements, but they have made well like what's the update the factors that may cause actual results could differ materially from those that they forecast.

During the remarks.

But they make reference to adjust to me, but and pro forma results towards doing well so energy International segment.

Our non-GAAP measures.

Hi, this is about blades that genie energys measure up but just to be but.

Genie retail energy International's pro forma results.

Do you school information to book knowledge, but other investors.

Oh My Genie Energys.

Or the relevant segment.

Core operating results.

The Genie energy earnings release, because the reconciliation of the destiny, but up to net income.

Other pro forma Genie retail energy Internationals result.

Comparable GAAP measures.

Well go on the Investor Relations page of the Genie corporates the web site.

BW Dot dot com.

Earnings release I've also been filed on form 8-K, what the season.

After today's presentation by GBM and use that.

I won't be as an opportunity to ask questions.

So asking a question where press Star then one on your customer.

So what's your question.

Plus stores into.

Please note this event as well recorded.

Like the telecom scope much of Mr. Michael Stein.

As Chief Executive Officer.

Mr started the pleasure Sir.

Thank you operator, welcome to Genie Energy's first quarter 2020 earnings call today, we will discuss our operational and financial results for three months ended March 31st 2020.

Hobby Golden our Chief Financial Officer will follow my discussion with a deeper dive into the quarter's financial results. Following Ali's remarks, we'll be glad to take your questions.

My remarks today will focus on our operational results I will alter your view the effects of the restrictions imposed due to the Kogan 19, pandemic, which had its first full lots of impact in April following the quarter close finally, I'll touch on some are promising growth opportunities Genie energy achieved very strong first quarter results.

Robust growth in our customer base and strong electricity margins here in the U.S. helped us achieve record levels of revenue and gross profit.

Our global customer base surpassed about 400000, RC and 500000 meter milestones powered by expansion in both our domestic markets and overseas books.

Here in the U.S. Genie retail energy added in that 20000, Rcs 15000 meters during the quarter.

The our CEO Revere ratio has increased from our historical levels, reflecting our recent focus on adding high quality high consumption meters.

No we closed the quarter, serving 330000, Rcs comprising 384000 meters over.

Overseas, where more of our customer base resides in apartments at an average consumption is significantly lower she our international added 7000, Rcs and 20000 meters to close the quarter, serving 72000, Rcs comprising 148000 meters.

By March 31st we had increased our global customer base to 401000 ours is there and 533000 meters. During the trailing 12 months, we increased our sees served by 20% or just over 68000, an increase global meter served by 33% or 133000 meters pardon.

I should say fast growing our customer base is attributable to occur events in domestic customer churn profile that we have achieved over the past couple of years, we have put into place initiatives across our business to mitigate churn, including customer service process is acquisition and offering mix.

Customer churn in first quarter decreased again to 4.7 per cent per month from 5.3% per month in the first quarter 2019 for additional perspective, our average turned over the past 12 month is 5.4% versus 6.6% in the 12 months proceeding.

Hi, Genie energy services, our President Solar unit delivered most of its outstanding waters JP Morgan Chase.

The solar market continues to evolve we've begun to rightsize overhead and streamline prisons operations diversity. Meanwhile continues to progress toward profitability after delivering the most successful year in its history in 29 King.

AECO gas, we still have to complete the final well test in northern Israel as early as the close of the second quarter.

We have reduced costs and overhead to the bare minimum and anthro.

Turning now to be impacted the corona buyers due to the timing of the impact coping 19 and associated public health measures did not significantly affect customer acquisition activity. This quarter, we suspended all door to door customer acquisition toward the end of March at about the same time as most if not all other retail providers, who use that channel. We then pivoted.

Focus more resources on our other acquisition channels in April after the quarter close the near term impact in the pandemic became clear required teams in place and all of our markets. We Nevertheless had a strong highlighted that redevelopment.

First we benefited from an increase in per meter electricity consumption compared to the seasonally adjusted averages.

