Spark Energy, Inc. ("Spark" or the "Company") (NASDAQ:SPKE), an
independent retail energy services company, today reported
financial results for the quarter ended March 31, 2018.
Key Highlights
- Achieved $15.9 million in Adjusted EBITDA, $45.7 million in
Retail Gross Margin, and a $(41.8) million Net Loss for the first
quarter
- Total RCE count increased 1% to a record 1,055,000 as of
March 31, 2018
- Average monthly attrition of 4.2% for the first quarter
- Closed on two acquisitions, adding approximately 80,000
RCEs
- Continue to simplify, streamline, and optimize the
organization
- Expanded the senior credit facility to $200.0 million in
commitments
- Issued two million shares of Series A Preferred Stock for net
proceeds of approximately $48.9 million
“Since the start of the year, we closed on two
acquisitions, completed the integration of Verde Energy,
implemented additional integration and cost-reduction initiatives,
and further increased our liquidity,” said Nathan Kroeker, Spark
Energy’s President and Chief Executive Officer. “That said, first
quarter results were tempered by an unexpected burst of cold
weather in early January that adversely affected Spark and our
entire industry. This prolonged cold weather negatively impacted
our financial results, especially compared to last year, when
warmer-than-normal weather resulted in very strong unit margins for
the winter months.
“Looking forward to the remainder of the year,
we will continue to execute on our synergy projects to achieve
further economies of scale. We intend to remain cost-effective with
our organic acquisitions, and we will continue to evaluate
additional acquisition opportunities while maintaining discipline
with respect to purchase prices and valuation. On balance, we still
anticipate that full-year Adjusted EBITDA for 2018 should be
similar to that of 2017.”
Summary First Quarter 2018 Financial
Results
For the quarter ended March 31, 2018, Spark
reported Adjusted EBITDA of $15.9 million compared to Adjusted
EBITDA of $34.4 million for the quarter ended March 31, 2017.
The Company attributes this decrease of $18.5 million primarily to
unexpected extreme cold weather patterns that raised short-term
commodity prices in January.
For the quarter ended March 31, 2018, Spark
reported Retail Gross Margin of $45.7 million compared to Retail
Gross Margin of $64.6 million for the quarter ended March 31,
2017. Spark attributes this decrease of $18.9 million primarily to
unexpected extreme cold weather patterns that raised short-term
commodity prices in January.
Net loss for the quarter ended March 31,
2018, was $(41.8) million compared to net income of $11.1 million
for the quarter ended March 31, 2017, driven by higher
non-cash mark-to-market losses.
Strategic Update
As previously announced, the termination of the
Verde earnout agreement on January 15, 2018 has allowed Spark to
integrate Verde's operations on an accelerated basis. In addition,
the Company expects the reintegration of Retailco Services into its
operations, effective April 1, 2018, will allow it to realize
synergies and cost reductions as early as the second quarter.
Finally, Spark's internal brand consolidation and cost-cutting
measures should also begin impacting 2018 results in the second
quarter.
During the quarter, Spark increased the
commitments on its credit facility to $200.0 million and issued an
additional $48.9 million of its Series A Preferred Stock.
Liquidity and Capital
Resources
($ in thousands) |
March 31, 2018 |
Cash and cash
equivalents |
$ |
21,065 |
Senior Credit Facility
Availability (1) |
43,811 |
Subordinated Debt
Availability (2) |
25,000 |
Total Liquidity |
$ |
89,876 |
(1) Subject to Senior Credit Facility borrowing
base and covenant restrictions. (2) The availability of the
Subordinated Facility is dependent on our Founder's financial
position and liquidity.
Dividend
Spark’s Board of Directors declared quarterly
dividends of $0.18125 per share of Class A common stock payable on
June 14, 2018, and $0.546875 per share of Series A Preferred
Stock payable on July 16, 2018.
Conference Call and Webcast
Spark will host a conference call to discuss
first quarter 2018 results on Thursday, May 10, 2018, at 10:00
AM Central Time (11:00 AM Eastern).
A live webcast of the conference call can be
accessed from the Events & Presentations page of the Spark
Energy Investor Relations website at
http://ir.sparkenergy.com/events-and-presentations. An archived
replay of the webcast will be available for twelve months following
the live presentation.
About Spark Energy, Inc.
