GNE - NYSE

Good morning and welcome to Genie Energy's Fourth Quarter and Year-End 2023 Earnings Call. Until the Q&A portion of the call, all participants will be in listen-only mode. [Operator Instructions] After today's presentation by Genie Energy's management, there will be an opportunity to ask questions. Please note this event is being recorded. I will now turn the call over to Brian Siegel of Hayden IR.

Thank you, operator. With me today are Michael Stein, Genie Energy's CEO; and Avi Goldin, Genie Energy's CFO, who will discuss operational and financial results. Any forward-looking statements made during this conference call, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those statements. These risks and uncertainties include, but are not limited to, both discussed in the reports that we filed periodically with the SEC. Genie assumes no obligation to update any forward-looking statements that we have made or may make or to update the factors that may cause actual results to differ materially from those that we forecast. During their remarks, management makes reference to adjusted EBITDA, a non-GAAP measure. Management believes that its measure of adjusted EBITDA provides useful information to both management and investors that supplement our core operating results. Our earnings release, which is posted on the genie.com IR page includes a reconciliation of consolidated adjusted EBITDA to its nearest comparable GAAP measures, consolidated net income and income from operations for all periods presented. In addition, adjusted EBITDA for applicable segments are reconciled in the earnings release through their respective segment's income from operations for all periods presented. I will now turn the conference over to Michael Stein, Genie's Chief Executive Officer.

Thank you, Brian. Welcome to Genie Energy's fourth quarter earnings call. I'm happy that we achieved record revenue for the fourth quarter and full year 2023 while exceeding our adjusted EBITDA guidance with $57 million for the full year. This achievement was a result of the extraordinary efforts of our team and several strategic moves we made over the course of 2022 and 2023 that took advantage of the volatility in global energy markets. We are extremely pleased with the performance of the company as we accomplished our 2023 goal of materially growing the size of our customer book while establishing a new baseline of financial performance. At GRE, we ended the year with 361,000 customers and 350,000 RCEs, representing increases of 31% and 34%, respectively, over the prior year-end. Our success in aggressively growing our customer base in the early part of the year, drove record levels of annual consumption, enabling record revenues. Sequentially, our customer counts decreased somewhat reflecting the expiration of a customer aggregation deal in Massachusetts. At GREW, we closed on the acquisition of a 9.4 megawatt operating portfolio during the quarter, our first acquisition of its kind. The IRR in this transaction was especially attractive for an operating portfolio and we felt it moved our strategy forward. Note that as we grow out this business, we intend to be opportunistic about potential acquisitions at all stages of the development cycle, including operating assets. With regards to our development pipeline, we advanced on our projects in development and saw the addition of new projects, while others dropped out due to lack of liability. This is not uncommon given that many pipeline projects are early-stage opportunities where we are still in the process of acquiring site rights. However, we recently invested in our team and capabilities here, and believe this will help us to build a larger solar pipeline and bring more projects to completion. As a reminder, our solar project development strategy is intended to be a long-term value driver for the company. Developing projects from site rights acquisition through construction and into operations can, in some cases, take years. However, we are focused on the identification and development of projects with robust return potential that we expect will provide growing recurring revenue streams to the company for many years to come. Building off our strong performance in 2023, we're targeting $40 million to $50 million in company-wide consolidated adjusted EBITDA for 2024. This represents a significant increase from our pre-2022 normalized adjusted EBITDA range of $25 million to $30 million, even after allowing for our planned investment in GREW. Our higher expectations reflect our expanded customer base at GRE, our pivot to operating exclusively in domestic retail markets and our focus on continuously enhancing our analytical and operation capabilities. Our 2024 projections also include continued investment in new retail customer acquisition. While wholesale energy costs remain at lower levels, we will continue to pursue acquisition opportunities created by the higher legacy cost base rates of certain incumbent utilities. This organic targeted growth strategy should enable us to expand our meter base cost effectively, albeit likely at a lower growth rate than we saw in 2023. This year, at GREW, we will continue to move forward in completion of our Perry, New York and Lansing, New York solar farms. Additionally, we expect our upgraded project development team to continue to expand our pipeline and move existing projects ahead expeditiously. Our Diversegy business continues to grow at accelerated levels and provides recurring revenues. We expect that Diversegy in our other third-party services business can modestly enhance our growth and profitability in the years to come. To wrap up, we delivered another year of strong operational and financial results while continuing to position ourselves to create incremental medium to long-term value with our solar pipeline. Now I'll turn the call over to Avi for his discussion of our financial results.

