Spark Energy, Inc. ("Spark" or the "Company") (NASDAQ: SPKE), an
independent retail energy services company, today reported
financial results for the quarter ended June 30, 2018.
Key Highlights
- Achieved $16.1 million in Adjusted EBITDA, $43.4 million in
Retail Gross Margin, and a $23.9 million in Net Income for the
second quarter
- Total RCE count increased 26.9% year-over-year to 1,049,000 as
of June 30, 2018
- Overall monthly attrition of 3.7% for the second quarter
- Continuing to simplify, streamline, and optimize the
organization to improve long-term margin profile
"We made considerable progress in our synergy
and brand consolidation efforts during the second quarter,
achieving our target of annualized general and administrative cost
savings of $15 million through facility and headcount reductions,"
said Nathan Kroeker, Spark Energy's President and Chief Executive
Officer. "We successfully migrated a total of 110,000 customers to
more cost-effective billing platforms and notified another 62,000
customers of planned platform switches that should be complete by
end of the third quarter.
"Despite strong operating cost controls, our
second-quarter results were negatively impacted by lower
electricity unit margins. This was a result of the hedges we had to
purchase during the first few weeks of the year, additional hedges
we used to insure against adverse weather in ERCOT this summer, and
increases in capacity costs in New England. While we are
disappointed with our first half performance, we are implementing
the appropriate strategies that we expect will improve
profitability and Adjusted EBITDA performance.
"As we enter the second half of the year, we
expect to drive an additional $5 million in annualized cost savings
through a series of targeted projects. We're also focusing on
organic growth through recently integrated Verde sales channels, as
well as new retail sales channels that we believe will help us
increase our mass-market concentration and improve margins as we
pivot away from larger, lower-margin C&I customers."
Summary Second Quarter 2018 Financial
Results
For the quarter ended June 30, 2018, Spark
reported Adjusted EBITDA of $16.1 million compared to Adjusted
EBITDA of $20.0 million for the quarter ended June 30, 2017.
This decrease of $3.9 million is primarily attributable to lower
electricity unit margins as well as higher G&A due to a larger
customer portfolio.
For the quarter ended June 30, 2018, Spark
reported Retail Gross Margin of $43.4 million compared to Retail
Gross Margin of $43.1 million for the quarter ended June 30,
2017. Spark attributes this increase of $0.3 million primarily to
higher electricity volumes, primarily as a result of acquisitions
completed over the prior twelve months, largely offset by lower
electricity margins.
Net income for the quarter ended June 30,
2018, was $23.9 million compared to net income of $4.7 million for
the quarter ended June 30, 2017. The increase in performance
compared to the prior year was primarily the result of unrealized
mark to market hedge gain in the second quarter.
Liquidity and Capital
Resources
($ in thousands) |
|
June 30, 2018 |
|
Cash and cash
equivalents |
$ |
35,702 |
|
Senior Credit Facility
Availability (1) |
|
36,281 |
|
Subordinated Debt
Availability (2) |
|
15,000 |
|
Total Liquidity |
$ |
86,983 |
|
(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
September 13th, 2018, and $0.546875 per share of Series A Preferred
Stock payable on October 15, 2018.
