IDT Energy Sees Net Churn Continue as Gross Acquisitions Slow

IDT Energy reported its second consecutive quarter of net customer churn, on a customer meter basis, as gross customer acquisitions slowed.

IDT Energy reported serving a total of 485,000 meters as of March 31, 2013, versus 502,000 as of December 31, 2012 and 475,000 a year ago.

The net decline of 17,000 meters since December 31, 2012 compares to a net decline of 21,000 meters from September 30, 2012 to December 31, 2012.

IDT Energy reported that the decline in net meters reflects a decline in the rate of gross meter acquisitions. IDT Energy added 66,000 gross meters in Q1 of this year, compared to 79,000 in Q4 2012 and 108,000 in the year-ago quarter.

Among the reasons for the slower gross additions were scaled back efforts to reflect the fact that conditions made it more difficult to achieve IDT Energy's specified rates of return. Additionally, IDT Energy has not been able to enter new utility territories as quickly as it did in 2011 and in the first half of 2012.

As of March 31, 2013, IDT Energy was serving 319,000 electric meters and 166,000 natural gas meters, versus 331,000 electric meters and 171,000 natural gas meters as of December 31, 2012.

While net meters served deceased versus December 31, 2012, IDT Energy's number of Residential Customer Equivalents increased to 329,000 as of March 31, 2013, from 312,000 as of December 31, 2012 and 258,000 a year ago, as newer customers have on average higher levels of consumption.

IDT Energy is currently working to enter additional natural gas territories in Pennsylvania, and is evaluating opportunities in Illinois, the District of Columbia, Massachusetts, and Connecticut.

The slowed gross acquisitions did result in a slower churn rate, as newer customers typically have significantly higher rates of churn than do longer tenured customers. Average monthly churn dropped from 6.8% in the prior sequential quarter and 6.4% in the year-ago quarter to 6.3% this quarter.

IDT Energy income from operations increased to $8.9 million for the quarter, from $7.4 million a year ago, on higher gross profit and lower SG&A expenses.

Gross profit increased to $19.0 million in 1Q13 from $18.0 million in 1Q12, driven primarily by the increases in kWh sold and therms sold partially offset by a decline in margin per kWh sold.

The gross profit from electricity was $10.3 million, a decrease from $11.6 million in Q1 2012. The increase in kilowatt-hours sold during the quarter was offset by a steep decrease in electricity gross profit margin which declined from an unusually high 36.5% in Q1 2012 to 19.0% in Q1 this year.

IDT Energy said that the decrease in gross margin on electricity sales was primarily the result of a series of sharp spikes in the electric spot market in New York that increased costs during January and February. IDT Energy obtains nearly all of the supply for its customers in that state from the spot market, and chose to absorb a portion of those increased costs to keep its pricing competitive and to dampen churn.

The gross profit from natural gas increased to $8.7 million in Q1 from $6.5 million in the year-ago quarter, on increased volumes and margin.

IDT Energy's revenues during 1Q13 were $85.3 million for the quarter ending March 31, 2013.