Just Energy Group Inc. (“Just Energy” or the “Company”) (TSX:JE;
NYSE:JE), a retail energy provider specializing in electricity and
natural gas commodities, renewable energy options and carbon
offsets, announced its second quarter results for fiscal year 2021.
“The second fiscal quarter was hallmarked by
several important milestones including reestablishing the Company
as a financially stable, more nimble and competitive retail energy
provider” said Just Energy’s President and Chief Executive Officer,
Scott Gahn. “We believe the successful closing of our
Recapitalization plan, the reconstitution of the Board of Directors
and appointment of new leadership were mission critical and
position us to better meet our customers’ needs and ultimately
deliver value to our stakeholders.”
“Our Q2 sales improved, with our total new RCE
additions increasing from forty-six thousand in Q1 to eighty-six
thousand for the second quarter of fiscal 2021. The increase
was driven by our focus on building our digital sales capabilities
while our direct sales channels continue to be inhibited by the
COVID-19 pandemic, resulting in a decline in our net RCE additions
for the quarter. In spite of the challenges, we continue to
concentrate on ensuring every action we take is in pursuit of
profitable growth and we are confident in our ability to achieve
that goal.”
Mr. Gahn concluded, “While the timing and pace
of any potential recovery is difficult to predict during the
pandemic, which continues to constrain our direct selling activity,
we are experiencing increasing momentum in digital sales activity
and gaining more confidence in our outlook for fiscal year 2021
financial results. As a result, we are tracking to the upper end of
our original Base EBITDA guidance and have increased our guidance
for Base EBITDA to a range of $145 million to $165 million for
fiscal year 2021.”
Key developments:
- The Company completed its
comprehensive Recapitalization plan on September 28, 2020 to
strengthen and de-risk the business, resulting in total liquidity
of $138 million as at September 30, 2020.
- Base EBITDA from continuing
operations decreased 33% compared to the second quarter of fiscal
year 2020 to $32.8 million. After taking into account a $6
million one-time legal provision in the quarter and a non-recurring
$15 million gain in the second quarter of fiscal year 2020, Base
EBITDA was up $5 million compared to the second quarter of fiscal
year 2020. The second quarter of fiscal year 2021 was impacted by
the one-time legal provision and lower Base gross margin but was
partially offset by lower bad debt expense.
- Base gross margin was $138.3
million, a decrease of 11% compared to the second quarter of fiscal
2020, as a result of a decline in the customer base, partially
offset by higher consumption loads as a result of COVID-19 and
lower weather hedge costs.
- Administrative expenses were $44.0
million. Excluding the one-time non-recurring $6 million
legal provision (see Legal Proceedings in the Company’s Financial
Statements and Management Discussion and Analysis), the
administrative expenses were 7% lower than the comparable quarter
in fiscal year 2020.
- Selling non-commission and
marketing expenses fell 37% to $13.0 million compared to the same
period of fiscal 2020 driven by suspending door-to-door sales,
realizing prior year cost savings and maintaining our focus on cost
containment partially offset by additional investment in digital
and telesales.
- Delivered unlevered free cash flow
of $53 million for the six months ended September 30th, 2020 while
paying $30 million of Recapitalization and restructuring costs and
paying down certain extended supplier payables.
- Embedded gross margin (“EGM”)
decreased 20% to $ 1,520.8 million as compared to September 30,
2019 due to the decline in the customer base but was partially
offset by a stronger U.S. dollar.
- Appointed Michael Carter as Chief
Financial Officer and Jim Brown as Chief Commercial Officer;
promoted Scott Fordham to Chief Operating Officer.
