Genie Energy Ltd. Reports Third Quarter 2019 Results

NEWARK, N.J., Nov. 8, 2019 /PRNewswire/ -- Genie Energy Ltd. GNE GNEPRA))) reported third quarter 2019 net income of $0.18 per share on revenue of $85.7 million.

FINANCIAL AND OPERATIONAL HIGHLIGHTS

(Throughout this release, 3Q19 results are compared to 3Q18 results unless otherwise noted)

• Global customer base increased by 27 thousand RCEs (+8%) to 384 thousand RCEs and by 45 thousand meters (+10%) to 492 thousand meters during 3Q19;
• Average monthly churn was 5.3% - a decrease from 5.7% in 3Q18 and an increase from 4.4% in 2Q19;
• Genie Retail Energy (GRE) commenced customer acquisition in Texas - the largest deregulated electricity market in the U.S.;
• Prism Solar, a supplier of solar panels in which Genie holds a majority stake, received significant additional orders from JP Morgan Chase for facilities around the nation pursuant to an existing preferred supplier agreement;
• Consolidated revenue increased 19.3% to $85.7 million from $71.8 million;
• Consolidated income from operations was $6.9 million and Adjusted EBITDA* was $8.0 million, both results unchanged from 3Q18;
• During the quarter, Genie Energy repurchased 470,147 shares of its Class B common stock, approximately 1.7% of shares outstanding, for $3.4 million;
• Genie Energy's Board of Directors has declared a third quarter 2019 dividend of $0.075 per share.

COMMENTS OF MICHAEL STEIN, CEO

"Across the Company, Genie Energy continued its strong performance with a solid third quarter. Domestically, we increased our customer base within our existing markets and entered a huge new deregulated market – Texas, with over seven million addressable meters. Internationally, we continued our rapid expansion. Within our energy services division, Prism Solar is rapidly expanding its business through its solar panel supply agreement with JP Morgan Chase.  Our robust financial results and strong balance sheet enabled us to repurchase over 470 thousand shares of our outstanding common stock during the third quarter for $3.4 million while maintaining our quarterly dividend."

CONSOLIDATED RESULTS

*Adjusted EBITDA for all periods is a non-GAAP measure intended to provide useful information that supplements the core operating results in accordance with GAAP of Genie Energy or the relevant segment.  Please refer to the Reconciliation of Non-GAAP Financial Measure at the end of this release for an explanation of Adjusted EBITDA and reconciliation to the most directly comparable GAAP measure.

* * Genie Energy accounts for its investments in Orbit Energy, its joint venture operating in the U.K. and Atid, a drilling services business based in Israel in which it holds a minority stake, under the equity method of accounting. Under this method, Genie Energy records its share in the net income or loss of the venture. Therefore, revenue generated, and expenses incurred are not reflected in Genie Energy's consolidated revenue and expenses, but the customers are included in metrics regarding our customer base.

METERS AND RCEs

Genie Energy's global customer base increased sequentially and year-over-year driven by investment in customer acquisition in U.S. and overseas markets.  Genie Energy's global RCE and meter totals are provided in the chart below.

*Includes RCEs and meters acquired and served by Genie Energy's domestic and international retail energy provider businesses including operations at ventures in Finland and Japan and at our joint ventures in the U.K..

SEGMENT RESULTS

Genie Retail Energy (GRE)

GRE's financial results are summarized in the chart below:

• Customers served at September 30th increased to 329 thousand RCEs and 389 thousand meters from 318 thousand RCEs and 378 thousand meters at June 30^th and from 275 thousand RCEs and 342 thousand meters at September 30, 2018.  Gross meter adds during the quarter totaled 76,000 compared to 45,000 in 3Q18;
• Average monthly churn increased to 5.3% from 4.4% in 2Q19 and decreased from 5.7% in 3Q18;
• Electricity revenue increased to $78.5 million from $67.3 million in 3Q18 reflecting increased meters and RCEs served and modest increases in both consumption per meter and revenue per kilowatt hour sold;
• SG&A expense increased to $14.8 million from $10.4 million primarily on increased customer acquisition expense in the quarter and the reversal of a $1.5 million accrual of legal expenses in 3Q18;
• Income from operations in 3Q19 increased to $10.9 million from $10.5 million in 3Q18.  Adjusted EBITDA* increased to $11.2 million from $11.0 million in 3Q18.  The increases resulted primarily from increases in kilowatt hours sold and margin per kilowatt hour sold, significantly offset by the increases in customer acquisition expense and the impact of the reversal of an accrual in 3Q18.

