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Spark Energy Adjusted EBITDA Down From Cost of Additional Summer Hedges, Capacity Costs

August 1, 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 June 30, 2018, Spark Energy, Inc. reported Adjusted EBITDA of $16.1 million, compared to Adjusted EBITDA of $20.0 million for the quarter ended June 30, 2017.

This decrease of $3.9 million is primarily attributable to lower electricity unit margins as well as higher G&A due to a larger customer portfolio.

"Despite strong operating cost controls, our second-quarter results were negatively impacted by lower electricity unit margins. This was a result of the hedges we had to purchase during the first few weeks of the year, additional hedges we used to insure against adverse weather in ERCOT this summer, and increases in capacity costs in New England. While we are disappointed with our first half performance, we are implementing the appropriate strategies that we expect will improve profitability and Adjusted EBITDA performance," said Nathan Kroeker, Spark Energy's President and Chief Executive Officer.

For the quarter ended June 30, 2018, Spark reported Retail Gross Margin of $43.4 million compared to Retail Gross Margin of $43.1 million for the quarter ended June 30, 2017. Spark attributes this increase of $0.3 million primarily to higher electricity volumes, primarily as a result of acquisitions completed over the prior twelve months, largely offset by lower electricity margins.

Net income for the quarter ended June 30, 2018, was $23.9 million compared to net income of $4.7 million for the quarter ended June 30, 2017. The increase in performance compared to the prior year was primarily the result of unrealized mark to market hedge gain in the second quarter.

Spark's total RCE count as of June 30, 2018 was 1,049,000, versus the 1,055,000 previously reported as of March 31, 2018

Spark said that, year-over-year, total RCE count increased 26.9%

Spark said that overall monthly attrition was 3.7% for the second quarter

"We made considerable progress in our synergy and brand consolidation efforts during the second quarter, achieving our target of annualized general and administrative cost savings of $15 million through facility and headcount reductions," Kroeker said. "We successfully migrated a total of 110,000 customers to more cost-effective billing platforms and notified another 62,000 customers of planned platform switches that should be complete by end of the third quarter.

"As we enter the second half of the year, we expect to drive an additional $5 million in annualized cost savings through a series of targeted projects. We're also focusing on organic growth through recently integrated Verde sales channels, as well as new retail sales channels that we believe will help us increase our mass-market concentration and improve margins as we pivot away from larger, lower-margin C&I customers," Kroeker said

Spark Energy is holding an earnings call later this morning

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