Q2 2023 Genie Energy Ltd Earnings Call

Good morning, and welcome to Genie Energy's second quarter 2023 earnings call.

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After todays presentation by Genie Energy's management, there will be an opportunity to ask questions. Please.

Please note. This event is being recorded I will now.

Now I'll turn the call over to Brian Segal of Hayden IR.

Thank you operator with me today are Michael Stein, Genie Energy's, CEO , and Avi Goldin Genie Energy's CFO , who will discuss operational and financial results.

Any forward looking statements made during this conference call, whether general or specific in nature are subject to risks and uncertainties that may cause actual results to differ materially from those statements. These risks and uncertainties include but are not limited to those discussed in the reports that we filed periodically with the SEC.

<unk> assumes no obligation to update any forward looking statements that we have made or may make or to update the factors that may cause actual results to differ materially from those that we forecast.

Jeremy or their remarks management makes reference to adjusted EBITDA, a non-GAAP measure.

Magically you said, it's a measure of adjusted EBITDA provides useful information to both management and investors.

Our core operating results.

Earnings release, which is posted on the Jamie Dot Com IR page 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 in the earnings release to their respective segments income from <unk>.

<unk> for all periods presented.

I'll now turn the conference over to Michael Stein Genie as Chief Executive Officer.

Thank you, Brian and welcome to our investors and other stakeholders listening today during the second quarter, we build on our positive first quarter momentum continuing to add significant numbers of new retail energy customers, expanding and advancing projects within our solar project pipeline and delivering very strong financial results, including record levels of the second quarter.

Our revenue and income from operations.

At GRE commodity prices again remained relatively stable during the quarter and this favorable environment, we pushed to acquire new customers by quarters and you had added 75000 gross meter adds in the quarter more than double the year ago pace RC He's increased by 45% to 380000 and meters by 36%.

To 381000 and.

We are now serving more rfps than ever before in the company's history financially the increasing mirror acquisitions is reflected in both our increased sales and marketing spend and in our growing revenue base. Meanwhile, our churn rate dropped to four 3% from four 4% in the prior and year ago quarters, We are particularly pleased with this since <unk>.

Usually accelerates during higher customer acquisition periods. The current decrease reflects great work from our customer retention team, which is making a more significant impact with each passing quarter, a big shout out to them for a job well done we will continue to focus on minimizing our churn even as we further build our customer base in upcoming quarters.

At Genie renewables or group, we continue to build out our pipeline of company owned projects in the second quarter, we gain side control on another five projects totaling roughly 30 megawatts, bringing the total number of pipeline projects to 15 within an aggregate 108 megawatts of potential power generation.

In April we broke ground on our first related to your solar project, a project and Harry in New York and in July after the quarter closed we achieved notice to proceed on our second community Solar project. This 1% to 625 megawatt community Solar Farm Atlanta, New York Looking ahead, we are making great progress within our development pipeline and expect to.

Against Icontrol on more potential projects in the second half of the year. The economics of these projects are attractive and we anticipate retaining ownership in most if not all of them to leverage our strong balance sheet and relatively low cost of capital and maximize shareholder value creation as.

As a result of our strong performance year to date and positive outlook. We are increasing our consolidated 2023, adjusted EBITDA guidance to the 47% to $65 million range from the 40% to $50 million range, we forecast at the start of the year. Our upwardly revised guidance also represents a powerful increased from our pre 2022 normalized EBITDA, which was.

The $25 million to $30 million range the improvement in our performance reflects our significantly larger customer base, our transition to operating exclusively in domestic retail markets, our proven ability to operate our rfps profitably across a wide range of market conditions in those domestic markets and our focus on operational excellence, we strive to continually.

Hence our analytics and operational capabilities and our success is reflected in our bottom line results. Our guidance also includes continued investment in new retail customer acquisitions in the second half of the year with wholesale energy costs. This year remaining at lower levels than last year. We are pursuing targeted opportunities created by higher legacy cost base rates are certainly becoming <unk>.

Utilities this organic growth strategy should enable us to cost effectively expand our meter base in the second half of the year, albeit at a lower rate of meter ads in the first half looking to the second half of the year for group. We are on target to complete construction of our Paris, New York Farm and begin construction of the Lansing project, while incrementally continuing.

To advance and expand our project pipeline.

A wrap up we continue to deliver to deliver strong operational and financial results in the second quarter, while significantly increasing our retail customer base and taking significant steps forward in our emerging renewables businesses. We also continued to fulfill our ongoing commitment to return capital to our stockholders by redeeming the remaining preferred stock and paying our quarterly common stock.

Dividend.

In all this was another very strong quarter and I want to acknowledge the efforts of my Genie colleagues that make it possible. Thank you team and keep up the good work now I will turn the call over to Avi for his discussion of our Q2 financial results. Thank you Michael and thanks to everyone on the call for joining us this morning.

My remarks today focus on our financial results for three months ended June 32023.

My remarks, I will primarily compares second quarter 2023.

Second quarter of 2022 to remove from consideration the seasonal factors that are characteristic of our retail energy business.

The second quarter is typically impacted by seasonally low levels per meter electricity and gas consumption as it falls between the year's peak heating months in the first quarter and peak cooling months in the third quarter G&A.

<unk> second quarter financial results again reflect at our retail business is very strong underlying fundamentals and continued investments to build out a renewables platform.

At GRE root, we achieved record second quarter revenue gross profit income from operations and adjusted EBITDA.

Powered by the rapid growth of our customer base in the first half of this year margins.

