NEWARK, NJ — November
5, 2014: Genie Energy Ltd. (NYSE:
GNE, GNEPRA) reported revenue of $46.2 million, Adjusted EBITDA* of $856
thousand, and a net loss attributable to common stockholders of $4.8 million ($0.22
per fully diluted share), for the third quarter, the three months ended September
30, 2014.
·
Genie
Retail Energy, Genie Energy’s retail energy provider business, generated Adjusted
EBITDA* of $5.8 million dollars in 3Q14;
·
The
Northern District Planning and Building Committee in Israel issued a permit to Genie
Energy’s Afek subsidiary to conduct a 10-well oil and gas drilling exploration
program within Afek’s license area. Operations have been temporarily halted by
an injunction issued by the High Court of Israel pending resolution of a legal
challenge;
·
In
September, Genie Mongolia signed a prospecting agreement with the Petroleum
Authority of Mongolia. The new exploration block covers twenty-five thousand
square kilometers in Central Mongolia southeast of the capital city – Ulaanbaatar. The Company has begun exploratory and
resource characterization activities;
·
Genie
Energy’s working capital increased to $118 million following the purchase of
shares by Chairman and CEO Howard Jonas for $24.6 million.
MANAGEMENT COMMENTS
Howard Jonas, Genie Energy’s Chairman and CEO, said, “The
transformation taking place in our retail energy business has established a
foundation for future growth. At Genie
Oil and Gas, we continue to move forward despite a challenging regulatory
environment. We added a significant new
license area in Mongolia with a path to commercialization. I am hopeful that the legal challenges facing
Afek will be resolved relatively quickly so that we can begin drilling within
our Northern Israel license area during the first half of 2015. At IEI, we were disappointed by the decision of
the Jerusalem District Planning and Building Committee not to issue a permit
for our oil shale pilot plant, but I am optimistic that we will find a way to
move forward on this important long-term project.”
Geoff Rochwarger, Genie Energy’s Vice Chairman, said, “Our domestic
electricity and natural gas provider business has been evolving rapidly in
recent months, with exciting initiatives in branding, customer acquisition
programs and expanded retail offerings.
Reflective of this diversification, this quarter we begin reporting on
these businesses, including the operations of IDT Energy, as Genie Retail
Energy. Genie Retail Energy had a solid
quarter generating $5.8 million in Adjusted EBITDA on strong margins for
electric sales. The number of meters served has stabilized after declines in
recent quarters, and we are confident that Epiq Energy, our network marketing
subsidiary which we acquired less than a year ago, will help put us on the path
to resume growing our customer base in the year ahead.”
GENIE ENERGY 3Q14 CONSOLIDATED RESULTS
$ in millions, except EPS
|
3Q14
|
2Q14
|
3Q13
|
YoY Change (%/$)
|
Revenue
|
$46.2
|
$48.8
|
$71.6
|
(35.5)%
|
Gross profit
|
$17.8
|
$11.5
|
$19.9
|
(10.6)%
|
Gross margin percentage
|
38.6%
|
23.5%
|
27.8%
|
+1080 basis points
|
SG&A expense including stock-based compensation
|
$18.9
|
$13.4
|
$12.7
|
+49.1%
|
Stock-based compensation
|
$4.9
|
$1.7
|
$1.0
|
+$3.9
|
Research and development expense
|
$3.0
|
$2.4
|
$2.7
|
+14.7%
|
Equity in the net loss of AMSO, LLC
|
$0.0
|
$0.0
|
$0.7
|
$(0.7)
|
Adjusted EBITDA*
|
$0.9
|
$(2.6)
|
$5.0
|
$(4.2)
|
(Loss) income from operations
|
$(4.1)
|
$(4.3)
|
$3.9
|
$(8.1)
|
Net (loss) income attributable to Genie Energy
common stockholders
|
$(4.8)
|
$(5.2)
|
$1.7
|
$(6.5)
|
Diluted (loss) income per share attributable to
Genie Energy’s common stockholders
|
$(0.22)
|
$(0.24)
|
$0.08
|
$(0.30)
|
Net cash (used in) provided by operating activities
|
$(1.0)
|
$22.6
|
$(2.0)
|
$(1.1)
|
* Adjusted
EBITDA is a non-GAAP measure intended to provide useful information that
supplements the core operating results in accordance with GAAP of Genie Energy
or the relevant segment. Please refer to
the Reconciliation of Non-GAAP Financial Measure at the end of this release for
a complete explanation of Adjusted EBITDA and reconciliation to the most
directly comparable GAAP measure.
