Genie Energy Q1 2024 Earnings Call Transcript

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May 8, 2024

There are 4 speakers on the call.

Operator

After today's presentation by Genie Energy's management, there will be an opportunity to ask questions. Please note this event is being recorded. I will now turn the call over to Brian Siegel of Hayden IR.

Speaker 1

Thank you, operator. With me today are Michael Stein, Genie Energy's CEO and Avi Golden, Genie Energy's CFO, who will discuss operational and financial results. Any forward looking statements made during this conference call, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those statements. These risks and uncertainties include, but are not limited to, those discussed in the reports that we file periodically with the SEC. Genie assumes no obligation to update any forward looking statements that we have made or may make to update the factors that may cause actual results to differ materially from those that we forecast.

Speaker 1

During their remarks, management makes reference to adjusted EBITDA, a non GAAP measure. Management believes that its measure of adjusted EBITDA provides useful information to both management and investors that supplement our core operating results. Our earnings release, which is posted on the genie.comir page, includes a reconciliation of consolidated adjusted EBITDA to its nearest comparable GAAP measures, consolidated net income and income from operations for all periods presented. In addition, adjusted EBITDA for applicable segments are reconciled in the earnings release to the respective segment's income from operations for all periods presented. I will now turn the conference over to Michael Stein, Genie's Chief Executive Officer.

Speaker 2

Thank you, Brian. Welcome to Genie Energy's Q1 2024 earnings call. We reported a solid quarter this morning with record first quarter revenue and gross profit. On top of our regular quarterly dividend, we repurchased 250,000 shares of common stock, which we believe is trading well below its fair value. At GRE, we ended the 1st quarter with 300 and 65,000 customers, up about 5% and 348,000 RCEs, down about 1%, respectively, over the prior year.

Speaker 2

Within GRU, Diversagie had another very strong quarter and at Genie Solar, we advanced several third party owned commercial projects into the construction phase, helping to drive a significant increase in segment revenue, quarterly gross profit and adjusted EBITDA year over year. We also advanced several Genie owned solar projects that are in development and added new projects to the pipeline, even as several others dropped out of our development plans due to lack of viability. This movement in and out of the pipeline is not uncommon for early stage solar opportunities. We are confident that the investments we've made to enhance our team and upgrade our operational capabilities should help us grow and optimize the pipeline, while also moving existing projects through the pipeline more rapidly. As a reminder, our solar project development strategy is intended to be a long term value driver for the company.

Speaker 2

Developing projects from site right acquisitions through construction and into operations typically takes years. However, we are pursuing projects with robust ROI projections that we expect will provide growing recurring revenue streams to the company for years to come. Given the solid operational and financial start to the year, we remain on track to deliver $40,000,000 to $50,000,000 in company wide consolidated adjusted EBITDA for 2024. This range represents a significant increase from our pre-twenty 22 normalized adjusted EBITDA range of $25,000,000 to $30,000,000 and includes significant ongoing investments in developing utility scale solar projects at Group. Our upgraded expectations reflect expanded customer base at GRE, our pivot away from international retail and our focus on continuously enhancing our analytical and operational capabilities.

Speaker 2

Consistent with our 2024 projections, we expect to remain opportunistic with respect to potential new retail customer acquisitions, both organic and inorganic. This year at GRU, we will continue to move toward the completion of our Perry and Lansing solar farms, both in New York. Additionally, we expect our upgraded project development team to further expand our pipeline and move the viable projects through development process more quickly. Our diversity business continues to perform well. Diversity's revenue grew for the 10th straight quarter and its gross profit reached its highest level ever for the 4th consecutive quarter.

Speaker 2

Overall, we expect that Diversegy will contribute to our enhanced growth and profitability in the coming years. To wrap up, we delivered another solid quarter, allocated capital to buy back shares at what we believe are deep value levels and continue to make progress in our solar business. Now, I'll turn the call over to Avi for his discussion of our financial results.

