Q1 2022 Genie Energy Ltd Earnings Call
Good morning, and welcome to Genie Energy's first quarter 2022 earnings call.
Participants will be in a listen only mode.
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After todays presentation by Genie Energy's management, there will be an opportunity to ask questions.
Please note this event is being recorded.
I will now turn the call over to Brian Segal of Hayden IR.
Thank you operator on this morning's call with me is Michael Stein Genie <unk>, Chief Executive Officer, Avi Goldin, Genies, Chief Financial Officer, who will discuss operational and financial results for the three months period ended March 31 2022.
Any forward looking statements made during this conference call either in the prepared remarks or in 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 with the company anticipates.
These risks and uncertainties include but are not limited to specific risks and uncertainties discussed in the reports that we filed periodically with the SEC.
<unk> assumes no obligation either to update any forward looking statements that they 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, a non-GAAP measure management believes that Genie is measure of adjusted EBITDA provides useful information to both management and investors that supplement our core operating results.
Earnings release includes a reconciliation of consolidated adjusted EBITDA to its nearest comparable GAAP measures consolidated net income and income from operations for all periods presented.
In addition, adjusted EBITDA for applicable segments are reconciled to their respective segments income from operations for all periods presented.
The earnings release is posted on the Investor Relations page of the Genie Corporation website.
<unk> Dot com and has been filed on a form 8-K with the SEC.
Now I'll turn the conference call over to Michael.
Thank you Brian .
Welcome to Genie Energy's first quarter 2022 earnings call today, I will go through a brief overview of our business and opportunities followed by a discussion of our first quarter results Avi Goldin, Our Chief Financial Officer will then provide a deeper dive into the financial results and then we will be glad to take questions.
As a reminder, business transitions at some weather anomalies complicated our financial statements in fiscal 2021 as a result, we will provide pro forma information in our investor presentation that.
That will be posted on our website in the coming days to give investors a view of how the existing businesses have performed historically and to provide for current and future comparisons.
Moving to a quick overview of our business Genie energy owns a portfolio of assets that offer an attractive investment opportunity within the energy space and our diversification both as to our product offerings and geographically reduces our risk profile, while providing significant upside opportunities as we saw over the past few quarters.
In the U S. Our asset light Genie retail energy business or Jerry for sure has demonstrated a resilient ability to generate cash in a variety of market conditions.
<unk> currently operates in 17 in 2007, Deregulated States, plus Washington D C and our mid to long term strategy is to opportunistically grow when market conditions warrant by taking share in existing territories expanding into new areas and offering additional products and services to our installed base.
We'll also at times take steps to slow growth and protect margins over a shorter time horizon when market conditions dictate which is what we did in the fourth quarter and much of the first quarter.
Our next business unit Genie retail energy International G. R E.
Emerging growth business that has become profitable with improving margins similar to our domestic retail operations. We do at times manage the customer portfolio to protect margins and cash flow during times of price volatility as we are currently seeing in Europe . We also from time to time time to time see opportunities to be a market consolidate.
As our risk management activities tend to be more sophisticated than some of our competitors longer term. This business affords the opportunity to expand into a handful of other European countries.
Potential total addressable market to more than 22 million meters over the next few years.
Our Genie renewables business provides access into multiple opportunities that can lead to outsized growth in 2021, we pivoted to focus on higher margin solar opportunities and in 2022, we are leveraging our strong balance sheet to pursue opportunities up the solar value chain through financing solar generation assets.
We believe this initiative will provide attractive.
Attractive financial returns increase the win rate on new projects and contribute more meaningfully to top line and adjusted EBITDA growth.
Moving to our first quarter results <unk> had another great quarter with $84 million in revenue and over $30 million in income of operations and adjusted EBITDA easily the most profitable Q1 in our history. The decisions that we made in the fourth quarter relative to the customer book and risk management left us well positioned to capitalize on the momentum.
The market, while our meter NRC accounts were up only slightly from the end of the year, our churn decreased both year over year and sequentially.