BALANCE SHEET AND CASH FLOW HIGHLIGHTS
As of September 30, 2014, Genie Energy had $158.8 million in
total assets, including $103.0 million in cash, cash equivalents, restricted
cash (short and long term), and certificates of deposit. Liabilities totaled $28.9 million, and working
capital (current assets less current liabilities) totaled $118.1 million.
Net cash used in operating activities in 3Q14 was $1.0 million
compared to net cash provided by operating activities of $22.6 million in 2Q14
and net cash used in operating activities of $2.0 million in 3Q13.
Through the nine months ended September 30, 2014, Genie
Energy has distributed $982 thousand in dividends to holders of its Series
2012-A Preferred Stock.
RESULTS BY SEGMENT
Genie Retail Energy
Genie Energy’s retail
energy provider and related businesses will be referred to as ‘Genie Retail
Energy’ in this and future earnings announcements. This change reflects the Company’s evolving
business strategy including the diversification and expansion of brands,
marketing and sales channels, and customer offerings beyond those which historically
were referred to as ‘IDT Energy’.
$ in millions
|
3Q14
|
2Q14
|
3Q13
|
YoY Change
|
Total revenue
|
$46.2
|
$48.8
|
$71.6
|
(35.5)%
|
Electricity revenue
|
$43.4
|
$40.0
|
$66.9
|
(35.2)%
|
Natural gas revenue
|
$2.8
|
$8.8
|
$4.7
|
(40.0)%
|
Gross profit
|
$17.8
|
$11.5
|
$19.9
|
(10.6)%
|
Gross margin percentage
|
38.6%
|
23.5%
|
27.8%
|
+1080 basis points
|
SG&A expense
|
$12.2
|
$10.5
|
$10.3
|
+18.1%
|
Adjusted EBITDA
|
$5.8
|
$1.1
|
$9.9
|
(41.5)%
|
Income from operations
|
$5.6
|
$0.9
|
$9.6
|
(41.5)%
|
In 3Q14, Genie Retail Energy increased gross meter
acquisitions to 56 thousand in 3Q14 from 55 thousand in 2Q14 and decreased
compared to 64 thousand in 3Q13. The
sequential increase incorporates contributions from several early stage initiatives: Epiq Energy’s network marketing program, the
deployment of an in house door-to-door sales force, utilization of a new brand
-- Residents Energy, and the expanded deployment of a 12-month guaranteed rate offering
in some utility territories. As
previously disclosed, IDT Energy purchased Epiq Energy, operator of a network
marketing channel, in December 2013. The improving customer acquisition
performance also reflected the resumption of sales activity in all markets
following suspensions in some areas related to the polar vortex.
Genie Retail Energy’s average monthly customer churn decreased
significantly compared to the prior quarter, falling to 6.2% (representing 58 thousand
meters) from 8.1% in 2Q14, reflecting a return to a ‘normalized’ churn rate
following the impact of last winter’s polar vortex. The 3Q14 churn rate was also slightly below
the year ago quarter’s 6.3% churn rate.
Genie Retail Energy’s meters served decreased sequentially
by approximately two thousand meters to 362 thousand at September 30, 2014
compared to 364 thousand at June 30, 2014 and 456 thousand at September 30,
2013.
Meters at end of Quarter
(in thousands)
|
September 30,
2014
|
June 30,
2014
|
March 31, 2014
|
December 31,
2013
|
September 30,
2013
|
Electricity meters
|
235
|
238
|
256
|
282
|
300
|
Natural gas meters
|
127
|
126
|
135
|
145
|
156
|
Total
|
362
|
364
|
391
|
427
|
456
|
|
|
|
|
|
|
|
|
Genie Retail Energy’s residential
customer equivalents (RCEs) also decreased year over year and sequentially,
declining to 248 thousand reflecting the impact of the relatively cool summer in
the service region and higher rates of churn among relatively higher average
consumption meters, primarily in Pennsylvania.
RCEs at end of Quarter
(in thousands)
|
September 30,
2014
|
June 30,
2014
|
March 31,
2014
|
December 31, 2013
|
September 30,
2013
|
Electricity RCEs
|
165
|
174
|
198
|
228
|
246
|
Natural gas RCEs
|
83
|
86
|
90
|
87
|
91
|
Total
|
248
|
260
|
288
|
315
|
337
|
Genie Retail Energy’s revenue decreased to $46.2 million
in 3Q14 from $71.6 million in the year ago quarter reflecting significant decreases
in electric and gas meters and consumption.
