Genie Energy - Earnings Call - Q2 2025

Executive Summary

• Revenue grew 16.0% year over year to $105.3M, but gross margin contracted 1,445 bps to 22.3% as GRE’s wholesale power costs spiked, driving adjusted EBITDA down to $3.0M and diluted EPS to $0.11.
• GRE’s customer base expanded to ~419k meters (+14.8% YoY) and 414k RCEs (+20.5% YoY), while churn improved to 4.8% from 5.5% in Q1; GREW revenue rose 57.3% YoY to $6.3M and the segment neared breakeven.
• Management reaffirmed FY2025 consolidated adjusted EBITDA guidance of $40–$50M, contingent on “normalized” retail margin conditions and continued GREW momentum; Lansing community solar expected to commission in Q3.
• Capital returns continued: 159k shares repurchased ($2.7M) and a $0.075 quarterly dividend declared for Q2 (paid Aug 19; record Aug 11).
• Estimates context: S&P Global consensus for Q2 2025 EPS/revenue was unavailable; coverage appears thin—consensus exists for forward quarters but only one estimate per metric, limiting robustness* [GetEstimates Q2 2025].

What Went Well and What Went Wrong

What Went Well

• Customer growth and retention: Meters rose to ~419k (+14.8% YoY) and RCEs to 414k (+20.5% YoY); churn improved to 4.8% vs 5.5% in Q1, supporting volume growth.
• Renewables execution: GREW revenue increased 57.3% YoY to $6.3M, led by Diversegy (+59.5% YoY) and Genie Solar; segment approached breakeven as losses narrowed to ~$0.2M.
• Strategic and shareholder returns: Reaffirmed FY2025 adjusted EBITDA $40–$50M; repurchased ~159k shares and paid $0.075 dividend; commissioning of Lansing community solar in Q3 on track.
• Quote: “We continue to expect that Genie will generate $40 to $50 million of consolidated Adjusted EBITDA in 2025.”.

What Went Wrong

• Margin compression: Gross margin fell to 22.3% (from 36.8%); GRE operating income dropped 73% to $4.0M and GRE adjusted EBITDA fell to $4.4M (from $14.9M), driven by elevated wholesale prices and early-summer heat.
• Cost spikes by region and commodity: Cost of electricity per kWh sold increased ~20% YoY, particularly in PJM and MISO; cost per therm of gas +52% YoY, overwhelming revenue growth.
• Profitability deterioration: Consolidated income from operations declined to $2.0M (vs $10.6M), adjusted EBITDA to $3.0M (vs $12.0M), and diluted EPS to $0.11 (vs $0.36).

Transcript

Speaker 4

Morning and welcome to the Genie Energy Limited's second quarter 2025 earnings call. In today's presentation, Genie Energy management will discuss Genie's financial and operational results for the three months ended June 30, 2025. During prepared remarks by Genie Energy's Chief Executive Officer Michael Stein and Chief Financial Officer Avi Goldin, all participants will be in a listen-only mode. If you do 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 the 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, 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 may have been 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 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 Form 8-K with the SEC.

I will now turn the conference over to Michael Stein. Sir, the floor is yours.

Speaker 2

Thank you, Operator. Our second quarter yielded mixed results. On the one hand, it was highlighted by solid operational progress and double-digit top-line growth. On the other hand, our bottom line was impacted by significant margin compression at GRE, which weighed on our bottom line results. At GRE, we expanded our customer base in the second quarter to approximately 419,000 meters served, comprising approximately 414,000 RCEs, representing a year-over-year increase of 15% and 20% in meters and RCEs, respectively. Churn in the second quarter dropped to 4.8% from 5.5% in the first quarter, and I think we can and will continue to make progress as we further improve our customer retention operations. GRE's bottom line, however, was impacted by wholesale power price increases in some of its supply markets, most notably within the PJM and MISO interconnection zones.

The volatility in the quarter was driven by policy concerns and by warmer-than-usual weather, particularly in June. There have been times over the past few years where wholesale price volatility has led to margin upsides for the company. However, this quarter, the impact was identical. GRU delivered very strong results. Revenue increased 44%, and the segment approached pre-season even as we invested in some of our newly developing businesses. At Diversegy, our brokerage and energy advisory business, revenue increased year over year by over 50%, and profitability increased by almost 3,000%. At Genie Solar, revenue jumped over six times the year-ago level to $1 million, reflecting a solid quarter from its portfolio of operating arrays, and the bottom line loss decreased by 90% as we also significantly reduced SG&A.

