Q3 2024 Genie Energy Ltd Earnings Call
i
Speaker Change: Good morning and welcome to the GD Energy Limited, third quarter 2024 earnings call.
and I'm the president of the International Foundation, Jenny Energy Management, will discuss Jenny's financial and operational results for a three-month period and it's September 30, 2024.
Speaker Change: During prepared remarks by Gini Energy's Chief Executive Officer Michael Stein and Chief Financial Officer, Avi Goldin. All participants will be in a listen-only mode.
Shedunio, Assistant, please signal a conference specialist by pressing the star key followed by zero.
and Avi will take questions from investors.
and the CUNA session, whether general or specific in nature are subject to risks and uncertainties that make all 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.
GD Energy assumes no obligation either to update any forward-looking statements that they have made or may make or to update the factors that make cause actual results to differ materially from those that they forecast.
In their presentation or in the Q&A session, GD Energy's management may make reference to non-GAAP measures, including adjusted EBITDA, non-GAAP net income and non-GAAP earnings per share.
Speaker Change: A schedule provided in the Gini Energy's earnings release reconciles adjusted EBITDA, non-GAAP net income and non-GAAP earnings per share to the nearest corresponding GAAP measures.
Please note that the Genie Energy earnings release is available on the Investor Relations page of the Genie website. The earnings release has also been filed on a Form 8K with the SEC.
Speaker Change: I will now turn the conference over to Michael Stein.
Michael Stein: Thank you, Operator. Genie Energy's third quarter results were strong across the board. We generated $12 million in income from operations and $14 million in adjusted EBITDA.
And, as Avi will detail for you, we continue to build our capital base to pursue additional growth opportunities while returning value to stockholders through dividends and stock buybacks.
Through the first nine months of 2024, we have generated $37 million in adjusted EBITDA, and we are on track to deliver on the high end of our annual adjusted EBITDA guidance of $40 to $50 million. Now let me give you a rundown on our operational highlights.
Speaker Change: At GRE, our retail energy business, a large residential electricity aggregation deal helped us to add approximately 36,000 net new meters during the quarter.
Speaker Change: We have discussed this type of local government brokered competitively bid deal before.
Speaker Change: As a reminder, aggregation deals typically generate low GP on a per meter basis, however, the aggregate GP can be significant and it drops directly to the bottom line with negligible levels of sales and administrative expense.
Speaker Change: Consequently, we continue to pursue them opportunistically.
Speaker Change: This latest aggregation deal and our consistent efforts to balance customer acquisition and churn over the past year
Speaker Change: RCEs increased by 1.3% from the year ago quarter to 380,000. Also during the third quarter we began signing up our first residential natural gas customers in California, a new state for us and we expect to be cleared to begin serving them in the fourth quarter.
Speaker Change: Entering the California gas market is the latest step in our ongoing effort to grow our portfolio. Expansion in new markets provides diversification that helps mitigate risk and dampen the impact of regional volatility in energy markets.
Speaker Change: With the addition of California, we will serve electricity and or natural gas to customers in 19 states in addition to in Washington, D.C.
Speaker Change: We continue to work diligently towards opening additional states and utility territories as well.
Speaker Change: While California represents an outstanding long-term opportunity for us, we are just as excited by the near-term prospects in our existing markets.
Speaker Change: Many of our markets afford promising marketing opportunities, as the incumbent utilities with whom we compete manage their way through a rapidly transitioning energy market.
Speaker Change: Most notably, following winter storm Uri in 2021, Texas' deregulated retail market has consolidated, and as a result, the competitive environment has improved for independent reps like us.
Speaker Change: Our Texas team is making the most of the opportunity and they have done great work to accelerate growth in the Lone Star State.
Speaker Change: If these generally positive trends continue, we hope to pick up the pace of organic meter growth in the coming months.
Speaker Change: Now, let's look at GRU, our renewable business. As mentioned last quarter, we are strategically repositioning GRU for stronger top-line growth and improving operating margins with a two-pronged strategy.
Speaker Change: Looking ahead, we are working to achieve a similar pace of growth over the next year and turn this business into a consistent, reliable engine of top and bottom line growth for Jeanne.
Speaker Change: On the solar development side of GRU, our strategic focus on genie-owned utility-scale projects has enabled us to expand gross profit generation and operate more efficiently.
Speaker Change: GP more than doubled compared to the year ago quarter, even as we cut in half Genie Solar's SG&A expense compared to the year ago quarter. Genie Solar's development pipeline expanded again in the third quarter. We gained site control for an additional six projects and moved another one to the permitting stage.
Speaker Change: Our two construction stage projects continue to make good progress. At our Lansing, New York project, the racks have been installed and we will soon begin mounting the panels.