Spark Energy, Inc. is an established and growing
independent retail energy services company founded in 1999 that
provides residential and commercial customers in competitive
markets across the United States with an alternative choice for
their natural gas and electricity. Headquartered in Houston, Texas,
Spark currently operates in 19 states and serves 94 utility
territories. Spark offers its customers a variety of product and
service choices, including stable and predictable energy costs and
green product alternatives.
We use our website as a means of disclosing
material non-public information and for complying with our
disclosure obligations under Regulation FD. Investors should note
that new materials, including press releases, updated investor
presentations, and financial and other filings with the Securities
and Exchange Commission are posted on the Spark Energy Investor
Relations website at ir.sparkenergy.com. Investors are urged to
monitor our website regularly for information and updates about the
Company.
Cautionary Note Regarding Forward
Looking Statements
This earnings release contains forward-looking
statements that are subject to a number of risks and uncertainties,
many of which are beyond our control. These forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”) and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)
can be identified by the use of forward-looking terminology
including “may,” “should,” “likely,” “will,” “believe,” “expect,”
“anticipate,” “estimate,” “continue,” “plan,” “intend,” “projects,”
or other similar words. All statements, other than statements of
historical fact included in this earnings release, regarding
strategy, future operations, financial position, estimated revenues
and losses, projected costs, prospects, plans, objectives and
beliefs of management are forward-looking statements.
Forward-looking statements appear in a number of places in this
earnings release and may include statements about business strategy
and prospects for growth, customer acquisition costs, ability to
pay cash dividends, cash flow generation and liquidity,
availability of terms of capital, competition and government
regulation and general economic conditions. Although we believe
that the expectations reflected in such forward-looking statements
are reasonable, we cannot give any assurance that such expectations
will prove correct.
The forward-looking statements in this earnings
release are subject to risks and uncertainties. Important factors
that could cause actual results to materially differ from those
projected in the forward-looking statements include, but are not
limited to:
- changes in commodity prices and the sufficiency of risk
management and hedging policies;
- extreme and unpredictable weather conditions, and the impact of
hurricanes and other natural disasters;
- federal, state and local regulation, including the industry's
ability to address or adapt to potentially restrictive new
regulations that may be enacted by the New York Public Service
Commission;
- our ability to borrow funds and access credit markets and
restrictions in our debt agreements and collateral
requirements;
- credit risk with respect to suppliers and customers;
- changes in costs to acquire customers and actual customer
attrition rates;
- accuracy of billing systems;
- whether our majority stockholder or its affiliates offer us
acquisition opportunities on terms that are commercially acceptable
to us;
- ability to successfully identify and complete, and efficiently
integrate acquisitions into our operations;
- competition; and
- the “Risk Factors” in our latest Annual Report on Form 10-K,
and in our quarterly reports, other public filings and press
releases.
You should review the risk factors and other
factors noted throughout or incorporated by reference in this
earnings release that could cause our actual results to differ
materially from those contained in any forward-looking statement.
All forward-looking statements speak only as of the date of this
earnings release. Unless required by law, we disclaim any
obligation to publicly update or revise these statements whether as
a result of new information, future events or otherwise. It is not
possible for us to predict all risks, nor can we assess the impact
of all factors on the business or the extent to which any factor,
or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking
statements.