Electricity revenue decreased 35.2% year over year to $43.4
million in 3Q14. The decline primarily
reflected the reduction in meters served over the past year augmented by a
decline in consumption per meter reflective of the relatively cooler summer
compared to the prior year. kWH sold
decreased 36.7% year over year as the average number of meters served declined
20.8% and consumption per meter decreased 20.0%.
Average revenue per kWh sold increased 2.3% year over year,
even as the average cost per kWh decreased 14.8%. As a result, the gross margin percentage on
electric sales increased to 39.7% compared to 27.5% in the year ago
quarter. Gross profit on electric sales
was $17.2 million compared to $18.4 million in the year ago quarter.
Natural gas revenue decreased 40.0% to $2.8 million in 3Q14.
The decrease in revenue was driven by a 22.8% decline in therms sold reflective
of the decline in gas meters served, and a 22.3% decrease in revenue per therm
sold reflective of a significant decrease in the market price of natural
gas. Genie Retail Energy’s average cost
per therm sold decreased 11.0%, declining more slowly than revenue per therm. As a result, the gross margin percentage on
gas sales declined to 22.2% compared to 32.0% in the year ago quarter. Gross profit on gas sales was $0.6 million
compared to $1.5 million in the year ago quarter.
Genie Retail Energy’s SG&A expense in 3Q14 increased 18.1%
year over year to $12.2 million primarily due to personnel, professional,
consulting and software costs associated with the integration and ramp-up of
operations at Diversegy and Epiq Energy.
Genie Retail Energy generated Adjusted EBITDA of $5.8 million
in 3Q14 compared to $9.9 million in the year ago quarter, and income from operations
of $5.6 million compared to $9.6 million in 3Q13. The decreases in Adjusted EBITDA and income
from operations were driven primarily by lower electricity and natural gas
gross profit and increased SG&A.
Genie Oil and Gas (GOGAS)
GOGAS currently generates no revenue. GOGAS’ operating
expenses consist primarily of research and development, resource evaluation and
other business development efforts.
GOGAS reported $249 thousand in SG&A expense in 3Q14,
compared to $374 thousand in 3Q13. R&D
expense was $3.0 million in 3Q14, compared to $2.7 million in 3Q13.
In 3Q14 Genie elected not to fund its portion of capital calls
for AMSO, LLC, and AMSO LLC’s joint venture partner funded those calls under
existing agreements.
GOGAS’ loss from operations in 3Q14 was $3.3 million
compared to $3.7 million in 3Q13.
Corporate
Genie Energy’s corporate SG&A expense totaled $6.4
million in 3Q14, including $4.7 million in stock-based compensation related primarily
to the amendment of Howard Jonas’ employment agreement. In 3Q13, corporate
SG&A expense totaled $1.9 million, including $611 thousand in stock-based
compensation.
GOGAS OPERATIONS – PROJECT UPDATES
Afek -- Oil and Gas Exploratory
Project in Northern Israel
Afek was awarded a 36-month (extendable to seven years) petroleum
exploration license covering 396.5 square kilometers in Northern Israel in
2013. Afek conducted above ground
geophysical tests, and, based upon its analysis of the results, applied to
Israel’s Northern District Planning and Building Committee for a permit to
conduct a 10-well oil and gas exploration drilling program. In July, the Committee voted to approve the Afek
application, and subsequently issued the drilling permit.
On October 20, 2014, the High Court of Justice in Israel
issued an interim order to halt Afek’s drilling program until it rules on a
petition filed by the Israel Union for Environmental Defense and some local
residents challenging the issuance of the drilling permit. In announcing its
decision, the Court stated that it expects to convene a three judge panel to
hear arguments on the petitions within approximately two months.
Israel Energy
Initiatives (IEI) -- Oil Shale Exploration Project in Central Israel
IEI submitted its application to conduct an oil shale pilot
test in 2013 to the Jerusalem District Planning and Building Committee. In September of 2014, the Committee declined
to issue IEI the permit. IEI is
currently evaluating its options to determine the best course of action to move
forward to exploit the resource covered by the exploration license.