Conference Call and Webcast
Spark will host a conference call to discuss
second quarter 2018 results on Friday, August 3, 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;
- significant changes in, or new charges by, the ISOs in the
regions in which we operate;
- 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 JUNE 30, 2018 AND
DECEMBER 31, 2017(in
thousands)(unaudited)
|
June 30, 2018 |
|
December 31, 2017 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
35,702 |
|
|
$ |
29,419 |
|
Accounts
receivable, net of allowance for doubtful accounts of $3.6 million
and $4.0 million as of June 30, 2018 and December 31, 2017,
respectively |
132,011 |
|
|
158,814 |
|
Accounts
receivable—affiliates |
3,427 |
|
|
3,661 |
|
Inventory |
1,860 |
|
|
4,470 |
|
Fair
value of derivative assets |
11,526 |
|
|
31,191 |
|
Customer
acquisition costs, net |
17,123 |
|
|
22,123 |
|
Customer
relationships, net |
20,669 |
|
|
18,653 |
|
Prepaid
assets |
3,575 |
|
|
1,028 |
|
Deposits |
12,109 |
|
|
7,701 |
|
Other
current assets |
18,863 |
|
|
19,678 |
|
Total
current assets |
256,865 |
|
|
296,738 |
|
Property and equipment,
net |
7,190 |
|
|
8,275 |
|
Fair value of
derivative assets |
595 |
|
|
3,309 |
|
Customer acquisition
costs, net |
5,315 |
|
|
6,949 |
|
Customer relationships,
net |
31,600 |
|
|
34,839 |
|
Deferred tax
assets |
27,581 |
|
|
24,185 |
|
Goodwill |
120,343 |
|
|
120,154 |
|
Other assets |
11,360 |
|
|
11,500 |
|
Total
assets |
$ |
460,849 |
|
|
$ |
505,949 |
|
Liabilities,
Series A Preferred Stock and Stockholders' Equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
59,393 |
|
|
$ |
77,510 |
|
Accounts
payable—affiliates |
2,373 |
|
|
4,622 |
|
Accrued
liabilities |
32,330 |
|
|
33,679 |
|
Fair
value of derivative liabilities |
2,079 |
|
|
1,637 |
|
Current
portion of Senior Credit Facility |
— |
|
|
7,500 |
|
Current
payable pursuant to tax receivable agreement—affiliates |
2,508 |
|
|
5,937 |
|
Current
contingent consideration for acquisitions |
2,980 |
|
|
4,024 |
|
Other
current liabilities |
1,282 |
|
|
2,675 |
|
Current
portion of note payable |
13,921 |
|
|
13,443 |
|
Total
current liabilities |
116,866 |
|
|
151,027 |
|
Long-term
liabilities: |
|
|
|
Fair
value of derivative liabilities |
4,380 |
|
|
492 |
|
Payable
pursuant to tax receivable agreement—affiliates |
26,067 |
|
|
26,355 |
|
Long-term
portion of Senior Credit Facility |
102,000 |
|
|
117,750 |
|
Subordinated debt—affiliate |
10,000 |
|
|
— |
|
Contingent consideration for acquisitions |
— |
|
|
626 |
|
Other
long-term liabilities |
1 |
|
|
172 |
|
Long-term
portion of note payable |
— |
|
|
7,051 |
|
Total
liabilities |
259,314 |
|
|
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 June 30, 2018
and 1,704,339 shares issued andoutstanding 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,13,493,158 issued, and 13,393,712 outstanding at June
30, 2018 and 13,235,082issued and 13,135,636 outstanding at
December 31, 2017 |
135 |
|
|
132 |
|
Class B
common stock, par value $0.01 per share, 60,000,000 shares
authorized,21,485,126 issued and outstanding at June 30, 2018 and
December 31, 2017 |
216 |
|
|
216 |
|
Additional paid-in capital |
28,846 |
|
|