Margins for the quarter was strong by historical standards, although slightly below last year's exceptional second quarter.

Junior renewables, we continue to make progress in our solar generation development pipeline, while our other renewables businesses performed well.

Balance sheet perspective, our strong operating results for this quarter enabled us to further fortify our financial position, even as we continued to return value to shareholders through quarterly common stock dividends and the redemption of the outstanding shares of our preferred stock now.

Now, let's look at the quarter's results in more detail second quarter consolidated revenue increased 40% to $93 million driven by our retail business at GRE second quarter revenue increased by 42% to 90 million on strong electricity sales, which increased by 51% to $80 million.

Our sold increased by 47% on a comparable percentage increase in average electric meter served our average revenue per kilowatt hour sold edged up 3%.

<unk> sales decreased 11% to $9 million, an 8% decrease in therm sold.

Our renewables revenue was $3 7 million impacted by strong growth of diversity.

Gross profit on a consolidated basis in the second quarter increased 28% to $38 million from $30 million, while gross margin decreased 370 basis points to 41%.

At GRE gross profit increased 29% to $37 million gross margin decreased 120 basis points to 42% well above historical levels.

Bertrand you go quarter kilowatt hour sold increased by 47%, but gross profit per kilowatt hour sold was 17% lower as the year ago quarter was impacted by an unusually strong margin position.

Consolidated SG&A increased 28% to $23 million.

Yeah, SG&A increased 31% to $19 million, reflecting a significant increase in gross meter acquisitions compared to the year ago quarter.

For SG&A was unchanged compared to the year ago quarter at $2 1 million.

Other income from operations increased 28% to $15 million in the second quarter on the strength of Jerry's expanded electricity customer base salary to adjusted EBITDA increased 30% to $15 8 million.

<unk> income from operations increased 28% to $18 4 million and adjusted EBITDA increased 27% to $18 8 million the increase in Jeremy's gross profit more than offset the increased spending for meter acquisition.

Children, who are both loss from operations of negative adjusted EBITDA were $1 3 million and $1 2 million, respectively compared to a loss from operations of 518000 and negative adjusted EBITDA of 508000, a year earlier.

As was the case last quarter. The results reflect increased SG&A spending as you ramp up our investment in solar projects. These projects are expected to begin generating revenue early next year as our first community solar projects come online.

<unk> earnings per share from continuing operations, which exclude any impact from our international operations increased to 45 cents in the second quarter of 2023 compared to 26% year earlier do you need diluted EPS was <unk> 57 on net income attributable Genie common stockholders of $15 million compared to EPS of $1 30 on net income attributable to <unk>.

Many common stockholders of $33 9 million a year ago quarter.

The decline was caused entirely by lower net income from discontinued operations as the year ago quarter included significant one time gain at our European retail business, turning now to the balance sheet at June 30, cash restricted cash and marketable equity securities totaled $116 1 million working capital was $156 million and non current liabilities totaled.

$2 8 million.

The company continued to deliver strong performance achieving record revenue and income from operations in the quarter driven by the strong operational performance at Michael covered in his remarks, we continue to return value to shareholders not only paying the dividend in our common stock for completing the redemption of our preferred stock.

<unk> first half results the robust growth of our customer base and our competitive position the retail energy market position us to raise our guidance for the year now operator back to you for Q&A.

Certainly we will now begin the question.

Okay.

Good question.

John .

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Caroline to assemble our roster.

Your first question is coming from.

Karen.

A private investor.

Yeah, Hi, guys congrats.

Congrats a really amazing quarter very impressive.

My.

My first question is it's great that you're raising estimates then I'm just wondering right now.

How conservative those estimates are considering the growth of meters in the ongoing heat wave across the country, where these are running nonstop. So I assume the electrical bills will be up significantly in quarter, three and I'm. Just wondering how if you can comment on that situation and you know kind of what youre seeing.

Hi, Thanks.

Thanks.

Our warm wishes.

No, we're going to stick by that guidance.

We feel very very confident that we're going to hit it.

Yes throughput is as strong during this tour no question about it.

And then how does it work in terms of the wholesale costs when the electricity usage is going up so significantly you know, especially in Texas.

Are you guys affected by that at all.

Yes.

Definitely we've seen a few days of price spikes throughout the summer, but it hasnt been.

<unk>.

For a sustained period, it's more of a few hours a day.

Here and there.

So it's nothing like what we saw.

During winter storm Youri don't.

Don't have those concerns as far as the rest of the country.

<unk> costs.

Bob.

Chris stayed pretty tame.

Relative to the hot weather that that was expected.

Or is that that we've been experiencing rather.

That probably has a lot to do with the fact that we had a large natural gas storage.

Excess.

Across the country.

Yes.

So we're in good shape.

Okay, Great and just one more quick question do you have any update on the cash that's held by the UK administrators I'm not really clear on where that would show up in the balance and you know whether you got that money back.

I'll, let <unk> talk to you where it would show up on the balance sheet, we haven't gotten money back yet.

So that's that.

It's definitely making its way.

Sure.

The courts and the administration process we.

We do expect resolution this year.

Okay.

Hi this.

So that would show up in current assets of discontinued operations on the balance sheet.

Okay, Alright, I I see it thanks, a lot and that's and that's part of that number.

Other elements in there as well.

Okay.

Great quarter again, thanks, a lot guys.

Thank you.

Once again, if you have a question please press star one.

Yeah.

Okay.

This concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.

Yeah.