Q4 2020 Genie Energy Ltd Earnings Call
Good morning, and welcome to Genie Energy's fourth quarter and full year 'twenty 'twenty earnings call.
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And its presentation Genie Energy's management team will discuss operational and financial results for the three and 12 month periods ended December 31st 2020.
Any forward looking statements made during this conference call.
In the prepared remarks on the Q&A session, whether general or specific in nature are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates.
These risks and uncertainties include but are not limited to specific risks and uncertainties discussed in the reports that Genie energy files periodically with the SEC.
Genie energy assumes no obligation either to update any forward looking statements.
They have that have made or may make.
Or to update the factors that may cause actual results to differ materially from those that they forecast.
During their remarks management may make reference to adjusted EBITDA and pro forma revenue and pro forma income from operations for its Genie retail energy International segment, both are non-GAAP measures.
Management believes that Genie Energy's measure of adjusted EBITDA.
And Genie retail energy International's pro forma results provide useful information on both management and investors but.
Supplement Genie Energy's.
And the Genie energy retail international segment's core operating results.
The Genie energy earnings release includes a reconciliation of adjusted EBIT to net income and of the pro forma Genie retail energy international results to their nearest comparable GAAP measures. The earnings release is posted on the Investor Relations page of.
The Genie Corporation website.
Genie Dot com.
It's been filed on a form 8-K with the S E C.
After todays presentation by Genie Energy's management there.
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I will now turn the conference over to Michael Stein Genie Energy's Chief Executive Officer. Please go ahead Mr. Stein.
Thank you operator, welcome to Genie Energy's fourth quarter and full year 2020 earnings call today, we will discuss our operational and financial results for the three and 12 months periods ended December 31 2020.
Also I'll discuss the impacts of winter storm that struck tactics on February the volatility in Japan wholesale markets as well as our operational and strategic responses to those assets.
On the Golden our Chief Financial Officer will follow with a deeper dive into the quarter's and full year financial results. Following his remarks, we'll be glad to take your questions recap an outstanding 2020 with solid fourth quarter results lets start by looking at the most fundamental of our Kpis our customer base.
Spicer challenges on the global pandemic, we were able to increase our global our global customer base by 66000 Rcs during the year to reach 440000, rfps that year, and a 17% increase and a record for our company.
In the fourth quarter historically, our slowest sales quarter Rte decreased slightly from 442000. They are in the U S. Gre's customer acquisition program, specifically face to face sales channels has been constrained since last spring by COVID-19 related restrictions on in person solicitation on the flip side the churn.
It has also been lower because of the COVID-19 related sales restrictions apply equally to our competitors. Nevertheless, we added 28000 domestic artsy during the year to end the year with 337000 Rcs. Despite a fourth quarter decline from 350000 Rfps at GRE International.
Increased RC served by 58% during 2020 on a 12% during the fourth quarter to reach 103000 Rcs at year end, our Scandinavian operation was the largest contributor to our fee growth year over year and sequentially given the challenges of COVID-19, our team did an outstanding job in 2020 to continue building our customer base.
We are well positioned to build upon that success in 2021 now.
Now to address the weather related challenges in Texas in Japan, as you know, Texas was hit by an extremely powerful series of winter storms in mid February the storms caused an unprecedented surge in electricity demand and at the same time knock some sources of supply offline that.
And that imbalance led the PUC to manipulate spot market prices moving them from the usual sub $50 per megawatt hour to 9000 per megawatt hour.
Were they were artificially maintained by ERCOT, Texas grids manager for five full days around the clock just to give you an idea of how completely unprecedented. This was in the previous 10 years energy prices only hit 9000 without government interference for a total of 16 hours on top of these absurd prices for.
Supply Genie and other retail suppliers are being saddled with exorbitant load shedding and ancillary charges.
For reference in the week before the storm ancillary charges amounted to approximately $2 per megawatt hour, while during the storm the prices spiked to over 20000 per megawatt hour.
While we were fully hedged for colder than normal seasonal weather, having bought power well in excess of what our customers demand on a normal winter day.
Unprecedented increase in ancillary charges, the artificially sustained period of $9000 per megawatt hour supply pricing on the extraordinarily high usage led to significant losses since the storm our meter data has been updated numerous times and our bills have been reissued and resettled multiple times at this moment the.