Genie Energy Services (GES)

• GES' revenue increased to $1.0 million from $0.7 million in 3Q18 reflecting the impact of the Prism Solar acquisition in 4Q18;
• Prism Solar has orders on hand for solar panels with a generative capacity of 35 megawatts that are expected to contribute to revenue and profits upon delivery of panels over the next several quarters;
• GES' loss from operations was $0.8 million compared to a loss from operations $0.2 million in 3Q18.  Negative Adjusted EBITDA* was $0.6 million compared to $0.2 million in 3Q18.

Genie Retail Energy International (GRE International)

(Genie Energy accounts for its investments in Orbit Energy, its joint venture operating in the U.K., under the equity method of accounting. Revenue generated, and expenses incurred are not reflected in segment revenue and operating expenses. RCE and meter counts do, however, include Orbit Energy customers).

• Customers served at September 30^th increased to 53 thousand RCEs and 103 thousand meters compared to 37 thousand RCEs and 69 thousand meters at June 30^th;
• GRE International's revenue increased to $3.0 million compared to nil in 3Q18 reflecting the impact of the Lumo Energia acquisition in 1Q19 and early activity in Japan;
• Equity in the net loss of Orbit Energy was nil compared to $0.8 million in 3Q18;
• GRE International's loss from operations increased to $1.6 million from a loss from operations of $328 thousand in 3Q18.  The increased loss reflects the investment in Genie Japan and, to a lesser degree, the continued investment in Lumo Energia, Negative Adjusted EBITDA* was $1.0 million compared to negative Adjusted EBITDA* of $1.1 million in 3Q18.

Genie Oil and Gas (GOGAS)

• Operations at Genie Energy's Afek oil and gas exploration subsidiary remain suspended pending final testing on an existing well, which is expected to take place within the next two quarters;
• Loss from operations was $0.3 million compared to a loss from operations of $1.0 million in 3Q18 including an impairment charge of $0.5 million.  Negative Adjusted EBITDA* was $0.4 million compared to negative Adjusted EBITDA* of $0.6 million in 3Q18.  The improvements reflect the suspension of oil and gas activities at Afek.

Corporate

• Corporate loss from operations was $1.4 million compared to a loss from operations of $2.0 million in 3Q18.  The loss narrowed on a decline in stock-based compensation, which decreased to $0.1 million dollars from $0.9 million in the year ago quarter.  Negative Adjusted EBITDA* for Corporate operations was $1.2 million in 3Q19 compared to negative Adjusted EBITDA* of $1.1 million.

BALANCE SHEET AND CASH FLOW HIGHLIGHTS

At September 30, 2019, Genie Energy had $150.2 million in total assets, including $45.3 million in cash, cash equivalents and restricted cash.  Liabilities totaled $62.4 million and working capital (current assets less current liabilities) totaled $46.6 million.

During the quarter, Genie Energy repurchased 470,147 shares of its Class B common stock representing approximately 1.7% of the shares outstanding, for $3.4 million.

Cash provided by operating activities in 3Q19 increased to $12.1 million from $8.2 million in 3Q18.

DIVIDEND ON GENIE ENERGY COMMON STOCK

Genie Energy's Board of Directors has declared a 3Q19 dividend of $0.075 per share of Class A and Class B common stock with a record date of November 18, 2019.  The dividend will be paid on or about November 29, 2019.  The distribution will be treated as an ordinary dividend for income tax purposes.

GENIE ENERGY EARNINGS CONFERENCE CALL

This earnings press release is available for download in the "Investors" section of the Genie Energy website (https://genie.com/investors/investor-relations/) and has been filed on a current report (Form 8-K) with the SEC.

At 8:30 AM Eastern time today, November 8, 2019, Genie Energy's management will host a conference call to discuss financial and operational results, business outlook and strategy.  The call will begin with management's remarks followed by Q&A with investors.

To participate in the conference call, dial toll-free 1-888-348-6472 (from the US) or 1-412-902-4240 (international) and request the Genie Energy conference call.

