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Spark Energy Reports Earnings Growth on Enhanced Margins, M&A

March 24, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Spark Energy reported that, for the fourth quarter of 2015, Adjusted EBITDA was $16.3 million and Retail Gross Margin was $34.4 million on revenue of $94.8 million, compared to Adjusted EBITDA of $5.0 million and Retail Gross Margin of $26.8 million for the fourth quarter of 2014.

For the year 2015, Adjusted EBITDA was $36.9 million and Retail Gross Margin was $113.6 million on revenue of $358.2 million, compared to Adjusted EBITDA of $11.3 million and Retail Gross Margin of $76.9 million for 2014.

Spark invested $19.9 million in organic customer acquisition costs in the year 2015, compared to $26.2 million in 2014.

"With continued enhanced margins in our retail electricity and retail natural gas segments, along with three transactions during the year, we delivered $36.9 million in Adjusted EBITDA in 2015, along with $113.6 million of Retail Gross Margin. In terms of customer count, we were able to grow by 9%, and on an RCE basis, we grew by 27%. As we move through the first quarter of 2016, we continue to see strong results," said Nathan Kroeker, Spark Energy, Inc.'s President and Chief Executive Officer.

Spark reported "consistently strong unit margins across both retail natural gas and electricity segments."

The increase of $36.7 million in annual Retail Gross Margin was primarily attributable to, "increased unit margins in both [Spark's] retail electricity and retail natural gas segments, which were positively impacted by expanded spot margins from the overall lower commodity price environment, and increased volume in [Spark's] retail electricity segment, which was primarily driven by [Spark's] CenStar and Oasis acquisitions."

The increase of $7.6 million in fourth quarter Retail Gross Margin was attributable to expanded retail electricity and retail natural gas unit margins and increased retail electricity volumes. "Favorable supply costs across several of our markets were a key driver of these elevated unit margins in the fourth quarter," Spark said

During 2015, Spark increased its customer count from 318,000 to 347,000 and its RCE count from 326,000 to 415,000 (Spark's RCE total as of September 30, 2015 had been reported as, "over 400,000").

As of December 31, 2015, Spark reported that the number of customers potentially affected by the New York PSC's retail market order represented approximately 10% of the company's RCEs.

Net income for the year ended December 31, 2015 was $26.0 million, or $1.06 of diluted earnings per share of Class A common stock ("EPS"). An unrealized gain on the hedge portfolio valuation of Spark's future supply positions positively impacted net income by $1.0 million and EPS by $0.07. Net income and EPS for the year ended December 31, 2014 were $(4.3) million and $(0.02), respectively.

Net income and EPS for the quarter ended December 31, 2015 were $3.1 million and $(0.01), respectively. An unrealized loss on the hedge portfolio valuation of Spark's future supply positions negatively impacted net income by $(3.6) million and EPS by $(0.09). Net income and EPS for the quarter ended December 31, 2014 were $(11.4) million and $(0.37), respectively.

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