Q2 2025 Genie Energy Ltd Earnings Call
Speaker #5: Good morning. And welcome to the Genie Energy Ltd's second quarter 2025 earnings call. In today's presentation, Genie Energy Management will discuss Genie's financial and operational results for the three-month ended June 30th, 2025.
Speaker #5: During prepared remarks by Genie Energy's Chief Executive Officer, Michael Stein, and Chief Financial Officer, Avi Goldin, all participants will be in a listen-only mode.
Speaker #5: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After Avi Goldin's remarks, Michael and Avi will take questions from investors.
Speaker #5: 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 which the company anticipates.
Speaker #5: These risks and uncertainties include but are not limited to the specific risks and uncertainties discussed in the reports that Genie Energy files periodically with the SEC.
Speaker #5: Genie Energy assumes no obligation either to update any forward-looking statements that may have made or may make or to update the factors that may cause actual results to differ materially from those that they forecast.
Speaker #5: In their presentation or in the Q&A session, Genie Energy's management may refer to non-GAAP measures, including adjusted EBITDA, non-GAAP net income, and non-GAAP earnings per share.
Speaker #5: A schedule provided in the Genie Energy's earnings release reconciles adjusted EBITDA, non-GAAP net income, and non-GAAP earnings per share to the nearest corresponding GAAP measures.
Speaker #5: 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 Form 8K with the SEC.
Speaker #5: I will now turn the conference over to Michael Stein. Sir, the floor is yours.
Speaker #6: Thank you, operator. Our second quarter yielded mixed results. On the one hand, it was highlighted by solid operational progress and double-digit top-line growth. On the other hand, our bottom line was impacted by significant margin compression at GRE, which weighed on our bottom-line results.
Speaker #6: At GRE, we expanded our customer base in the second quarter to approximately 419,000 meters served, comprising approximately 444,000 RCEs, representing a year-over-year increase of 15% and 20% in meters and RCEs, respectively.
Speaker #6: During the second quarter, we dropped to 4.8% from 5.5% in the first quarter, and I think we can and will continue to make progress as we further improve our customer retention operations.
Speaker #6: GRE's bottom line, however, was impacted by wholesale power price increases in some of its supply markets, most notably within the PJM and MISO interconnection zones.
Speaker #6: The volatility in the quarter driven by policy concerns and by warmer-than-usual weather, particularly in June. There have been times over the past few years where wholesale price volatility has led to margin upside for the company.
Speaker #6: However, this quarter, the impact was against us. Grew delivered very strong results, revenue increased 44%, and the segment approached break-even even as we invested in some of our newly developing businesses.
Speaker #6: At Diversigy, our brokerage and energy advisory business, revenue increased year-over-year by over 50% and profitability increased by almost 3,000%. At Genie Solar, revenue jumped over six times the year-ago level to $1 billion reflecting a solid quarter from its portfolio of operating arrays, and the bottom-line loss decreased by 90% as we also significantly reduced SGNA.
Speaker #6: Turning now to Genie Solar's development pipeline. We are making good progress on the more advanced projects, including our Lansing Community Solar project, which I'm excited to say we expect to commission in the third quarter.
Speaker #6: Meanwhile, we have paused work on several of the earliest stage development pipeline projects to reevaluate their economics in light of recent changes in the development landscape.
Speaker #6: On the one hand, we anticipate unprecedented demand for power from data centers and industry in the coming years. On the other hand, the accelerated sunset of solar generation tax incentives, included in the recently enacted federal tax and budget legislation, the One Big Beautiful Bill, will impact a few projects at the tail end of our current pipeline that are in the earliest stages of development.
Speaker #6: We are currently working to gauge the impact of those changes on these early-stage projects and determine whether and how it makes sense to move ahead with them.
Speaker #6: Also, because of the legislation, we are pausing efforts to add projects to our development pipeline. Also within Grew, we continue to invest carefully in promising initiatives outside of the solar generation space.
Speaker #6: Most notably, we have had an early success leveraging our insurance capabilities and marketing expertise to offer tailored insurance products to retail customers. We are also optimistic about Rodette, our majority-owned venture, utilizing recycled plastic waste to make pallets and other products.
Speaker #6: We hope to have more to share about both businesses in the coming quarters. Turning back to Genie on a consolidated basis, during the second quarter, we again returned value directly to our shareholders by repurchasing approximately 159,000 shares and paying our regular quarterly dividend of 7.5 cents per share.
Speaker #6: Looking ahead to the balance of the year, we are expecting GRE's margins to return closer to historical levels. Assuming a normalized commodity environment and with continued improvement in growth at Grew, we confirm Genie's 2025 consolidated adjusted EBITDA guidance at 40 to 50 million dollars.
Speaker #6: Now, here is Avi.
Speaker #7: Thank you, Michael, and thanks to everyone on the call for joining us this morning. My remarks today cover a financial results for three months ended June 30th, 2025.