Speaker Change: The operational arrays we acquired in Ohio and Michigan contributed about $320,000 in adjusted EBITDA this quarter. Later this month, we expect to close on a project finance loan for these arrays, which will return approximately $7 million in cash to our balance sheet.
Speaker Change: This loan, in part, will serve as a proof of concept, establishing a foundation for larger finance deals to come as we bring projects in our development pipeline through to completion.
Speaker Change: To wrap up, at both GRE and GRU, we reported strong quarterly results and made significant progress operationally and financially.
Speaker Change: Consistent with our performance, Genie continued to return value to shareholders.
Speaker Change: In addition to our quarterly dividend, we repurchased approximately 123,000 shares in the third quarter for $2 million. I expect that we will close 2024 with good momentum, and I look forward to accelerating our performance in 2025.
Speaker Change: Our progress has been and will continue to be driven by the hard work and dedication of the entire Gini team And I'm very grateful for their effort day in and day out Now I will turn the call over to Avi for his discussion of our quarterly financial results
Avi Goldin: Thank you, Michael, and thanks to everyone on the call for joining us this morning.
Avi Goldin: Our remarks today cover our financial results for the three months ended September 30, 2024. Throughout my commentary, I will compare the results for the third quarter of 2024 to the third quarter of 2023 to remove from consideration the seasonal factors that impact our results, particularly in our retail energy supply business.
Speaker Change: The third quarter is typically characterized by relatively high levels of electricity consumption since it includes the summer cooling season.
Avi Goldin: Overall, the third quarter results were strong, and we are on track to achieve the upper end of our annual guidance.
Avi Goldin: Consolidated revenue in the third quarter decreased 10.5% to $111.9 million.
Avi Goldin: The decrease was driven entirely by GRV, where revenue declined 12.1% to $105.8 million, primarily reflecting a decrease in kilowatt hours sold due to lower per meter consumption.
Avi Goldin: Milder weather throughout the summer cooling season compared to the year ago quarter was the primary driver of the reduction in consumption per customer.
Avi Goldin: Electricity sales generated 95% of GRE's revenue in the quarter, in line with expectations.
Avi Goldin: At GRU, revenue increased 29.2% to $6.1 million. The drivers of revenue growth included continued rapid growth in diversity, which nearly doubled its revenue year over year, contributions from the operating solar projects in Indiana and Michigan, and the achievement of solar construction milestones within our C&I portfolio.
Speaker Change: As Michael mentioned, we have pivoted the solar business to focus on utility-scale project development and are working to complete the CNI projects already in the pipeline.
Avi Goldin: Cheney Energies consolidated gross profit with $37.9 million for a gross margin of 33.9 percent. 100 basis point improvement year over year.
Avi Goldin: At GRE, the gross profit came in at $35.8 million for a gross margin of 33.8%, a slight 10 basis point decrease from the prior year.
Avi Goldin: Gruesor's profit increased to $2.1 million from less than $300,000 a year earlier. The jump was driven by the high margin revenues and diversity in revenue from our operational arrays, which incur no direct costs.
Avi Goldin: Consolid SGNA increased 8.5% to 25.2 million. GRB's increased pace of organic growth meter ads during the quarter, exclusive to the aggregation deal Michael mentioned, to have a 10.1% increase in GRB's STNA to 20.7 million.
Avi Goldin: At GRU, SG&A was $2.3 million, unchanged compared to the year-ago quarter, despite its robust top-line growth as we implemented organizational changes related to the shift in focus of Gini Solar to utility-scale projects. Corporate SG&A was also level at $2.1 million.
Avi Goldin: Solid income from operations decreased 34.7% to $11.7 million and adjusted EBITDA decreased 26.7% to $13.6 million.
Avi Goldin: Chiari's income from operations decreased 31.6% to $15 million and adjusted EBITDA decreased 30.7% to $15.5 million.
Avi Goldin: The decreases were driven by the reduction in kWh sold and increased customer acquisition at GRE.
Avi Goldin: At group, we narrowed the loss from operations from $2.1 million a year ago quarter to $243,000. On negative adjusted EBITDA, it declined to just $24,000 from $2 million a year ago quarter.
Avi Goldin: Also this quarter we recorded a non-cash expense of $991,000 and a loss reserved by our captive insurance subsidiary. The charge didn't impact adjusted EBITDA but is reflected in our GAAP income from operations and bottom line results.
Avi Goldin: Quarterly changes in this light item will reflect changes in the potential liability for the risks that the captive is ensuring.
Speaker Change: Just a reminder, if anyone has any questions you can press star one on Youll find key patent now to join the key.
Speaker Change: Okay, we appear to have no questions.
Avi Goldin: So this concludes the end of the call.
Speaker Change: This concludes the end of our conference call. Thank you for attending today's presentation you may now disconnect.