<unk> had a strong quarter as well due to the geopolitical situation in Europe energy prices continue to be extraordinarily volatile, which significantly impacted our mark to market position in this quarter, the mark to market change swung to a loss of reversal from the fourth quarter. Nonetheless, the business was able to expand.
And non mark to market margins and generate operating profit due to our decision to slow customer growth. During this period of uncertain commodity prices.
I applaud our risk management team for navigating a difficult period and coming out on the right side of the market.
We believe we have fared better than many of our competitors in the market some of which took heavy losses. We believe it is still prudent to deviate from the approach of many of our competitors that are still competing on price to acquire new customers instead of engaging customers at this high customer acquisition costs, we will sit back protect margins and wait for the market to rationalize.
Before moving back into customer acquisition mode.
Renewables saw a dip in revenue and profit this quarter on several projects were still in process at quarter's end. However, we continue to expand our sales and marketing efforts our pipeline of potential.
Projects remains strong and our contracted revenue continued to grow as we signed three new deals as a result, we remain excited about the opportunity for GE renewables and the remainder of 2022 and beyond.
Looking to the outlook for all of 2022, despite the continued volatility high energy prices Russia's invasion of Ukraine inflation and other factors, we remain confident that our strong risk management program will differentiate us from the competition.
While Q2 is seasonally a period of lower consumption in the U S. We expect to continue to deliver strong results looking to the remainder of the year, we plan to enter some new states, where our domestic retail operations, one of which we expect to come online in Q2. In addition, genie renewables, especially our solar business is well positioned to contribute significantly to our top.
While we currently have over $15 million in contracted solar projects and now believe the entire renewable segment will do $15 million to $20 million of revenue for the year. Finally, our cash position remains very strong with $95 million in working capital. We are continuously looking at inorganic investment opportunities.
Across all three of our business units that would increase shareholder value. Although there is nothing imminent at this time and we will only move forward. If we are confident that the parameters makes sense in summary, we started the year on a high note with a very strong cash position that affords us numerous ways to create further shareholder value. Thank you for your time today and I look forward to sharing our results for Q2.
Two in early August now over to Avi Goldin for his discussion of our Q1 financial results.
Thank you Michael and thank you all for joining US. This morning, My remarks today cover our financial results for the three months ended March 31 2022.
Throughout my remarks, I will compare the first quarter of 2022 to the first quarter of 2021.
Focusing on the year over year, rather than sequential comparisons controls for the impact of seasonal factors that are characteristic of our retail energy businesses.
The first quarter is typically characterized by seasonally elevated per meter electricity and gas consumption. As it includes the peak heating months of January and February .
The headlines for the first quarter that Genie delivered record results. The results were driven by strong performance of our core retail business. We're benefited from strategic decision made in the fourth quarter to moderate customer load and adjust the hedge book. Accordingly ahead of what was what was shaping up to be a volatile winter. Additionally.
Additionally, when comparing this quarter to the year ago quarter I want to point out that last year's results reflected the $13 million negative impact of winter storm year in Texas and losses at Genie, Japan, which we sold in last May.
Consolidated revenue decreased eight 3% to $98 $5 million at Genie retail energy, our domestic supply business revenue decreased seven 5% to $83 9 million, reflecting a 19% decrease in electricity sales killed.
Kilowatt hours sold decreased 37%, partially offset by a 28% increase in revenue per kilowatt hour.
The decrease in kilowatt hours sold was largely the result of reduction of our customer base as I mentioned beginning in the fourth quarter of 2021, we sought to maximize the value of our foreign commodity position and reduce our exposure to price volatility by pausing certain customer acquisition efforts and allowing lower margin customers, including those acquired to municipal aggregation deals to attrit to others.
Suppliers. In addition, we did experience a moderate gape in electricity consumption per meter and our residential heavy customer base as employees are returning to in office work and weather moderated in certain territories, including Texas compared to the year ago quarter.
Natural gas sales increased 42% year over year. This increase reflected a 20% increase in therm sold and an 18% increase in revenue per therm.
