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Genie Retail Energy Posts Record Quarterly Adjusted EBITDA

Customer Count Falls On Strategic Pullback From Customer Acquisition In Certain Markets

Reports Customer Count Impact From NY Low-Income Prohibition

March 8, 2018

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Reporting by Paul Ring • ring@energychoicematters.com

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Genie Retail Energy reported quarterly Adjusted EBITDA of $12.8 million for the fourth quarter of 2017, up from $3.1 million a year ago, on strong consumption and robust electricity margins

The 4Q17 Adjusted EBITDA was the highest level of quarterly Adjusted EBITDA in the history of the Genie retail business

"We are looking forward to building on our momentum in 2018 by executing on our growth strategy including organic meter acquisition, expansion to new geographies and, when opportunities present themselves, strategic acquisitions," Genie said

GRE's revenue increased to $73.1 million in 4Q17 from $51.5 million in 4Q16.

GRE's gross profit in 4Q17 increased to $26.8 million from $14.6 million in 4Q16. The gross profit on electricity sales increased to $21.6 million from $11.1 million primarily reflecting a 58.0% increase in gross profit per kilowatt sold. The gross profit on natural gas sales increased to $4.8 million from $3.2 in 4Q16 as the increase in revenue per therm sold outpaced the increase in the underlying commodity cost.

GRE's gross margin percentage increased to 36.6% in 4Q17 from 28.3% in 4Q16 as average revenue per kilowatt hour increased and average unit cost of electricity was primarily unchanged, as well as improved margins on natural gas sales.

GRE's SG&A expense in 4Q17 increased to $14.1 million from $11.8 million in 4Q16 primarily due to increases in legal fees and compensation expense.

GRE's income from operations in 4Q17 increased to $12.2 million from $2.7 million a year ago

GRE's full year 2017 income from operations was $16.6 million and Adjusted EBITDA was $18.8 million including the impact of $10.5 million in legal and regulatory related accruals, compared to income from operations of $26.5 million and Adjusted EBITDA of $27.3 million in 2016.

Full year 2017 revenue increased to $264.2 million from $212.1 million in 2016. Gross profit for full year 2017 increased to $85.5 million from $76.9 million in 2016 primarily reflecting the increase in kilowatt hours sold partially offset by weaker electricity gross margins.

Full year 2017 SG&A expense increased to $68.4 million from $50.4 million in 2017 reflecting increased gross meter acquisitions and payroll expenses as well as an accrual of $5.4 million in 2017 for the settlement of class action lawsuits.

Genie Retail Energy customer count decreased by 34,000 meters from September 30, 2017 to December 31, 2017, reflecting a strategic pullback from customer acquisition activity in certain territories. For comparison, Genie Retail Energy customer count had increased by 16,000 meters from June 30, 2017 to September 30, 2017

Genie Retail Energy customer count stood at 412,000 meters as of December 31, 2017, versus 446,000 as of September 30, 2017, and 412,000 as of a year ago

At December 31, 2017, Genie Retail Energy was serving 307,000 electricity meters and 105,000 natural gas meters

On a Residential Customer Equivalent Basis, Genie Retail Energy was serving 301,000 RCEs as of December 31, 2017, versus 325,000 as of September 30, 2017, and 283,000 as of a year ago

Gross meter acquisitions in 4Q17 increased to 62,000 from 54,000 in the year ago quarter but decreased from 111,000 in 3Q17.

Reflective of the high rates of customer acquisition in recent quarters, GRE's average monthly customer churn increased to 6.9% in 4Q17 from 6.7% in the year ago quarter and was unchanged compared to the prior quarter. For the full year 2017, average monthly churn increased to 6.6% from 6.0% in 2016.

Meters enrolled in offerings with fixed rate characteristics constituted approximately 39% of GRE's electric load during December 2017 compared to 32% of GRE's load during December 2016 as the customer mix has shifted towards fixed rate.

GRE reported that it is complying with the NY PSC's low-income prohibition order and has begun the transfer of customers as required. The order will require GRE's various retail suppliers to transfer customer accounts comprising approximately 21,000 meters, representing 12,000 RCEs, to their respective incumbent utilities during the first half of 2018.

As previously reported, Genie Energy is strategically refocusing on its core retail energy provider business, "which has been consistently profitable and where we see continued strong growth potential," the company said, as Genie Energy previously suspended an exploratory oil and gas drilling program in Northern Israel

"On a consolidated basis, this will entail a substantial reduction in oil and gas exploration expense going forward as we move closer to a pure play retail energy provider model," Genie said

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