SPARK ENERGY,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS AS OF MARCH 31, 2018 AND
DECEMBER 31, 2017(in
thousands)(unaudited)
|
March 31, 2018 |
|
December 31, 2017 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash
equivalents |
$ |
21,065 |
|
|
$ |
29,419 |
|
Accounts receivable,
net of allowance for doubtful accounts of $4.4 million and $4.0
million as of March 31, 2018 and December 31, 2017,
respectively |
|
152,454 |
|
|
|
158,814 |
|
Accounts
receivable—affiliates |
|
3,063 |
|
|
|
3,661 |
|
Inventory |
|
400 |
|
|
|
4,470 |
|
Fair value of
derivative assets |
|
7,965 |
|
|
|
31,191 |
|
Customer acquisition
costs, net |
|
20,181 |
|
|
|
22,123 |
|
Customer relationships,
net |
|
20,878 |
|
|
|
18,653 |
|
Prepaid assets |
|
3,809 |
|
|
|
1,028 |
|
Deposits |
|
28,763 |
|
|
|
7,701 |
|
Other current
assets |
|
22,001 |
|
|
|
19,678 |
|
Total current
assets |
|
280,579 |
|
|
|
296,738 |
|
Property and equipment,
net |
|
7,699 |
|
|
|
8,275 |
|
Fair value of
derivative assets |
|
262 |
|
|
|
3,309 |
|
Customer acquisition
costs, net |
|
6,698 |
|
|
|
6,949 |
|
Customer relationships,
net |
|
35,074 |
|
|
|
34,839 |
|
Deferred tax
assets |
|
30,734 |
|
|
|
24,185 |
|
Goodwill |
|
120,154 |
|
|
|
120,154 |
|
Other assets |
|
11,452 |
|
|
|
11,500 |
|
Total assets |
$ |
492,652 |
|
|
$ |
505,949 |
|
Liabilities,
Series A Preferred Stock and Stockholders' Equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
$ |
61,687 |
|
|
$ |
77,510 |
|
Accounts
payable—affiliates |
|
4,050 |
|
|
|
4,622 |
|
Accrued
liabilities |
|
40,259 |
|
|
|
33,679 |
|
Fair value of
derivative liabilities |
|
12,347 |
|
|
|
1,637 |
|
Current portion of
Senior Credit Facility |
|
— |
|
|
|
7,500 |
|
Current payable
pursuant to tax receivable agreement—affiliates |
|
5,937 |
|
|
|
5,937 |
|
Current contingent
consideration for acquisitions |
|
3,043 |
|
|
|
4,024 |
|
Other current
liabilities |
|
2,484 |
|
|
|
2,675 |
|
Current portion of note
payable |
|
11,332 |
|
|
|
13,443 |
|
Total current
liabilities |
|
141,139 |
|
|
|
151,027 |
|
Long-term
liabilities: |
|
|
|
Fair value of
derivative liabilities |
|
11,038 |
|
|
|
492 |
|
Payable pursuant to tax
receivable agreement—affiliates |
|
26,355 |
|
|
|
26,355 |
|
Long-term portion of
Senior Credit Facility |
|
106,500 |
|
|
|
117,750 |
|
Contingent
consideration for acquisitions |
|
— |
|
|
|
626 |
|
Other long-term
liabilities |
|
— |
|
|
|
172 |
|
Long-term portion of
note payable |
|
5,900 |
|
|
|
7,051 |
|
Total liabilities |
$ |
290,932 |
|
|
$ |
303,473 |
|
Commitments and
contingencies (Note 13) |
|
|
|
Series A Preferred
Stock, par value $0.01 per share, 20,000,000 shares authorized,
3,707,256 shares issued and outstanding at March 31, 2018 and
1,704,339 shares issued and outstanding at December 31, 2017 |
|
90,758 |
|
|
|
41,173 |
|
Stockholders'
equity: |
|
|
|
Common Stock (1)
: |
|
|
|
Class A common stock,
par value $0.01 per share, 120,000,000 shares authorized,
13,237,981 issued, and 13,138,535 outstanding at March 31, 2018 and
13,235,082 issued and 13,135,636 outstanding at December 31,
2017 |
|
132 |
|
|
|
132 |
|
Class B common stock,
par value $0.01 per share, 60,000,000 shares authorized, 21,485,126
issued and outstanding at March 31, 2018 and December 31, 2017 |
|
216 |
|
|
|
216 |
|
Additional
paid-in capital |
|
27,717 |
|
|
|
26,914 |
|
Accumulated
other comprehensive loss |
|
(43 |
) |
|
|
(11 |
) |
Retained
earnings |
|
(5,726 |
) |
|
|
11,008 |
|
Treasury stock,
at cost, 99,446 shares at March 31, 2018 and December 31, 2017 |
|
(2,011 |
) |
|
|
(2,011 |
) |
Total
stockholders' equity |
|
20,285 |
|
|
|
36,248 |
|
Non-controlling
interest in Spark HoldCo, LLC |
|
90,677 |
|
|
|
125,055 |
|
Total
equity |
|
110,962 |
|
|
|
161,303 |
|
Total liabilities,
Series A Preferred Stock and stockholders' equity |
$ |
492,652 |
|
|
$ |
505,949 |
|
(1) Outstanding shares of common stock reflect the
two-for-one stock split, which took effect on June 16, 2017. See
Note 5 "Equity" for further discussion.(2) See Note 5
"Equity" for disclosure of our variable interest entity in Spark
HoldCo, LLC.
