Genie Energy Ltd.

Good morning and welcome to the Gini Energy Ltd.'s second quarter 2026 earnings call. In today's presentation, Gini Energy Management will discuss Gini's financial and operational results for the three months ended June 30th, 2026. During prepared remarks by Gini Energy's Chief Executive Officer, Michael Stein, and Chief Financial Officer, Avi Goldin, all participants will be in listening mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After Avi Goldin's remarks, Michael and Avi will take questions from investors. Any forward-looking statements made during this conference call, either in the prepared remarks or in Q&A session, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates. These risks and uncertainties include, but are not limited to, limited to the 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 may 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 refer to adjusted EBITDA and other non-GAAP measures. The schedule provided in the GENIE Energy earnings release reconciles adjusted EBITDA to the nearest corresponding gap 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 Form 8K with the SEC. I will now turn the conference over to Michael Stein.

Thank you, Operator. In the second quarter, Genie delivered strong bottom-line results in both operating segments while continuing to invest in growth opportunities across our businesses and return value to shareholders. A Genie Retail Energy relatively normalized wholesale energy market conditions enabled us to achieve gross margin on a level comparable to our long-term historical average and that drove a significant year-over-year improvement in our bottom-line results. GRE's top line declined 5%, primarily reflecting the expiration of aggregation deals over the past year. The deals typically generate low margin revenue, so the impact of their expiration at our bottom line was minimal. At quarter end, we served 345,000 RCEs and 363,000 meters compared to 413,000 RCEs and 419,000 meters a year earlier. During the second quarter, we added 65,000 gross new customers compared to $70,000 a year earlier. Total customer acquisition expense increased materially as we acquired a higher percentage of customers through higher cost of acquisition channels and fewer through lower cost channels. We approached these low cost channels opportunistically as they generate lower margin customers compared to higher cost channels. We allowed low cost channel acquisition volumes to fluctuate depending on how competitive market rates compare to the incoming utilities offerings. In the second quarter, with these low-cost channels underperforming, we increased our investment in acquisitions through higher-cost channels, increasing our base of higher lifetime value customers, and building a tailwind that we expect to positively impact the coming quarters. Acquisitions through high-cost channels also enabled us to prioritize further diversification of our customer base through strong growth in some of our newer markets, including Texas' power market and California's gas market. At GRU, the top line was flat year over year. However, contributions from our diversity energy brokerage and Genie Solar businesses enabled the segment to achieve positive EBITDA. Diversity had a particularly strong quarter as it continues to execute its growth strategy. Both Diversity and Genie Solar are on track to further expand their bottom lines in the coming quarters. Diversity continues to build its book of business at a double-digit annualized growth rate even better because new business frequently entails upfront customer payments, growth from a cash perspective has been stronger than what is reflected in EBITDA. Moreover, this new business will drive revenue growth for several years to come as we earn revenue over the lifetime of the contracts. One of the key drivers for DiversiG's expansion has been our ability to leverage AI to optimize our customer acquisition efforts across channels. Analyzing the energy requirements of our customers and their industries so that we can tailor our offerings to meet their needs with greater precision. At Genie Solar, we turned on our second community solar project in New York State late in the second quarter, and that will positively impact results starting in the third quarter. GRU's second quarter's results also reflected our continued investment in several early stage growth initiatives, most notably at Rodead. As we've discussed previously, Rodead utilizes a patented recycling technology to manufacture useful plastic products from agricultural and other plastic waste. At Rodet, we made terrific progress during the quarter. The company continued to expand production in Israel to meet strong local demand for its pallet products. In fact, we already are approaching the production capacity of our current facility and received a commitment from the Israeli Minister of Environment to underwrite a material portion of the cost of