Speaker 3

Thank you, Michael, and thanks to everyone on the call for joining us this morning. My remarks today cover our financial results for the 3 months ended March 31, 2024. Throughout my remarks, when I discuss the quarterly results, I will compare the Q1 of 2024 to the Q1 of 2023 to remove from consideration the seasonal factors that impact the results of our retail energy supply business. In that business, the Q1 is typically characterized by seasonally elevated levels of per meter electricity and gas consumption as it includes the winter's peak heating months for much of our service area. Also during my remarks, I will discuss our measure of adjusted EBITDA, a non GAAP measure in order to provide investors with a consistent perspective on the underlying performance of our business.

Speaker 3

TD's financial results were highlighted by record 1st quarter revenue and gross profit and solid adjusted EBITDA, while returning value to to our common stockholders through repurchases of our Class B common stock as well as our quarterly dividend. 1st quarter consolidated revenue increased 14% to $120,000,000 from $105,000,000 in the Q1 of last year. At GRE, 1st quarter revenue increased by 11% to $112,000,000 from $101,000,000 a year ago. The increase was driven by the growth in our meter base that Michael mentioned as well as increased consumption per meter. The increase in kilowatt hours sold was partially offset by decreases in the average price per unit sold of both electricity and natural gas.

Speaker 3

At our Renewables segment, 1st quarter revenue increased by 87 percent to $7,200,000 from $3,900,000 driven by increased sales of Genie Solar and Diversegy. At Genie Solar, the revenue increase largely reflected attainment of a number of third party commercial project development milestones in the quarter. Diversegy continues to expand its advisory and brokerage business. Consolidated gross profit in the Q1 increased by 1.5 percent to $33,800,000 from $33,300,000 while our gross margin decreased 340 basis points to 28.2 percent from 31.6 percent. At GRE, gross profit in the first quarter decreased 1.1 percent to $32,200,000 reflecting a decrease in our margin on electricity sales, substantially offset by an increase in kilowatt hours sold and higher gross margin on gas sales.

Speaker 3

This dynamic led to an overall decline in GRE's gross margin of 350 basis points to 28.6% from 32.1%. At Genie Renewables, 1st quarter gross profit more than doubled to $1,600,000 from 747,000 dollars reflecting the contribution from Diversigy and the Genie Solar businesses. Solidated SG and A increased 4.1 percent to $22,900,000 from $22,000,000 in the Q1 of 2023 due to an increased rate of customer acquisitions and higher fees paid for participation in utility purchase and receivable programs, partially offset by a decrease in corporate expenses. Consolidated income from operations in the Q1 was $9,800,000 compared to $11,300,000 in the year ago quarter. The decrease primarily reflects the increase in SG and A and a $1,000,000 non cash charge for an increase in captive insurance liabilities.

Speaker 3

At GRE, income from operations decreased to $14,200,000 from $16,400,000 in the year ago quarter as a result of the increased rate of investment in customer acquisitions and the decrease in electricity margins. At Genie Renewables, the 1st quarter loss from operations narrowed to $645,000 from $1,100,000 in the year ago quarter on the strong increase in gross profit. 1st quarter consolidated adjusted EBITDA decreased to 11,700,000 dollars from $12,400,000 in the year ago quarter. Genie's earnings per share was $0.30 in the Q1 compared to diluted earnings per share of $0.54 a year earlier. Discontinued operations contributed a $0.01 loss per share in this quarter compared to a $0.12 per share positive contribution to diluted earnings per share in the year ago quarter.

Speaker 3

Turning now to the balance sheet. At March 31, cash, cash equivalents, long and short term restricted cash and marketable equity securities totaled 162,400,000 dollars Working capital was $127,200,000 As Michael mentioned, we repurchased 250,000 shares of our Class B common stock during the quarter and returned $6,200,000 in aggregate value to our stockholders through that buyback in our regular quarterly dividend. To wrap up, this was another solid quarter financially, highlighted by record first quarter revenue and gross profit. We remain committed to returning value to our stockholders even as we invest significantly in long term growth opportunities. Now, operator, back to you for Q and A.

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