SPARK ENERGY,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOMEFOR THE THREE
MONTHS ENDED MARCH 31, 2018 AND 2017(in
thousands)(unaudited)
|
Three Months Ended March 31, |
|
|
2018 |
|
2017 (1) |
Revenues: |
|
|
|
Retail revenues |
$ |
284,001 |
|
|
$ |
196,500 |
|
Net asset optimization
revenues/(expense) (2) |
|
2,687 |
|
|
|
(193 |
) |
Total Revenues |
|
286,688 |
|
|
|
196,307 |
|
Operating
Expenses: |
|
|
|
Retail cost of
revenues |
|
289,876 |
|
|
|
145,761 |
|
General and
administrative (3) |
|
30,047 |
|
|
|
24,493 |
|
Depreciation and
amortization |
|
13,019 |
|
|
|
9,270 |
|
Total Operating
Expenses |
|
332,942 |
|
|
|
179,524 |
|
Operating (loss)
income |
|
(46,254 |
) |
|
|
16,783 |
|
Other
(expense)/income: |
|
|
|
Interest expense |
|
(2,245 |
) |
|
|
(3,445 |
) |
Interest and other
income |
|
201 |
|
|
|
199 |
|
Total other
expenses |
|
(2,044 |
) |
|
|
(3,246 |
) |
(Loss) Income before
income tax (benefit) expense |
|
(48,298 |
) |
|
|
13,537 |
|
Income tax
(benefit)/expense |
|
(6,467 |
) |
|
|
2,405 |
|
Net (loss) income |
|
(41,831 |
) |
|
$ |
11,132 |
|
Less: Net (loss) income
attributable to non-controlling interests |
|
(29,505 |
) |
|
|
8,862 |
|
Net (loss) income
attributable to Spark Energy, Inc. stockholders |
$ |
|
(12,326 |
) |
|
$ |
2,270 |
|
Less:
Dividend on Series A preferred stock |
|
2,027 |
|
|
|
183 |
|
Net (loss) income
attributable to stockholders of Class A common stock |
$ |
|
(14,353 |
) |
|
$ |
2,087 |
|
Other comprehensive
loss, net of tax: |
|
|
|
Currency translation
loss |
$ |
(83 |
) |
|
$ |
(49 |
) |
Other comprehensive
loss |
|
(83 |
) |
|
|
(49 |
) |
Comprehensive (loss)
income |
$ |
(41,914 |
) |
|
$ |
11,083 |
|
Less: Comprehensive
(loss) income attributable to non-controlling interests |
|
(29,556 |
) |
|
|
8,831 |
|
Comprehensive (loss)
income attributable to Spark Energy, Inc. stockholders |
$ |
(12,358 |
) |
|
$ |
2,252 |
|
(1) Financial information has been recast to include
results attributable to the acquisition of Perigee Energy, LLC by
an affiliate on February 3, 2017. See Notes 2 and 4, "Basis of
Presentation and Summary of Significant Accounting Policies" and
"Acquisitions," respectively, for further
discussion.(2) Net asset optimization revenues
(expenses) includes asset optimization revenues—affiliates of $648
and $0 for the three months ended March 31, 2018 and 2017,
respectively, and asset optimization revenues—affiliates cost of
revenues of $12 and $0 for the three months ended March 31, 2018
and 2017, respectively.(3) General and administrative
expense includes general and administrative expense—affiliates of
$6,400 and $7,300 for the three months ended March 31, 2018 and
2017, respectively.
