MXenergy Reports Wider Loss on Lower Gas Gross Profit, SSO Timing Mismatch

MXenergy reported a net loss for the three months ended September 30, 2010 (first quarter of fiscal 2011) of $23.4 million, versus a loss of $10.2 million a year ago.

Lower natural gas gross profit and higher operating expenses more than offset higher electricity gross profit.

Adjusted EBITDA was a loss of $6.9 million, versus a loss of $3.6 million a year ago.

MXenergy reported that during the quarter ended September 30, 2010, it recorded revenue related to approximately 0.5 million MMBtu of natural gas in connection with the Ohio Standard Service Offer (SSO) program, which had a negative impact on natural gas gross profit for the quarter due to a mismatch in the timing of fixed transportation and capacity costs in relation to revenues which will not be recorded until the commodity is delivered to customers. MXenergy expects to recover these costs during the upcoming winter months when the commodity is delivered to customers in the SSO program.

The gross profit attributable to natural gas delivered to customers was negative $429,000, versus $3.7 million a year ago, largely on a $287,000 charge related to weighted-average cost of gas methodology in the current quarter, versus a $1 million benefit from the weighted-average cost of gas methodology in the year-ago quarter. Lower volumes and unit margins also adversely impacted natural gas gross profit.

Gross profit per MMBtu sold during the period, excluding unrealized hedging impacts, was 30¢, versus $1.77 a year ago.

Electric gross profit attributable to electricity delivered to customers was $9.2 million, up from $5.1 million a year ago, on customer growth. Gross profit per MWh sold during the quarter was lower at $19.58 versus $25.68 a year ago, reflecting competitive pricing environments in many of MXenergy's electricity markets, including Pennsylvania.

MXenergy's customer growth continued, with 634,000 Residential Customer Equivalents (RCEs) as of September 30, 2010, versus 606,000 as of June 30, 2010 and 547,000 a year ago. The totals exclude gas customers served under the Ohio SSO program.

Natural gas RCEs, excluding Ohio SSO customers, were 445,000 as of September 30, 2010, versus 433,000 as of June 30, 2010 and 470,000 a year ago.

Electric RCEs were 189,000 as of September 30, 2010, versus 173,000 as of June 30, 2010 and 77,000 a year ago. Actual electricity RCEs as of September 30, 2010 include over 55,000 customers added as a result of expansion into new electricity markets in Pennsylvania and Maryland during the nine months ended September 30, 2010.

The customer renewal percentage was 92% for the 12-month period ending September 30, 2010, versus 90% for the comparable year-ago period. The in-contract attrition percentage for the 12-month period ending September 30, 2010 was improved at 27% versus 33% a year ago.

Natural gas volumes for the quarter were 4,026,000 MMBtu, versus 4,345,000 MMBtu a year ago. Electric volumes were 496,000 MWh for the quarter, versus 216,000 MWh a year ago.

Advertising and marketing expenses increased to $1.4 million from $353,000 a year ago.

Additionally, customer acquisition costs capitalized increased $5.8 million to $8.2 million during the quarter ending September 30, 2010. The cost to acquire customers was approximately $100 per RCE for the quarter ended September 30, 2010, which was consistent with the cost to acquire customers during the fiscal year ended June 30, 2010.