Genie Energy Ltd. Reports Fourth Quarter and Full Year 2018 Results

NEWARK, N.J., March 7, 2019 /PRNewswire/ -- Genie Energy Ltd. (NYSE: GNE, GNEPRA) reported fourth quarter 2018 earnings per diluted share of $0.47 on revenue of $62.8 million.  Full year 2018 earnings per diluted share were $0.83 on revenue of $280.3 million.

OPERATIONAL AND FINANCIAL HIGHLIGHTS
(Throughout this release, 4Q18 results are compared to 4Q17 and full year 2018 results are compared to full year 2017 unless otherwise noted)

• During 4Q18, Genie acquired a majority stake in Prism Solar Technologies, a solar solutions company and domestic manufacturer of high-efficiency bi-facial solar panels;

• In January 2019, Genie acquired a controlling interest in Helsinki-based Lumo Energia, a Finnish provider of retail electricity;

• Consolidated revenue in 4Q18 decreased to $62.8 million from $73.1 million.  Full year 2018 revenue increased to $280.3 million from $264.2 million; 

• Consolidated loss from operations in 4Q18 was $1.8 million compared to income from operations of $430 thousand.  Full year 2018 income from operations was $8.5 million compared to a loss from operations of $6.5 million; 

• Consolidated Adjusted EBITDA* in 4Q18 was negative $554 thousand compared to positive $8.9 million.  Full year 2018 Adjusted EBITDA increased to $17.9 million from $7.3 million;

• Earnings per diluted share were $0.47 in 4Q18 compared to a loss per share of $0.01.  Full year 2018 earnings per diluted share were $0.83 compared to a loss per share of $0.36. EPS in 4Q18 was positively impacted by the release of a valuation allowance on a deferred tax asset;

• Genie Energy's Board of Directors has declared a fourth quarter dividend of $0.075 per share.

COMMENTS OF MICHAEL STEIN, CEO OF GENIE ENERGY

"Throughout 2018, we continued our strategic focus on building and diversifying our retail energy and services business.  We invested the strong cash flows generated by our domestic energy supply operations in promising growth opportunities, both domestic and international, while significantly strengthening our balance sheet.

"Our recent investment initiatives include expansion of our retail supply operations into new international markets.  Following the end of the quarter, we acquired a majority stake in Lumo Energia, a Finnish retail energy supplier.  Lumo brings us its existing customer base and a platform to address the 12-plus million deregulated meters in the Scandinavian market.  In February, we began to enroll new customers in Japan's fully deregulating and extensive retail market.  With our joint venture in the UK ramping up its meter acquisition program, we had over 50,000 international meters as of the end of February and footholds in several of the world's most promising deregulated retail energy markets. 

"Domestically, we plan to return to meter growth in 2019.  As part of that effort, we are working to expand our service footprint in certain states we already serve and to obtain licenses to operate in additional deregulated states.  Late last year, we secured a license to operate in Texas, one of the nation's largest deregulated retail electricity markets, and we expect to begin enrolling meters there during the first half of 2019. 

"In addition, we are intensifying our customer acquisition efforts in our current territories while maintaining our discipline and focus on higher consumption meters.  This effort generated strong positive net meter growth through the first two months of 2019.

"Within our energy services business, we are very excited by the potential and progress of Prism Solar Technologies, the manufacturer of high efficiency, bi-facial solar panels in which we acquired a controlling stake during the fourth quarter.

"On a consolidated bases, Genie Energy delivered solid financial results for the full year 2018 including significant gains in revenue, income from operations, and EPS.  Fourth quarter results were in-line with our expectations although not at the level of our performance in the year ago quarter."

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's Afek Oil & Gas subsidiary accounts for its oil and gas exploration activities under the "successful efforts" method of accounting.  Under this method, acquisition costs, costs of drilling exploratory wells, and exploratory-type stratigraphic test wells are capitalized on the balance sheet as "Capitalized exploration costs – unproved oil and gas property" pending determination of whether the well has found proved reserves.  Exploration costs, other than exploration drilling costs, are charged to expense in the statement of operations as "Exploration expense".

*** Genie Energy accounts for its investment in Orbit Energy, its joint venture operating in the UK, and in Atid, a drilling services company in Israel, 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 by the venture are not reflected in Genie Energy's consolidated revenue and expenses.

SEGMENT RESULTS

Genie Energy's segment reporting has been revised to align with recent changes in its business operations and structure.  Effective 4Q18 and for all prior periods reported:

• Genie Retail Energy (GRE) comprises domestic and international retail energy supply businesses, including results from the operations of Genie Energy's joint venture in the UK;   
• Genie Energy Services (GES) comprises Genie Solar, Prism Solar Technologies, and Diversegy, a retail brokerage and advisory business (formerly in GRE);
• Genie Oil and Gas (GOGAS) comprises Afek's oil and gas exploration venture in Israel (formerly a separate segment) and legacy inactive exploration ventures;
• Corporate is Genie Energy's corporate overhead. 

Genie Retail Energy (GRE)

Genie Retail Energy's US customer base - as measured in residential customer equivalents (RCEs) and meters served - decreased year over year (see chart below) as the company focused on higher value customers, reduced regulatory risk in certain jurisdictions, and reduced customer acquisition expense in order to increase liquidity and enhance strategic flexibility.

