Genie Energy Ltd.

Good morning and welcome to the Gini Energy Limited third quarter 2024 earnings call. In today's presentation, Gini Energy Management will discuss Gini's financial and operational results for the three-month period ended September 30, 2024. During prepared remarks by Gini Energy's Chief Executive Officer, Michael Stein, and Chief Financial Officer, Avi Golden, all participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After Avi Golden's remarks, Michael and Avi will take questions from investors. Any forward-looking statements made during this conference call, either in prepared remarks or in the Q&A session, whether general or specific in nature, are subject to risks and uncertainties that may call actual results to differ. materially from those which the company anticipates. These risks and uncertainties include but are not limited to specific risks and uncertainties discussed in the reports that Genie Energy files periodically with the SEC. Genie Energy assumes no obligation either to update any forward-looking statements that they have made or may make or to update the factors that may cause actual results to differ materially from those that they forecast. In their presentation or in the Q&A session, Genie Energy's management may make reference to non-GAAP measures, including adjusted EBITDA, non-GAAP net income, and non-GAAP earnings per share. A schedule provided in the Genie Energy's earnings release reconciles adjusted EBITDA, non-GAAP net income, and non-GAAP earnings per share to the nearest corresponding GAAP measures. Please note that the Genie Energy earnings release is available on the Investor Relations page of the Genie website. The earnings release has also been filed on a form 8K with the SEC. I will now turn the conference over to Michael Stein.

Thank you, Operator. Genie Energy's third quarter results were strong across the board. We generated $12 million in income from operations and $14 million in adjusted EBITDA. And as Avi will detail for you, we continue to build our capital base to pursue additional growth opportunities while returning value to stockholders through dividends and stock buybacks. Through the first nine months of 2024, we have generated $37 million in adjusted EBITDA, and we are on track to deliver on the high end of our annual adjusted EBITDA guidance of $40 to $50 million. Now, let me give you a rundown on our operational highlights. At GRE, our retail energy business, A large residential electricity aggregation deal helped us to add approximately 36,000 net new meters during the quarter. We have discussed this type of local government brokered competitively bid deal before. As a reminder, aggregation deals typically generate low GP on a per meter basis. However, the aggregate GP can be significant and it drops directly to the bottom line with negligible levels of sales and administrative expense. Consequently, we continue to pursue them opportunistically. This latest aviation deal and our consistent efforts to balance customer acquisition and churn over the past year helped us to grow to 399,000 meters served at September 30th, a 3.5% increase compared to the year-ago quarter. RCEs increased by 1.3% from the year-ago quarter to 380,000. Also during the third quarter, we began signing up our first residential natural gas customers in California, a new state for us, and we expect to be clear to begin serving them in the fourth quarter. Entering the California gas market is the latest step in our ongoing effort to grow our portfolio. Expansion in new markets provides diversification that helps mitigate risk and dampen the impact of regional volatility in energy markets. With the addition of California, we will serve electricity and or natural gas to customers in 19 states in addition to in Washington, D.C. We continue to work diligently towards opening additional states and utility territories as well. While California represents an outstanding long-term opportunity for us, we are just as excited by the near-term prospects in our existing market. Many of our markets afford promising marketing opportunities as the incumbent utilities with whom we compete manage their way through a rapidly transitioning energy market. Most notably, following winter storm Yuri in 2021, Texas' deregulated retail market has consolidated, and as a result, the competitive environment has improved for independent reps like us. Our Texas team is making the most of the opportunity, and they have done great work to accelerate growth in the Lone Star State. If these generally positive trends continue, we hope to pick up the pace of organic meter growth in the coming months. Now let's look at GRU, our renewable business. As mentioned last quarter, we are strategically repositioning GRU for stronger top-line growth and improving operating margins with a two-pronged strategy. First, we are building diversity, our energy procurement advisory business, at a record pace. Second, we are narrowing our solar business to focus on development and operation of utility scale generation projects and moving away from the commercial and industrial projects that we started the business with in 2016. In the third quarter, our diversity team did a tremendous job. Revenue doubled from the year-ago level and increased five-fold from where we were two years ago. That record top line helped diversity generate positive adjusted EBITDA for the first time since we acquired it. Looking ahead, we are working to achieve a similar pace of growth over the next year and turn this business into a consistent, reliable engine of top and bottom line growth for Genie. On the solar development side of GRU, our strategic focus on Genie-owned utility scale projects has enabled us to expand gross profit generation and operate more efficiently. GP more than doubled compared to the year-ago quarter, even as we cut in half Genie Solar's SG&A expense compared to the year-ago quarter. Genie Solar's development pipeline expanded again in the third quarter. We gained site control for an additional six projects and moved another one to the permitting stage. Our two construction stage projects continue to make good progress. At our Lansing, New York project, the racks have been installed and we will soon begin mounting the panels. The operational arrays we acquired in Ohio and Michigan contributed about $320,000 in adjusted EBITDA this quarter. Later this month, we expect to close on a project finance loan for these arrays, which will return approximately $7 million in cash to our balance sheet. This loan, in part, will serve as a proof of concept, establishing a foundation for larger finance deals to come as we bring projects in our development pipeline through to completion. To wrap up, at both GRE and GRU, we reported strong quarterly results and made significant progress operationally and financially. Consistent with our performance, GENIE continued to return value to shareholders. In addition to our quarterly dividend, we repurchased approximately 123,000 shares in the third quarter for $2 million. I expect that we will close 2024 with good momentum, and I look forward to accelerating our performance in 2025. Our progress has been and will continue to be driven by the hard work and dedication of the entire Genie team, and I'm very grateful for their effort day in and day out. Now, I will turn the call over to Avi for his discussion of our quarterly financial results.