SPARK ENERGY,
INC.CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY FOR THE THREE MONTHS ENDED
MARCH 31, 2018(in
thousands)(unaudited)
|
Issued Shares of Class A Common
Stock |
Issued Shares of Class B Common
Stock |
Treasury Stock |
Class A Common Stock |
Class B Common Stock |
Treasury Stock |
Accumulated Other Comprehensive
Loss |
Additional Paid-in Capital |
Retained Earnings (Deficit) |
Total Stockholders' Equity |
Non-controlling Interest |
Total Equity |
Balance at December 31,
2017 |
13,235 |
|
21,485 |
|
(99 |
) |
$ |
132 |
|
$ |
216 |
|
$ |
(2,011 |
) |
$ |
(11 |
) |
$ |
26,914 |
|
$ |
11,008 |
|
$ |
36,248 |
|
$ |
125,055 |
|
$ |
161,303 |
|
Stock based
compensation |
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
817 |
|
|
— |
|
|
817 |
|
|
— |
|
|
817 |
|
Restricted stock unit
vesting |
3 |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
(14 |
) |
|
— |
|
|
(14 |
) |
|
— |
|
|
(14 |
) |
Consolidated net
loss |
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
|
(12,326 |
) |
|
(12,326 |
) |
|
(29,505 |
) |
|
(41,831 |
) |
Foreign currency
translation adjustment for equity method investee |
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
(32 |
) |
|
— |
|
|
— |
|
|
(32 |
) |
|
(51 |
) |
|
(83 |
) |
Distributions paid to
non-controlling unit holders |
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,822 |
) |
|
(4,822 |
) |
Dividends paid to Class
A common stockholders |
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
|
(2,381 |
) |
|
(2,381 |
) |
|
— |
|
|
(2,381 |
) |
Dividends to Preferred
Stock |
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
|
(2,027 |
) |
|
(2,027 |
) |
|
— |
|
|
(2,027 |
) |
Balance at March 31,
2018 |
13,238 |
|
21,485 |
|
(99 |
) |
$ |
132 |
|
$ |
216 |
|
$ |
(2,011 |
) |
$ |
(43 |
) |
$ |
27,717 |
|
$ |
(5,726 |
) |
$ |
20,285 |
|
$ |
90,677 |
|
$ |
110,962 |
|
SPARK ENERGY,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 2018 AND 2017(in
thousands)(unaudited)
|
Three Months Ended March 31, |
|
2018 |
|
2017 (1) |
Cash flows from
operating activities: |
|
|
|
Net (loss) income |
$ |
(41,831 |
) |
|
$ |
11,132 |
|
Adjustments to reconcile net income to net cash flows
provided by operating activities: |
|
|
|
Depreciation and amortization expense |
11,632 |
|
|
8,204 |
|
Deferred
income taxes |
(6,549 |
) |
|
(87 |
) |
Stock
based compensation |
1,131 |
|
|
1,367 |
|
Amortization of deferred financing costs |
295 |
|
|
248 |
|
Change in
Fair Value of Earnout liabilities |
— |
|
|
711 |
|
Accretion
on fair value of Earnout liabilities |
— |
|
|
1,226 |
|
Bad debt
expense |
2,423 |
|
|
356 |
|
Loss on
derivatives, net |
36,542 |
|
|
21,796 |
|
Current
period cash settlements on derivatives, net |
16,442 |
|
|
(6,178 |
) |
Accretion
of discount to convertible subordinated notes to affiliate |
— |
|
|
1,004 |
|
Payment
of the Major Energy Companies Earnout |
— |
|
|
(1,104 |
) |
Other |
(248 |
) |
|
6 |
|
Changes in
assets and liabilities: |
|
|
|
Decrease
in accounts receivable |
9,737 |
|
|
3,738 |
|
Decrease
(Increase) in accounts receivable—affiliates |
354 |
|
|
(55 |
) |
Decrease
in inventory |
4,070 |
|
|
3,322 |
|
Increase
in customer acquisition costs |
(4,274 |
) |
|
(7,690 |
) |
Increase
in prepaid and other current assets |
(21,465 |
) |
|
(1,302 |
) |
Increase
in other assets |
(58 |
) |
|
— |
|
Decrease
in accounts payable and accrued liabilities |