Financial
and operating highlights |
For the three
months ended September 30.(thousands of dollars, except where
indicated and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% increase |
|
|
|
|
Fiscal 2021 |
|
(decrease) |
|
Fiscal 2020 |
Sales |
$ |
649,602 |
|
|
(15)% |
|
|
|
768,440 |
|
Cost of goods sold |
|
428,891 |
|
|
(49)% |
|
|
|
843,788 |
|
Gross margin |
|
220,711 |
|
|
NMF3 |
|
|
|
(75,348 |
) |
Realized gain (loss) of
derivative instruments and other |
|
(82,438 |
) |
|
(136)3 |
|
|
|
230,732 |
|
Base gross margin1 |
|
138,273 |
|
|
(11)% |
|
|
|
155,384 |
|
Administrative expenses2 |
|
43,957 |
|
|
6% |
|
|
|
41,466 |
|
Selling commission
expenses |
|
34,894 |
|
|
4% |
|
|
|
33,499 |
|
Selling non-commission and
marketing expense |
|
13,017 |
|
|
(37)% |
|
|
|
20,780 |
|
Bad Debt Expense |
|
11,662 |
|
|
(61%) |
|
|
|
29,570 |
|
Restructuring costs |
|
7,118 |
|
|
NMF3 |
|
|
|
- |
|
Finance costs |
|
29,744 |
|
|
5% |
|
|
|
28,451 |
|
Profit (loss) from continuing
operations |
|
(50,156 |
) |
|
NMF3 |
|
|
|
89,349 |
|
Loss from discontinued
operations |
|
(1,210 |
) |
|
(88)% |
|
|
|
(9,809 |
) |
Profit (loss) for the
period4 |
|
(51,366 |
) |
|
NMF3 |
|
|
|
79,540 |
|
Earnings (loss) per share from
continuing operations available to shareholders – basic |
|
(4.37 |
) |
|
|
|
|
|
9.05 |
|
Earnings (loss) per share from
continuing operations available to shareholders – diluted |
|
(4.37 |
) |
|
|
|
|
|
8.97 |
|
Base EBITDA from continuing
operations1 |
|
32,774 |
|
|
(33)% |
|
|
|
49,069 |
|
Embedded gross margin1 |
|
1,520,800 |
|
|
(20)% |
|
|
|
1,892,000 |
|
Total RCEs |
|
3,086,000 |
|
|
(12)% |
|
|
|
3,500,000 |
|
Total gross customer (RCE)
additions |
|
86,000 |
|
|
(49)% |
|
|
|
168,000 |
|
Total
net customer (RCE) additions |
|
(97,000 |
) |
|
49% |
|
|
|
(65,000 |
) |
1 See “Non-IFRS financial measures” on page 6 of
the MD&A.2 Includes $0.3 million and $3.6 million of Strategic
Review costs for the second quarter of fiscal 2021 and 2020,
respectively.3 Not a meaningful figure. 4 Profit (loss) includes
the impact of unrealized gains (losses), which represents the mark
to market of future commodity supply acquired to cover future
customer demand as well as weather hedge contracts entered into as
part of the Company’s risk management practice. The supply has been
sold to customers at fixed prices, minimizing any realizable impact
of mark to market gains and losses.
Balance sheet, unlevered cash flow and
liquidity
- The Company has $138 million of total liquidity available as at
September 30, 2020. The liquidity is made up of cash and cash
equivalents of $78 million and available capacity of $60 million
under its senior secured credit facility.
- Total debt decreased to $500 million as at September 30, 2020
from $782 million as at March 31, 2020 as a result of the
completion of the Recapitalization transaction.
- Unlevered free cash flow of $53 million for the six months
ended September 30, 2020 compared to $102 million for the six
months ended September 30, 2019 driven by $30 million of
Recapitalization and restructuring costs and paying down of certain
extended supplier payables.
Total customer count
|
As atSept. 30, 2020 |
As atMarch 31, 2020 |
Sept. 30 vs.March 31variance |
As atSept 30, 2019 |
Sept. 2020 vs.Sept. 2019 |
Consumer |
906,000 |
988,000 |
(8 |
)% |
1,078,960 |
(16 |
)% |
Commercial |
108,000 |
119,000 |
(9 |
)% |
118,172 |
(9 |
)% |
Total customer count |
1,014,000 |
1,107,000 |
(8 |
)% |
1,197,132 |
(15 |
)% |
- Total customer count, excluding discontinued operations,
declined 15% to 1,014,000 compared to September 30, 2019 and 8%
compared to March 31, 2020, due to the Company’s focus on adding
longer tenure more profitable customers and impacts of
COVID-19.
Annual Gross Margin Per RCE
|
|
|
Q2 Fiscal |
|
Number of |
|
|
Q2 Fiscal |
|
Number of |
|
|
2021 |
|
RCEs |
|
2020 |
|
RCEs |
|
|
|
|
|
|
|
|
|
|
|
Consumer customers added or
renewed |
|
$ |
355 |
|
32,000 |
|
$ |
314 |
|
161,000 |
Commercial customers added or renewed1 |
|
|
89 |
|
33,000 |
|
|
87 |
|
110,000 |
1 Annual Gross
margin per RCE excludes margins from Interactive Energy Group and
large Commercial and Industrial customers. |
- Consumer gross margin per RCE increased 13% versus the prior
comparable period driven by a stronger U.S. dollar and the
Company’s increase in focus on profitable customer growth.