Speaker #7: In my commentary, I will compare the results for the second quarter of 2025 to the second quarter 2024, to remove from consideration the seasonal factors that impact our results, particularly within our retail energy business.
Speaker #7: The second quarter is ically characterized by relatively low levels of electricity and gas consumption. As a false mostly between the first quarter's peak heating season and the third quarter's peak cooling season in many of our service areas.
Speaker #7: Our second quarter financial results were headlined by a challenging pricing environment in the retail energy business, where we experienced higher than usual costs, leading to margin pressure.
Speaker #7: Sally's revenue in the second quarter increased 16% to 105.3 million, driven by growth at both Genie Retail and Genie Renewables. At GRE, revenue increased 14% to 99 million in the second quarter, reflecting the year-over-year growth of our ustomer base that Michael detailed for you.
Speaker #7: Per-meter consumption was roughly in line with the year-ago levels. Electricity revenue climbed 15% to 89.9 million, representing 91% of GRE's revenues. Kilowatt-hours sold increased by 17%, while our venue per kilowatt-hour sold decreased 2%.
Speaker #7: Natural gas revenue increased 8% to 9.1 million. From sold increased 5%, while our venue per third sold increased 3%. At Grew, second quarter revenue increased 57% to 6.3 million.
Speaker #7: The revenue increase was led by continued strong growth within our etail brokerage and advisory service, Diversigy, and at Genie Solar. Consolidated gross profits decreased 30% to 23.5 million, while gross margin decreased 1,400 basis points to 22%.
Speaker #7: At GRE, gross profits declined 34% to 21.3 million, reflecting increases in our wholesale electricity and natural gas costs. Our cost of electricity per kilowatt-hour sold increased 20% compared to the year-ago quarter, particularly within the PJM and MISO interconnection zones.
Speaker #7: Our cost per thermic gas also increased up 52% year-over-year, albeit on relatively low consumption levels. Consolidated to 21.2 million on reduced payroll and customer acquisition expense.
Speaker #7: Consolidated income from operations for the quarter came in at 2 million, with adjusted EBITDA of 3 million, down from 9.5 million and 12.5 million, respectively, in the second quarter 2024.
Speaker #7: The declines were primarily driven by the reduced gross profit at GRE that I discussed earlier. At GRE, income from operations decreased 73% to 4 million, and adjusted EBITDA decreased 74% to 4.4 million.
Speaker #7: At Grew, the second quarter loss from operations narrowed to 181,000 from 1.4 SGNA decreased 4% million the year-ago quarter, while adjusted EBITDA improved from negative 1.1 million to negative 97,000.
Speaker #7: The improvements are driven by accelerating profitability at Diversigy and a narrowing loss from Genie Solar. Consolidated net income attributed to Genie Common stockholders was 2.8 million, or 11 cents per share compared 9.6 million, or 36 cents per share a year earlier.
Speaker #7: Turning to the balance sheet, at June 30, 2025, cash, cash equivalents, long and short-term restricted cash—which includes cash held by our active insurance subsidiary and market-blacklisted securities—totaled $201.6 million. Working capital was $115 million.
Speaker #7: Our net current and non-current debt totaled 9 million, primarily from the financing of our solar portfolio. We repurchased approximately 159,000 shares of our class B common stock in the second quarter for 2.7 million, and paid our quarterly dividend, returning 4 million in value to our stockholders so far this year.
Speaker #7: Wrapping up, pite the challenging pricing environment within retail, the underlying business fundamentals remain strong, where a well-positioned for the remainder of the year and expect to meet our full adjusted EBITDA guidance of 40 to 50 million assuming normalized weather conditions.
Speaker #7: Operator, back to you for Q&A.
Speaker #3: Thank you. We will now begin our Q&A session. To ask a question. You may press sir, then one on your touch tone phone. If you're ing a speaker phone, please pick up your handset before pressing the keys.
Speaker #3: To withdraw your question, please press star two. Thank you. We will pause momentarily to assemble our roster. Thank you. Our first question. It's coming from Syed Said.
Speaker #3: Who is an investor? Your line is live. Syed, your line is live, sir. There appears to be nobody available on that line. We have a question from Scott Blake, who is a private investor.
Speaker #3: Your line is live.
Speaker #8: Yeah. Hi. Morning. thanks for thanks for the comments. Two questions. And the first one: what gives ou hope or confidence that your retail margins or rather your wholesale margins will return to normal?
Speaker #8: Obviously, the world's changed. Quite a bit over the last six months, and this is a relatively tough quarter for Genie. So maybe starting with that one, what gives you hope that your margins will return close to normal and reaffirming your guidance for the year?
Speaker #9: hi. Thank you. thank you for the question. So, you know, our margins were hurt in the quarter by, definitely some political factors, but I I think mostly, by by weather.