(10,345 |
) |
|
(8,979 |
) |
Decrease
in accounts payable—affiliates |
(572 |
) |
|
(1,684 |
) |
Decrease
in other current liabilities |
(6,653 |
) |
|
(2,413 |
) |
Decrease
in other non-current liabilities |
(171 |
) |
|
(324 |
) |
Net cash (used in) provided by operating
activities |
(9,540 |
) |
|
23,294 |
|
Cash flows from
investing activities: |
|
|
|
Purchases
of property and equipment |
(754 |
) |
|
(112 |
) |
Acquisition of HIKO Energy |
(15,041 |
) |
|
— |
|
Net cash used in investing activities |
(15,795 |
) |
|
(112 |
) |
Cash flows from
financing activities: |
|
|
|
Proceeds
from issuance of Series A Preferred Stock, net of issuance costs
paid |
48,490 |
|
|
38,607 |
|
Borrowings on notes payable |
83,800 |
|
|
5,625 |
|
Payments
on notes payable |
(102,550 |
) |
|
(46,993 |
) |
Payment
of the Major Energy Companies Earnout |
(1,607 |
) |
|
(6,299 |
) |
Payment
of the Provider Companies Earnout and installment
consideration |
— |
|
|
(2,097 |
) |
Payments
on the Verde promissory note |
(3,261 |
) |
|
— |
|
Proceeds
from disgorgement of stockholders short-swing profits |
244 |
|
|
666 |
|
Payment
of dividends to Class A common stockholders |
(2,381 |
) |
|
(2,355 |
) |
Payment
of distributions to non-controlling unitholders |
(4,822 |
) |
|
(4,347 |
) |
Payment
of Dividends to Preferred Stock |
(932 |
) |
|
— |
|
Net cash provided by (used in) financing
activities |
16,981 |
|
|
(17,193 |
) |
(Decrease)
increase in Cash and cash equivalents |
(8,354 |
) |
|
5,989 |
|
Cash and cash
equivalents—beginning of period |
29,419 |
|
|
18,960 |
|
Cash and cash
equivalents—end of period |
$ |
21,065 |
|
|
$ |
24,949 |
|
Supplemental
Disclosure of Cash Flow Information: |
|
|
|
Non-cash items: |
|
|
|
Property
and equipment purchase accrual |
$ |
180 |
|
|
$ |
76 |
|
Cash paid during the
period for: |
|
|
|
Interest |
$ |
1,854 |
|
|
$ |
888 |
|
Taxes |
$ |
1,268 |
|
|
$ |
118 |
|
(1) Financial information has been recast to include results
attributable to the acquisition of Perigee Energy, LLC by an
affiliate on February 3, 2017.
SPARK ENERGY,
INC.OPERATING SEGMENT RESULTSFOR
THE THREE MONTHS ENDED March 31, 2018 AND 2017(in
thousands, except per unit operating
data)(unaudited)
|
Three Months Ended March
31, |
|
2018 |
|
2017 (1) |
|
(in thousands, except volume and
per unit operating data) |
Retail
Electricity Segment |
|
|
|
Total Revenues |
220,899 |
|
|
133,694 |
|
Retail Cost of
Revenues |
249,547 |
|
|
108,844 |
|
Less: Net Losses on
non-trading derivatives, net of cash settlements |
(48,367 |
) |
|
(11,921 |
) |
Retail Gross Margin —
Electricity |
19,719 |
|
|
36,771 |
|
Volumes — Electricity
(MWhs) |
2,252,024 |
|
|
1,385,114 |
|
Retail Gross Margin —
Electricity per MWh |
8.76 |
|
|
26.55 |
|
|
|
|
|
Retail Natural
Gas Segment |
|
|
|
Total Revenues |
$ |
65,789 |
|
|
$ |
62,613 |
|
Retail Cost of
Revenues |
40,329 |
|
|
36,917 |
|
Less: Net Asset
Optimization Revenues (Expenses) |
2,687 |
|
|
(193 |
) |
Less: Net Losses on
non-trading derivatives, net of cash settlements |
(3,227 |
) |
|
(1,940 |
) |
Retail Gross Margin —
Gas |
$ |
26,000 |
|
|
$ |
27,829 |
|
Volumes — Gas
(MMBtus) |
7,677,082 |
|
|
8,219,279 |
|
Retail Gross Margin —
Gas per MMBtu |
$ |
3.39 |
|
|
$ |
3.39 |
|
(1) Financial information has been recast to
include results attributable to the acquisition of Perigee Energy,
LLC by an affiliate on February 3, 2017.
