Good morning, ladies and gentlemen. Welcome to the Spark Energy, Inc. Fourth Quarter 2020 Earnings Conference Call. My name is Doug, and I will be your operator for today [Operator Instructions]. As a reminder, this conference is being recorded for replay purposes, and this call will be posted on Spark Energy, Inc.'s Web site.

I would now like to turn the conference over to Mr. Mike Barajas with Spark Energy, Inc. Please go ahead..

Thank you. Good morning, and welcome to Spark Energy's fourth quarter 2020 earnings call. This call is also being broadcast via webcast, which can be located in the Investor Relations section of our Web site at sparkenergy.com. With us today from management is our CEO, Keith Maxwell; and our CFO, Jim Jones.

Please note that today's discussion may contain forward-looking statements, which are based on assumptions that we believe to be reasonable as of this date. Actual results may differ materially. We urge everyone to review the safe harbor statement in yesterday's earnings release as well as the risk factors in our SEC filings.

We undertake no obligation to update these statements as a result of future events, except as required by law. In addition, we will refer to both GAAP and non-GAAP financial measures.

For information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures, please refer to yesterday's earnings release. With that, I'll turn the call over to Keith Maxwell, our CEO..

Thank you, Mike. I want to welcome everyone to today's earnings call. I begin by providing a summary of the full year results and then our CFO, Jim Jones, will provide more details on the financials. Last year was our strongest year yet here at Spark.

Through 2020, we have continued to focus on improving our mass market business and the completing of shedding of low margin large commercial customers. We are continuing to refine our organic sales channels.

We are striving to grow affinity and high quality third party vendor relationships, along with an increased focus on in house sales channel as we try to optimize our go to market strategy. This will allow us lower CAC spending in 2021 and capitalize on the increased M&A opportunities that we're beginning to see.

As we finalize these initiatives, we expect to continue seeing significant improvements in the quality of our customer portfolio. These major accomplishments have had a direct impact on achieving the $106.6 million adjusted EBITDA, a 15% increase over last year and a record.

And the increase was not only attributable to hedging strategy but also driven by savings in G&A, bad debt and customer acquisition costs. As we move into 2021, we are still evaluating the effects of winter storm, Yuri. We are confident that Spark is well positioned with ample liquidity to further pursue the market opportunities created by the storm.

We're very proud of the way our team worked together, and we're fortunate that the impact of the event was contained only a few days without adversely affecting our forward outlook of the company's performance.

We believe that our initiatives to streamline the business and continue to simplify our systems and our platform accompanied by an overall healthier book, will lead to enhanced margins and profitability in 2021. And with that, I'll turn the call over to Jim for his financial review.

Jim?.

Thanks, Keith. Good morning. In the fourth quarter of 2020, we achieved $24.7 million in adjusted EBITDA, a 4% decrease compared to last year's fourth quarter of $25.7 million. Gross margin for the fourth quarter 2020 was $49 million compared to $64.3 million last year.

The 24% decrease in retail gross margin was primarily due to a lower volume as we strategically adjusted our customer mix. Full year adjusted EBITDA was up 15% to $106.6 million compared to $92.4 million for 2019, while full year retail gross margin was down 11% at $196.5 million for 2020 compared to $220.7 million in 2019.

The primary factors driving this increase in adjusted EBITDA was our efforts to successfully simplify our platform that allowed us to achieve G&A savings, improved collection efforts that had an enormous impact on our bad debt expense when compared year over year.

Our fourth quarter G&A expenses decreased by 37% year-over-year, decreasing from $39.2 million in 2019 to $24.6 million in 2020 due to onetime charges for litigation settlements, bad debt and legal fees that occurred in 2019. We fully expect to continue to achieve these G&A run rates going forward.

We ended the year with 400,000 RCEs as a result of proactively nonrenewing some of our less profitable C&I customers. For the year, we spent $1.5 million in customer acquisition costs compared to $18.7 million in the prior year.

Interest expense for the year fell from $8.6 million in 2019 to $5.3 million in 2020, primarily because of repayments of long term indebtedness, which decreased from $123 million at the end of 2019 to $100 million at the end of 2020.

Looking at our balance sheet, we had net debt of $28.3 million and total liquidity of $168.2 million at the end of 2020. Income tax expense increased to $15.7 million in 2020 from $7.3 million in 2019, driven by an increase in taxable income due to improved financial results.

Our net income for the year was $68.2 million with $14.3 million mark to market gain compared to a net loss of $14.2 million in 2019, which included $24.9 million mark to market loss. On December the 15th and January the 15th, we paid quarterly cash dividends on our Class A common stock and our Series A preferred stock respectively.

On January 21st, we announced our fourth quarter dividend of $0.18125 per share on our common stock and $0.54688 per share on the preferred stock to be paid March 15th and April 15th, respectively. As we've stated in the past, we expect to continue to pay these quarterly dividends on a go forward basis. That's all I have. Back to you, Keith..

Thanks, Jim. I'm proud of everyone here at Spark for the work they put in to continue the success of our business over the course of the last year. We're very excited about 2021 as we continue to see further benefits from our simplified platform and increased focus on our mass market business.

I want to thank our employees and our suppliers for their hard work producing a great quarter and a strong year. And I want to thank Spark customers for choosing us as their energy provider. We're excited about the future and we look forward to connecting with you on our next call. Thank you..

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day..

End of Q&A:.