MXenergy Reports Higher Earnings, Higher Customer Churn for Quarter Ending December 31

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February 15, 2011  

MXenergy reported higher net income of $25.7 million for the three months ending December 31, 2010, versus $18.2 million a year ago, as well as higher Adjusted EBITDA of $22.0 million versus $20.8 million a year ago, on higher electric gross profit and customer growth versus the year-ago quarter.

However, MXenergy reported that the months of December through February have historically seen low customer acquisitions due to seasonal factors, and that trend continued for the quarter ending December 31, 2010, as MXenergy saw net customer churn versus September 30, 2010.

Total Residential Customer Equivalents (RCEs) as of December 31, 2010 were 618,000, lower than the 634,000 recorded as of September 30, 2010, but much higher than the 527,000 recorded as of December 31, 2009.  These totals (and figures cited below) exclude customers served under the Columbia Gas of Ohio Standard Service Offer program.

Natural gas customers as of December 31, 2010 were 427,000 as of December 31, 2010, versus 445,000 as of September 30, 2010 and 446,000 as of December 31, 2009.  During the quarter ended December 31, 2010, MXenergy experienced decreases in its commercial and small business gas customer counts, while its residential customer counts remained relatively constant.  

Electricity RCEs as of December 31, 2010 continued to grow at 191,000, versus 189,000 as of September 30, 2010 and 81,000 as of December 31, 2009.  Electricity RCEs as of December 31, 2010 include over 77,000 net customers added as a result of MXenergy's expansion into new electricity markets in Pennsylvania and Maryland during the twelve months ended December 31, 2010.

However, the rate of electric RCE growth slowed considerably in the quarter ended December 31, 2010, primarily due to higher in-contract attrition from increased competitive pressure, particularly in the Pennsylvania and Connecticut electric markets.  

For both commodities, MXenergy's customer renewal percentage was constant at 92% versus September 30, 2010 and the year-ago quarter.  However, in-contract attrition grew to 31% from 27% as of September 30, 2010 and 29% a year ago.

Gross profit (before unrealized gains from risk management activities, net) from natural gas was $30.5 million for the quarter ending December 31, 2010 ($1.84/MMBtu), versus $30.6 million ($2.22/MMBtu) a year ago.

The decrease in unit margins reflects the impact of lower-margin sales under the Columbia SSO program.  Excluding the impact of the SSO program, higher gross profit attributable to natural gas delivered to customers was due to the combined impact of a 13% increase in gross profit per MMBtu sold to customers and a 10% increase in heating degree days, which were partially offset by a 3% decrease in the volume of natural gas sold to customers, due to the aforementioned decline in commercial RCEs.

MXenergy said that it will no longer supply the Columbia SSO program effective April 1, 2011.

Electricity gross profit (before unrealized gains from risk management activities, net) was $10.3 million for the quarter ($22.41/MWh), versus $5.0 million ($29.96/MWh) a year ago.  The increase in total gross profit reflects higher volumes associated with customer growth, partially offset by lower unit margins resulting from competitive pricing environments.

For the remainder of fiscal 2011, MXenergy intends to continue with its growth initiatives in recently entered markets, "in addition to evaluating opportunities to enter new markets and to acquire new customer portfolios that are consistent with our overall growth strategy, our operating and information systems environments, our risk management policy, and our supply, hedging and financing capabilities."

Capitalized customer acquisition costs increased $8.4 million, or 140%, and advertising and marketing expenses increased $2.4 million, or 321%, during the first six months of fiscal year 2011, as compared with the same period in the prior fiscal year.  When considering the number of customers acquired, the cost to acquire customers approximated $100 per RCE for the three months and six months ended December 31, 2010, which was consistent with MXenergy's cost to acquire customers during the same periods in the prior fiscal year.

Volumes data is below:
Three months ended December 31          2010                2009
MMBtus sold during the period          16,562,000       13,808,000
MWhrs sold during the period                458,000            166,000

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