26,914 |
|
Accumulated other comprehensive loss |
(33 |
) |
|
(11 |
) |
Retained
earnings |
(2,678 |
) |
|
11,008 |
|
Treasury
stock, at cost, 99,446 shares at June 30, 2018 and December 31,
2017 |
(2,011 |
) |
|
(2,011 |
) |
Total
stockholders' equity |
24,475 |
|
|
36,248 |
|
Non-controlling interest in Spark HoldCo, LLC |
86,302 |
|
|
125,055 |
|
Total
equity |
110,777 |
|
|
161,303 |
|
Total
liabilities, Series A Preferred Stock and stockholders' equity |
$ |
460,849 |
|
|
$ |
505,949 |
|
(1) |
Outstanding
shares of common stock reflect the two-for-one stock split, which
took effect on June 16, 2017. See 5 "Equity" in our 10-Q for
further discussion. |
(2) |
See Note 5
"Equity" in our 10-Q for disclosure of our variable interest entity
in Spark HoldCo, LLC. |
SPARK ENERGY,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOMEFOR THE THREE
AND SIX MONTHS ENDED JUNE 30, 2018 AND
2017(in
thousands)(unaudited)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenues: |
|
|
|
|
|
|
|
Retail
revenues |
$ |
231,488 |
|
|
$ |
151,604 |
|
|
$ |
515,489 |
|
|
$ |
348,104 |
|
Net asset
optimization revenues/(expense) (1) |
763 |
|
|
(168 |
) |
|
3,450 |
|
|
(361 |
) |
Total Revenues |
232,251 |
|
|
151,436 |
|
|
518,939 |
|
|
347,743 |
|
Operating
Expenses: |
|
|
|
|
|
|
|
Retail
cost of revenues |
162,669 |
|
|
114,637 |
|
|
452,545 |
|
|
260,398 |
|
General
and administrative (2) |
27,780 |
|
|
19,346 |
|
|
57,827 |
|
|
43,839 |
|
Depreciation and amortization |
12,861 |
|
|
9,656 |
|
|
25,880 |
|
|
18,926 |
|
Total
Operating Expenses |
203,310 |
|
|
143,639 |
|
|
536,252 |
|
|
323,163 |
|
Operating
income (loss) |
28,941 |
|
|
7,797 |
|
|
(17,313 |
) |
|
24,580 |
|
Other
(expense)/income: |
|
|
|
|
|
|
|
Interest
expense |
(2,316 |
) |
|
(2,452 |
) |
|
(4,561 |
) |
|
(5,897 |
) |
Interest
and other income |
553 |
|
|
(265 |
) |
|
755 |
|
|
(66 |
) |
Total
other expenses |
(1,763 |
) |
|
(2,717 |
) |
|
(3,807 |
) |
|
(5,963 |
) |
Income (loss) before
income tax expense (benefit) |
27,178 |
|
|
5,080 |
|
|
(21,120 |
) |
|
18,617 |
|
Income
tax expense (benefit) |
3,251 |
|
|
409 |
|
|
(3,216 |
) |
|
2,814 |
|
Net income (loss) |
$ |
23,927 |
|
|
$ |
4,671 |
|
|
$ |
(17,904 |
) |
|
$ |
15,803 |
|
Less: Net
income (loss) attributable to non-controlling interests |
16,427 |
|
|
3,592 |
|
|
(13,078 |
) |
|
12,454 |
|
Net income (loss)
attributable to Spark Energy, Inc. stockholders |
$ |
7,500 |
|
|
$ |
1,079 |
|
|
$ |
(4,826 |
) |
|
$ |
3,349 |
|
Less:
Dividend on Series A preferred stock |
2,027 |
|
|
991 |
|
|
4,054 |
|
|
1,174 |
|
Net income (loss)
attributable to stockholders of Class A common stock |
$ |
5,473 |
|
|
$ |
88 |
|
|
$ |
(8,880 |
) |
|
$ |
2,175 |
|
Other comprehensive
income (loss), net of tax: |
|
|
|
|
|
|
|
Currency translation
gain (loss) |
$ |
25 |
|
|
$ |
(26 |
) |
|
$ |
(58 |
) |
|
$ |
(75 |
) |
Other comprehensive
income (loss) |
25 |
|
|
(26 |
) |
|
(58 |
) |
|
(75 |
) |
Comprehensive income
(loss) |
$ |
23,952 |
|
|
$ |
4,645 |
|
|
$ |
(17,962 |
) |
|
$ |
15,728 |
|
Less:
Comprehensive income (loss) attributable to non-controlling
interests |
16,442 |
|
|
3,576 |
|
|
(13,114 |
) |
|
12,407 |
|
Comprehensive income