Reconciliation of GAAP to Non-GAAP
Measures
Adjusted EBITDA
We define “Adjusted EBITDA” as EBITDA less
(i) customer acquisition costs incurred in the current period,
(ii) net gain (loss) on derivative instruments, and
(iii) net current period cash settlements on derivative
instruments, plus (iv) non-cash compensation expense, and
(v) other non-cash and non-recurring operating items. EBITDA
is defined as net income (loss) before provision for income taxes,
interest expense and depreciation and amortization. We deduct all
current period customer acquisition costs (representing spending
for organic customer acquisitions) in the Adjusted EBITDA
calculation because such costs reflect a cash outlay in the period
in which they are incurred, even though we capitalize such costs
and amortize them over two years in accordance with our accounting
policies. The deduction of current period customer acquisition
costs is consistent with how we manage our business, but the
comparability of Adjusted EBITDA between periods may be affected by
varying levels of customer acquisition costs. For example, our
Adjusted EBITDA is lower in years of customer growth reflecting
larger customer acquisition spending. We do not deduct the cost of
customer acquisitions through acquisitions of business or
portfolios of customers in calculated Adjusted EBITDA. We deduct
our net gains (losses) on derivative instruments, excluding current
period cash settlements, from the Adjusted EBITDA calculation in
order to remove the non-cash impact of net gains and losses on
derivative instruments. We also deduct non-cash compensation
expense as a result of restricted stock units that are issued under
our long-term incentive plan.
We believe that the presentation of Adjusted
EBITDA provides information useful to investors in assessing our
liquidity and financial condition and results of operations and
that Adjusted EBITDA is also useful to investors as a financial
indicator of our ability to incur and service debt, pay dividends
and fund capital expenditures. Adjusted EBITDA is a supplemental
financial measure that management and external users of our
condensed consolidated financial statements, such as industry
analysts, investors, commercial banks and rating agencies, use to
assess the following:
- our operating performance as compared to other publicly traded
companies in the retail energy industry, without regard to
financing methods, capital structure or historical cost basis;
- the ability of our assets to generate earnings sufficient to
support our proposed cash dividends; and
- our ability to fund capital expenditures (including customer
acquisition costs) and incur and service debt.
Retail Gross Margin
We define retail gross margin as operating
income (loss) plus (i) depreciation and amortization expenses
and (ii) general and administrative expenses, less
(i) net asset optimization revenues, (ii) net gains
(losses) on non-trading derivative instruments, and (iii) net
current period cash settlements on non-trading derivative
instruments. Retail gross margin is included as a supplemental
disclosure because it is a primary performance measure used by our
management to determine the performance of our retail natural gas
and electricity business by removing the impacts of our asset
optimization activities and net non-cash income (loss) impact of
our economic hedging activities. As an indicator of our retail
energy business’ operating performance, retail gross margin should
not be considered an alternative to, or more meaningful than,
operating income (loss), its most directly comparable financial
measure calculated and presented in accordance with GAAP.
We believe retail gross margin provides
information useful to investors as an indicator of our retail
energy business's operating performance.
The GAAP measures most directly comparable to
Adjusted EBITDA are net income (loss) and net cash provided by
operating activities. The GAAP measure most directly comparable to
Retail Gross Margin is operating income (loss). Our non-GAAP
financial measures of Adjusted EBITDA and Retail Gross Margin
should not be considered as alternatives to net income (loss), net
cash provided by operating activities, or operating income (loss).
Adjusted EBITDA and Retail Gross Margin are not presentations made
in accordance with GAAP and have important limitations as
analytical tools. You should not consider Adjusted EBITDA or Retail
Gross Margin in isolation or as a substitute for analysis of our
results as reported under GAAP. Because Adjusted EBITDA and Retail
Gross Margin exclude some, but not all, items that affect net
income (loss) and net cash provided by operating activities, and
are defined differently by different companies in our industry, our
definition of Adjusted EBITDA and Retail Gross Margin may not be
comparable to similarly titled measures of other companies.
Management compensates for the limitations of
Adjusted EBITDA and Retail Gross Margin as analytical tools by
reviewing the comparable GAAP measures, understanding the
differences between the measures and incorporating these data
points into management’s decision-making process.
The following tables present a reconciliation of
Adjusted EBITDA to net income (loss) and net cash provided by
operating activities for each of the periods indicated.