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 12 months ended December 31st, 2023. Throughout my remarks, when I discuss the quarterly results, I will compare the fourth quarter of 2023 to the fourth quarter of 2022 to remove consideration of the seasonal factors that impact our Retail Energy business. The fourth quarter is typically characterized by seasonally reduced levels of per meter electricity and gas consumption as it falls between the third quarter's peak cooling months and the first quarter's peak heating months. Genie's strong fourth quarter and full year 2023 financial results were highlighted by record revenue, solid adjusted EBITDA generation and significant further strengthening of our balance sheet, all while continuing to return value to our common stockholders through our quarterly dividend. Before we turn to the quarter and full year results, please note that as we previously disclosed, we recorded a noncash charge of $45.1 million in the fourth quarter, reflecting a loss reserve by our new captive insurance subsidiary. The charge didn't impact adjusted EBITDA, but is reflected in our GAAP income from operations and bottom line results. To provide investors with a consistent perspective on the underlying performance of our business, we are providing non-GAAP earnings and earnings per share that excludes the impact of the loss reserve. Now let's look at the results. Fourth quarter consolidated revenue jumped 29% to $105 million from $81 million a year earlier. At GRE, fourth quarter revenue increased by 28% to $98 million from $77 million a year ago, also a fourth quarter record. The increases were driven by the powerful year-over-year growth in our meter base that Michael discussed as well as increased consumption per meter. Resulting increase in consumption was partially offset by decreases in average price per unit sold for both electricity and natural gas. At our Renewables segment, fourth quarter revenue increased 48% to $6.5 million from $4.4 million driven by growth of our energy brokerage and community solar marketing ventures. Full year 2023 consolidated revenue increased 36% to $429 million from $316 million in 2022. At GRE, full year revenue increased 35% to $410 million from $304 million, largely due to our successful efforts to expand GRE's customer base. At GREW, full year 2023 revenue climbed 63%, $18.8 million from $11.6 million, again driven by expansion of our energy brokerage and community solar marketing businesses. Turning now to gross profit. Consolidated gross profit in the fourth quarter decreased 3% to $34 million. The decrease was due to lower gross profit per unit of electricity and natural gas sold, which is only partially offset by the growth of GRE's customer base. For the fourth quarter, GRE's gross profit decreased 5% to $32.5 million while GRE's gross profit margin decreased to 33% from 44.4%. At GREW, fourth quarter gross profit more than doubled to $1.1 million and $500,000 in 2022. Full year 2023 consolidated gross profit was $146 million, a 6% decrease from the record $155 million we achieved in 2022. Full year 2023 consolidated gross profit was $146 million, a 6% decrease from the record $155 million we achieved in 2022. GRE's gross profit hit 6% to $143 million, while GREW's gross profit climbed 58% to $2.8 million. Increased rates of customer acquisition and personnel costs drove quarterly and full year increases in consolidated SG&A. For the fourth quarter, SG&A increased 32% to $22.7 million from $17.2 million. For the full year, SG&A increased 22% to $91.1 million from $75 million. The consolidated loss from operations in the fourth quarter was $34.2 million compared to income from operations of $15.5 million in a year ago quarter. The decrease primarily reflects the $45.1 million noncash insurance charge and higher SG&A costs. At GRE, fourth quarter income from operations decreased 27% to $15 million from $20.6 million, reflecting both the higher margins we were able to capture in 2022 as well as a higher rate of investment in customer acquisition in the fourth quarter of this year. At GREW, the fourth quarter loss from operations widened to $1.3 million from $1 million a year earlier, reflecting the upgrades we have made to our operational teams and capabilities as well as investment in solar project development. Full year 2023 consolidated income from operations was $10 million compared to $77.8 million in 2022. The results included the impact of the insurance reserve in 2023. 2022's exceptional retail margins and our investment in meter acquisition this year. At GRE, full year 2023 income from operations decreased 22% to $71.9 million compared to $92.6 million in 2022. At GREW, the full year loss from operations of $5.8 million compared to $3.5 million in 2022. Fourth quarter consolidated adjusted EBITDA was $11.4 million compared to $18.5 million in a year ago quarter. And for the full year 2023, adjusted EBITDA was $58.2 million compared to $83.2 million in 2022. For the fourth quarter of 2022, Genie's loss per diluted share was $0.90 compared to diluted EPS of $0.59 a year earlier, and 2023 full year diluted EPS was $0.74 compared to $3.26 in 2022. Our fourth quarter non-GAAP diluted EPS was $0.37 compared to $0.59 a year earlier, and our full year non-GAAP EPS was $2.06 compared to $3.26 in 2022. Turning now to the balance sheet. At December 31st, cash, cash equivalents, long and short-term restricted cash and marketable equity securities totaled $163.4 million, an increase of $19.6 million during the quarter. Working capital was $131.6 million and noncurrent liabilities totaled $47.8 million. Over the course of 2023, Genie returned over $20 million to shareholders through dividends, repurchases of common stock and redemptions of the remaining outstanding shares of preferred stock. Looking into 2024, we expect another strong year with solid customer growth across all of our businesses. We are starting the year with a significantly larger retail energy customer base with higher average consumption than at the start of 2023. With the strength of our balance sheet, we are well positioned to pursue the abundant growth opportunities in both our retail and renewables businesses and continue returning value to our stockholders. Now operator, back to you for Q&A.