(loss) attributable to Spark Energy, Inc. stockholders |
$ |
7,510 |
|
|
$ |
1,069 |
|
|
$ |
(4,848 |
) |
|
$ |
3,321 |
|
(1) |
Net asset
optimization revenues (expenses) includes asset optimization
revenues—affiliates of $340 and $0 for the three months ended June
30, 2018 and 2017, respectively, and asset optimization
revenues—affiliates cost of revenues of $24 and $0 for the three
months ended June 30, 2018 and 2017, respectively, and asset
optimization revenues—affiliates of $988 and $0 for the six months
ended June 30, 2018 and 2017, respectively, and asset optimization
revenue—affiliates cost of revenues of $36 and $0 for the six
months ended June 30, 2018 and 2017, respectively. |
(2) |
General and
administrative expense includes general and administrative
expense—affiliates of $1,600 and $6,100 for the three months ended
June 30, 2018 and 2017, respectively, and $8,000 and $13,400 for
the six months ended June 30, 2018 and 2017, respectively. |
SPARK ENERGY,
INC.CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY FOR THE SIX MONTHS ENDED JUNE 30,
2018(in
thousands)(unaudited)
|
IssuedShares ofClass ACommonStock |
IssuedShares ofClass B
CommonStock |
TreasuryStock |
Class ACommonStock |
Class BCommonStock |
TreasuryStock |
AccumulatedOtherComprehensiveLoss |
AdditionalPaid-inCapital |
RetainedEarnings(Deficit) |
TotalStockholders'Equity |
Non-controllingInterest |
TotalEquity |
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 |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
2,647 |
|
— |
|
2,647 |
|
— |
|
2,647 |
|
Restricted stock unit
vesting |
258 |
|
— |
|
— |
|
3 |
|
— |
|
— |
|
— |
|
(715 |
) |
— |
|
(712 |
) |
— |
|
(712 |
) |
Consolidated net
loss |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(4,826 |
) |
(4,826 |
) |
(13,078 |
) |
(17,904 |
) |
Foreign currency
translation adjustment for equity method investee |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(22 |
) |
— |
|
— |
|
(22 |
) |
(36 |
) |
(58 |
) |
Distributions paid to
non-controlling unit holders |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(19,501 |
) |
(19,501 |
) |
Dividends paid to Class
A common stockholders |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(4,805 |
) |
(4,805 |
) |
— |
|
(4,805 |
) |
Dividends to Preferred
Stock |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(4,055 |
) |
(4,055 |
) |
— |
|
(4,055 |
) |
Acquisition of NG&E
Customers |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
— |
|
(6,138 |
) |
(6,138 |
) |
Balance at June 30,
2018 |
13,493 |
|
21,485 |
|
(99 |
) |
$ |
135 |
|
$ |
216 |
|
$ |
(2,011 |
) |
$ |
(33 |
) |
$ |
28,846 |
|
$ |
(2,678 |
) |
$ |
24,475 |
|
$ |
86,302 |
|
$ |
110,777 |
|
SPARK ENERGY,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS FOR THE SIX MONTHS ENDED JUNE 30,
2018 AND 2017(in
thousands)(unaudited)
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
Cash flows from
operating activities: |
|
|
|
Net (loss) income |
$ |
(17,904 |
) |
|
$ |
15,803 |
|
Adjustments to reconcile net income to net cash flows
provided by operating activities: |
|
|
|
Depreciation and amortization expense |
24,639 |
|
|
18,411 |
|
Deferred
income taxes |
(3,396 |
) |
|
3 |
|
Change in