Turning now to Genie Solar's development pipeline, we are making good progress on the more advanced projects, including our Lansing Community Solar project, which I'm excited to say we expect to commission in the third quarter. Meanwhile, we have paused work on several of the earlier-stage development pipeline projects to reevaluate their economics in light of recent changes in the development landscape. On the one hand, we anticipate unprecedented demand for power from data centers and industry in the coming years. On the other hand, the accelerated sunset of solar generation tax incentives, included in the recently enacted federal tax and budget legislation, the One Big Beautiful Bill, will impact a few projects at the tail end of our current pipeline that are in the earliest stages of development.

We are currently working to gauge the impact of those changes on these early-stage projects and determine whether and how it makes sense to move ahead with them. Also, because of the legislation, we are pausing efforts to add projects to our development pipeline. Also within GRU, we continue to invest carefully in promising initiatives outside of the solar generation space. Most notably, we have had early success leveraging our insurance capabilities and marketing expertise to offer tailored insurance products to rebuilt customers. We are also optimistic about Rosette, our majority-owned venture, utilizing recycled plastic waste to make pallets and other products. We hope to have more to share about both businesses in the coming quarters.

Turning back to Genie Energy on a consolidated basis, during the second quarter, we again returned value directly to our shareholders by repurchasing approximately 159,000 shares and paying our regular quarterly dividends of $0.075 per share. Looking ahead to the balance of the year, we are expecting GRE's margins to return closer to historical levels. Assuming a normalized commodity environment and with continued improvement in growth at GRU, we confirm Genie Energy's 2025 consolidated adjusted EBITDA guidance at $40 to $50 million. Now, the floor is Avi's.

Speaker 0

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 June 30, 2025. In my commentary, I will compare the results of the second quarter of 2025 to the second quarter of 2024 to remove from consideration the seasonal factors that impact our results, particularly within our retail energy business. The second quarter is typically characterized by relatively low levels of electricity and gas consumption and defaults mostly between the first quarter's heating season and the third quarter's cooling season in many of our service areas. Our second quarter financial results were headlined by a challenging pricing environment in the retail energy business, where we experienced higher than usual costs leading to margin pressure.

Solid revenue in the second quarter increased 15% to $105.3 million, driven by growth at both Genie Retail Energy and Genie Renewables. At GRE, revenue increased 14% to $99 million in the second quarter, reflecting the year-over-year growth of our customer base at Michael's Retail for year-over-year consumption roughly in line with the year-ago level. Electricity revenue climbed 15% to $89.9 million, representing 91% of GRE's revenue. Solar hours sold increased by 17%, while our revenue per kilowatt hour sold decreased 2%. Natural gas revenue increased 8% to $9.1 million. Therms sold increased 5%, while our revenue per therm sold increased 3%. At GRU, second quarter revenue increased 57% to $6.3 million. The revenue increase was led by continued strong growth within our retail brokerage and advisory service at Diversegy and at Genie Solar.

Consolidated gross profits decreased 30% to $23.5 million, while gross margin decreased 1,400 basis points to 22%. At GRE, gross profits declined 34% to $21.3 million, reflecting increases in the wholesale existing natural gas costs. Our cost of electricity per kilowatt hour sold increased 20% compared to the year-ago quarter, particularly within the PJM and MISO interconnection zones. Our cost per therm of gas also increased, up 52% year over year, albeit on a relatively low consumption level. Consolidated SG&A decreased 4% to $21.2 million on reduced payroll and customer acquisition expenses. Consolidated operating income for the quarter pinned at $2 million, with adjusted EBITDA of $3 million, down from $9.5 million and $12.5 million respectively in the second quarter of 2024. The decline is primarily driven by reduced gross profit at GRE's variable cost ratio.

At GRE, income from operations decreased 73% to $4 million and adjusted EBITDA decreased 74% to $4.4 million. At GRU, the second quarter loss from operations now is $181,000 from $1.4 million the year-ago quarter, while adjusted EBITDA has improved from negative $1.1 million to negative $97,000. The improvements are driven by accelerating profitability at Diversegy and the narrowing of losses from Genie Solar. Consolidated net income attributed to the Genie Energy stockholders was $2.8 million or $0.11 per share compared to $9.6 million or $0.36 per share a year earlier. Turning now to the balance sheet. At June 30, 2025, cash, cash equivalents, loans, and total firm-assisted tax, which includes cash held by our tax incurrences at GRE and market volatility securities, totaled $201.6 million. Working capital was $115 million. Our net current and non-current debt totaled $9 million, primarily from the financing of our solar portfolio.

We repurchased approximately 159,000 shares of our Class D common stock in the second quarter for $2.7 million and paid our regular equivalent dividend, and $4 million in value for our stockholders so far this year. Wrapping up, despite the challenging pricing environment within retail, the underlying business fundamentals have been hanging strong. We are well positioned for the remainder of the year and expect to meet our full adjusted EBITDA guidance of $40 to $50 million should normalized weather conditions. Operator, back to you for Q&A.