The increase in terms of soul reflected growth in our meter base as we entered several new gas only Youtube utility territories over the past year and an increase in average consumption per gas meter the newly acquired meters have on average higher consumption profiles within our existing base.
At Genie retail international revenue decreased 12% from $14 3 million to $12 6 million. This decrease was primarily a result of the sale Genie, Japan in the second quarter of 2021 augmented by a reduction in kilowatt hours sold during the first quarter, reflecting our decision to pause meter acquisition. These factors were partially offset by a strong increase in average revenue per.
Kilowatt hours sold as electricity prices climbed across the EU versus the year ago period.
Actually renewables revenue decreased to $2 million from $2 5 million a year ago quarter. However, as Michael mentioned, we expect strong revenue growth for the remainder of the year as we execute on the expanding pipeline of projects within our solar activities.
First quarter consolidated gross profit jumped to a record $45 5 million from $12 7 million a year ago, while our gross margin rose to 46% from 12% at GRE gross profit more than tripled to $46 6 million from $15 million, while gross margin increased to 56% from 17%.
At GRE I reduced our loss to $1 6 million from a loss of $3 4 million a year earlier.
The year ago period included losses of approximately $2 5 million incurred by Genie Japan.
First quarter 2022, gross margins generated by our Scandinavian operations were impacted by Mark to market losses as commodity prices fell from the levels at the end of 2021, no mark to market gains positively impacted the fourth quarter.
Consolidated SG&A expenses increased 17% to $21 1 million. This increase was incurred primarily GRE incorporate reflecting higher marketing expenses as we increased sales during the quarter <unk>.
Consolidated income from operations surged to a record $24 4 million from a loss from operations of $5 5 million a year ago. The improvement was driven by the extraordinary strong gross margins, we achieved a jerry and the negative impact from winter storm year in Texas, which impacted our bottom line in the first quarter of 2021.
Consolidated adjusted EBITDA climbed $25 7 million also the highest level in the company's history compared to a negative $4 4 million in the first quarter of 2021.
In addition, adjusted EBITDA for the trailing 12 months totaled $67 8 million compared to $12 7 million the preceding 12 months G.
<unk> income from operations increased to $30 2 million in the first quarter from $1 2 million a year earlier and adjusted EBITDA increased $30 5 million from $1 5 million.
Jerry is loss from operations narrowed to $2 8 million from $5 5 million, primarily due to the sale of Genie Japan.
Geneva renewables loss from operations was 479000 in the first quarter compared to income from operations of 559000, a year earlier, we have invested significantly to enhance our sales and operational teams and expect our growing pipeline can begin to positively impact results going forward.
Earnings per diluted share in the first quarter was <unk> 67, compared to a loss of nine per basic and diluted share in the year ago quarter, turning now to our balance sheet remained very well positioned from a liquidity and working capital standpoint, a March 31 cash restricted cash and marketable securities totaled $95 3 million net working capital was 96 million non current liabilities were just too.
$9 million.
Consistent with our previous announcements, we have initiated the process to redeem a portion of our preferred stock in the second quarter. The board authorized the redemption of $2 million this quarter and up to an additional $1 million per quarter going forward.
There are approximately two 3 million shares of preferred stock outstanding with a total liquidation preference $19 $7 million.
To wrap up Genie generated record financial results in the first quarter, our comprehensive approach to commodity risk magic put us in a solid position heading into the winter and we're able to deliver exceptional bottom line results. Once again, we've demonstrated the ability of our retail supply business model to create value for shareholders across a wide range of market conditions.
With a strong balance sheet, we're in good position to rebuild our customer basis, both in the U S and Scandinavia when market conditions warrant. Additionally, our renewals with both business is poised for significant growth with a robust pipeline of projects and expanding execution capabilities.
For those interested we will be presenting at the Sidoti Conference on May 12 at the 10 45 am eastern time slot and available for one on ones on both May 11th and May 12, now operator back to you for Q&A.
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Our great quarter is left everyone's speechless.
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Ladies and gentlemen, this does conclude todays event you may disconnect at this time and have a wonderful day. Thank you for your participation.