Genie Energy Q3 2023 Earnings Call Transcript

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November 6, 2023

There are 4 speakers on the call.

Operator

Good morning, and welcome to Genie Energy's Third Quarter 2023 Earnings Call. I will now turn the call over to Brian Siegel of Hayden IR.

Speaker 1

Thank you, operator. With me today are Michael Stein, Genie Energy's CEO and Avi Golden, 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 file periodically with the SEC. Genie 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 useful information to both management and investors that supplement our core operating results.

Speaker 1

Our earnings release, which is posted on the genie.comir page, I will now turn the conference over to Michael Stein, Genie's Chief Executive Officer.

Speaker 2

Thank you, Brian. Welcome to Genie Energy's 3rd quarter earnings call. Our momentum from the first half of the year continued into Q3 with record quarterly revenues and nearly $19,000,000 in adjusted EBITDA, driven mainly by GRE's investments in retail customer acquisition since early in the year. Additionally, Genie Renewables or GRU continued to expand its pipeline of projects, while moving forward in the construction process with 2 of its projects. At GRE, we added 60,000 gross new meters in the quarter, And therefore, RCE and meters were essentially flat sequentially despite year over year growth of 49% 42%, respectively.

Speaker 2

Our churn rate was down 30 basis points from last year at 4.4%. While we were not as aggressive as in the first half, we continue to capitalize on pockets during the quarter, while continuing to build out the 2 New York projects under construction. As a result of our strong performance year to date and overall 2023 outlook, We are increasing our previous consolidated adjusted EBITDA guidance range of $47,000,000 to $55,000,000 to $52,000,000 to 57,000,000 This range increase reflects our strong Q3 and continued optimism about the business as we head into the winter. Remember, these results also represent a significant increase from our pre-twenty 22 normalized EBITDA range of $25,000,000 to $30,000,000 and these are consolidated configures even after allowing for our continued investment in Group. These higher expectations reflect our larger customer base, transition to operating exclusively in domestic retail markets, continue to invest in new retail customer acquisition.

Speaker 2

With wholesale energy costs remaining at lower levels, we will continue to pursue targeted opportunities created by the higher legacy cost based rates of certain incumbent utilities. This organic targeted growth strategy should enable us to expand our meter base cost effectively, Albeit at a lower growth rate than in the first half of the year. Looking to the Q4 for GRU, we are making solid progress toward completing our Perry, New York Solar and are in the construction phase for our Lansing, New York project. Of course, we will also continue looking for opportunities to expand our pipeline of potential projects. To wrap up, we delivered yet another quarter of strong operational and financial results, while continuing to position ourselves to create incremental medium to long term value with our solar pipeline.

Speaker 2

Now, I'll turn the call over to Avi for his discussion of Q3 financial results.

Speaker 3

Thank you, Michael, and thanks to everyone on the call for joining us this morning. My remarks today focus on our financial results for the 3 months ended September 30, 2023. Throughout my remarks, I will primarily compare Q3 2023 results Q3 of 2022 to remove from consideration seasonal factors that are characteristic of our Retail Energy business. The Q3, which includes this year's peak cooling season, is typically characterized by high levels of per meter electricity consumption and low per meter levels of gas usage. As Michael mentioned, our Q3 2023 financial results were highlighted by record quarterly revenue and solid bottom line results.

Speaker 3

Consolidated revenue increased $44,000,000 or 54 percent to $125,000,000 with strong contributions from both GRE At GRE, we increased quarterly revenue 51 percent to $120,000,000 driven by the significant investments we've made in customer acquisition this year. Sales in electricity increased 55% from the year ago quarter, a 57% increase in electric meters served coupled 13% increase in consumption per meter from a 73% increase in total kilowatt hours sold. At G and A Renewables, revenue increased $4,700,000 on growth within Solar, Diversegy and CityCom. Our consolidated gross profit in the 3rd quarter was very strong at $41,000,000 yielding a gross margin of 33 Our gross profit decreased $2,000,000 or 5% from

Speaker 2

the year ago quarter, while our

Speaker 3

gross margin declined from 41% in the year ago quarter. It's important to note that margin in 2022 was positively impacted by our decision to reduce customer load in the face of volatile commodity prices. In 2023, the margin environment has returned to historical levels and the company has successfully added profitable meters. Consolidated SG and A increased 20% to are $23,200,000 At GRE, SG and A increased 19 percent to $18,800,000 driven by increased customer acquisition expense. Genie Renewables SG and A increased 63 percent to $2,300,000 as we continue to expand Genie Solar's operational capabilities.

Speaker 3

Corporate SG and A decreased from $2,400,000 to $2,100,000 in the quarter. Consolidated income from operations was $17,900,000 While adjusted EBITDA was $18,500,000 both decreased 24% from their respective levels in the year ago quarter, reflecting both the reduction in gross profit and increased SG expense. GRE delivered $22,000,000 in income from operations compared to $27,400,000 a year ago. Adjusted EBITDA was $22,300,000 compared to 27 the value of our solar panel inventory. Diluted EPS from continuing operations, which excludes any impact from our discontinued international operations, are $0.53 on net income attributable to Genicom and stockholders of $14,500,000 compared to EPS of $0.70 on net income attributable to Genicom and stockholders are in the year ago quarter.

Speaker 3

In the year ago quarter, we exited our remaining international businesses in Scandinavia and booked a $3,900,000 loss from the discontinued operations, compared to a loss from discontinued operations of $300,000 in this quarter. Genie Energy's balance sheet continued to strengthen during the quarter. Cash restricted cash and marketable securities increased by $28,700,000 sequentially to 143,800,000 Working capital was $164,400,000 and non current liabilities totaled just $2,500,000 Wrapping up, in the Q3 a year ago, We capitalize on the unprecedented market volatility to achieve exceptional margins in our retail business. This quarter's results represent a solid performance under more normalized market conditions. GRE benefited significantly from the investments we've made this year to build our customer base and is well positioned for a strong finish to 2023 and beyond.

Speaker 3

At gi Renewables, we continue to advance our pipeline of utility scale solar projects, while

Operator

This concludes today's conference and you may disconnect your lines at this time.

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Genie Energy Q3 2023
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