Genie Energy Ltd.

Good morning and welcome to Genie Energy's third quarter 2023 earnings call. Until the Q&A portion of the call, all participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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.

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 filed periodically with the SEC. Jeannie 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. During the 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 Gini.com IR page, includes a reconciliation of consolidated adjusted EBITDA to its nearest comparable gap measures, consolidated debt 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, Gini's Chief Executive Officer.

Thank you, Brian. Welcome to Genie Energy's third quarter earnings call. Our momentum from the first half of the year continued into Q3, with record quarterly revenues and nearly $19 million in adjusted EBITDA, driven mainly by GRE's investments in retail customer acquisition since early in the year. Additionally, Genie Renewables, or GRU, continued to expand its pipeline of potential projects while moving forward in the construction process with two of its projects. At GRE, we added 60,000 gross new meters in the quarter, up 81% from Q3 of last year. However, we were less aggressive in adding customers compared to the first half of the year, and therefore, our CEN meters were essentially flat sequentially, despite year-over-year growth of 49% and 42% respectively. Our return rate was down 30 basis points from last year at 4.4%, While we were not as aggressive as in the first half, we continued to capitalize on pockets of customer acquisition opportunities during the quarter. At GRU, we added two projects comprising nine megawatts to our development pipeline during the quarter, while continuing to build out the two New York projects under construction. As a result of our strong performance year to date and overall 2023 outlook, we are increasing our previous consolidated adjusted EBITDA guidance range of 47 to 55 million to 52 to 57 million. This range increase reflects our strong third quarter and continued optimism about the business as we head into the winter. Remember, these results also represent a significant increase from our pre-2022 normalized EBITDA range of $25 to $30 million, and these are consolidated configures even after allowing for our continued investment in GRU. These higher expectations reflect our larger customer base, transition to operating exclusively in domestic retail markets, and our focus on continuously enhancing our analytical and operational capabilities. For the fourth quarter, we expect to continue to invest in new retail customer acquisitions. With wholesale energy costs remaining at lower levels, we will continue to pursue targeted opportunities created by the higher legacy cost-based rates of certain incumbent utilities. This organic, targeted growth strategy should enable us to expand our meter-based cost effectively, albeit at a lower growth rate than in the first half of the year. Looking to the fourth quarter for GRU, we are making solid progress toward completing our Perry, New York solar farm and are in the construction phase for our Lansing, New York project. Of course, we will also continue looking for opportunities to expand our pipeline of potential projects. To wrap up, we delivered yet another quarter of strong operational and financial results while continuing to position ourselves to create incremental medium to long-term value with our solar pipeline. Now, I'll turn the call over to Avi for his discussion of Q3 financial results.

Thank you, Michael, and thanks to everyone on the call for joining us this morning. My remarks today focus on our financial results for the three months ended September 30, 2023. Throughout my remarks, I will primarily compare third quarter 2023 results to the third quarter of 2022 to remove from consideration the seasonal factors that are characteristic of our retail energy business. The third quarter, which includes this year's peak cooling season, is typically characterized by high levels of per meter electricity consumption and low per meter levels of gas usage. As Michael mentioned, our third quarter 2023 financial results were highlighted by record quarterly revenue and solid bottom line results. Consolidated revenue increased $44 million, or 54%, to $125 million, with strong contributions from both GRE and Junior Renewables. At GRE, we increased quarterly revenue 51% to $120 million, driven by the significant investments we've made in customer acquisition this year. Sales of electricity increased 55% from the year-ago quarter. A 57% increase in electric meter serve, coupled with a 13% increase in consumption per meter, drove a 73% increase in total kilowatt hours sold. At Genie Renewables, revenue increased to $4.7 million on growth within solar, diversity, and Citical. Our consolidated gross profit in the third quarter was very strong at $41 million, yielding a gross margin of 33%. Our gross profit decreased $2 million, or 5% from the year-ago quarter, while our gross margin declined from 41% in the year-ago quarter. It's important to note that margin in 2022 was positively impacted by our decision to reduce customer load in the face of volatile commodity prices. In 2023, the margin environment has returned to historical levels, and the company has successfully added profitable meters. Consolidated SG&A increased 20% to $23.2 million. At GRE, SG&A increased 19% to $18.8 million, driven by increased customer acquisition expense. Genie Renewables SG&A increased 63% to $2.3 million as we continued to expand Genie Solar's operational capabilities. Corporate SG&A decreased from $2.4 million to $2.1 million in the quarter. Consolidated Income from Operations was $17.9 million, while Adjusted EBITDA was $18.5 million. Both decreased 24% from their respective levels in the year-over-quarter, reflecting both a reduction in gross profit and increased SG&A expense. GRE delivered $22 million in income from operations compared to $27.4 million a year ago. Adjusted EBITDA was $22.3 million compared to $27.7 million a year earlier. At Cheney Renewables, the loss from operations increased to $2.1 million from $1.5 million. Renewals were impacted by an $820,000 write-down in the value of our solar panel inventory. Deluded EPS from continuing operations, which excludes any impact from our discontinued international operations, decreased to $0.54 in the third quarter of 2023 from $0.85 a year earlier. Genie's third quarter diluted EPS was $0.53 on net income attributed to Genie Common stockholders of $14.5 million, compared to EPS of $0.70 on net income attributed to Genie Common stockholders of $18.3 million in the year-ago quarter. In the year-ago quarter, we exited our remaining international businesses in Scandinavia and booked a $3.9 million loss from discontinued operations. compared to a loss from discontinued operations of $300,000 in this quarter. Genie Energy's balance sheet continued to strengthen during the quarter. Cash-restricted cash and marketable securities increased by $28.7 million sequentially to $143.8 million. Working capital was $164.4 million, and non-current liabilities totaled just $2.5 million. Rapidly, in the third quarter a year ago, we capitalized on the unprecedented market volatility to achieve exceptional margins in our retail business. This quarter's results represent a solid performance under more normalized market conditions. GRE benefited significantly from the investments we've made this year to build our customer base and is well positioned for a strong finish to 2023 and beyond. At Genie Renewables, we continue to advance our pipeline of utility-scale solar projects while building out our capabilities for commercial solar development. From an actual standpoint, we are particularly well positioned for a high interest rate environment. With our strong business performances and unlevered balance sheet, we continue to put robust cash flows into our retail business to work to expand that business as market conditions permit, while prudently investing in promising solar development projects that will accrete significantly to our bottom line results in the coming years, and accomplish this while continuing to return value to our stockholders. Now, operator, back to you for Q&A.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that is star 1 to ask a question. Please hold while we poll for questions.

Again, if you have a question, please press star 1. This concludes today's conference, and you may disconnect your lines at this time.

Thank you for your participation.