The actual customers who comprise the great majority of our book are spending more time at home and consequently, using more electricity.

Second suspension of door to door customer acquisition across all of our geographic markets reduce our customer acquisition expense in April door to door typically our most expensive acquisition channel and the U.S. and the alternative channels that we have transitioned to have lower costs and finally, because one of the most potent drivers of customer churn is door to door cost.

Our activity engage them by our competitors the industry wide suspension the door to their programs further reduced our churn rate in April on the downside the rate of gross customer additions here in the U.S. has slowed somewhat and the UK and Japan has virtually stop.

And then its impact on customer acquisition is evolving rapidly we may see that meter attrition in the coming up.

In addition, we are closely monitoring the marketing strengthened the meters, we had been adding through alternative channels.

Overall, the near term impact independently has demonstrated the resilience of our business. We have made rapid adjustment the evolving marketplace and our steps are bearing fruit that sat like almost all businesses, we will do better long term when our customers are prosper.

But we are well positioned to meet the challenges ahead and pursue our growth opportunities historically Genie energys growth has been driven primarily by access to new markets. We are fortunate to have recently entered the largest dynamic electricity market in Texas and our customer acquisition program. There is performing well we've already added approximately 10000 our seasonal.

Sorry state outside of Texas, we are looking at entering several new utility territories in the second quarter and later in the year, two new States, Michigan in Georgia overseas to our finished based RMP, even though we entered the electricity market in Sweden last month and have only just begun to scratched the surface of our two largest international market the UK in Japan.

To wrap up the first quarter was exceptional with robust RC I'd be your growth lower churn and as he will be dealt strong financial results. We have taken decisive actions to calibrate our operations to address the early challenges of the pandemic and have abundant opportunities for growth, particularly in new markets. As a result out outlook remains positive are geographically diversify.

Markets liquid balance sheet, and very low level of long term debt put us in a great position to build on the first quarters Momenta.

Gee Board of directors had been vigilant about returning value to shareholders last year. In addition to paying 30 cents an aggregate dividends to our common stockholders, we repurchased $5.6 million at common stock today might have the resilience of our business its underlying strength and the abundant growth opportunities Genies board of directors has increased our quarterly dividend.

During the assets, 13% inquiries now with more on this quarter's financial result, Here's our Chief Financial Officer Avi Goldin.

Thank you Mike one thanks to everyone on the call for joining us this afternoon.

My remarks today will cover our financial results for three months ended March 31st 2020.

Throughout my remarks, I compare the first quarter 2020 results to the first quarter 2019, focusing on the year over year, rather than sequential comparisons loosen consideration to seasonal factors that are characteristic of our retail energy business.

First quarter includes the peak heating season, and its typically characterized by a relatively high levels of electricity consumption, the highest level of natural gas consumption of any quarter of the year.

The first quarter's financial results were strong and included record levels of revenue and gross profit as a comic eventually skewed toward the second half of March the covert 19 pandemic did not significantly impact our first quarter financial results.

Consolidated revenue in the first quarter increased 17.49, Dollarstwo hundred and $4.1 million $12.7 million. If the increase was contributed by our GT energy services Division revenue jumped to $18 million on fulfillment of outstanding Solar panel orders by our Prism solar subsidiary.

Going forward, we do not anticipate comparable order volume so revenue and as Michael indicated, we're taking steps to reduce costs and position that business for the future.

Genie retail energy contributed $79.1 million in revenue.

Increase of 2.6 $9 compare to your go quarter.

Well bus growth or electric meter customer base over the past 12 months it drove a 17% increasing kilowatt hours sold more than offsetting a slight decrease in per unit revenue.

This is partially offset by decline in revenue contribution from the gas book as we experienced lower consumption and pricing professor.

Actually retail energy international revenue totaled $7 million, an increase of 2.1 $9 from a year ago quarter.

The increase reflects customer base expansion at both loan, Finland, and you need Japan.