Information, we received to date from our supplier BP indicates that our costs as a result on the storm stand at approximately $12 $8 million. We believe that we are close to receiving the final information about our total losses and when we have a complete accounting we will provide it to you.
We are hopeful that new information and re settlements that have already been ordered by the PUC, but not yet passed through to our bills will bring relief rather than add to the pain. We will know soon enough, let's not forget that what happened in Texas as a result of this natural disaster caused very real suffering from many people throughout the region. Our hearts go out to them, but much of the suffer.
<unk> could have been prevented the mistakes of ERCOT, the PUC and the generators compounded the storms damage and I commend Governor Abbott Lieutenant Governor Patrick and the many members of the legislature, who have come out to call for the PUC to take immediate corrective actions, we joined them in asking the PUC to remove the financial repercussions for the decisions that culminated in us.
At the epic market failure away from the RFP industry and be fairly distributed to the relevant market participants. However to date. The PUC has allowed retailers who are protecting customers from the price increases that the PUC itself instituted to take the financial fall, we and Justice is great and we intend to price using all means necessary to.
Protect our shareholders and we intend to come out of this stronger than ever. Unfortunately, Texas is not the only market, where we faced unprecedented wholesale price spikes in the first quarter energy suppliers in Japan, including at our subsidiary Genie, Japan were squeezed when generators were unable to meet a spike in demand caused by recent cold snap.
Net prices on the Japan electric power exchanged surged to 2000 and $390 per megawatt hour be coming for a while the most expensive market in the world with only 433 nuclear power plants operating the country is heavily reliant on LNG to meet short term burst in demand, but with less than two weeks of LNG.
Line Reserve the country was unable to meet its needs after Korea, and China snapped up the available supply once again as a result of the generators and regulators mistakes. The retail suppliers are bearing the costs, even though many including G. We're well hedged going into the season.
We have better information on the cost in Japan, and our RCD basis smaller than in Texas. So we can say with some confidence that the hit in Japan will be approximately $2 $5 million.
As a result of these two events, our operating results and balance sheet position, we'll take a meaningful hit in the first quarter. Our management team on genius Board have adopted a plan to replenish our cash war chest prudently grow our core business in the U S. While maximizing cash generation take operational steps to lower our risk profile and to reevaluate.
<unk> assets and reform or shed higher risk longer term opportunities in light of this we are a positive dividend on our common stock to maximize our ability to grow the businesses that are generating rather than consuming cash. We are also using this opportunity to progress our other growth businesses, such as the demand for renewables, which leverage our existing.
<unk> strength and strategic assets to align more fully with the profound changes underway as energy markets shift to renewables and other cleaner supply sources, we have already made some material strides in this regard we hope to share good accretive news about this in future quarters, while I'm disappointed in the Texas and Japan results you can be sure that we will do everything on.
On our power to recoup those losses I am confident that our tightened focus on Genie is best performing assets will yield good results for shareholders now I'll turn the call over to Avi to review the financial results for the quarter and fiscal year.
Thank you Michael and thanks to everyone on the call for joining us this morning.
<unk> today cover our financial results for the three and 12 months ended December 31 2022.
Throughout my remarks, I will compare fourth quarter 2020 results for the fourth quarter of 2019 and full year 2020 results to full year 2019, focusing on a year over year on a quarterly comparison, rather than sequential comparisons from <unk>.
From consideration to seasonal factors that are characteristic of our retail energy business.
From a reporting perspective. Please note the following two changes in our presentation of results.
During the fourth quarter, we acquired the outstanding interest in orbit energy, our EP business in the UK and began consolidating its results on October eight our earnings release provides pro forma revenue and income from operations for our GRE International Division.
<unk> results from Orbitz in all periods presented and reconciliations of those measures to the corresponding GAAP measures.
Because we have concluded our exploration activities at our Capex, we no longer report Genie oil and gas as a separate segment its costs primarily related to the fourth quarter, well test and the shutdown of operations at <unk> are reported within our corporate results.
Turning now to the fourth quarter and full year results.
Fourth quarter was comparable to the year ago quarter and capped off a very strong 2020 highlighted by record levels of consolidated revenue and income from operations, which drove significant top and bottom line improvements over 2019.
Fourth quarter 2020, consolidated revenue increased by $21 million to a $103 million, primarily reflecting the consolidation of orbit energy from the fourth quarter of this year.
