Genie Energy Q4 2023 Earnings Call Transcript

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March 11, 2024

Key Takeaways

  • Genie Energy delivered record revenue of $429 million in 2023, up 36% year-over-year, and achieved $58 million in consolidated adjusted EBITDA, exceeding guidance.
  • In the Retail Energy segment, customer count rose 31% to 361,000 and RCEs grew 34%, driving consumption gains despite a sequential Q4 dip due to a Massachusetts aggregation deal expiration.
  • The Renewables unit closed a 9.4 MW operating solar portfolio acquisition with an attractive IRR and is expanding its project pipeline by investing in development capabilities for long-term recurring revenue.
  • For 2024, the company targets $40 million to $50 million in consolidated adjusted EBITDA, reflecting its expanded domestic retail base, strategic investments, and ongoing customer acquisition efforts.
  • Genie ended 2023 with $163 million in cash and equivalents, returned over $20 million to shareholders, and remains well-positioned to pursue growth opportunities across retail energy and renewables.
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Earnings Conference Call
Genie Energy Q4 2023
00:00 / 00:00

There are 4 speakers on the call.

Operator

Good morning, and welcome to Genie Energy's 4th Quarter and Year End 2023 Earnings Call. Until the Q and A portion of the call, all participants will be in a listen only mode. After today's 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 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. Genius 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.

Speaker 1

During their remarks, management makes reference to adjusted EBITDA, a non GAAP measure. Management believes that its measure of adjusted EBITDA provides useful information to both management and investors that supplement our core operating results. Our earnings release, which is posted on the genie.comir 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 operations for all periods presented. 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 4th quarter earnings call. I'm happy that we achieved record revenue for the Q4 and full year 2023, while exceeding our adjusted EBITDA guidance with $57,000,000 for the full year. This achievement was the result of the extraordinary efforts of our team and several strategic moves we made over the course of 2022 and 2023 that took advantage of the volatility in global energy markets. We are extremely pleased with the performance of the company as we accomplished our 2023 goal of materially growing the size of our customer book while establishing a new baseline of financial performance.

Speaker 2

At GRE, we ended the year with 361,000 customers and 350,000 RCEs, representing increases of 31% and 34% respectively over the prior year end. Our success base in the early part of the year drove record levels of annual consumption, enabling record revenues. Sequentially, our customer counts decreased somewhat, reflecting the expiration of a customer aggregation deal in Massachusetts. At GRU, we closed on the acquisition of a 9.4 Megawatt operating portfolio during the quarter, our first acquisition of its kind. The IRR in this transaction was especially attractive for an operating portfolio and we felt it moved our strategy forward.

Speaker 2

Note that as we grow out this business, we intend to be opportunistic about potential acquisitions at all stages of the development cycle, including operating assets. With regards to our development pipeline, we advanced on our projects in development and saw the addition of new projects, while others dropped out due to lack of viability. This is not uncommon given that many pipeline projects are early stage opportunities where we are still in the process of acquiring site rights. However, we recently invested in our team and capabilities here and believe this will help us to build a larger solar pipeline and bring more projects to completion. As a reminder, our solar project development strategy is intended to be a long term value driver for the company.

Speaker 2

Developing projects from site rights acquisition through construction and into operations can in some cases take years. However, we are focused on the identification and development of projects with robust return potential that we expect will provide growing recurring revenue streams to the company for many years to come. Building off our strong performance in 2023, we are targeting $40,000,000 to $50,000,000 in company wide consolidated adjusted EBITDA for 2024. This represents a significant increase from our pre-twenty 22 normalized adjusted EBITDA range of $25,000,000 to 30,000,000 dollars even after allowing for our planned investment in GRU. Our higher expectations reflect our expanded customer base at GRE, our pivot to operating exclusively in domestic retail markets, and our focus on continuously enhancing our analytical and operation capabilities.

Speaker 2

Our 2024 projections also include continued investment in new retail customer acquisition. While wholesale energy costs remain at lower levels, we will continue to pursue acquisition 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 based cost effectively, albeit likely at a lower growth rate than we saw in 2023. This year at GRU, we will continue to move forward in completion of our Perry, New York and Lansing, New York solar farms. Additionally, we expect our upgraded project development team to continue to expand our pipeline and move existing projects ahead expeditiously.

Speaker 2

Our Diversagie business continues to grow at accelerated levels and provides recurring revenues. We expect that Diversagie in our other third party services businesses can modestly enhance our growth and profitability in the years to come. To wrap up, we delivered another year of strong operational and financial results while continuing to position ourselves to create incremental medium to long term value with our solar pipeline. Now, I'll turn the call over to Avi for his discussion of our financial results.

Speaker 3

Thank you, Michael, and thanks to everyone on the call for joining us this morning. My remarks today cover our financial results for the 3 12 months ended December 31, 2023. Throughout my remarks, when I discuss the quarterly results, I will compare the Q4 of 2023 to the Q4 of 2022 to remove consideration the seasonal factors that impact our Retail Energy business. The Q4 is typically characterized by seasonally reduced levels of per meter electricity and gas consumption as it falls between the 3rd quarter's peak cooling months and the Q1's peak heating months. Genie's strong 4th quarter and full year 2023 financial results were highlighted by record revenue, solid adjusted EBITDA generation and significant further strengthening of our balance sheet, all while continuing to return value to our common stockholders through our quarterly dividend.