APPENDIX TABLES A-1 AND
A-2ADJUSTED EBITDA
RECONCILIATIONS(in
thousands)(unaudited)
|
Three Months Ended March 31, |
(in thousands) |
|
2018 |
|
2017 (1) |
Reconciliation
of Adjusted EBITDA to Net Income: |
|
|
|
Net (loss) income |
$ |
(41,831 |
) |
|
$ |
11,132 |
|
Depreciation and
amortization |
|
13,019 |
|
|
|
9,270 |
|
Interest expense |
|
2,245 |
|
|
|
3,445 |
|
Income tax (benefit)
expense |
|
(6,467 |
) |
|
|
2,405 |
|
EBITDA |
|
(33,034 |
) |
|
|
26,252 |
|
Less: |
|
|
|
Net, losses on
derivative instruments |
|
(36,542 |
) |
|
|
(21,796 |
) |
Net, Cash settlements
on derivative instruments |
|
(15,537 |
) |
|
|
7,355 |
|
Customer acquisition
costs |
|
4,274 |
|
|
|
7,690 |
|
Plus: |
|
|
|
Non-cash
compensation expense |
|
1,131 |
|
|
|
1,367 |
|
Adjusted
EBITDA |
$ |
15,902 |
|
|
$ |
34,370 |
|
(1) Financial information has been recast to
include results attributable to the acquisition of Perigee Energy,
LLC by an affiliate on February 3, 2017.
|
Three Months Ended March 31, |
(in thousands) |
2018 |
|
2017 (1) |
Reconciliation
of Adjusted EBITDA to net cash provided by operating
activities: |
|
|
|
Net cash (used in)
provided by operating activities |
$ |
(9,540 |
) |
|
$ |
23,294 |
|
Amortization of
deferred financing costs |
(295 |
) |
|
(248 |
) |
Allowance for doubtful
accounts and bad debt expense |
(2,423 |
) |
|
(356 |
) |
Interest expense |
2,245 |
|
|
3,445 |
|
Income tax (benefit)
expense |
(6,467 |
) |
|
2,405 |
|
Changes in operating
working capital |
|
|
|
Accounts receivable,
prepaids, current assets |
11,374 |
|
|
(2,381 |
) |
Inventory |
(4,070 |
) |
|
(3,322 |
) |
Accounts payable and
accrued liabilities |
17,570 |
|
|
13,076 |
|
Other |
7,508 |
|
|
(1,543 |
) |
Adjusted
EBITDA |
$ |
15,902 |
|
|
$ |
34,370 |
|
Cash Flow
Data: |
|
|
|
Cash flows (used in)
provided by operating activities |
$ |
(9,540 |
) |
|
$ |
23,294 |
|
Cash flows used in
investing activities |
(15,795 |
) |
|
(112 |
) |
Cash flows provided by
(used in) financing activities |
16,981 |
|
|
(17,193 |
) |
(1) Financial information has been recast to
include results attributable to the acquisition of Perigee Energy,
LLC by an affiliate on February 3, 2017.
The following table presents a reconciliation of
Retail Gross Margin to operating income (loss) for each of the
periods indicated.
APPENDIX TABLE A-3RETAIL
GROSS MARGIN RECONCILIATION(in
thousands)(unaudited)
|
Three Months Ended March 31, |
(in thousands) |
2018 |
|
2017 (1) |
Reconciliation
of Retail Gross Margin to Operating Income: |
|
|
|
Operating (loss)
income |
$ |
(46,254 |
) |
|
$ |
16,783 |
|
Depreciation and
amortization |
13,019 |
|
|
9,270 |
|
General and
administrative |
30,047 |
|
|
24,493 |
|
Less: |
|
|
|
Net asset optimization
revenues (expenses) |
2,687 |
|
|
(193 |
) |
Net, Losses on
non-trading derivative instruments |
(36,712 |
) |
|
(21,376 |
) |
Net, Cash settlements
on non-trading derivative instruments |
(14,882 |
) |
|
7,515 |
|
Retail Gross
Margin |
$ |
45,719 |
|
|
$ |
64,600 |
|
Retail Gross Margin -
Retail Electricity Segment |
$ |
19,719 |
|
|
$ |
36,771 |
|
Retail Gross Margin -
Retail Natural Gas Segment |
$ |
26,000 |
|
|
$ |
27,829 |
|
(1) Financial information has been recast to
include results attributable to the acquisition of Perigee Energy,
LLC by an affiliate on February 3, 2017.
Contact: Spark Energy, Inc.
Investors:
Christian Hettick, 832-200-3727
Media:
Kira Jordan, 832-255-7302
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