constructing a larger manufacturing plant. For diversified or dead revenue, we are preparing to begin manufacturing a second product utilizing the same recycled plastic feedstock. Also, the company was certified as a producer of plastic credits through Vero's Plastic Waste Reduced Standard Program, a global platform to incentivize businesses to utilize the vast quantities of waste plastic that otherwise would end up in our oceans or our landfills. This certification will enable Rodette to enhance profitability through the monetization of credits it receives for the plastic it collects and converts to finished product. Looking a little further ahead, Rodette is moving forward on an international expansion. The company has identified several potential manufacturing sites in the southeastern U.S. and is now working to select the final site, hire key managers, and design the initial pallets it will offer for the North American market. To wrap up at Genie Energy, for the balance of the year, we're looking to boost cash generation across GRE, diversity, and Genie Solar, make good on operational progress in our growth initiatives, and return value to shareholders through opportunistic stock purchases and our quarterly dividends. Now, I will 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. and our most varied cover of financial results for the three-month end of June 30, 2026. In my commentary, I'll compare the results for the second quarter of 2026 to the second quarter of 2025 to remove from consideration the seasonal factors that impact our results, particularly our retail energy business. The second quarter, which includes spring and the early stages of the summer cooling season, is typically characterized by moderate levels of electricity consumption and low levels of natural gas consumption. The quarter's financial results were highlighted by strong margin and adjusted EBITDA expansion of GRE and profitability approval, both of which helped to drive an increase in our consolidated bottom-line performance. Consolidated revenue in the second quarter decreased 4.6% to $100.4 million. GRE revenue decreased 4.9% to $94.1 million as our customer base contracted through the expiration of low-margin aggregation deals. Resulting decrease in consumption was partially offset by increased revenue per unit sold for both electricity and natural gas. Sales of electricity, which introduced 89% of GRE's revenues, decreased 7% to $83.6 million. Kilowatt-hour sold decreased by 17%, while revenue per kilowatt-hour sold increased to 12%. Natural gas revenue decreased 16.2% to $10.6 million. Therm sold decreased 23%, while revenue per therm sold increased 50%. At GRU, second quarter revenue is relatively unchanged at $6.3 million. Consolidated gross profit increased 43.4% to $33.7 million, while gross margin increased to 33.5%. At GRE, gross profit increased 42.2% to $30.3 million, and gross margin increased to 32.2%. GRE achieved a gross margin within the historical range given normalized commodity market conditions. note that the year-ago second quarter was impacted by unusually low natural gas profitability. At Groove, gross profit increased 55% to $3.3 million, driven by each increased contribution to both Diversity and Genie Solar, the two more mature businesses within the segment, both of which are already generating cash. Consolidated SG&A increased 28% to $27.2 million, largely reflecting a mixed shift of Genie Retail's customer acquisition channels towards higher per-acquisition cost methods. Horst, or higher customer lifetime values. The gross profit increase at GRE drove a $4.3 million year-over-year increase in consolidated income from operations to $6.5 million and a $4.5 million increase in adjusted EBITDA to $7.5 million. At GRE, income from operations increased 108.3% to $8.3 million and adjusted EBITDA increased 96.7% to $8.7 million. Strong contributions from diversity in G-Solar enabled groups to achieve profitability. Income from operations increased to $100,000 from the loss from operations of $200,000 a year earlier and adjusted EBITDA increased to $200,000 from the adjusted EBITDA loss of $97,000 in the second quarter of 2025. Consolidated net income attributable to Gini Commons staff holders was $11.4 million, or $0.43 for the rooted share, compared to $2.3 million, or $0.09 per share, a year earlier. Turning out of the balance sheet, the June 30, 2026 cash-cash equivalents Long and short-term shifted cash in market-elected securities totaled $204.3 million. Working capital is $109.6 million. Our net debt totaled $6.8 million, the largest component of which is the financing for our portfolio of operational solar arrays. The roof purchased approximately 47,000 shares of our Class B common staff in the second quarter for $659,000, and we paid our regular quarterly dividends, returning an additional $2 million directly to our stockholders. Wrapping up, Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone.