Speaker 3

Before we turn to the quarter and full year results, please note that as we previously disclosed, we recorded a non cash charge of $45,100,000 in the 4th quarter, reflecting the loss reserve by our new captive insurance subsidiary. The charge didn't impact adjusted EBITDA, but is reflected in our GAAP income from operations and bottom line results. To provide investors with a consistent perspective on the underlying performance of our business, we are providing non GAAP earnings and earnings per share that excludes the impact of the loss reserve. Now let's look at the results. 4th quarter consolidated revenue jumped 29% to $105,000,000 from $81,000,000 a year earlier.

Speaker 3

At GRE, 4th quarter revenue increased by 28% to $98,000,000 from $77,000,000 a year ago, also a 4th quarter record. The increases were driven by the powerful year over year growth in our meter base that Michael discussed, as well as increased consumption per meter. The resulting increase in consumption was partially offset by decreases in average price per unit sold for both electricity and natural gas. At our Renewables segment, 4th quarter revenue increased 48 percent to $6,500,000 from 4,400,000 dollars driven by growth of our energy brokerage and community solar marketing ventures. Full year 2023 consolidated revenue increased 36% to $429,000,000 from $316,000,000 in 2022.

Speaker 3

At GRE, full year revenue increased 35% to $410,000,000 from $304,000,000 largely due to our successful efforts to expand GRE's customer base. At group, full year 20 20 2 revenue climbed 63 percent to $18,800,000 from $11,600,000 again driven by expansion of our energy brokerage and community solar marketing businesses. Turning now to gross profit. Consolidated gross profit in the 4th quarter decreased 3% to 34,000,000 dollars The decrease was due to lower gross profit per unit of electricity and natural gas sold, which is only partially offset by the growth of GRE's customer base. For the Q4, GRE's gross profit decreased 5% to $32,500,000 while GRE's gross profit margin decreased to 33% from 44.4%.

Speaker 3

ATGrew 4th quarter gross profit more than doubled to $1,100,000 in $500,000 in 2022. Full year 2023 consolidated gross profit was $146,000,000 a 6% decrease from the record $155,000,000 we achieved in 20.22. Full year 2023 consolidated gross profit was $146,000,000 a 6% decrease from the record 155,000,000 we achieved in 2022. GRE's gross profit dipped 6% to $143,000,000 while GRU's gross profit climbed 58% to $2,800,000 Increased rates of customer acquisition and personnel costs drove quarterly and full year increases in consolidated SG and A. For the 4th quarter, SG and A increased 32 percent to $22,700,000 from 17,200,000 dollars For the full year, SG and A increased 22 percent to $91,100,000 from $75,000,000 Consolidated loss from operations in the 4th quarter was $34,200,000 compared to income from operations of $15,500,000 a year ago quarter.

Speaker 3

The decrease primarily reflects the $45,100,000 non cash insurance charge and higher SG and A costs. At GRE, 4th quarter income from operations decreased 27% to $15,000,000 from $20,600,000 reflecting both the higher margins we were able to capture in 2022 as well as the higher rate of investment in customer acquisition in the Q4 of this year. At Grew, the 4th quarter loss from operations widened to $1,300,000 from $1,000,000 earlier, reflecting the upgrades we have made to our operational teams and capabilities as well as investment in solar project development. Full year 2023 consolidated income from operations was $10,000,000 compared to $77,800,000 in 2022. The results included the impact of the Assurance reserve in 2023, 20 22's exceptional retail margins and our investment in METER acquisition this year.

Speaker 3

At GRE, full year 2023 income from operations decreased 22% to $71,900,000 compared to $92,600,000 in 2022. At Grew, the full year loss from operations was $5,800,000 compared to $3,500,000 in 20.22. This quarter, consolidated adjusted EBITDA was $11,400,000 compared to $18,500,000 a year ago quarter. And for the full year 2023, adjusted EBITDA was $58,200,000 compared to $83,200,000 in 20.20 2. For the Q4 of 2023, Genie's loss per diluted share was $0.90 compared to diluted EPS of $0.59 a year earlier.

Speaker 3

In 2023, full year diluted EPS was $0.74 compared to $3.26 in 20.22. Our 4th quarter non GAAP diluted EPS was $0.37 compared to $0.59 a year earlier and our full year non GAAP EPS was $2.06 compared to $3.26 in 2022. Turning now to the balance sheet. At December 31, cash, cash equivalents, long and short term restricted cash and marketable equity securities totaled $163,400,000 an increase of $19,600,000 during the quarter. Working capital was $131,600,000 and non current liabilities totaled $47,800,000 Over the course of 2023, Genie returned over $20,000,000 to shareholders through dividends, repurchases of common stock and redemptions of the remaining outstanding shares of preferred stock.

Speaker 3

Into 2024, we expect another strong year with solid customer growth across all of our businesses. We are starting the year with a significantly larger retail energy customer base with higher average consumption than at the start of 2023. With the strength of our balance sheet, we are well positioned to pursue the abundant growth opportunities in both our retail and renewables businesses and continue returning value to our stockholders. Now, operator, back to you for Q and A.

Operator

Thank you. At this time, we'll be conducting a question and answer There were no questions. And that does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

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