Quarterly revenue at Genie retail energy or GRE, our domestic our EP segment decreased 4 million to $70 million, primarily on decreased gas sales both revenue per therm sold in meters served decreased compared to the year ago quarter from.
Later, because we have focused our efforts on acquiring more profitable electric meters in recent years.
<unk> sales were relatively flat as increased consumption per meter was offset by decreased revenue per kilowatt hour sold.
At GRE International the segment that comprises our EP operations outside of the U S revenue in the fourth quarter increased by $26 million to 32 million, reflecting the inclusion of orbit results. Following its consolidation and increases in meters served and be more energy on our Scandinavian RFP.
Genie Energy services fourth quarter revenue decreased from $1 2 million to $876000 as revenue realized in the year ago quarter pursuant to prism solar contract for solar panels with Jpmorgan Chase's not repeated presumed fulfilled that contract earlier this year.
Full year 2020, consolidated revenue increased $64 million to $379 million a record for our company.
<unk> contributed $19 million on the consolidated revenue increase posting revenue of $305 million and the Covid driven shift to work from home drove higher per meter electricity consumption to.
The increase in kilowatt hours sold more than compensated for a decrease in revenue per kilowatt hours sold.
GRE International revenue increased 33 million to $50 million in 2020, primarily reflecting the consolidation of orbit result from the fourth quarter.
Genie Energy services revenue increased 12 to 24 million in 2020, almost exclusively because of the J P. Morgan contract revenues that were recognized in the first half of 2020.
Consolidated gross profit in the fourth quarter predominantly generated by Jerry was $22 million unchanged from the year ago quarter.
Gross profit at Trs decreased by $4 3 million to $17 7 million as gross profit per kilowatt hour sold decreased and was only partially offset by increases in per meter electricity consumption.
Our international contributed $4 4 million in gross profit compared to negative gross profit of 288000, a year ago quarter. The increase was primarily result of the inclusion of orbit energy margin contribution from most of the fourth quarter as well as improved economics that Lou Moe energy full.
Full year consolidated gross profit increased $14 8 million to $97 7 million gross profit increased $7 6 million at GRE on the strength of increased per meter consumption post COVID-19, which is offset by a decrease in gross profit per kilowatt hour GRE international growth and consolidation of orbit drove a $6 $8 million.
Increase in the segment's full year margin contribution to $7 2 million.
SG&A spend in the fourth quarter of 2020 increased $3 4 million to $22 7 million and full year 2020, SG&A increased $4 3 million to $77 million. Both increases resulted primarily from the consolidation of orbit energy as well as increases in bad debt expense incurred as a result of our expanded presence in markets without.
<unk> programs.
Our fourth quarter consolidated loss from operations was $1 1 million compared to income from operations of $2 8 million in the year ago quarter, primarily as a result of the decrease in margin per kilowatt hour sold at GRE.
We generated income from operations of $5 1 million, a decrease from $8 2 million a year ago quarter, reflecting the decrease in margin per kilowatt hours sold as well as decreased gas sales. We continue to invest in building our book overseas CRE International's loss from operations was $2 9 million compared to $3 $2 million a year ago quarter flow.
Year 2020 income from operations increased $9 5 million.
To $19 3 million the improvement was primarily generated a GRE or income from operations increased $9 2 million to $36 4 million on increased consumption, partially offset by narrower margin per kilowatt hours sold Jerry's loss from operations narrowed to $7 6 million from $8 1 million.
Consolidated adjusted EBITDA on the fourth quarter was $693000 compared to 815000, a year ago quarter for the full year the increase in residential electricity consumption at GRE drove an increase in <unk> full year, adjusted EBITDA to $37 $3 million, which in turn helped those consolidated adjusted EBITDA by $13 9 million.
24 months.
Genie Energy's earnings per diluted share increased to one <unk> from now on the year ago quarter and for the full year 2020 increased to 44 from Tencent from 2019.
In light of the situation in Texas that Michael highlighted I'm, particularly pleased by the continued strength of our balance sheet. At December 31, we had cash cash equivalents restricted cash and short term investments totaling $48 $3 million working capital totaled $38 2 million and we again have no debt at quarter end and non current liabilities totaled $3 8 million.
To wrap up results. This quarter were generally consistent from year ago, while the full year 2020 results from very strong with robust top and bottom line results. Our domestic business generated record levels of income from operations. This year and again demonstrated its cash generation potential that concludes my discussion of our financial results now operator back to you for <unk>.
Good day.
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