Thank you, Michael, and thanks to everyone on the call for joining us this morning. Our remarks today cover our financial results for the three months ended September 30, 2024. Throughout my commentary, I'll compare the results for the third quarter of 2024 to the third quarter of 2023 to remove from consideration the seasonal factors that impact our results, particularly in our retail energy supply business. The third quarter is typically characterized by relatively high levels of electricity consumption, since it includes the summer cooling season. Overall, the third quarter results were strong, and we are on track to achieve the upper end of our annual guidance. Consolidated revenue in the third quarter decreased 10.5% to $111.9 million. The decrease was driven entirely by GRE, where revenue declined 12.1% to $105.8 million, primarily reflecting a decrease in kilowatt-hours sold due to lower per-meter consumption. Milder weather throughout the summer cooling season compared to the year-ago quarter was the primary driver of the reduction in consumption per customer. Electricity sales generated 95% of Jerry's revenue in the quarter, in line with expectations. At GRU, revenue increased 29.2% to $6.1 million. The drivers of revenue growth included continued rapid growth of diversity, which nearly doubled its revenue year over year, contributions from the operating solar projects in Indiana and Michigan, and the achievement of solar construction milestones within our CNI portfolio. As Michael mentioned, we have pivoted the solar business to focus on utility-scale project development and are working to complete the CNI projects already in the pipeline. Genie Energy's consolidated gross profit was $37.9 million for a gross margin of 33.9%, 100 basis point improvement year over year. At GRE, the gross profit came in at $35.8 million for a gross margin of 33.8%, a slight 10 basis point decrease from the prior year. GRU's gross profit increased to $2.1 million from less than $300,000 a year earlier. The jump was driven by the high margin revenues of diversity in revenue from our operational arrays, which incur no direct costs. Consolidated SG&A increased 8.5% to $25.2 million. GRE's increased pace of organic gross meter ads during the quarter, exclusive to the aggregation deal Michael mentioned, drove a 10.1% increase in GRE's SG&A to $20.7 million. At GRU, SG&A was $2.3 million unchanged compared to the year-ago quarter, despite its robust top-line growth as we implemented organizational changes related to the shift in focus of Genie Solar to utility-scale projects. Corporate SG&A was also level at $2.1 million. Solid income from operations decreased 34.7% to $11.7 million, and adjusted EBITDA decreased 26.7% to $13.6 million. Charity's income from operations decreased 31.6% to $15 million, and adjusted EBITDA decreased 30.7%. $15.5 million. The decreases were driven by the reduction in kilowatt hours sold and increased customer acquisition at GRE. At GRU, we narrowed the loss from operations from $2.1 million a year ago quarter to $243,000, when negative adjusted EBITDA declined to just $24,000 from $2 million a year ago quarter. Also this quarter, we recorded a non-cash expense of $991,000 and a loss reserved by our captive insurance subsidiaries. The charge didn't impact adjusted EBITDA, but is reflected in our GAAP income from operations and bottom line results. Quarterly changes in this item will reflect changes in the potential liability for the risks that the captive is insuring. GD's income for diluted share was $0.38 in the third quarter compared to $0.53 a year earlier. Turning now to the balance sheet. By September 30th, cash equivalents, long and short-term restricted cash remarkable equity securities totaled $191.7 million. an increase of $28.3 million so far this year. Working capital was $138.8 million. As Michael mentioned, we purchased approximately 123,000 shares of our Class B common stock this quarter. Year-to-date, we've returned $18.5 million in aggregate value to our stockholders through share purchases and a regular quarter dividend. To wrap up, this was another solid financial quarter, highlighted by continued success within GRE and the great progress we've made at Group. We continue to strengthen our balance sheet, while returning value to our stockholders. We expect to finish off the year with another strong quarter. Now, operator, back to you for Q&A.

Thank you, Avi. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. We will now pause momentarily to assemble our roster. Just a reminder, if anyone has any questions, you can press star one on your phone keypad now to join the key. Okay, we appear to have no questions. So this concludes the end of the call. concludes the end of our conference call. Thank you for attending today's presentation. You may now disconnect.