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Genie Energy Focusing On Customer Growth In 2019, Expanding Footprint, Intensifying Customer Acquisition Efforts

Reports Customer Decline in Q4 Prior To Ramp-up

Provides Further Specificity On Timing For Upcoming Texas Market Entry

Begins Enrolling Customers in Japan

Genie Energy Reports Earnings

March 7, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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In reporting earnings today, Genie Energy said that it is ramping up customer growth efforts in its retail energy business

"Domestically, we plan to return to meter growth in 2019. As part of that effort, we are working to expand our service footprint in certain states we already serve and to obtain licenses to operate in additional deregulated states. Late last year, we secured a license to operate in Texas, one of the nation's largest deregulated retail electricity markets, and we expect to begin enrolling meters there during the first half of 2019," Genie Energy said

More specifically, Genie said that it expects to begin acquiring meters in Texas during the second quarter of this year. EnergyChoiceMatters.com had earlier exclusively reported both Genie's grant of a license in Texas and targeted launch in Texas during the first half of 2019

"In addition, we are intensifying our customer acquisition efforts in our current territories while maintaining our discipline and focus on higher consumption meters. This effort generated strong positive net meter growth through the first two months of 2019," Genie Energy said

Genie Retail Energy was serving 323,000 meters as of December 31, 2018, compared to 342,000 meters as of September 30, 2018, and 412,000 meters a year ago

The net loss of 19,000 meters from September 30, 2018 to December 31, 2018 compares to a net loss of 21,000 meters from June 30, 2018 to September 30, 2018

As previously reported, during 2018 Genie had narrowed and reduced the scope of its customer acquisition program in 2018 to acquire higher consumption meters, diversify geographically, to respond to unfavorable regulatory developments in certain states, and to strengthen its balance sheet

At December 31, 2018, Genie was serving 249,000 electric meters and 74,000 gas meters

Gross meter acquisitions during 4Q18 totaled 42,000 compared to 62,000 in 4Q17 and 45,000 in 3Q18.

Genie said that in the first two months of 2019, it has seen an increased pace of meter enrollments in the U.S.

On an RCE basis, Genie Retail Energy was serving 256,000 RCEs as of December 31, 2018, compared to 275,000 RCEs as of September 30, 2018, and 301,000 RCEs a year ago

Average monthly customer churn in 4Q18 was 7.1% compared to 5.7% in the prior quarter and 6.9% in the year ago quarter. Churn was negatively impacted by the expiration of a municipal aggregation agreement in New Jersey. Excluding the impact of the expiration, churn for the quarter would have been approximately 6.1%.

Meters enrolled in offerings with fixed rate characteristics constituted approximately 32% of GRE's total load during December 2018 compared to 30% in December 2017.

In February, Genie began to enroll new customers in Japan's retail market. "With our joint venture in the UK ramping up its meter acquisition program, we had over 50,000 international meters as of the end of February and footholds in several of the world's most promising deregulated retail energy markets," Genie said

As previously reported, following the end of the quarter, Genie acquired a majority stake in Lumo Energia, a Finnish retail energy supplier.

Genie Retail Energy income from operations in 4Q18 decreased to $1.6 million from $12.3 million a year ago driven principally by decreases in meters served and a decrease in the gross margin from electricity sales.

Genie Retail Energy 4Q18 revenue decreased to $58.8 million from $72.6 million a year ago, driven by decreases in GRE's meter base slightly offset by higher revenue per unit sold of electricity and natural gas.

Genie Retail Energy gross profit for 4Q18 was $14.5 million, versus $26.4 million a year ago. Gross margin percentage in 4Q18 was 24.6% compared to 36.4% in 4Q17. The decrease primarily reflects rising electricity commodity costs compared to the prior periods.

SG&A expense in 4Q18 decreased to $11.5 million from $13.4 million a year ago. The decrease primarily resulted from reductions in customer acquisition costs related to the lower levels of gross meter adds and lower legal expense.

Genie is now reporting as a separate segment, known as Genie Energy Services (GES), the businesses Genie Solar, Prism Solar Technologies, and Diversegy

GES' revenue was $4.0 million in 4Q18 compared to $488 thousand in 4Q17. The increase primarily reflects the addition of Prism Solar Technologies' revenue in 4Q18. GES' loss from operations was $637 thousand compared to $84 thousand in 4Q17. GES' full year 2018 revenue was $5.7 million compared to $1.9 million in 2017, and full year 2018 loss from operations was $982 thousand compared to $784 thousand.

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