Speaker 4

Thank you. We will now begin our Q&A session. To ask a question, you may press STAR, then 1 on your touchphone screen. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press STAR 2. Thank you. We will pause momentarily to reassemble our roster. Thank you. Our first question is coming from Saeed Saeed, who is an investor. Your line is live. Saeed, your line is live, sir. It seems there appears to be nobody available on that line. We have a question from Scott Briggs, who is a private investor. Your line is live.

Hi. Morning. Thanks for the comments. Two questions. The first one, what do you hope for confidence that your retail margins or rather your wholesale margins will return to normal? Obviously, the world's seen quite a bit over the last six months, and this was a relatively tough quarter for Genie Energy. Maybe starting with that one, what do you hope that your margins will return close to normal and reaffirm your guidance for the year?

Speaker 2

Hi. Thank you. Thanks for the question. Our margins were hurt in the quarter by definitely some political factors, but I think mostly by weather. It has been a particularly hot end of spring and beginning of summer, which kind of put prices higher. We think things are starting to calm down on the wholesale fronts, and that's a good confidence that we should be able to pull off our values.

It is really just a hope on weather. Are there any hedging strategies or trading strategies you could take in the hope on weather? It is not a great, not a great strategy, pretty high.

Typically, the way we hedge, we hedge our business at a very high %, meaning we hedge out our expected load at a very high %. Strips are kind of a small % that could vary depending on, you know, very, very depending on weather. There is some that is definitely out of our control, but by and large, the highest %, you know, the vast majority of our power is already purchased.

How would the margins, I guess I'm just a little, not depressed, but I'm a little confused, then. How does weather impact your margins so significantly if you're purely hedged? Does that small amount make that big of a difference?

Yeah. Weather is significantly different than historical. Even that, call it 15% to 20%, can make a very big difference in the margins. That's what happened to us over the last few months. You know, how the market obviously reacts to the fact that it's very hot. When it's very hot early in the season, typically what you see is that the rest of the season, or typically, sorry, when it's very hot in the beginning of the season, the wholesale markets react in an uncertain kind of a way. When you see heat toward the end of the season or when you expect to see that heat, usually the market doesn't react as much as it did in the beginning of the season.

We feel pretty confident that the amount that we hedge, and given that we're already kind of middle toward the end of the summer where people expect the heat, we should be in good shape.

Okay. Got it. On your solar projects, is there a viable path for new solar projects? Could I understand the pause as everybody sorts through it? Maybe a few questions on the solar. What's the amount of capital that's locked up in those projects that may not go forward as in potential loss? Is there a growth path currently without the tax credits?

Very little capital is locked up in all new projects. Generally, the way these projects work is that the development part, where you're trying to get permits and interconnection approvals, engineering viability, is the amount you spend on that, is a very, very small percentage of the overall total spend on the project. Probably 95% of what you spend on the project is on construction. Very little capital is tied up in projects that are not viable. In terms of new projects, like I said, we're pausing. We're trying to figure out if there is a path forward for future projects that have a timeline that goes beyond when the One Big Beautiful Bill dictated that the ITC credits go away. We'll obviously be able to update you when we make those determinations.

Got it. Okay, thank you.

Speaker 4

Thank you. Our next question is coming from Jim Hardin, who is a private investor. Your line is live.

Hey, good morning. My questions are around the captive insurance subsidiary. Just starting at a high level, how would you summarize performance there? Are there policies sold or revenue or profit? You know, what's generally the investment mix? How does that compare in both those things? How does it compare to your expectations a few years ago?

Speaker 2

We're very, very conservative with how we manage the cash and the captive. Mostly system cash. You know, we have a little bit in alternative investments. It's doing just fine.

What lines are you selling? My understanding is this is a revenue opportunity, not just maybe a captive. It's for, you know, cost savings for employees. Is that accurate? What are you actually selling as far as lines of insurance?

We are starting. We just started. It's still very early, as I alluded to in my remarks. We are doing some health insurance sales, leveraging our existing marketing channels to sell some health insurance.

Are there any plans to expand from that?

Yes. We're still early stages, so I don't want to say what yet, but the plan is to get into more. To be clear, the captive insurance at this stage is not underwriting the actual insurance risk behind those health insurance plans. Right now, we're acting as a broker. There is a possibility that that would change at some point, but I think it'll be a few years before we do something like that.

Got it. Thank you.

Speaker 4

Thank you. As we have no further questions on the lines at this time, this will conclude today's call. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.