Let's discuss our earnings release, we account for the results of orbit energy a joint venture operating the UK, usually equity method and its results of operations are not consolidated in our revenue gross profit for Astrazeneca.

Consolidated gross profit in the first quarter increased $3.3 million to 20.9 dollars also record for the company.

She every contributed $27.6 million would that total an increase of $2.9 million from a year ago quarter predominately, reflecting the increase in kilowatt hours sold.

Just increasing margin per kilowatt hour and a decrease in cost per therm sold.

Increased rates of customer acquisition and she every drove an increase in consolidated <unk> expense to $19.5 million in the first quarter $3.7 million higher than a year ago period.

Equity in the net loss of Investees, which is comprised of our investments in orbit energy and our minority stake in it I Pete decreased to $379000 from $797000 in first quarter of 2019 as you may know different investments in either entity during the quarter.

We now expect to provide orbit with some additional growth capital later this year.

Our consolidated income from operations came in at $9.2 million compared to 9.8, $9 and you go quarter actually increasing customer acquisition expense narrowly offset beginning gross profit.

Adjusted EBITDA was $10.3 million effectively even with a year ago quarter.

He P.S. was 20 cents per diluted share one penny below the year ago corridor or.

Our balance sheet remains very strong at March 31st we reported $157.2 billion in total assets, including $36.4 million in cash cash equivalents unrestricted cash liabilities totaled $71.5 million, which is $2.2 million were noncurrent and networking capital totaled $51.5 million.

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Cash used in operating activities $2.7 million and the first quarter of 2020 compared to cash provided by operating activity $7 million in a year ago period.

The first quarters operating cash flows negatively impacted by the deliveries a prison solar as you receive payment for this activity upfront at the end of 2019 as well as the posting of cash collateral in support of certain hedge positions <unk>.

To wrap up the strong financial results this quarter reflect the impact of our sustained investment into your acquisition over the past year looking ahead and as Michael discussed the covert 19 penta creates uncertainty its impact is like we did beat mixed in the near term with certain factors improving performance and others working against it well the long term holds greater uncertainty we're comping.

That she is well positioned to get to you to realize value for shareholders.

As Michael mentioned supported by strong outlook. The board of directors approved an increase in the quarterly dividend to wait and half sensors share a 13% increase indicative annual dividend rate is now 34 cents per share.

Now I will turn the call back to the operator for Q and <unk>.

Thank you Sir we'll now begin the question answer session to ask a question limit Press Star then one other question.

If you think speakerphone, please pick up that said before passing the keys.

Any type of question has not just loved her daughter question. Please press Star then.

I goodness Star then one to ask your question.

That's how we'll just pause momentarily saw some all roster.

And the first question wearable come from parents have Great Mountain Capital management. Please go ahead.

Hi, first a thing so congratulations on your record setting corridor.

Question about the the financials the increase in a as gene they expense, primarily due to customer acquisition combination or something else entirely.

Oh, hi, or anything.

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We're not sitting together this time, so it's hard to argue to coordinate between the two about Oh.

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Bobby has anything to jump into that.

You know I I Hope you will first of all bank, there and for joining the call and for the good wishes hope everyone in your and your family all your loved ones. There are a healthy in say HM.

The the S DNA expense.

Primarily is a function of Oh, I'm selling selling costs increased conditions on the higher a meter acquisition numbers.

Pair two years ago. There is some some bad debt expense in there you know, which which we saw in the first quarter.

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And that's pretty much it.

Okay, and then you mentioned effect given that you still hope to.

Completed testing by the first after this year.

Is that going to be.

A pressure test on the well and if so wouldn't that are.

To close to a month so a when you can you.

Give anymore guidance on that.

Yeah. So we we did expect cab or we expected to have already been able to do it we schedule scheduled time to do it with the army before that the koby pandemic kind of changed everything that said Oh, it was really only delayed.

