Genie Energy - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 revenue was $102.9M (-1.9% YoY) with gross margin of 32.5% (+40–46 bps YoY), while Adjusted EBITDA was $11.1M (-2.8% YoY); GAAP diluted EPS was $(0.58), impacted by a $30.9M non-cash captive insurance loss reserve.
• GRE added ~23.5K net meters in Q4 and ~60.9K for 2024 (+17% meters YoY), sustaining customer growth despite lower electricity margins and higher acquisition expense.
• GREW improved profitability via Diversegy (Adjusted EBITDA positive) and pivoted Genie Solar to utility-scale, closing a $7.4M project loan to enhance ROE and liquidity; cash, restricted cash, and marketable securities reached $201.0M at 12/31/24.
• 2025 outlook: management maintained consolidated Adjusted EBITDA guidance at $40–$50M and expects continued cash build, opportunistic buybacks, and dividend payments; catalysts include TX expansion and initial CA natural gas revenue.

What Went Well and What Went Wrong

• What Went Well

  • “We achieved the high end of our Adjusted EBITDA guidance” for 2024 ($48.5M), underscoring solid execution despite normalization from 2023 outperformance.
  • Meter growth accelerated: “adding over 23,000 net meters” in Q4 and “over 60,000” in 2024, positioning GRE for 2025 profitability.
  • Renewables strategy delivered: Diversegy reached Adjusted EBITDA profitability and Genie Solar advanced its pipeline while completing structured financing to boost ROE and balance sheet cash.

• What Went Wrong

  • Electricity margin compression and higher acquisition spend reduced GRE operating income and Adjusted EBITDA; GRE Q4 income from operations fell to $12.6M (from $15.0M) and GRE Adjusted EBITDA to $13.4M (from $15.4M).
  • GREW Q4 revenue fell 30.1% YoY to $4.5M as Genie Solar exited commercial-scale development; losses narrowed but remain a drag on consolidated profitability.
  • GAAP results were heavily impacted by the captive insurance reserve: Q4 loss from operations was $(20.8)M including a $30.9M non-cash charge; continuing operating cash flow for the quarter declined 39.7% YoY to $11.1M.

Transcript

Operator (participant)

Good day and welcome to the Genie Energy Limited's fourth quarter and full year 2024 earnings call. In today's presentation, Genie Energy management will discuss Genie's financial and operational results for the three and twelve-month periods ended December 31st, 2024. During prepared remarks by Genie Energy's Chief Executive Officer, Michael Stein, and Chief Financial Officer, Avi Goldin, 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 Avi Goldin's remarks, Michael and Avi will take questions from investors. Any forward-looking statements made during this call, either in their 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, 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 included 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 8-K with the SEC.

I will now turn the conference over to Michael Stein.

Michael Stein (CEO)

Thank you, Operator.

Avi Goldin (CFO)

Thank you.

Michael Stein (CEO)

Genie finished 2024 with a solid fourth quarter across both our retail and renewables businesses, even as we continue to invest significantly in growth initiatives in both segments. For the full year, we achieved the high end of our adjusted EBITDA guidance. GRE performed well throughout the year. We capitalized on favorable market conditions to ramp up customer acquisitions on the one hand, and through our customer retention program, we reduced churn significantly. As a result, we added 23,000 net new meters in the fourth quarter and over 60,000 during the full year, an increase of nearly 17%. The impact of this increase in our meter book was partially offset by lower levels of per meter electricity and gas consumption compared to the year-ago quarter as a result of mild weather in October, followed by pretty typical patterns in November and December.

Electricity margins in the fourth quarter were lower than in the year-ago quarter, reflecting a multi-year migration toward fixed-price meters, including a number of aggregation wins during 2024. Having said that, the fourth quarter's margin on electricity sales was still above our historical seasonal average. Looking ahead, we expect to continue to build our meter book in 2025. As I mentioned last quarter, we have accelerated our growth in Texas's dynamic electricity market, and we have just begun to generate revenue from our newest market, natural gas in California. These two markets highlight our growth opportunity but conditions are favorable across our markets now in 19 states plus the District of Columbia. GREW, our renewables business, made tremendous progress in 2024 and capped the year with a strong fourth quarter. GREW's profit in 2024 increased by over 120% compared to 2023, surpassing $6 million.

Meanwhile, we held the percentage increase in SG&A to single digits to provide a strong improvement in GREW's bottom-line performance. In addition to holding our solar generation and related businesses, GREW holds a number of early-stage growth initiatives. The largest of these is Roded, an environmental tech recycling business. Even though our increased investment in Roded contributed nearly 25% of the total loss from operations at GREW, we still cut GREW's loss from operations nearly in half in 2024 compared to 2023. Roded has a patented technology developed in Israel that turns agricultural and industrial plastic waste into end-use plastic products for industrial customers. It has successfully demonstrated its technology and begun to generate its first revenues, selling heavy-duty plastic pallets in local markets as its initial commercial product.