TRA liability |
79 |
|
|
— |
|
Stock
based compensation |
2,686 |
|
|
2,905 |
|
Amortization of deferred financing costs |
614 |
|
|
531 |
|
Excess
tax benefit related to restricted stock vesting |
(101 |
) |
|
179 |
|
Change in
Fair Value of Earnout liabilities |
(63 |
) |
|
(2,568 |
) |
Accretion
on fair value of Earnout liabilities |
— |
|
|
2,660 |
|
Bad debt
expense |
5,725 |
|
|
919 |
|
Loss on
derivatives, net |
19,487 |
|
|
31,473 |
|
Current
period cash settlements on derivatives, net |
7,170 |
|
|
(11,828 |
) |
Accretion
of discount to convertible subordinated notes to affiliate |
— |
|
|
1,004 |
|
Payment
of the Major Energy Companies Earnout |
— |
|
|
(1,104 |
) |
Payment
of the Provider Companies Earnout |
— |
|
|
(677 |
) |
Other |
(555 |
) |
|
224 |
|
Changes in
assets and liabilities: |
|
|
|
Decrease
in accounts receivable |
25,957 |
|
|
18,072 |
|
Increase
in accounts receivable—affiliates |
(10 |
) |
|
(1,925 |
) |
Decrease
in inventory |
2,693 |
|
|
310 |
|
Increase
in customer acquisition costs |
(6,254 |
) |
|
(12,074 |
) |
(Increase) decrease in prepaid and other current assets |
(59 |
) |
|
5,394 |
|
Decrease
(increase) in other assets |
97 |
|
|
(788 |
) |
Decrease
in accounts payable and accrued liabilities |
(20,140 |
) |
|
(18,422 |
) |
(Decrease) increase in accounts payable—affiliates |
(2,249 |
) |
|
313 |
|
Decrease
in other current liabilities |
(1,545 |
) |
|
(2,862 |
) |
Decrease
in other non-current liabilities |
(461 |
) |
|
(328 |
) |
Net cash provided by operating activities |
36,410 |
|
|
45,625 |
|
Cash flows from
investing activities: |
|
|
|
Purchases
of property and equipment |
(1,163 |
) |
|
(371 |
) |
Acquisitions of Perigee and other customers |
— |
|
|
(9,353 |
) |
Deposit
for Verde Acquisition |
— |
|
|
(65,785 |
) |
Acquisition of HIKO |
(15,041 |
) |
|
— |
|
Acquisition of NG&E customers |
(7,796 |
) |
|
— |
|
Net cash used in investing activities |
(24,000 |
) |
|
(75,509 |
) |
Cash flows from
financing activities: |
|
|
|
Proceeds
from issuance of Series A Preferred Stock, net of issuance costs
paid |
48,490 |
|
|
37,937 |
|
Borrowings on notes payable |
146,800 |
|
|
121,000 |
|
Payments
on notes payable |
(160,050 |
) |
|
(93,789 |
) |
Payment
of the Major Energy Companies Earnout |
(1,607 |
) |
|
(6,299 |
) |
Payment
of the Provider Companies Earnout and installment
consideration |
— |
|
|
(6,676 |
) |
Payments
on the Verde promissory note |
(6,573 |
) |
|
— |
|
Proceeds
from disgorgement of stockholders short-swing profits |
244 |
|
|
666 |
|
Restricted stock vesting |
(2,589 |
) |
|
(2,009 |
) |
Payment
of Tax Receivable Agreement liability |
(3,577 |
) |
|
— |
|
Payment
of dividends to Class A common stockholders |
(4,805 |
) |
|
(4,754 |
) |
Payment
of distributions to non-controlling unitholders |
(19,501 |
) |
|
(19,822 |
) |
Payment
of Dividends to Preferred Stock |
(2,959 |
) |
|
— |
|
Purchase
of Treasury Stock |
— |
|
|
(1,285 |
) |
Net cash (used in) provided by financing
activities |
(6,127 |
) |
|
24,969 |
|
Increase
(decrease) in Cash and cash equivalents |
6,283 |
|
|
(4,915 |
) |
Cash and cash
equivalents—beginning of period |
29,419 |
|
|
18,960 |
|
Cash and cash
equivalents—end of period |