So we do expect to at least the test before quarter end right. Yeah, we do it quickly enough and we get the right personnel on on the spot you know two could do the analysis things are moving a little bit more quickly in Israel in terms that I've read from coded then it is.

The world. So we're able to do that quickly began some results before the before the end of the quarter or at least hopefully by the time, we released a second quarter earnings.

Okay, and I realize you I saw the you mentioned that the sharp increase so.

And your working capital I didn't see anything about or any share buybacks I'm I'm looking at you results in the share price and thinking that.

That maybe if I was a management I would considered a bargain are you considering.

Ah doing any more share buybacks I know walking book last call. You said that to you were looking to increase your working capital and that share buybacks my take on the back seat, but I'm wondering like that it's changed.

Oh, so we still have a approval from the board or to buy back more shares. It if we decide the prices are right.

HM we wanted to return more more capital to shareholders a in general which is part of the reason why we increased the dividend that we show you know very confident.

About our short term at long term future. So I guess I'll leave it I'll leave it at that its always on the table.

Okay and there was a note a in the release about.

Are you had to post the additional cash collateral or a in support of certain or hedge positions a jury was that due to.

Increased customers was that due to increased volatility in so increasing margin demands a combination something else.

I was wondering if you could expand upon that.

Hi, It was mostly as a result of of the volatility at all at all.

He thinks it is do you elaborated huh.

Sure. So it's it's as you pointed out it's a little bit of a combination of a number of factors as you're aware the energy markets move down pretty materially over the last six months. So some of the positions we'd add on in support of our fixed rate book I required. So I'm, a mark to market and told those roll off and supportive of the.

Customers that they were put on for and that's a young we expect there to be sort of an ongoing level of a requirement just given the size our fixed rate book now I'd like it was a it wasn't usually large for a relatively short period.

Okay, Alright, great. That's all my questions I hope to talk to you a next caller and everyone is all couldn't healthy.

Thank you. Thank you.

Yeah. That's your mind there if you like to participate today Q. They please press Star then one on the Touchtone phone again not a star then one next we have Kevin there private investor.

Gentlemen.

Can you hear me.

Oh, yes yesterday.

Just a few questions about you said you suspended the the door to door sales how effective is that how many how many meters where they bring in and then also without I'm kind of curious how did they operate do they did when they go out today no.

Who they're going to what what they're paying their current customers do they have like a head up well know knowing what they have to beat or how does that kind of kept you working out not not section.

So Oh hi, Kevin.

Good to connect so the door to door the face to face customer acquisition, a channel is our biggest our biggest channel generally speaking.

It happens to also be one of the largest channels in the industry in general so while we're seeing while we have to seize door to door sometime towards the end of March and therefore, we're not doing any face to face marketing in ER in all of April honestly, even that even though our net.

Meter acquisition took a a major hit in that regard on the flip side. We also saw our attrition rate come down significantly in April.

For the same reason that our competitors werent going door to door and weren't marketing face to face level and actually will be up modestly we didn't warrant in the earnings release, you that we may see some that attrition over the co good pandemic period dips.

Pending on how long that lasts but specifically in April we actually saw a overall a modest increase in the U.S. <unk> in the U.S. business in terms of meters and Archie acquisition growth.

Okay.

Does that answer here.

But did you hear the second part of my question I was curious do they I'm sorry. The second part of your question was that just how is the mechanically how did the door to door selling process work.

Yeah.

Do they know what you didn't know what they're going against did they know who went to what what they're bidding against it I just want it my question enjoy yeah. So typically we you know we educate the door to door customers about our competition. Our competition is very often or mostly the the local utility.

Transmission delivery companies I'm sure there armed with a you know relative pricing.

As well as obviously the customer themselves or are are able to tell the vendors, what they're able to pay.

Yeah.

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Thank you Sir.

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Well. This concludes our question and answers Josh I'm a conference call. Thank you all for attending today's presentation. I'd. Just tell me may disconnect. Your lines. Thank you everyone take care and have a great.

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