Genie Mongolia -- Oil
Shale Exploration Project in Central Mongolia
In April 2013, Genie Mongolia and the
Petroleum Authority of Mongolia entered into an exclusive oil shale
development agreement to explore and evaluate the commercial potential of oil
shale resources on a 34,470 square kilometer area in Central Mongolia. In September 2014, Genie Mongolia signed a
prospecting agreement with the Petroleum Authority of Mongolia covering an
additional 25,000 square kilometers in Central Mongolia. The 2014 agreement,
the first to be signed under recently passed legislation, also provides a
framework under which Genie Mongolia can request a commercial production
agreement once a specific suitable resource and location are identified. In
aggregate, Genie Mongolia currently has exclusive rights to explore for oil
shale in approximately 60,000 square kilometers. In 3Q14, Genie Mongolia continued surface
mapping and other geophysical evaluation work of the area.
AMSO, LLC -- Oil Shale
RD&D Project in Western Colorado
During 3Q14, AMSO, LLC continued its review of alternative
heating system solutions. The heater
development and new equipment qualification process will continue through the remainder
of 2014 and into 2015. Significant
progress was made in the design, construction and operation of specialized
testing systems to qualify various components of the various down-hole heaters
under consideration. A number of
additional testing systems will be deployed over the coming months to aid in
evaluating heater equipment for potential use in pilot operations.
GOGAS has not funded its portion of AMSO, LLC’s capital
calls to date during 2014. Total S.A. funded GOGAS’ share in the aggregate
amount of $3.0 million. As a result, GOGAS’ ownership interest in AMSO, LLC was
reduced to 44.3% and Total’s ownership interest increased to 55.7%. GOGAS is evaluating its options with respect
to funding AMSO, LLC in 2015. Funding of
less than GOGAS’ full share will result in further dilution of its interest in
AMSO, LLC.
GENIE ENERGY EARNINGS CONFERENCE CALL
Genie Energy’s management will host a conference call at 8:30
AM Eastern today, November 5th, to discuss financial and operational
results, business outlook and strategy.
The call will begin with management’s remarks followed by Q&A with
analysts and investors.
To listen to the call and/or to participate in the
Q&A, dial 1-800-860-2442 (domestic toll-free) or 1-412-858-4600
(international) and request the Genie Energy call.
An audio file of the call in MP3 format replay will be
available on the “Investors” section of the Genie Energy website approximately
one hour after the call concludes. In
addition, a teleconference replay will be available through November 12, 2014
at 1-877-870-5176 (US toll free) or 1-858-384-5517 (international). Callers should ask for conference call # 10055503.
Genie Energy quarterly earnings releases are not distributed
via news wire services. Investors can download
the earnings release from the Genie Energy website investor relations
page: http://www.genie.com/investors/investor-relations. Genie Energy encourages interested investors
to sign up for email alerts through its website http://genie.com/investors/email-alerts/
to have earnings releases and other press releases emailed directly to
them.
ABOUT GENIE
ENERGY LTD.
Genie Energy Ltd. (NYSE: GNE, GNEPRA) is comprised of Genie
Retail Energy and Genie Oil and Gas (GOGAS). Genie Retail Energy is a
retail energy provider supplying electricity and natural gas to residential and
small business customers in the Northeastern United States, and other
operations in the retail energy provider industry. GOGAS is pioneering technologies to produce
clean and affordable transportation fuels from the world's abundant oil shales
and other fuel resources. GOGAS resource development projects include a
conventional oil and gas exploration program in Israel and in-situ oil shale projects
in Colorado, Israel and Mongolia. For more information, visit www.genie.com.
In this press release,
all statements that are not purely about historical facts, including, but not
limited to, those in which we use the words “believe,” “anticipate,” “expect,”
“plan,” “intend,” “estimate, “target” and similar expressions, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. While these forward-looking statements
represent our current judgment of what may happen in the future, actual results
may differ materially from the results expressed or implied by these statements
due to numerous important factors, including, but not limited to, those
described in our most recent report on SEC Form 10-K (under the headings “Risk
Factors” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations”), which may be revised or supplemented in subsequent
reports on SEC Forms 10-K, 10-Q and 8-K. These factors include, but are
not limited to, the following: potential declines in prices for our products
and services; our ability to return to
profitability and improve our cash flow; impact of government regulation;
effectiveness of our marketing and distribution efforts; and general economic
conditions. We are under no obligation, and expressly disclaim any
obligation, to update the forward-looking statements in this press release,
whether as a result of new information, future events or otherwise.
Contact: Genie Energy Investor
Relations Bill Ulrey P: (973) 438-3848 E-mail: invest@genie.com
Please see attached pdf of complete earnings release for financial statements and Non-GAAP reconciliations |