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Genie Retail Energy Sees Wider Profit

Says Solar Acquisition Will Allow Integration Of Services, Expand Value Offered To C&Is

November 6, 2018

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

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Genie Retail Energy reported higher profitability for the quarter ending September 30, 2018 (3Q18) on higher revenues and a reduction in customer acquisition costs.

Genie Retail Energy was serving 342,000 meters as of September 30, 2018, versus 363,000 meters as of June 30, 2018 and 446,000 meters a year ago.

Genie Retail Energy said that, "Genie Retail Energy's customer base as measured in residential customer equivalents (RCEs) and meters served decreased (see chart) year over year reflecting the regulatorily mandated relinquishment of certain low-income customers in New York served by retail energy providers (REPs) to the incumbent utilities as well as GRE's strategic decision to focus on higher value customers, reduce regulatory risk in certain jurisdictions, and reduce customer acquisition expense in order to increase liquidity and enhance strategic flexibility."

During an earnings call, executives said that the company expects to gradually increase its investment in high consumption meter acquisitions and stabilize if not build its customer base as measured in Residential Customer Equivalent (RCEs) during the fourth quarter.

Gross meter acquisitions during 3Q18 totaled 45,000 compared to 57,000 in 2Q18 and 111,000 in 3Q17

On a Residential Customer Equivalent basis, Genie Retail Energy was serving 275,000 RCEs as of September 30, 2018, versus 283,000 RCEs as of June 30, 2018 and 325,000 RCEs a year ago.

GRE's average monthly customer churn in 3Q18 was 5.7%, unchanged compared to the prior quarter and a decrease from 6.9% in the year-ago quarter. The year over year decline primarily reflects lower rates of new customer acquisitions in recent periods (as new customers exhibit higher churn rates than longer tenured customers) and the impact of customer retention programs.

Meters enrolled in offerings with fixed rate characteristics constituted approximately 36% of GRE's total load during September 2018 the same level as in September 2017.

GRE's revenue increased to $71.7 million in 3Q18 from $69.5 million a year ago driven by an increase in electricity consumption per meter and increased commercial gas sales partially offset by the impact of the larger legal accrual in 3Q18 compared to 3Q17 and a decrease in revenue per kilowatt hour sold.

The increased electricity consumption reflects the warmer weather this summer compared to last year, as well as efforts to acquire higher-value meters while pulling back from certain markets with lower-than-average meter consumption and higher regulatory risk. The return of low-income customers in New York pursuant to orders from the New York Public Service Commission was also a factor as those meters were generally relatively lower consumption, the company said. These factors more than compensated for customer attrition over the past year.

GRE's gross margin percentage decreased to 29.4% in 3Q18 from 31.3% in 3Q17 and gross profit decreased to $21.1 million in 3Q18 from $21.8 in 3Q17 million predominantly as the result of the reduction in revenue resulting from the larger accrual in 3Q18 compared to 3Q17.

GRE's SG&A expense decreased to $11.1 million in 3Q18 from $16.8 million a year ago as a result of the reduction in gross meter ads compared to the year ago quarter and the reversal of an accrual for legal matters.

GRE's income from operations increased to $9.2 million in 3Q18 from $4.8 million a year ago and Adjusted EBITDA increased to $9.8 million in 3Q18 from $5.4 million a year ago. The improvements were primarily attributable to the decrease in customer acquisition expense.

Discussing the company's strategy during an earnings call, executives said that, with its previously reported acquisition of Prism Solar Technologies (see story here), the company expects Prism to play an important and synergistic role in the larger energy services business, as the company extends its offerings along the commercial energy value chain. Executives said that, with Prism, being a fully integrated retail provider gives the company advantages both for its legacy retail base and for the retail services division across the board.

Executives said that the company expects to begin enrolling retail energy customers in Japan as early as the end of the year, and said that its Orbit Energy U.K. business is doing well, and the company seeks revenue diversification and growth by expanding to new retail energy markets overseas.

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