Genie Energy Ltd.

Good morning and welcome to Genie Energy's second quarter 2024 earnings call. All participants should be in listen-only mode and 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. Sir, you may begin.

Thank you, Operator. With me today are Michael Stein, Genie Energy's CEO, and Avi Golden, Genie Energy's TFO, 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. Genius has 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 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.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, GENIE's Chief Executive Officer.

Thank you, Brian. Welcome to Genie Energy's second quarter 2024 earnings call. We reported another in a 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 million while paying our regular quarterly dividend and repurchasing approximately 170,000 shares of common stock, which at about six times enterprise value to adjusted EBITDA, we believe continues trading well below its fair value. At GRE, we ended the second quarter with 362,000 customers and 345,000 RCEs, which were relatively flat to the first quarter, but down from a year ago when we were aggressively rebuilding our customer base. The first G had yet another very strong quarter with over 50% revenue growth. At GE Solar, we recognized our first 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 two New York State projects that are in the construction phase, and in July, we had two projects pass the CSER 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. Developing 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. Given the solid operational and financial first half of the year, we remain on track to deliver $40 to $50 million in consolidated adjusted EBITDA for 2024. This range represents a significant increase from our pre-2022 normalized adjusted EBITDA range of $25 to $30 million. 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 the third quarter as we sign the new aggregation deal. We expect our diversity business to continue to perform well. Diversity's revenue grew for the 11th straight quarter, and it delivered record gross profit for the fifth consecutive quarter. Overall, we expect that diversity 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.

Thank you, Michael, and thanks to everyone on the call for joining us this morning. My remarks today cover our financial results for the three months ended June 30, 2024. Throughout my remarks, I will compare the results for the second quarter of 2024 to the second quarter 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 the second quarter of 2023, which had uniquely strong margins within the retail business. Consolidated revenue for the quarter decreased 3% to $90.7 million from $93.5 million. The decrease was driven by GRE, where revenue dipped 3.4% to $86.7 million, primarily reflecting a 2.3% decrease in revenue per kilowatt-hour sold. Electricity sales generated 90% of GRE's revenue, as seasonally this is a shoulder period for natural gas. Although electric meter counts were slightly lower than last year, per meter electricity consumption climbed nearly 4% to maintain kilowatt hours sold at the year-ago level. At GRU, revenue decreased 6.6% to $4 million, reflecting the continued expansion of diversity in the first full quarter of contribution from our acquisition of our portfolio of operating solar arrays. Genie Energy's consolidated gross profit was $33.3 million for a gross margin of 36.8%. At GRE, the gross profit came in at $32.7 million for a gross margin of 37.2%. GRE's margin was strong, but represented a decrease compared to the 41.8% obtained in the year-ago quarter, which is well above historical margin performance. Consolidated SG&A decreased 5% to $22 million from $23.2 million, partially driven by reduced sales-related spending at GRE. Consolidated income from operations was $10.6 million, and adjusted EBITDA was $12 million, representing decreases from $15 million and $15.8 million respectively in the year-ago period. The decreases were driven primarily by the reduction in gross profit, partially offset by the reduction in SG&A. Also this quarter, we recorded a non-cash expense of $640,000 on a loss reserved by our captive insurance subsidiary. The charge didn't impact adjusted EBITDA, but is reflected in our GAAP income from operations and bottom line. We expect this item to continue quarterly, reflecting the change in potential liability for the risks that the captive is insuring. At GRE, income from operations decreased to $14.6 million from $18.4 million a year ago on the decrease in gross profit. At GRU, loss from operations increased to $1.4 million from $1.2 million, as we added key new employees to expand the operational capabilities at Diversi-G and GVSoilers. GE's income per diluted share was $0.36 in the second quarter compared to diluted EPS of $0.57 a year earlier. Discontinued operations contributed a $0.01 loss per share in the second quarter 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 30th, cash, cash equivalents, long- and short-term restricted cash, and marketable equity securities totaled $178.3 million, working capital was $132.8 million. As Michael mentioned, we repurchased approximately 169,000 shares of our Class B common stock this quarter. Year-to-date, we have returned $10.8 million in aggregate value to our stockholders through share repurchases and our regular quarterly dividends. 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. We are well-positioned to continue generating strong cash flows during the third quarter's peak cooling season, and the remainder of the year. Now, operator, back to you for Q&A.

Thank you. At this time we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The 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. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Okay, as we have no questions in the queue at this time, this will conclude today's conference and you may disconnect your lines at this time. And we thank you for your participation.