Just Energy Sees Consistent Customer Churn On Continued Margin Discipline

Just Energy reported a dip in its customer count for the quarter ending March 31, 2016, which was in-line with the net decline during the quarter ending December 31, 2015, as the company continues to focus on margin discipline

Specifically, Just Energy saw a net decline of 47,000 Residential Customer Equivalents from December 31, 2015 to March 31, 2016. That's in-line with the net decline of 46,000 Residential Customer Equivalents from October 1, 2015 to December 31, 2015, and compares to a net increase of 4,000 RCEs from June 30, 2015 to September 30, 2015 and a net decline of 77,000 RCEs from March 31, 2015 to June 30, 2015.

Total Just Energy RCEs as of March 31, 2016 were 4.520 million, 4.567 million as of December 31, 2015 and 4.686 million a year ago.

The quarter ended March 31, 2016 represented the end of fiscal 2016 for Just Energy, and its reported data concerning gross additions were for the entire year, as opposed to the three months ended March 31, 2016

Mass market RCEs at March 31, 2016 were 1.884 million, and commercial RCEs at March 31, 2016 were 2.636 million

The combined attrition rate for Just Energy was 16% for the year ended March 31, 2016, consistent with the prior year. While mass market attrition rate decreased one percentage point to 26% from a year ago, the commercial attrition rate increased by two percentage points to 9%. The increase in commercial attrition was a result of increased competition over the past year. Just Energy continues to focus on maintaining its profitable customers and ensuring that variable rate customers meet base profitability profiles even if this results in higher attrition. The consumer attrition includes the impact from higher customer defaults in markets where Just Energy bears collection risk.

For the three months ended March 31, 2016, gross margin was $204.3 million (all $ Canadian), an increase of 5% from the prior comparable quarter as a result of an increase from foreign exchange and the increase in the U.K. customer base.

For the year ended March 31, 2016, the average gross margin per RCE for the customers added and renewed by the mass market division was $207/RCE, an increase from $191/RCE in fiscal 2015. The average gross margin per RCE for the mass market customers lost during fiscal 2016 was $196/RCE, compared with $184/RCE in fiscal 2015. Higher new customer margins reflect strong margins on new products including bundled offerings as well as an impact from foreign currency translation.

For the commercial division, the average gross margin per RCE for the customers signed during the year ended March 31, 2016 was $84/RCE compared to $79/RCE in the prior fiscal year. Commercial customers lost through attrition and failure to renew during the year ended March 31, 2016 were at an average gross margin of $66/RCE, a decrease from $73/RCE reported in the prior year.

Sales for the three months ended March 31, 2016 decreased by 11% to $1,075.9 million from $1,209.9 million recorded in the fourth quarter of fiscal 2015. The mass market division’s sales decreased by 15% while the commercial division’s sales decreased by 6%, primarily a result of the lower consumption during the winter months.

For the three months ended March 31, 2016, Base EBITDA was $67.3 million, a 1% decrease from $67.9 million in the prior comparable quarter. Just Energy's reported Base EBITDA in the fourth quarter of fiscal 2016 includes $7.4 million of prepaid commission expense, reflecting the change in classification of prepaid commissions to a current asset effective April 1, 2016.

Excluding this additional expense item, fourth quarter Base EBITDA increased by 10% to $74.7 million for the fourth quarter of fiscal 2016. Of this $6.8 million year over year improvement in Base EBITDA, $6.7 million was due to the foreign currency impact from translation of the U.S. operations and $0.1 million was driven by operational performance improvements.

Just Energy Co-CEO James Lewis said, "While sales and net customer additions declined in the fourth quarter as compared to a very strong fourth quarter of fiscal 2015, due to our refusal to engage in risky pricing tactics that would ultimately damage our improved profitability profile, we feel strongly that our margin per customer improvement initiative will continue to deliver in fiscal 2017 and beyond ... [W]e feel confident that our ability to embrace the customer and build longer-term loyalty programs through the offering of a differentiated product suite will drive our market position growth in a very profitable manner moving forward. As a result of our strong position, we believe the Company will achieve fiscal 2017 Base EBITDA in the range of $223 to $233 million, reflecting continued double-digit year over year growth."