 

 

GRE:  4Q18 and Full Year 2018 KPIs and Take-Aways:

• Gross meter acquisitions during 4Q18 totaled 42,000 compared to 62,000 in 4Q17 and 45,000 in 3Q18.
• Average monthly customer churn in 4Q18 was 7.1% compared to 5.7% in the prior quarter and 6.9% in the year ago quarter. Churn was negatively impacted by the expiration of a municipal aggregation agreement in New Jersey. Excluding the impact of the expiration, churn for the quarter would have been approximately 6.1%. 
• Meters enrolled in offerings with fixed rate characteristics constituted approximately 32% of GRE's total load during December 2018 compared to 30% in December 2017.
• 4Q18 revenue decreased to $58.8 million from $72.6 million, and full year 2018 revenue decreased to $274.4 million from $262.3 million.  The revenue reductions were driven by decreases in GRE's meter base slightly offset by higher revenue per unit sold of electricity and natural gas.
• Gross margin percentage in 4Q18 was 24.6% compared to 36.4% in 4Q17.  Full year 2018 gross margin percentage decreased to 27.4% from 32.2%.  The decreases primarily reflect rising electricity commodity costs compared to the prior periods.
• SG&A expense in 4Q18 decreased to $11.5 million from $13.4 million.  Full year 2018 SG&A expense decreased to $46.6 million from $65.7 million.  The decreases primarily resulted from reductions in customer acquisition costs related to the lower levels of gross meter adds and lower legal expense.
• Income from operations in 4Q18 decreased to $1.6 million from $12.3 million driven principally by decreases in meters served and a decrease in the gross margin from electricity sales.  Full year 2018 income from operations increased to $24.8 million from $17.4 million primarily due to the decrease in full year SG&A expense.

 

Genie Energy Services
Genie Energy Services is comprised of Diversegy, an energy advisory and brokerage services company, and Genie's solar businesses including Prism Solar Technologies in which Genie acquired a controlling interest during 4Q18.  GES' revenue was $4.0 million in 4Q18 compared to $488 thousand in 4Q17.  The increase primarily reflects the addition of Prism Solar Technologies' revenue in 4Q18.  GES' loss from operations was $637 thousand compared to $84 thousand in 4Q17.  GES' full year 2018 revenue was $5.7 million compared to $1.9 million in 2017, and full year 2018 loss from operations was $982 thousand compared to $784 thousand.

Genie Oil and Gas (GOGAS)
Genie Energy's GOGAS segment includes its Afek oil and gas exploration project, several dormant exploration operations and a minority position in a drilling services company in Israel.  Afek is currently awaiting the permits required for final testing on an existing well.  In 3Q18, GOGAS divested a majority stake in a drilling services company.  For periods prior to the divestiture, results include the full impact of that company's operations, and for subsequent periods, results include only Genie Energy's portion of results.   

In 4Q18, GOGAS incurred $778 thousand in SG&A expense. In 4Q17, GOGAS incurred $524 thousand in SG&A expense, $2.3 million in exploration expense, and a $6.5 million write-off of capitalized exploration costs. 

Corporate
Corporate overhead totaled $1.7 million in 4Q18, including $646 thousand in non-cash compensation, compared to $2.5 million and $1.1 million, respectively.  Full year 2018 corporate overhead totaled $8.3 million, including $4.0 million in non-cash compensation, compared to $9.8 million in 2017, including $4.4 million in non-cash compensation. 

BALANCE SHEET HIGHLIGHTS

At December 31, 2018, Genie Energy had $146.9 million in total assets, including $44.2 million in cash, cash equivalents and restricted cash.  Liabilities totaled $54.2 million.  Working capital (current assets less current liabilities) totaled $47.1 million. 

DIVIDEND ON GENIE ENERGY COMMON STOCK

Genie Energy's Board of Directors has declared a 4Q18 dividend of $0.075 per share of Class A and Class B common stock with a record date of March 25, 2019.  The dividend will be paid on or about March 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 (www.genie.com/investor-relations) and has been filed on a current report (Form 8-K) with the SEC.  

At 8:30 AM Eastern time today, March 7, 2019, Genie Energy's management will host a conference call to present financial and operational results, business outlook and strategy 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 March 14, 2019.  The replay PIN is 10128971.  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., (NYSE: GNE, GNEPRA) is a global energy solutions company.  We supply homes and small businesses in the US, Europe and Asia with electricity - including electricity generated from renewable resources - and natural gas.  We provide commercial and industrial clients with energy brokerage and consultative services through our Diversegy brand.  Through Genie Solar Energy and Prism Solar, we design, construct and deliver commercial solar energy 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 Fourth Quarter and Full Year 2018

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 four quarter and full year 2018, 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 joint venture, 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 (loss) from operations and add depreciation, amortization, stock-based compensation, and write-down of assets held for sale to fair value.

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.

Write-down of assets held for sale to fair value is a component of (loss) income from operations that is excluded from the calculation of Adjusted EBITDA. From time-to-time, Genie Energy may determine that a line of business is outside of its core business and therefore decide to dispose of the related assets and liabilities. However, such disposals do not occur each quarter. Genie Energy does not believe the losses or gains from asset disposals or sales are components of its or the relevant segment's core operating results.

Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, gross profit, income (loss) from operations, cash flow from operating activities, net income (loss), basic and diluted earnings (loss) 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 (loss) from operations for Genie Energy's reportable segments and net income (loss) for Genie Energy on a consolidated basis.

 

 

 

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SOURCE Genie Energy Ltd.