$ |
35,702 |
|
|
$ |
14,045 |
|
Supplemental
Disclosure of Cash Flow Information: |
|
|
|
Non-cash items: |
|
|
|
Property
and equipment purchase accrual |
$ |
(123 |
) |
|
$ |
50 |
|
Cash paid during the
period for: |
|
|
|
Interest |
$ |
3,884 |
|
|
$ |
1,395 |
|
Taxes |
$ |
5,399 |
|
|
$ |
7,232 |
|
SPARK ENERGY,
INC.OPERATING SEGMENT RESULTSFOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND
2017(in thousands, except per unit operating
data)(unaudited)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(in thousands, except volume and
per unit operating data) |
Retail
Electricity Segment |
|
|
|
|
|
|
|
Total Revenues |
$ |
209,446 |
|
|
$ |
131,908 |
|
|
430,346 |
|
|
$ |
265,602 |
|
Retail Cost of
Revenues |
151,953 |
|
|
102,079 |
|
|
401,500 |
|
|
210,923 |
|
Less: Net gains
(losses) on non-trading derivatives, net of cash settlements |
24,852 |
|
|
(5,034 |
) |
|
(23,515 |
) |
|
(16,955 |
) |
Retail Gross Margin (1)
— Electricity |
$ |
32,642 |
|
|
$ |
34,863 |
|
|
$ |
52,361 |
|
|
$ |
71,634 |
|
Volumes — Electricity
(MWhs) |
2,100,007 |
|
|
1,379,051 |
|
|
4,352,031 |
|
|
2,764,165 |
|
Retail Gross Margin (2)
— Electricity per MWh |
$ |
15.54 |
|
|
$ |
25.28 |
|
|
$ |
12.03 |
|
|
$ |
25.92 |
|
|
|
|
|
|
|
|
|
Retail Natural
Gas Segment |
|
|
|
|
|
|
|
Total Revenues |
$ |
22,804 |
|
|
$ |
19,528 |
|
|
$ |
88,593 |
|
|
$ |
82,141 |
|
Retail Cost of
Revenues |
10,716 |
|
|
12,558 |
|
|
51,045 |
|
|
49,475 |
|
Less: Net Asset
Optimization Revenues (Expenses) |
763 |
|
|
(168 |
) |
|
3,450 |
|
|
(361 |
) |
Less: Net gains
(losses) on non-trading derivatives, net of cash settlements |
542 |
|
|
(1,148 |
) |
|
(2,685 |
) |
|
(3,088 |
) |
Retail Gross Margin (1)
— Gas |
$ |
10,783 |
|
|
$ |
8,286 |
|
|
$ |
36,783 |
|
|
$ |
36,115 |
|
Volumes — Gas
(MMBtus) |
2,840,721 |
|
|
2,629,087 |
|
|
10,517,802 |
|
|
10,848,366 |
|
Retail Gross Margin (2)
— Gas per MMBtu |
$ |
3.80 |
|
|
$ |
3.15 |
|
|
$ |
3.50 |
|
|
$ |
3.33 |
|
(1) |
Reflects
the Retail Gross Margin attributable to our Retail Natural Gas
Segment or Retail Electricity Segment, as applicable. Retail Gross
Margin is a non-GAAP financial measure. See “How We Evaluate Our
Operations” for a reconciliation of Adjusted EBITDA and Retail
Gross Margin to their most directly comparable financial measures
presented in accordance with GAAP. |
(2) |
Reflects
the Retail Gross Margin for the Retail Natural Gas Segment or
Retail Electricity Segment, as applicable, divided by the total
volumes in MMBtu or MWh, respectively. |
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 June 30, |
|
Six Months Ended June 30, |
(in
thousands) |
2018 |
|
2017 |
|
2018 |
|
2017 |
Reconciliation
of Adjusted EBITDA to Net Income: |
|
|
|
|
|
|
|
Net income (loss) |
$ |
23,927 |
|
|
$ |
4,671 |
|
|
$ |
(17,904 |
) |
|
$ |
15,803 |
|
Depreciation and amortization |
12,861 |
|
|
9,656 |
|
|
25,880 |
|
|
18,926 |
|
Interest
expense |
2,316 |
|
|
2,452 |
|
|
4,561 |
|
|
5,897 |
|
Income
tax expense (benefit) |
3,251 |
|
|
409 |
|
|
(3,216 |
) |
|
2,814 |
|
EBITDA |
42,355 |
|
|
17,188 |
|
|
9,321 |
|
|
43,440 |
|
Less: |
|
|
|
|
|
|
|
Net, Gain
(losses) on derivative instruments |
17,054 |
|
|
(9,677 |
