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Crius Earnings Higher on Customer Growth; Will Reinvest Cash in Customer Acquisition; Multiple Acquisition Opportunities Still Being Evaluated

November 16, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Crius Energy Trust reported higher earnings for the three months ended September 30, 2015 due to customer growth, largely driven by its acquisition of TriEagle Energy earlier this year.

Crius Energy was serving 799,000 customers as of September 30, 2015, versus 790,000 as of June 30, 2015, and 580,000 a year ago.

Net customer additions in the current quarter were consistent with customer growth rates achieved over the last twelve months, and benefited from the 2,000 customers acquired from Gulf Oil, success in the direct marketing channel and commercial sales activity, as well as from declining attrition rates attributable to longer-term fixed price residential and commercial customers in the portfolio, Crius said.

Specifically, average monthly attrition rates in the third quarter of 2015 of 3.2% have improved compared to average monthly attrition rates of approximately 5.0% last year.

Gross customer adds of 89,000 during the three months ended September 30, 2015 were higher than the average organic gross customer adds over the prior four quarters of 83,000, driven by a strong contribution from Crius' direct marketing activities

Crius said that, for the remainder of the year and into 2016, management intends to re-invest excess cash into customer growth initiatives. These initiatives are expected to temporarily increase customer acquisition costs through higher upfront selling costs, which are expensed when they occur, the company said. Additionally, residential gross margins are expected to be reduced in the near-term due to new products that offer increased customer savings during their first year of service, Crius said

Crius management expects to continue to make progress on strategic growth initiatives in the areas of customer segment, geography, distribution channel, and new products, which include commercial customer growth, geographic expansion into Texas, the Comcast strategic partnership roll-out, and growth in the solar business.

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"In addition to our strong organic customer growth prospects, acquisitions remain a core growth strategy for Crius Energy," the company said. "The Company continues to evaluate multiple acquisition opportunities; however, Management have noticed increased competition for retail energy assets which has resulted in fewer opportunities within our target acquisition valuation range."

Gross margin for the quarter ending September 30, 2015 was $48.0 million, 26.7% greater than $37.9 million in the third quarter of 2014, due to customer growth.

Electricity gross margin for the three-month period ending September 30, 2015 was $44.8 million, representing an increase of 32.8% from $33.7 million for the three-month period ending September 30, 2014. For the three months ending September 30, 2015, electricity gross margin per unit was $21.87/MWh, down from $26.73/MWh a year ago, reflecting normalized variable rate customer pricing as compared to the third quarter of 2014, when Crius was passing through to customers the higher wholesale energy costs incurred as a result of the severe weather conditions experienced in the first quarter of 2014.

Natural gas gross margin for the three months ending September 30, 2015 was $0.3 million, representing a 75.7% decrease from $1.2 million for the three months ending September 30, 2014. For the three months ending September 30, 2015, natural gas gross margin per unit was $0.82/MMBtu, down from $1.89/MMBtu a year ago, with the unit margins in the current quarter being adversely impacted by certain LDC cost of sales true-ups, the impact of which was exaggerated due to the reduced volumes, with the third quarter representing the lowest usage summer period for natural gas.

Adjusted EBITDA in the third quarter of 2015 was $16.1 million, a 5.7% increase over $15.2 million in the third quarter of 2014, with the current quarter being impacted by $3.2 million in increased selling costs due to incremental incentives offered in the Viridian channel as part of a transition to the new compensation plan. Additionally, the prior year comparative period was elevated due to the strategy employed in 2014 to spread extremely high wholesale energy prices incurred in the first quarter due to the "polar vortex" weather event over the balance of the year to recover costs and mitigate customer attrition.

Crius also reported that gross sales of solar systems reached new highs in the quarter ending September 30, 2015, with 1,372 systems sold representing 11.8 MW of generating capacity, an increase of 16.8% and 29.7% respectively over the second quarter of 2015

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