Commercial customer gross margin per RCE increased 2% due to the
stronger U.S. dollar and the adding and renewing of a larger
proportion of lower usage, higher margin Commercial customers.
Total RCE Summary
|
July 1, |
|
|
Failed to |
Sept. 30, |
% increase |
Sept. 30, |
% |
|
2020 |
Additions |
Attrition |
renew |
2020 |
(decrease) |
2019 |
decrease |
Consumer |
|
|
|
|
|
|
|
|
Gas |
299,000 |
1,000 |
(10,000 |
) |
(5,000 |
) |
285,000 |
(5 |
)% |
357,000 |
(20 |
)% |
Electricity |
846,000 |
33,000 |
(38,000 |
) |
(21,000 |
) |
820,000 |
(3 |
)% |
915,000 |
(10 |
)% |
Total
Consumer RCEs |
1,145,000 |
34,000 |
(48,000 |
) |
(26,000 |
) |
1,105,000 |
(3 |
)% |
1,272,000 |
(13 |
)% |
Commercial |
|
|
|
|
|
|
|
|
Gas |
396,000 |
30,000 |
(11,000 |
) |
(8,000 |
) |
407,000 |
3 |
% |
437,000 |
(7 |
)% |
Electricity |
1,642,000 |
22,000 |
(51,000 |
) |
(39,000 |
) |
1,574,000 |
(4 |
)% |
1,791,000 |
(12 |
)% |
Total
Commercial RCEs |
2,038,000 |
52,000 |
(62,000 |
) |
(47,000 |
) |
1,981,000 |
(3 |
)% |
2,228,000 |
(11 |
)% |
Total
RCEs |
3,183,000 |
86,000 |
(110,000 |
) |
(73,000 |
) |
3,086,000 |
(3 |
)% |
3,500,000 |
(12 |
)% |
Consumer
- Consumer RCE additions amounted to 34,000 for the second fiscal
quarter of fiscal 2021, an 89% increase over the first fiscal
quarter driven by an increased focus on digital sales and partially
restarting sales activity through our retail and other direct sales
channels. The 34,000 was a 52% decrease from the year ago
quarter, primarily driven by the selling constraints posed by
COVID-19 and the Company’s greater emphasis on profitable growth
through attracting and retaining strong-fit customers.
- The Company experienced a 4 percentage point decrease in the
Consumer attrition rate to 4% for the three months ended September
30, 2020 reflecting the improvements in customer survival
attributable to the Company’s greater emphasis on attracting and
retaining strong-fit customers. The Consumer attrition rate
for the trailing 12 months ended September 30, 2020 increased two
percentage points to 25%.
- The Company experienced an 11 percentage point increase in
Consumer renewal rates to 82% for the three months ended September
30, 2020 compared to 71% for the three months ended September 30,
2019, driven by improved retention offerings. The Consumer
renewal rate for the trailing 12 months ended September 30, 2020
also increased 11 percentage points to 80%.
Commercial
- Commercial RCE additions were 52,000 for the second fiscal
quarter, an 86% increase over the first fiscal quarter as the
impacts of the pandemic eased. The 52,000 was a 69% decrease
from the comparable period for fiscal year 2020 due to the selling
constraints posed by COVID-19 and competitive pressures on pricing
in the U.S. market.
- The Commercial attrition rate for the trailing 12 months ended
September 30, 2020 increased two percentage points to
10%.
- The Commercial renewal rate for the three months ended
September 30, 2020 increased from 48% to 55%. The trailing
12-month Commercial renewal rate ending September 30, 2020
decreased by 4 percentage points to 49% driven by a competitive
market for Commercial renewals with competitors pricing
aggressively and Just Energy’s focus on retaining longer-term,
profitable customers rather than pursuing low margin sales.
Outlook
The completion of the Recapitalization positions
Just Energy to continue executing on its core objectives. Moving
forward, we remain focused on our core North American retail energy
operations and driving towards profitable growth to create value
for our stakeholders.
To drive profitable growth, Just Energy is
committed to continue controlling costs, building off the success
achieved during fiscal year 2020. Further, the Company remains
committed to improving the quality of its customer base by
utilizing data to better understand its customers, pursuing
operational excellence, improving its customer experience and
through dedication to financial discipline.
