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Just Energy Reports Accelerated Net Customer Growth, Increased Earnings

Gross Mass Market RCE Additions Down On "Shrinking Customer Books In North America", Offset By International Growth

Just Energy Expands To 48 New Sam's Clubs, Integrates Digital Strategy With Retail Storefront Presence

February 8, 2018

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Reporting by Paul Ring • ring@energychoicematters.com

Just Energy reported accelerated customer growth during the three months ended December 31, 2017

Just Energy reported a net increase in Residential Customer Equivalents (RCEs) of 27,000 RCEs from September 30, 2017 to December 31, 2017. That compares to net growth of 11,000 RCEs from June 30, 2017 to September 30, 2017

Gross RCE additions for the quarter ending December 31, 2017 were 304,000 a decrease of 2% versus the three months ended September 30, 2017.

Mass market (Consumer) gross RCE additions amounted to 105,000 during the quarter ending December 31, 2017, a 38% decrease versus the quarter ending September 30, 2017, "primarily driven by shrinking customer books in North America offsetting by U.K. market growth."

Commercial gross RCE additions were 199,000 for the quarter ending December 31, 2017, a 41% increase versus the quarter ending September 30, 2017, as a result of increased additions from large natural gas Commercial and Industrial RCEs in Canada.

Total Just Energy RCEs as of December 31, 2017 were 4.114 million, versus 4.087 million as of September 30, 2017 and 4.227 million a year ago.

As of December 31, 2017, Just Energy's U.S., Canadian and U.K. segments accounted for 68%, 22% and 10% of the RCE base, respectively.

The combined attrition rate for Just Energy was 13% for the trailing 12 months, a decrease of two percentage points from the 15% reported a year prior, and a two percentage point increase sequentially. Consumer attrition of 22% decreased two percentage points year-over-year and was flat sequentially. Commercial attrition of 5% decreased three percentage points from the year ago period and was flat sequentially.

The renewal rate was 58% for the trailing 12 months, declined six percentage points year-over-year. Consumer renewal rate declined by seven percentage points to 72%, while the Commercial renewal rate also declined by seven percentage points to 48%.

"The decline in Commercial renewal rate reflected a very competitive market for Commercial renewals with competitors pricing aggressively and Just Energy’s focus on improving retained customers’ profitability rather than pursuing low margin growth," Just Energy said

"Consumer renewals in Canada have been negatively impacted by new consumer protection rules in Alberta and Ontario which prohibits selling energy products door-to-door, bans contracting with consumers at their home and disallows the automatic renewal or extension of expiring contracts," Just Energy said

Just Energy has continued execution of its previously reported retail channel expansion strategy with 111 new store launches across 12 different retail partners for a total of 348 stores. The company remains on track to achieve its goal of being present in 500 stores by its fiscal year end (March 31, 2018).

Just Energy's largest retail partner, Sam’s Club, recently awarded Just Energy with 48 additional stores to add to its portfolio of stores across North America.

"Additionally, capitalizing on our 'digital first' strategy, Sam’s Club is our first retail partner where our web presence will be integrated, allowing Sam’s Club members to sign up for energy products through our Just Energy site," Just Energy said

"The company is on track to be present in 500 stores by the fiscal year end, working with its retail partners, including Sam’s Club. With the success realized in the retail channel expansion efforts, the Company will focus on joint marketing partnerships and authorized agent programs to drive brand awareness and new customer growth. The business development efforts in retail will be shifted towards multi-nationals in footprint, allowing those efforts to be amortized over multiple countries in the portfolio. As part of Just Energy’s digital transformation, the Company revamped its website and completed its transition to its new digital partner while maintaining the expected new acquisitions," Just Energy said

Just Energy will continue to invest in international expansion, "by replicating its UK success in other markets." Just Energy has fully launched its operations in Ireland, Japan and Germany.

Base EBITDA for the quarter ending December 31, 2017 was $52.5 million, an increase of $1.0 million compared to last year, as operational performance improvements were offset by a mix of investments in strategic sales growth initiatives and foreign exchange (all $ Canadian).

Gross margin for the quarter ending December 31, 2017 was $171.3 million, down 2% versus the year-ago $174.3 million, primarily due to the weakening of the U.S. dollar.

The average gross margin per RCE for the customers added and renewed by the Consumer division was $225/RCE, an increase from $222/RCE added in the prior comparable period. The average gross margin per RCE for the Consumer (mass market) customers lost during the three months ended December 31, 2017 was $189/RCE, a decrease from $199/RCE margin lost on customers in the prior comparable period.

The average gross margin per RCE for the Commercial customers signed during the quarter was $73/RCE, a decrease from $82/RCE added in the prior comparable period. Customers lost through attrition and failure to renew during the three months ended December 31, 2017 were at an average gross margin of $77/RCE, a decrease from $81/RCE reported in the prior comparable period.

Administrative expenses increased $5.8 million due to costs associated with serving the international customer base and new strategic initiatives; selling and marketing expenses were roughly flat; and finance costs improved $5.0 million during the quarter.

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