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Spark Energy Reports Expanded Unit Margins, Customer Growth
Spark Energy saw expanded unit margins and increased customer count during the quarter ended June 30, 2014, it said in reporting second quarter earnings yesterday.
As of June 30, 2014, Spark Energy was serving over 390,500 residential customer equivalents (RCEs), versus 383,000 RCEs as of March 31, 2014.
Spark said that it has seen an increase of approximately 33% in its customer base since August 2013.
"We accelerated our customer growth in the second quarter of 2014 to take advantage of the market opportunity to acquire carbon neutral gas customers in California," Spark said in a 10-Q.
"During the second quarter, we spent $6.4 million on customer acquisition costs, of which $3.6 million was attributable to new gas customers in the Southwest Region. Our average cost per customer was approximately $96, which is comparable to customer acquisitions made since we relaunched our marketing efforts in the second half of 2013. Consistent with our historical experience, we anticipate seeing the results of this increased investment reflected in gross margins six to twelve months from the acquisition date of each customer. This increased customer acquisition spending reduced Adjusted EBITDA as compared to the same period in 2013, where only $0.6 million was spent on customer acquisition," Spark said.
Spark's average monthly customer attrition rate in the second quarter was 5.1%, which reflects an increase from 4.1% in the prior quarter. "We attribute this increase to: (i) early tenure attrition (which typically occurs when customers switch back to the utility shortly after signing on with the competitive retail provider) associated with the success of our California gas customer acquisition campaigns, and (ii) increased attrition in the Northeast following last winter's extreme weather patterns and associated high bills," Spark said.
"Management believes that the high early tenure attrition in the California gas market is the result of confusion and lack of awareness by consumers in an early stage competitive market and the fact that there are very few competitive gas retailers in the market. We also believe that this high level of early tenure attrition is not unusual given the nascency of this market. We are currently working with our vendors in this market to better educate consumers at the time of the sale in order to lower early tenure attrition, as well as lowering the overall cost to acquire these customers," Spark said.
Spark's electricity retail gross margin per MWh was $29.17/MWh for the quarter ending June 30, 2014, versus $23.84/MWh a year ago.
Overall electricity retail gross margin was flat at $10.8 million in the second quarter, as higher per-unit margins were offset by lower volumes. Quarterly electricity volumes decreased from 454,802 MWh during the three months ended June 30, 2013 to 369,341 MWh during the three months ended June 30, 2014, primarily due to a strategic shift of the concentration of marketing efforts from commercial to residential customers.
Spark's natural gas retail gross margin per MMBtu was $2.83/MMBtu for the quarter ending June 30, 2014, versus $2.28/MMBtu a year ago.
Total natural gas retail gross margin increased to $7.1 million for the second quarter, from $6.2 million a year ago, on the higher unit margins, partially offset by lower volumes. The volumes of natural gas sold decreased from 2,702,803 MMBtu during the three months ended June 30, 2013 to 2,519,172 MMBtu during the three months ended June 30, 2014 due to the shift in Spark's customer base to lower volume, higher margin residential gas users, primarily in the Southwest Region.
Aggregate retail gross margin was $17.9 million for the quarter ending June 30, 2014, versus $17.0 million a year ago.
Adjusted EBITDA was $1.4 million for the second quarter, versus $5.2 million a year ago, from $5.8 million in higher customer acquisition costs as noted above.
Net income, which reflects the treatment of derivative instruments, was $201,000 for the second quarter, versus a net loss of $945,000 a year ago.
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September 11, 2014
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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com
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