We believe that Roded can produce plastic pallets equivalent in size, versatility, and strength to current pallet market offerings at a fraction of the price. Over the next few months, we will attempt to scale up operations in Israel by improving production efficiencies and increasing sales. We hope to have more information to share about the business in the coming quarters. Also, at GREW, our energy procurement business, Diversegy, recorded a $700,000 loss from operations last year. In 2024, we supercharged its growth, increasing revenue by 70% and GP by 130% to generate over $750,000 in income from operations. We expect Diversegy to continue to grow its top and bottom lines in 2025. At Genie Solar, we have essentially completed our strategic migration to utility-scale project vertical. Building, owning, and operating utility-scale projects will enable us to capture the long-term residual value of the power generated.

In that regard, in the fourth quarter, we closed on our first solar financing deal for our portfolio of currently operating arrays, returning approximately $7 million in cash to our balance sheet. The result of the financing will leave us with an attractive return on equity for this portfolio. Going forward, we intend to use similarly structured asset-backed finance deals to monetize our operational arrays and boost returns on equity so that we can maximize the cash in our balance sheet while driving growth at a greater scale. In 2025, we expect that Genie Solar will complete construction and bring online one of its initial community solar projects. In addition, we expect to begin construction on two or three more community solar projects over the course of the year.

We'll also continue to advance our early-stage portfolio even as we look for opportunities to add new arrays through acquisitions, including both operating and development-stage solar projects. 2024 was a good year operationally and financially. We achieved strong adjusted EBITDA, significantly higher than what we were achieving before our outperformance years in 2022 and 2023. At GRE, we returned to meter and RCE growth, putting us on pace to repeat or exceed this year's profitability in 2025. At GREW, we improved key financial metrics, put ourselves on pace for continued growth while investing in new lines of businesses. Our strong operational performance enabled us to faithfully pay our dividend and buy back a significant amount of stock while growing our cash significantly. On a consolidated basis for the full year 2025, we maintain our annual consolidated adjusted EBITDA guidance at $40 million-$50 million.

We also expect to continue to build our cash reserves and opportunistically buy back our stock while paying our current dividend, even while investing in growth at both our new and established businesses. I want to wrap up by expressing my gratitude to the entire Genie team for doing terrific work in 2024 and setting the stage for an even better 2025. Now, I will turn the call over to Avi for his discussion of our quarterly and full-year financial results.

Avi Goldin (CFO)

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 and twelve months ended December 31, 2024. In my commentary on the quarterly results, I will compare the results for the fourth quarter of 2024 to the fourth quarter of 2023 to remove from consideration the seasonal factors that impact our results, particularly within our retail energy business. The fourth quarter is typically characterized by relatively low levels of electricity and moderate gas consumption, as the bulk of the quarter falls between the summer's peak cooling and winter heating seasons. I was pleased with our fourth quarter and full-year results, highlighted by operational and financial performance consistent with our expectations, enabling us to achieve the upper end of our 2024 guidance range while further strengthening our balance sheet.

Turning to the fourth quarter numbers, consolidated revenue in the quarter decreased 1.9%, or $2 million, to $102.9 million. At GRE, revenue was unchanged at $98.4 million. Electricity revenue of $82.1 million was also unchanged and contributed to 83.5% of GRE's revenues. Consumption increased as a result of the success of our meter acquisition programs, but the impact of that increase was offset by lower revenue per kilowatt-hour sold. Revenue from the sale of natural gas increased 7.5% in the fourth quarter to $16.2 million, reflecting increases in both our gas meter base and revenue per therm sold. At GREW, fourth quarter revenue decreased 30.1% to $4.5 million. Strong growth at Diversegy was offset by a reduction in revenue at Genie Solar as we shifted our strategic focus from lower-margin commercial projects and at CityCom Solar.

Consolidated gross profit was $33.5 million, a slight reduction from the $33.6 million we achieved in the year-ago quarter, while our gross margin edged up 40 basis points to 32.5%. At GRE, gross profit decreased 1.8% to $31.9 million, as our gross margin decreased 55 basis points to 32.4%. The decreases were driven by margin compression on electricity sales, which was partially offset by stronger margins on gas sales. We increased GREW's gross profit by 38% year-over-year to $1.5 million, achieving a gross profit margin of 33.9%. The improvement was driven by stronger results at Diversegy and the contributions from our operating solar projects at Genie Solar. Our fourth quarter consolidated loss from operations decreased 39.2% year-over-year to $20.8 million, which includes the impact of the $30.9 million loss reserve by our captive insurance subsidiary as we added additional risks.

