Spark Energy Reports 78% Increase In Electricity Unit Margins, Lifts Earnings

RCE Count Falls

November 4, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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For the quarter ended September 30, 2019, Spark Energy, Inc. reported Adjusted EBITDA of $28.1 million, compared to Adjusted EBITDA of $18.6 million for the quarter ended September 30, 2018.

This increase of $9.5 million was driven by an increase in retail gross margin, more than offsetting increases in customer acquisition spending compared to the third quarter of 2018.

For the quarter ended September 30, 2019, Spark reported Retail Gross Margin of $58.2 million, compared to Retail Gross Margin of $45.8 million for the quarter ended September 30, 2018. This increase of $12.4 million was primarily attributable to a 78% increase in electricity unit margins and a 13% increase in gas unit margins.

"Our ERCOT summer insurance hedging strategy combined with an increased percentage of residential customers in the overall customer book contributed to the successful quarter," the company said

Electricity Retail Gross Margin was $53.1 million for the quarter, versus $40.2 million a year ago

Electric volumes for the quarter were 1,808,276 MWh, versus 2,432,314 MWh a year ago

Electric per-unit Retail Gross Margin was $29.39 per MWh for the quarter, up from $16.55 per MWh a year ago

Natural gas Retail Gross Margin was $5.0 million for the quarter, versus $5.5 million a year ago

Natural gas volumes for the quarter were 1,119,126 MMBtus, versus 1,395,377 MMBtus a year ago

Natural gas per-unit Retail Gross Margin was $4.50 per MMBtu for the quarter, versus $3.97 per MMBtu a year ago

Spark's ERCOT summer insurance hedging strategy, "performed very well," the company said

Revenues for the quarter were $207 million, versus $258 million a year ago

Net income for the quarter ended September 30, 2019, was $37.7 million, compared to net income of $18.8 million for the quarter ended September 30, 2018. The increase in performance compared to the prior year was primarily the result of the increase in the non-cash mark to market position of the company's hedge portfolio of $25.3 million compared with the non-cash mark to market position of the company's hedge portfolio of $18.9 million in the third quarter of 2018. This combined with the $12.4 million increase in retail gross margin allowed for significant increased performance, the company said

Spark Energy reported total RCE count of 772,000 as of September 30, 2019, versus 818,000 as of June 30, 2019. Spark's year-ago RCE count had been listed as 979,000 as of September 30, 2018

Spark reported average monthly attrition of 4.0%

"Our third quarter was strong, with significant improvements compared to the third quarter of last year. As expected, higher unit margins more than offset the slight increase we saw in G&A compared to the third quarter of 2018. Our overall customer book is much healthier with attrition in line with prior year. We are approaching the final steps of our brand and system consolidations and still expecting over $22 million in run-rate savings by year end 2019. We have greatly simplified our platform and expect to realize improved economies of scale and empower Spark's story going forward," said Nathan Kroeker, Spark's President and Chief Executive Officer.

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