Just Energy Records Second Consecutive Quarter Of Net Mass Market Growth -- EnergyChoiceMatters.com

Just Energy Records Second Consecutive Quarter Of Net Mass Market Growth

Gross Margin Lower On Higher Commodity Prices & Competitive Pricing To Support Mass Market Growth

February 18, 2022

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Reporting by Paul Ring • ring@energychoicematters.com

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Just Energy Group Inc. announced its results for the third quarter of fiscal year 2022 (quarter ending December 31, 2021).

"Although our third quarter financial results were impacted by ongoing competitive headwinds and a rising commodity price environment, the Company delivered sequentially higher net positive Mass Markets RCE additions over the prior quarter, continuing to validate our strategic investment in digital marketing and face-to-face retail channels, and further strengthened by our higher customer renewal rates," said Scott Gahn, Just Energy’s President and Chief Executive Officer.

In its commodity business, Just Energy was serving a total of 2,761,000 RCEs as of December 31, 2021, versus 2,810,000 as of October 1, 2021.

In its mass market commodity business, Just Energy was serving 1,173,000 mass market RCEs as of December 31, 2021, versus 1,149,000 as of October 1, 2021.

The net growth of 24,000 mass market RCEs from October 1, 2021 to December 31, 2021 compares to net growth of 9,000 mass market RCEs from July 1, 2021 to September 30, 2021 and a net loss of 6,000 mass market RCEs from April 1, 2021 to June 30, 2021. In the year-ago quarter, Just Energy had experienced a net loss of 19,000 mass market RCEs for the three months ended December 31, 2020. The net increase in mass market RCEs from October 1, 2021 to December 31, 2021 was driven by the increase in gross adds while holding attrition and Failed to renew flat

Mass Markets RCE gross additions increased by 102% to 91,000 for the three months ended December 31, 2021 compared to 45,000 for the three months ended December 31, 2020. The increase is driven by investment in digital marketing and sales agent headcount, as well as continued improvement in direct face-to-face channels. The COVID-19 pandemic had substantial impacts in the three months ended December 31, 2020.

Mass Markets RCE attrition for the three months ended December 31, 2021 remained consistent at 47,000 as compared to prior year. The Mass Markets attrition rate for the three months ended December 31, 2021 remained consistent at 4%. Mass Markets failed to renew RCEs increased by 11% to 20,000 for the three months ended December 31, 2021 compared to 18,000 for the three months ended December 31, 2020.

Just Energy's Commercial RCE count was 1,588,000 as of December 31, 2021, versus 1,661,000 as of October 1, 2021.

Commercial RCE gross additions increased by 13% to 43,000 for the three months ended December 31, 2021 compared to 38,000 for the three months ended December 31, 2020. Commercial RCE attrition increased by 37% to 63,000 for the three months ended December 31, 2021 compared to 46,000 for the three months ended December 31, 2020. The increase was driven by a reduction in large Commercial & Industrial customers due to competitive market pricing.

Just Energy's Base EBITDA decreased by 60% to $22.3 million for the three months ended December 31, 2021 compared to $55.8 million for the three months ended December 31, 2020 (all $ Canadian unless otherwise noted). The decrease was primarily driven by lower Base Gross Margin and higher bad debt and non-commission selling expenses, the company said

Mass Markets segment Base EBITDA decreased by 59% to $26.0 million for the three months ended December 31, 2021 compared to $63.8 million for the three months ended December 31, 2020. The decrease was driven by lower Base Gross Margin, higher bad debt and increased investment in digital marketing and sales agent costs.

Commercial segment Base EBITDA increased by 71% to $15.0 million for the three months ended December 31, 2021 compared to $8.8 million for the three months ended December 31, 2020. The increase was driven by higher Base Gross Margin and lower selling commission and bad debt expenses.

Just Energy's Base Gross Margin decreased by 19% to $106.9 million for the quarter ended December 31, 2021 compared to $131.6 million for the quarter ended December 31, 2020. The decrease was primarily driven by lower Mass Markets realized Base Gross Margin due to higher commodity supply prices and competitive pricing to support growth and retention, the company said

Mass Markets Base Gross Margin decreased by 26% to $74.8 million for the three months ended December 31, 2021 compared to $101.5 million for the three months ended December 31, 2020. The decrease was primarily driven by lower average realized Base Gross Margin driven by higher supply costs and competitive pricing to support growth.

Mass Markets average realized Base Gross Margin per RCE for the trailing 12 months ended December 31, 2021 decreased 22% to $297 per RCE compared to $381 for the trailing 12 months ended December 31, 2020. The decrease is primarily attributable to higher supply costs and competitive market pricing to support growth and retention and changes to the sales channel mix.

For the three months ended December 31, 2021, the Mass Markets segment average gross margin per RCE for the customers added or renewed was $274, a decrease of 10% from $306 for the three months ended December 31, 2020 due to higher supply costs and competitive pricing to support customer growth and retention.

Commercial Base Gross Margin increased by 7% to $32.1 million for the three months ended December 31, 2021 compared to $30.1 million three months ended December 31, 2020. The increase was driven by higher average realized Base Gross Margin partially offset by a lower customer base.

Commercial average realized Base Gross Margin per RCE for the trailing 12 months ended December 31, 2021 increased 2% to $98 per RCE compared to $96 for the trailing 12 months ended December 31, 2020. The increase is primarily driven by higher average realized Base Gross Margin in the electricity markets.

For the three months ended December 31, 2021 the Commercial Segment average gross margin per RCE for the customers added or renewed was $90, a decrease of 1% from $91 for the three months ended December 31, 2020.

Bad debt expense increased by 164% to $8.9 million for the three months ended December 31, 2021 compared to $3.4 million for the three months ended December 31, 2020. The increase in bad debt was driven from the higher revenues in Texas Mass Market from an increase in the customer base and release of credit reserves in the prior year.

The Mass Markets average acquisition cost decreased by 5% to $231/RCE for the trailing twelve months ended December 31, 2021 compared to $244/RCE reported for the twelve months ended December 31, 2020, due to a change in channel mix towards lower cost channels.

The Commercial average customer acquisition cost increased by 2% to $44/RCE for the trailing twelve months ended December 31, 2021 compared to $43/RCE for the twelve months ended December 31, 2020.

Just Energy ended the quarter with $175.4 million of total liquidity, comprised of cash and cash equivalents. The Company owes $158.5 million under its DIP facility and has $1,049.7 million of total liabilities subject to compromise.

Just Energy reported that it is expecting to receive reimbursement of Costs in the amount of approximately USD $147.5 million (the 'Cost Recovery') under the Texas securitization program. The Cost Recovery is expected to be received in the Spring of 2022. Management determined that the Company has reasonable assurance as defined under IAS 20, Accounting for government grants and assistance to receive the Cost Recovery. The Company has recorded the Cost Recovery in the three months ended December 31, 2021, as a receivable and a corresponding decrease to cost of goods sold.

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