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Acquisitions Offset Organic Customer Losses At Crius Energy
Crius Energy, in releasing earnings yesterday, reported that as of June 30, 2014 it was serving 600,000 electricity and natural gas customers (on an RCE basis).
That's up from 587,500 as of March 31, 2014, representing a net gain of over 12,000 customers.
However, during the three months ended June 30, 2014, Crius Energy executed two acquisitions, indicating Crius would have suffered a net loss of customers organically but for the acquisitions.
Specifically, as previously reported, Crius during the quarter acquired a portfolio of approximately 38,000 electric and natural gas customers, together with other assets, from Superior Plus Energy Services for an aggregate purchase price of approximately $3.8 million.
These customers were reflected in Crius' 600,000 RCE customer base as of June 30, 2014, offsetting organic losses and leading to net growth of 12,000 RCEs
For comparison, from December 31, 2013 and March 31, 2014, a period not impacted by acquisitions, Crius saw its customer count decrease by about 28,000 RCEs.
During the quarter ending June 30, 2014, Crius also acquired a portfolio of approximately 16,000 electric customers from HOP Energy LLC for an aggregate purchase price of approximately $1.5 million, but these customers have not yet been integrated into Crius and are excluded from the June 30, 2014 RCE count.
Crius' 600,000 RCE total as of June 30, 2014 consisted of 520,000 electricity RCEs and 80,000 natural gas RCEs.
Crius said that during the quarter ending June 30, 2014, the company experienced new customer growth (e.g. gross additions) across all channels. "Quarterly performance was highlighted by continued growth in the Network Marketing channel, marketed under the Viridian Energy brand, as more than 42,000 new customers enrolled. Management is particularly pleased with the growth in this channel, up 20% over the prior comparable period. In addition, the Company’s Direct Marketing channel saw positive trends in the quarter as a result of the expansion and optimization of customer acquisition efforts in this channel," Crius said.
Total customer attrition decreased 22% quarter-over-quarter but remains elevated over historical levels, Crius said.
"Management also expects net customer growth to improve as a result of increased new customer adds, organically and through acquisition, coupled with normalization of customer attrition as more new customers enrol [sic] on long-term fixed-rate products and through additional corporate initiatives such as continued investment in technology and the winback program," Crius said.
Crius said that it is introducing new long-term products, with a focus on fixed rates, "which are expected to increase sales and improve overall customer lifetime value."
The Viridian Energy brand expects to open several new markets before year-end including California, Indiana and Ohio.
Crius reported Adjusted EBITDA of $13.2 million for the quarter, compared to $10.1 million in the prior comparable period.
Gross margin was $33.7 million for the quarter, representing 25.2% of revenue, compared to $27.6 million in the prior comparable period.
Electricity per-unit gross margin was $26.75/MWh in the quarter ending June 30, 2014, up from $23.43/MWh a year ago. Higher gross margins per unit were the direct result of the strategy adopted in the first quarter to increase retail rates on a staggered basis such that cost recovery related to the polar vortex conditions experienced in the first quarter and migration to higher rates occur over time in order to mitigate customer attrition.
Natural gas per-unit gross margin was $1.76/MMBtu, versus $0.04/MMBtu a year ago. The prior-year unit margins reflected the company's decision in the prior year to offer highly competitive customer rates and invest in growth of the natural gas portfolio.
"Management expects merger and acquisition activity to continue in the retail energy industry over the near-term as a result of the fragmented nature of the industry and the lasting impact of the first quarter 'polar vortex' market conditions. The Company has a robust pipeline of acquisition opportunities and has sufficient cash and availability to execute on these transactions through its working capital facility with Macquarie Energy. However, Management remains disciplined and will only act on those opportunities that will deliver strong value for unitholders," Crius said.
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August 15, 2014
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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com
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