The call replay will be available at 1-844-512-2921 (US toll-free) or 1-412-317-6671 (international) through November 15, 2019.  The replay PIN is 10136262.  A recording of the call - in MP3 format - will also be available for playback on the "Investors" section of the Genie Energy website.

Investors can sign up through the Genie Energy website to have earnings releases and other press releases e-mailed directly to them.

ABOUT GENIE ENERGY LTD.

Genie Energy Ltd. GNE GNEPRA))), is a global provider of energy services.  The Genie Retail Energy division supplies electricity, including electricity from renewable resources, and natural gas to residential and small business customers in the United States. The Genie Retail Energy International division supplies customers in Europe and Asia.  The Genie Energy Services division includes Diversegy, a commercial and industrial brokerage and consultative services company, and Genie Solar Energy and Prism Solar, which design, supply and install commercial solar solutions. For more information, visit Genie.com.

In this press release, all statements that are not purely about historical facts, including, but not limited to, those in which we use the words "believe," "anticipate," "expect," "plan," "intend," "estimate, "target" and similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  While these forward-looking statements represent our current judgment of what may happen in the future, actual results may differ materially from the results expressed or implied by these statements due to numerous important factors, including, but not limited to, those described in our most recent report on SEC Form 10-K (under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations"), which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K.  We are under no obligation, and expressly disclaim any obligation, to update the forward-looking statements in this press release, whether as a result of new information, future events or otherwise.

Reconciliation of Non-GAAP Financial Measure for the Third Quarter 2019

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the United States of America (GAAP), Genie Energy also disclosed for the third quarter 2019, as well as for comparable periods, Adjusted EBITDA, which is a non-GAAP measure. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.

Genie Energy's measure of Adjusted EBITDA consists of gross profit less selling, general and administrative expense, exploration expense and equity in the net loss of in equity method investees, net, plus depreciation, amortization and stock-based compensation (which are included in selling, general and administrative expense). Another way of calculating Adjusted EBITDA is to start with income from operations and add depreciation, amortization and stock-based compensation and subtract equity in net loss in equity method investees, net.

Management believes that Genie Energy's Adjusted EBITDA provides useful information to both management and investors by excluding certain expenses that may not be indicative of Genie Energy's or the relevant segment's core operating results. Management uses Adjusted EBITDA, among other measures, as a relevant indicator of core operational strengths in its financial and operational decision making. In addition, management uses Adjusted EBITDA to evaluate operating performance in relation to Genie Energy's competitors. Disclosure of this financial measure may be useful to investors in evaluating performance and allows for greater transparency to the underlying supplemental information used by management in its financial and operational decision-making. In addition, Genie Energy has historically reported Adjusted EBITDA and believes it is commonly used by readers of financial information in assessing performance, therefore the inclusion of comparative numbers provides consistency in financial reporting at this time.

Management refers to Adjusted EBITDA, as well as the GAAP measures gross profit, income (loss) from operations and net income (loss), on a segment and/or consolidated level to facilitate internal and external comparisons to the segments' and Genie Energy's historical operating results, in making operating decisions, for budget and planning purposes, and to form the basis upon which management is compensated.

Although depreciation and amortization are considered operating costs under GAAP, they primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. While Genie Energy's oil and gas exploration business may be capital intensive, Genie Energy does not expect to incur significant depreciation or depletion expense for the foreseeable future. Genie Energy's operating results exclusive of depreciation and amortization is therefore a useful indicator of its current performance.

Stock-based compensation recognized by Genie Energy and other companies may not be comparable because of the various valuation methodologies, subjective assumptions and the variety of types of awards that are permitted under GAAP. Stock-based compensation is excluded from Genie Energy's calculation of Adjusted EBITDA because management believes this allows investors to make more meaningful comparisons of the operating results of Genie Energy's core business with the results of other companies. However, stock-based compensation will continue to be a significant expense for Genie Energy for the foreseeable future and an important part of employees' compensation that impacts their performance.

Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, gross profit, income from operations, cash flow from operating activities, net income, basic and diluted earnings per share or other measures of liquidity and financial performance prepared in accordance with GAAP. In addition, Genie Energy's measurements of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

Following is the reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, which is income from operations, for Genie Energy's reportable segments and net income for Genie Energy on a consolidated basis.

SOURCE Genie Energy Ltd.