If you were using a speakerphone, please pick up your handset before pressing the start keys. To withdraw your question, please press star, then 2. We will now pause momentarily to assemble our roster. And the first question today is coming from Matt Baytypes from Freedom Broker. Your line is live.

Yes, hi. Thank you so much. Congratulations for the strong results. So my question is about the other income which is quite significantly in part the bottom line. So can you elaborate a little bit the breakdown of this other income and how do you see it going forward towards the end of the year? Thank you.

Sure. This is Adi. Thank you for the question. So the other income line reflects the change in value of other investments that we have, primarily when we invest balance sheet cash. Those are where we have a, you know, very strong cash position. So when we make investments that are to use that cash position to get value, those flow through the other investment line. So it's difficult to predict what those are going to be, but we expect that to, you know, hopefully continue to be, you know, positive for the company.

Okay, great.

Yeah, thank you.

And one more question is, so we see that there is some sort of sensitivity of your profitability and the gas prices, basically, which drives also the electricity prices. And now with the lower gas prices in second quarter, so we see positive impact also on your profitability, the rating results. So how do you see it going forward towards the year end? So do you expect also this trend to continue or is it something to be revised from this point of view?

Thank you. Hi. Thanks for the question. It's hard to predict obviously what markets are going to do, but we feel like we're in a good position right now for the rest of the year. to capitalize on where the market is and, again, still achieve the guidance that we set out.

Yeah. Okay. Okay. Great. So, and, again, these higher general expenses is, as you said, as you mentioned, it's a more expensive acquisition of new clients. So... You also see it kind of to be paid back in the future as it's more profitable sort of clients you're onboarding, yeah, through this higher general expense. Is it correct what I understood? Thank you.

Yeah, so our sales channels or our customer acquisition channels in general are a combination of our for the DORA telemarketing and digital marketing, direct mail, and other kinds of marketing efforts that we do. And some of those channels really will hire margin customers, and some of those channels generally are lower cost and yield lower margin customers. So, yeah, what we were saying is that this quarter, let's say versus last quarter when we, acquired a similar number of meters this quarter versus last year, the same quarter. The acquisition expense was significantly higher, and that's because most of the customer acquisition that was done this quarter was dominated by acquiring those higher margin customers, whereas last year in the same quarter, there was a much higher percentage of that customer acquisition. coming from the lower cost, the lower margin acquisition channels.

Oh, yeah, interesting.

Thank you so much.

And the last one, if you afford, about this, your new plastic business, this, like, maybe you can share with us, like, estimates, what's the overall market value in Israel and Europe, like, where you... and so on. So, just a little bit more on this particular market for the product you now develop. Thank you. Yeah, for sure.

So, without getting into specific numbers, what I can tell you is that we are currently, like you said, operating and like we mentioned on the call, we intend to expand to the U.S., the U.S. being obviously a significantly larger market than Israel. And our plan is all along has been to start with selling pallets and pallets is a huge, huge market. I mean, everything that gets shipped essentially goes out on pallets. and is our hope and intention to take market share in that space. And because our cost of raw materials is significantly lower than that of our competitors who are also doing plastic pallets, even for the same level of performance, we think we can take a big deal of market share. Obviously, it takes manufacturing, but that'll work. What's great about the technology and the patents that we have is that the patent is not on creating pallets. The patent is on creating any finished product. And as you mentioned on this call, we're already starting to make our second product custom for a customer. We've already started designing it and working out the details with that customer, very interested. And we know another, a whole bunch of customers who are also interested in that product. And our intention is to continue to diversify our portfolio of products using the same waste material and the same technology so that the market potential is as large as possible. but obviously as this thing gets more mature, we intend to share more numbers kind of way.

Sure.

Yeah. Yeah. Thank you so much. Yeah.

Have a nice day. Thank you.

Thank you. And there are no more questions. This concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.