Speaker #9: it has been a particularly hot end of spring, you ow, and beginning of summer. which kind , pushed pushed prices higher. you know, think things are starting to come down on the wholesale front, and, you know, that's what gives us confidence that we should be able to, to pull off our guidance.
Speaker #8: So it's really just a hope on weather? Are there any hedging strategies or trading strategies you could e and hope on weather is not a great not a great strategy?
Speaker #8: Pretty hot, pretty rough.
Speaker #9: so typically, way we we hedge, we, you know, we hedge our, business, at a very high percentage, meaning we, we hedge out our expected load at a very high percentage, and it's just a kind of a small percentage, that we, that could vary depending on, you know, very, very, depending on weather.
Speaker #9: so there is some that is is definitely out of our control, but by and large, the highest percent, you know, the the vast majority of our, of our power is already purchased.
Speaker #8: So how does how would the margins, I guess I'm just a ittle not to press, but I'm a little confused then. How does weather impact your margins so significantly if you're materially hedged?
Speaker #9: It.
Speaker #8: It is that
Speaker #8: small amount make that big of a ence?
Speaker #9: Yeah. Okay. So if weather is is significantly, different, then historicals, then even that, call it, 15 to 20 percent can make a very big difference in the margins, and that's what happened to us, you know, over the last, over the last few months.
Speaker #9: you know, and how the market obviously reacts to the fact that it's it's very hot. So, you know, when it's very hot early in the season, typically what you see is that the rest of the season, you know, or, typically, sorry, when when it's very hot in the beginning of the season, you know, the wholesale markets react in a in an uncertain kind of a way.
Speaker #9: But when you see heat toward the end of the season, or when you expect to see that heat, usually the market doesn't react as much as as it as it did, you know, in the beginning of the season.
Speaker #9: you know, so we feel pretty confident that the amount that we hedged, and then given that we're already in kind of middle toward the end of the summer, where people expect the heat, we should be, you know, we should be in good shape.
Speaker #8: Okay. Got it. And then just on your solar, projects, is there a viable path for new solar projects? But today, understand the pause. Is everybody sorts sorts through it?
Speaker #8: And maybe two questions on the solar. What's the amount of capital that's locked up in those projects that may not go forward as in potential loss?
Speaker #8: And is there a growth path currently without the tax credits?
Speaker #9: So very little capital is locked up in the new projects. Generally, the way these projects work is that, you know, the development part where you're trying to get permits, interconnection approvals, you know, engineering viability, you know, the amount you spend on that is a very, very small percentage of the overall total spend on the project.
Speaker #9: They, you ow, probably 95% of of what you spend on the project is once ou start construction. so very little capital is is tied up in, you know, in projects that, that we, you know, are not viable.
Speaker #9: in terms of new projects, like I said, we're we're we're pausing. We're trying to ure out, you know, if there is a path forward for, you know, for future projects.
Speaker #9: That have, a timeline that goes beyond, when the big beautiful bill, dictated, that the ITC credits go away. And, you know, obviously, be able to well, obviously, be able to update you when we make, we make those determinations.
Speaker #8: Got it. Okay. Thank you.
Speaker #3: Thank you. Our next question is coming from Jim Harden, who is a private investor. Your line is live.
Speaker #10: Hey. Good morning. my questions are around the captive insurance subsidiary. just starting at a high level, you know, how would you summarize performance there, whether that's policy sold or revenue or profit?
Speaker #10: w you know, what's what's generally the investment mix? And and how does that compare, you know, both those things? How does that compare to your expectations a few years ago?
Speaker #9: w-we're very, very conservative with how we manage, the cash and and the captive. you ow, mostly sits in cash. you know, we have a little bit in an alternative investments.
Speaker #9: it's doing just fine.
Speaker #8: And what what lines are you selling, and what's, my understanding this is a a revenue opportunity, not just maybe a captive that's for, you know, cost savings for employees.
Speaker #8: is that is that accurate? And how are you like, what are you ally selling as far as lines of insurance?
Speaker #9: we're we are starting we just started. It's it's still very early, I alluded to in my remarks, but, we are doing some health insurance, sales, leveraging our existing, marketing channels, to sell some health insurance.
Speaker #10: There is is there any plans to expand from that? To other lines?
Speaker #9: yes. We're we're we're , we're still early stages, so I don't want to what yet, but, the plan is to, you know, is to get into more.
Speaker #9: but to be clear, the captive insurance at this stage is not underwriting, the actual insurance risk behind those, those health insurance plans. Right now, we're acting as a broker.
Speaker #9: There is a possibility, that that will change at some point, but it it'll I think it'll a few years before we do something like .
Speaker #8: Yeah. Thank you.
Speaker #3: Thank you. As we have no further questions on the lines at this time, this will conclude today's call. You may disconnect your lines at this time and have wonderful day.