) |
|
(19,488 |
) |
|
(31,473 |
) |
Net, Cash
settlements on derivative instruments |
8,792 |
|
|
3,996 |
|
|
(6,745 |
) |
|
11,351 |
|
Customer
acquisition costs |
1,980 |
|
|
4,384 |
|
|
6,254 |
|
|
12,074 |
|
Plus: |
|
|
|
|
|
|
|
Non-cash
compensation expense |
1,555 |
|
|
1,538 |
|
|
2,686 |
|
|
2,905 |
|
Adjusted
EBITDA |
$ |
16,084 |
|
|
$ |
20,023 |
|
|
$ |
31,986 |
|
|
$ |
54,393 |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in
thousands) |
2018 |
|
2017 |
|
2018 |
|
2017 |
Reconciliation
of Adjusted EBITDA to net cash provided by operating
activities: |
|
|
|
|
|
|
|
Net cash provided by
operating activities |
$ |
45,950 |
|
|
$ |
22,331 |
|
|
$ |
36,410 |
|
|
$ |
45,625 |
|
Amortization of
deferred financing costs |
(319 |
) |
|
(283 |
) |
|
(614 |
) |
|
(531 |
) |
Allowance for doubtful
accounts and bad debt expense |
(3,302 |
) |
|
(563 |
) |
|
(5,725 |
) |
|
(919 |
) |
Interest expense |
2,316 |
|
|
2,452 |
|
|
4,561 |
|
|
5,897 |
|
Income tax expense
(benefit) |
3,251 |
|
|
409 |
|
|
(3,216 |
) |
|
2,814 |
|
Changes in operating
working capital |
|
|
|
|
|
|
|
Accounts
receivable, prepaids, current assets |
(38,516 |
) |
|
(19,159 |
) |
|
(25,888 |
) |
|
(21,541 |
) |
Inventory |
1,377 |
|
|
3,012 |
|
|
(2,693 |
) |
|
(310 |
) |
Accounts
payable and accrued liabilities |
7,618 |
|
|
7,895 |
|
|
23,934 |
|
|
20,971 |
|
Other |
(2,291 |
) |
|
3,929 |
|
|
5,217 |
|
|
2,387 |
|
Adjusted
EBITDA |
$ |
16,084 |
|
|
$ |
20,023 |
|
|
$ |
31,986 |
|
|
$ |
54,393 |
|
Cash Flow
Data: |
|
|
|
|
|
|
|
Cash flows provided by
operating activities |
$ |
45,950 |
|
|
$ |
22,331 |
|
|
$ |
36,410 |
|
|
$ |
45,625 |
|
Cash flows used in
investing activities |
$ |
(8,205 |
) |
|
$ |
(75,397 |
) |
|
$ |
(24,000 |
) |
|
$ |
(75,509 |
) |
Cash flows (used in)
provided by financing activities |
$ |
(23,108 |
) |
|
$ |
42,162 |
|
|
$ |
(6,127 |
) |
|
$ |
24,969 |
|
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 June 30, |
|
Six Months Ended June 30, |
(in thousands) |
2018 |
|
2017 |
|
2018 |
|
2017 |
Reconciliation of Retail Gross Margin to Operating Income
(loss): |
|
|
|
|
|
|
|
Operating income
(loss) |
$ |
28,941 |
|
|
$ |
7,797 |
|
|
$ |
(17,313 |
) |
|
$ |
24,580 |
|
Depreciation and amortization |
12,861 |
|
|
9,656 |
|
|
25,880 |
|
|
18,926 |
|
General
and administrative |
27,780 |
|
|
19,346 |
|
|
57,827 |
|
|
43,839 |
|
Less: |
|
|
|
|
|
|
|
Net asset
optimization revenues (expenses) |
763 |
|
|
(168 |
) |
|
3,450 |
|
|
(361 |
) |
Net,
gains (losses) on non-trading derivative instruments |
16,601 |
|
|
(10,202 |
) |
|
(20,111 |
) |
|
(31,578 |
) |
Net, Cash
settlements on non-trading derivative instruments |
8,793 |
|
|
4,020 |
|
|
(6,089 |
) |
|
11,535 |
|
Retail Gross
Margin |
$ |
43,425 |
|
|
$ |
43,149 |
|
|
$ |
89,144 |
|
|
$ |
107,749 |
|
Retail
Gross Margin - Retail Electricity Segment |
$ |
32,642 |
|
|
$ |
34,863 |
|
|
$ |
52,361 |
|
|
$ |
71,634 |
|
Retail
Gross Margin - Retail Natural Gas Segment |
$ |
10,783 |
|
|
$ |
8,286 |
|
|
$ |
36,783 |
|
|
$ |
36,115 |
|
Contact: Spark Energy, Inc.
Investors:
Christian Hettick, 832-200-3727
Media:
Kira Jordan, 832-255-7302
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