Despite the uncertainty associated with COVID-19
and the impact it has on sales, the Company is narrowing and
increasing its previous guidance range of between $130 million and
$160 million of Base EBITDA to a new expected range of $145 million
to $165 million for fiscal year 2021. This guidance includes the
impact of a one-time $6 million legal provision. The Company also
expects to be at the upper end of its original unlevered free cash
flow guidance and is narrowing the guidance to between $80 million
and $100 million in fiscal year 2021, subject to management’s
decision to further reduce extended supplier payables.
Earnings Call
The Company will host a conference call and live
webcast with Scott Gahn, Just Energy’s Chief Executive Officer, and
Michael Carter, Chief Financial Officer, to review the fiscal
second quarter results beginning at 10:00 a.m. Eastern Time on
Thursday, November 12th, 2020.
Those who wish to participate in the conference
call may do so by dialing 1-877-501-3160 in the U.S. and Canada.
International callers may join the call by dialing 1-786-815-8442.
The Conference ID number is 8259158. The call will also be
webcast live over the internet at the following link:
https://edge.media-server.com/mmc/p/89da749s
A webcasted replay for the call will also be
archived on the Just Energy investor relations website a few hours
after the event.
About Just Energy Group
Inc.
Just Energy is a retail energy provider
specializing in electricity and natural gas commodities and
bringing energy efficient solutions and renewable energy options to
customers. Currently operating in the United States and Canada,
Just Energy serves residential and commercial customers. Just
Energy is the parent company of Amigo Energy, Filter Group Inc.,
Hudson Energy, Interactive Energy Group, Tara Energy, and
TerraPass. Visit https://investors.justenergy.com/ to learn
more.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking
statements. These statements are based on current expectations that
involve several risks and uncertainties which could cause actual
results to differ from those anticipated. These risks include, but
are not limited to, risks with respect to the recapitalization
transaction resulting in a financially stronger Company; the impact
of the evolving COVID-19 pandemic on the Company’s business,
operations and sales; reliance on suppliers; uncertainties relating
to the ultimate spread, severity and duration of COVID-19 and
related adverse effects on the economies and financial markets of
countries in which the Company operates; the ability of the Company
to successfully implement its business continuity plans with
respect to the COVID-19 pandemic; the Company’s ability to access
sufficient capital to provide liquidity to manage its cash flow
requirements; general economic, business and market conditions; the
ability of management to execute its business plan; levels of
customer natural gas and electricity consumption; extreme weather
conditions; rates of customer additions and renewals; customer
credit risk; rates of customer attrition; fluctuations in natural
gas and electricity prices; interest and exchange rates; actions
taken by governmental authorities including energy marketing
regulation; increases in taxes and changes in government
regulations and incentive programs; changes in regulatory regimes;
results of litigation and decisions by regulatory authorities;
competition; dependence on certain suppliers. Additional
information on these and other factors that could affect Just
Energy’s operations or financial results are included in Just
Energy’s annual information form and other reports on file with
Canadian securities regulatory authorities which can be accessed
through the SEDAR website at www.sedar.com on the U.S. Securities
and Exchange Commission’s website at www.sec.gov or through Just
Energy’s website at investors.justenergy.com/.
NON-IFRS MEASURES
The financial measures such as “EBITDA”, “Base
EBITDA, “Base gross margin”, “Free cash flow” “Unlevered free cash
flow” and “Embedded gross margin” do not have a standardized
meaning prescribed by International Financial Reporting Standards
(“IFRS”) and may not be comparable to similar measures presented by
other companies. These financial measures should not be considered
as an alternative to, or more meaningful than, net income (loss),
cash flow from operating activities and other measures of financial
performance as determined in accordance with IFRS, but the Company
believes that these measures are useful in providing relative
operational profitability of the Company’s business. Please refer
to “Key Terms” in the Just Energy Q2 Fiscal 2021’s Management’s
Discussion and Analysis for the Company’s definition of “EBITDA”
and other non-IFRS measures.
Neither the Toronto Stock Exchange nor the New
York Stock Exchange has approved nor disapproved of the information
contained herein.
FOR FURTHER INFORMATION PLEASE
CONTACT:
Michael CarterChief Financial Officer Just Energy
mcarter@justenergy.com
or
InvestorsMichael CummingsAlpha
IRPhone: (617) 982-0475 JE@alpha-ir.com
MediaBoyd ErmanLongview
CommunicationsPhone: 416-523-5885berman@longviewcomms.ca
Source: Just Energy Group Inc.
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