Genie Energy Q2 2024 Earnings Call Transcript

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August 6, 2024

There are 4 speakers on the call.

Operator

Good morning, and welcome to Genie Energy's Second Quarter 2024 Earnings Call. All participants should be in listen only mode. 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.

Operator

Sir, you may begin.

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 or 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 their respective segments' 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 Q2 2024 earnings call. We reported another in the line of solid quarters this morning, despite it being a seasonally slower quarter. We increased our cash, cash equivalent and restricted cash balance to $178,000,000 while paying our regular quarterly dividend and repurchasing approximately 170,000 shares of common stock, which had about 6x enterprise value to adjusted EBITDA, we believe continues trading well below its fair value. At GRE, we ended the second quarter with 362000 customers and 345000 RCEs, which were relatively flat to the Q1, but down from a year ago when we were aggressively rebuilding our customer base.

Speaker 2

The 1st gs had yet another very strong quarter with over 50% revenue growth. At GE Solar, we recognized our 1st full quarter of revenue from our operating solar farms. From a pipeline perspective, while moving forward on several projects, we subtracted a net 15 megawatts, but the number of potential projects remained the same and we increased the amount in permitting phase to 10 megawatts. Remember that movement in and out of the pipeline is common for early stage solar opportunities. We also continue to make progress at our 2 New York State projects that are in the construction phase.

Speaker 2

And in July, we had 2 projects past the CAESAR studies and have now moved into the permitting stage. 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 driver of long term value for the company. Development projects from the 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.

Speaker 2

Given the solid operational and financial first half of the year, we remain on track to deliver $40,000,000 to $50,000,000 in consolidated adjusted EBITDA for 2024. This range represents 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 GRU. Consistent with our 2024 projections, we expect to remain opportunistic with respect to potential new retail customer acquisitions. For example, at GRE, we expect to see a significant increase in customers late in Q3 as we signed a new aggregation deal. We expect our Diversity business to continue to perform well.

Speaker 2

Diversey's revenue grew for the 11th straight quarter and it delivered record gross profit for the 5th consecutive quarter. Overall, we expect that Diversey will contribute to our enhanced growth and profitability in the coming years. To wrap up, we delivered another solid quarter, deployed 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 June 30, 2024. Throughout my remarks, I will compare the results for the Q2 of 2024 to the Q2 of 2023 to remove from consideration the seasonal factors that impact our results, particularly in our retail energy supply business. Overall, the quarterly results were strong and consistent with the pace of our annual guidance, notwithstanding that they did not favorably compare with Q2 of 2023, which had uniquely strong margins within the retail business. Consolidated revenue for the quarter decreased 3% to $90,700,000 from 93,500,000 dollars The decrease was driven by GRE where revenue dipped 3.4 percent to $86,700,000 primarily reflecting a 2.3% decrease in revenue per kilowatt hour sold.

Speaker 3

Electricity sales generated 90% of Jerry's revenue and seasonally this is a shoulder period for natural gas. Although electric meter counts are slightly lower than last year, per meter electricity consumption climbed nearly 4% to maintain kilowatt hours sold at the year ago level. ACRU revenue decreased 6.6 percent to $4,000,000 reflecting the continued expansion of Diversegy and the 1st full quarter of contribution from our acquisition of our portfolio of operating solar arrays. Genie Energy's consolidated gross profit was $33,300,000 for a gross margin of 36.8%. At GRE, the gross profit came in at $32,700,000 for a gross margin of 37.2%.

Speaker 3

GRE's margin was strong, represented a decrease compared to the 41.8% obtained in the year ago quarter, which is well above historical margin performance. Consolidated SG and A decreased 5 percent to $22,000,000 from $23,200,000 partially driven by reduced sales related spending at GRE. Consolidated income from operations was $10,600,000 and adjusted EBITDA was $12,000,000 representing decreases from $15,000,000 $15,800,000 respectively in the year ago period. The decreases were driven primarily by the reduction in gross profit, partially offset by the reduction in SG and A. Also this quarter, we recorded a non cash expense of $640,000 on a loss reserve by our captive insurance subsidiary.

Speaker 3

The charge didn't impact adjusted EBITDA, but is reflected in our GAAP income from operations and bottom line. We expect this slide in to new quarterly, reflecting the change in potential liability for the risks that the captive is ensuring. At GRE, income from operations decreased $14,600,000 from $18,400,000 a year ago on the decrease in gross profit. At Grew, loss from operations increased to $1,400,000 from $1,200,000 as we added key new employees to expand the operational capabilities at Diversigy and GV Soul. GV's income per diluted share was $0.36 in the 2nd quarter compared to diluted EPS of $0.57 a year earlier.

Speaker 3

Discontinued operations contributed a $0.01 loss per share in the Q2 this year compared to $0.12 per share benefit to diluted EPS in the year ago quarter on the wind down of certain overseas operations. Turning now to the balance sheet. At June 30, cash, cash equivalents, long and short term restricted cash and marketable equity securities totaled $178,300,000 working capital was $132,800,000 As Michael mentioned, we repurchased approximately 169,000 shares of our Class B common stock this quarter. Year to date, we have returned $10,800,000 in aggregate value to our stockholders through share repurchases and our regular quarterly dividend. To wrap up, this is another solid quarter financially, highlighted by further strengthening of our balance sheet even as we continue to return value to our shareholders.

Speaker 3

We are well positioned to continue generating strong cash flows during Q3's peak cooling season and through remainder of the year. Now, operator, back to you for Q and A.

Operator

Thank you. At this time, we will be conducting our question and answer session. Okay. As we have no questions in the queue at this time,

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