The comparative improvement is primarily due to the $45.1 million loss reserve in the year-ago quarter. These non-cash charges are excluded from our measures of adjusted EBITDA and non-GAAP earnings per share. Less additional risks are added. We expect the ongoing impact of this line item to reflect changes in the potential liability for the risks that the captive is insuring. Consolidated adjusted EBITDA decreased 2.8% to $11.1 million, driven by a reduction in adjusted EBITDA at GRE, partially offset by the increased contribution from GREW. At GRE, income from operations decreased 15.9% to $12.6 million, and adjusted EBITDA decreased 13% to $13.4 million. The decreases resulted from our increased pace of investment in meter acquisition and, to a lesser extent, the reduced margin on sales of electricity. At GREW, the fourth quarter's loss from operations decreased 46.9% to $700,000, and adjusted EBITDA loss decreased 60.2% to $521,000.

The improvement reflects Diversegy's improving profitability and margin expansion at Genie Solar. The consolidated net loss attributable to Genie common shareholders, which includes the non-cash insurance loss reserve, decreased $15.3 million to $0.58 per share from $24.5 million, or $0.90 per share, a year earlier. Consolidated net loss from continuing operations attributable to Genie shareholders, which excludes a $2.5 million charge related to our closure of our European operations that is reflected as a loss from discontinued operations, improved to a loss of $12.9 million, or $0.48 per diluted share, from a net loss of $25 million, or $0.92 per diluted share in the year-ago quarter. Now, I will spend a few minutes discussing our full-year 2024 results. Consolidated revenue in 2024 decreased 0.8% to $425.2 million. At GRE, 2024 revenue of $403.3 million fell 1.6% compared to 2023.

Electricity sales, which generated 87% of GRE's 2024 revenue, were flat as the impact of our larger electric meter base was offset by a decrease in revenue per kilowatt-hour sold. At GREW, 2024 revenue jumped 16.1% to $21.9 million on the back of Diversegy's strong top-line growth. Consolidated gross profit decreased 5.3% to $138.5 million, where our gross margin decreased 150 basis points to 32.6%. Our consolidated income from operations increased to $11.3 million from $10 million in 2023. The lower non-cash loss reserve for our captive insurance subsidiary in 2024 compared to 2023 more than offset the combined impacts of the decrease in our gross profit and increased investment in meter acquisition. Adjusted EBITDA, which excludes the loss reserves, came at the upper end of our guidance at $48.5 million compared to $58.2 million in 2023. The decrease was due entirely to a lower contribution from GRE.

At GRE, income from operations decreased 21.4% to $56.5 million from $71.9 million, and adjusted EBITDA decreased 20.4% to $58.4 million from $73.3 million. In 2023, we experienced a unique margin environment that allowed us to experience stronger-than-usual results. In 2024, we moved back towards our longer-term average gross margin while investing to grow our retail book. Note that while not as strong as the results we obtained in 2022 and 2023, 2024 results were a significant improvement over the long-term run rate. At GREW, the loss from operations improved to $3 million from $5.8 million in 2023, and we reduced our adjusted EBITDA loss to $2.2 million from $5.4 million in 2023. As was the case with our fourth quarter results, the full-year improvement reflects Diversegy's pivot to profitability and that Genie Solar has transitioned to utility-scale project development and operations.

For 2024, consolidated net income attributable to Genie common stockholders, which includes the non-cash provision for captive insurance liability, decreased to $12.6 million, or $0.46 per diluted share from $19.2 million, or $0.74 per diluted share in 2023. Diluted earnings per share from continuing operations, exclusive of the impact of our discontinued European operations, increased to $0.57 in 2024 from $0.49 in 2023. Non-GAAP diluted earnings per share, which excludes discontinued operations and the impact of the loss at the captive insurance company, was $1.40 per diluted share versus $2 per diluted share in 2023. Turning now to the balance sheet. At December 31, 2024, cash, cash equivalents, long and short-term restricted cash, which includes the cash held by our captive insurance subsidiary, as well as marketable equity securities, totaled $201 million, an increase of $37.6 million over the full year. Working capital was $117.6 million.

Our debt of $8.7 million reflects the financing deal for our portfolio of operational arrays that Michael mentioned earlier. We repurchased approximately 168,000 shares of our Class B Common Stock in the fourth quarter for $2.5 million. For the full year 2024, we repurchased 661,000 shares for $10.4 million and paid out a regular quarterly dividend to return an additional $8.2 million to stockholders. To wrap up, this was another solid financial quarter and capped off a strong year characterized by robust cash generation, further strengthening of our balance sheet, and significant investments in growth initiatives. We're in excellent position to perform very well again in 2025 and continue to return value to our stockholders. Operator, back to you for Q&A.

Operator (participant)

Certainly. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. We will now pause momentarily to assemble our roster. Again, if you have a question, please press star, then one. As there are no questions, this concludes our question-and-answer session and conference call. Thank you for attending today's presentation. You may now disconnect.