Genie Energy Ltd. 10-Q Summary
Business Context and Reporting Period
Genie Energy operates retail energy providers in the United States and internationally through GRE and GRE International, and solar, energy brokerage, and related businesses through Genie Renewables. The filing covers the three months ended March 31, 2021, with comparison to the three months ended March 31, 2020. Results are unaudited and subject to significant seasonality and weather-related variability.
Financial Performance and Position
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $135.3 million | $104.1 million | +30.1% |
| Gross profit | $17.5 million | $28.9 million | -39.4% |
| Gross margin | 12.9% | 27.8% | -14.9 percentage points |
| Operating income (loss) | $(6.6) million | $9.2 million | $(15.8) million |
| Operating margin | -4.9% | 8.9% | -13.7 percentage points |
| Net income (loss) | $(2.7) million | $6.4 million | $(9.1) million |
| Net loss attributable to common stockholders | $(2.4) million | $5.5 million | $(7.8) million |
| Basic and diluted EPS | $(0.09) | $0.21 basic; $0.20 diluted | Declined |
- Electricity revenue was $103.7 million, up from $70.0 million; natural gas revenue was $29.1 million, up from $16.1 million. Other revenue fell to $2.6 million from $18.0 million, primarily reflecting lower Genie Renewables revenue.
- GRE revenue increased 14.6% to $90.7 million, but operating income fell 90.8% to $1.2 million. GRE gross margin declined to 16.5% from 34.9%.
- GRE International revenue increased to $42.2 million from $7.0 million, largely because Shoreditch was consolidated beginning in October 2020. The segment nevertheless recorded a $6.7 million operating loss, compared with a $2.5 million loss.
- Genie Renewables revenue declined 86.1% to $2.5 million, while segment operating income increased to $0.6 million from $0.3 million because of lower costs and the absence of a prior-period impairment charge.
- Cash flow from operations was $(10.0) million, compared with $(2.7) million in Q1 2020. Investing cash flow was $(1.0) million, including a $1.0 million marketable-securities purchase; financing cash flow was $(0.4) million, consisting primarily of preferred dividends.
- Cash, cash equivalents, and restricted cash totaled $31.2 million at March 31, 2021, including $24.4 million of unrestricted cash, compared with $43.2 million at December 31, 2020. Working capital was $35.4 million.
- Total assets were $191.3 million and total liabilities were $107.8 million at March 31, 2021. The balance sheet showed no general loan payable, although $1.4 million of Genie Japan debt was classified within liabilities held for sale.
- Marketable equity securities were $10.5 million at quarter-end. The company recognized a $4.1 million unrealized gain related primarily to its investment in Rafael Holdings.
Material Changes Versus the Prior Comparable Period
- Revenue growth was more than offset by sharply higher energy costs. The Texas winter storm generated approximately $13.0 million of additional costs, while extreme Japanese energy prices generated approximately $2.5 million of additional costs.
- GRE electricity cost per unit increased 25.7%, while the average electricity rate charged to customers declined 5.2%. GRE electricity gross margin fell to 9.4% from 31.7%.
- Customer acquisition remained constrained by COVID-19 restrictions. Gross meter acquisitions declined to 62,000 from 69,000, and GRE meters served were 373,000 at quarter-end versus 384,000 a year earlier. Average monthly churn increased to 4.9% from 4.4%.
- Shoreditch contributed approximately $27.9 million of consolidated revenue in Q1 2021 but could not be separately identified for net income or loss.
- Common-stock dividends were suspended in March 2021 to preserve cash following the Texas and Japan losses. Preferred dividends continued.
- The company identified an immaterial prior-period segment-asset disclosure error; management stated it did not affect consolidated earnings, cash flows, liquidity, equity, or financial covenants.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expects unrestricted cash and operating cash flow to cover anticipated requirements from April 1, 2021 through at least May 7, 2022. No formal revenue or earnings guidance is provided.
- Management expects a modest rebound in customer acquisitions as COVID-19 restrictions ease, but warns that renewed restrictions could delay the recovery. Results remain exposed to weather, seasonality, energy-price volatility, customer churn, hedging effectiveness, and regulatory changes.
- In April 2021, the company agreed to sell Genie Japan for approximately $5.3 million, subject to closing conditions, with expected closing between May 11 and June 1, 2021.
- The company had $142.4 million of future purchase commitments at March 31, 2021, including $90.1 million for electricity and $52.3 million of renewable-energy-credit commitments. It also had $13.7 million of performance bonds and $2.2 million of unused letters of credit.
- At March 31, 2021, $50.5 million of receivables and $1.1 million of restricted cash were pledged to BP against $15.0 million of accounts payable. The company reported compliance with BP and Shoreditch supplier covenants and had $2.3 million of JPMorgan letters of credit outstanding against a $5.0 million facility.
- Connecticut regulatory matters resulted in accrued amounts of $0.4 million for Town Square and $0.3 million for Residents Energy. In May 2021, settlements in principle were reached for those amounts, with restrictions on certain Connecticut marketing or operations.
- New York retail-energy regulations may adversely affect customer acquisition, renewals, revenue, and profitability. Other regulatory reviews and investigations remain unresolved, including an Illinois investigation and a Maine review.
- Disclosure controls were not effective as of March 31, 2021 because of a material weakness previously reported in internal control over financial reporting. Management expects remediation to be completed in 2021 but had not yet concluded that the weakness was remediated.
Important Facts for Investors to Verify
- Whether the planned Genie Japan sale closes on the expected timetable and the final cash proceeds and accounting treatment.
- The sustainability of liquidity given $(10.0) million of quarterly operating cash outflow, substantial energy and renewable-credit commitments, and restricted cash requirements.
- Whether Texas and Japan energy-price effects were isolated events or indicate continuing commodity-price and hedging exposure.
- Progress in restoring GRE gross margins and customer acquisitions as marketing restrictions ease.
- The final terms and operational impact of the Connecticut regulatory settlements and any developments in other regulatory proceedings.
- Completion and effectiveness of remediation for the material weakness in internal controls.