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Spark Energy Reports Lower Adjusted EBITDA On Extreme Cold, Higher Wholesale Prices

May 10, 2018

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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For the quarter ended March 31, 2018, Spark Energy, Inc. reported Adjusted EBITDA of $15.9 million compared to Adjusted EBITDA of $34.4 million for the quarter ended March 31, 2017.

Spark attributes this decrease of $18.5 million primarily to unexpected extreme cold weather patterns that raised short-term commodity prices in January.

"[F]irst quarter results were tempered by an unexpected burst of cold weather in early January that adversely affected Spark and our entire industry. This prolonged cold weather negatively impacted our financial results, especially compared to last year, when warmer-than-normal weather resulted in very strong unit margins for the winter months," said Nathan Kroeker, Spark Energy’s President and Chief Executive Officer.

Net loss for the quarter ended March 31, 2018, was $(41.8) million compared to net income of $11.1 million for the quarter ended March 31, 2017, driven by higher non-cash mark-to-market losses.

For the quarter ended March 31, 2018, Spark reported Retail Gross Margin of $45.7 million compared to Retail Gross Margin of $64.6 million for the quarter ended March 31, 2017. Spark attributes this decrease of $18.9 million primarily to unexpected extreme cold weather patterns that raised short-term commodity prices in January.

"Looking forward to the remainder of the year, we will continue to execute on our synergy projects to achieve further economies of scale. We intend to remain cost-effective with our organic acquisitions, and we will continue to evaluate additional acquisition opportunities while maintaining discipline with respect to purchase prices and valuation. On balance, we still anticipate that full-year Adjusted EBITDA for 2018 should be similar to that of 2017," Kroeker said

Spark's total RCE count increased 1% to a record 1,055,000 as of March 31, 2018. Spark's RCE count had been 1,042,000 as of December 31, 2017

Average monthly attrition was 4.2% for the first quarter of 2018.

As previously reported, Spark during the first quarter closed on two acquisitions (Hiko and a book from National Gas & Electric, LLC), adding approximately 80,000 RCEs (see story here)

As previously announced, the termination of the Verde earnout agreement on January 15, 2018 has allowed Spark to integrate Verde's operations on an accelerated basis. In addition, Spark expects the reintegration of Retailco Services into its operations, effective April 1, 2018, will allow it to realize synergies and cost reductions as early as the second quarter. Finally, Spark said that its internal brand consolidation and cost-cutting measures should also begin impacting 2018 results in the second quarter.

Spark also expanded its senior credit facility to $200.0 million in commitments

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