Geoffrey Rochwarger - Vice Chairman and Chief Executive Officer of IDT Energy Avi Goldin - Chief Financial Officer.

Marco Rodriguez - Stonegate Securities.

Good morning and welcome to Genie Energy’s Third Quarter 2014 Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions). After today’s presentation by Genie Energy’s management there will be an opportunity to ask questions. (Operator Instructions).

In its presentation Genie Energy’s management team will discuss financial and operational results for the three months ended September 30, 2014.

Any forward-looking statements made during this conference call, either in the prepared remarks or in the Q&A session, whether general or specific in nature are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates.

These risks and uncertainties include but are not limited to specific risks and uncertainties discussed in the reports that Genie Energy files periodically with the SEC.

Genie Energy assumes no obligation, either to update any forward-looking statements that they have made or may make or to update the factors that may cause actual results to differ materially from those that they forecast.

Please note that the Genie Energy earnings release is available on the investor relations page of the Genie Corporation website, www.genie.com. The earnings release has also been filed on a Form 8-K with the SEC. Please note this event is being recorded.

I will now like to turn the conference over to Geoff Rochwarger, Genie Energy's Vice Chairman and CEO of IDT Energy. Please go ahead Mr. Rochwarger..

Thank you, operator. On behalf of our management team, including our Chairman and CEO, Howard Jonas, thank you for joining us for Genie Energy's third quarter 2014 earnings conference call. This morning I will begin with an overview of the progress of the four Genie Oil and Gas projects and then discuss our domestic retail energy provider business.

Afek our subsidiary holding an oil and gas exploratory license in Northern Israel won a major victory in July when the Northern District Planning and Building Committee approved its application for a 10-well exploratory drilling program. In September, the committee issued the drilling program permit.

However, in response to petitions filed by an environmental organization and few local residents challenging the legality of the permit, the High Court of Justice in Israel subsequently issued an interim injunction preventing drilling or building installations of any kind until the ruling on a petition is issued.

The court ordered that the case will be heard before three judge panel within two months. The state attorney [ph] has already filed its response arguing that the decision of the planning committee to issue the permit wasn’t in accordance with applicable laws and regulations and that the challenges should be dismissed.

Our legal advisors have taken a long hard look at the claims made by the petitioners and believe that they are baseless. The committee was careful to file the letter in spirit of the law and conducted a fair and robust review process. We are confident that the court will agree.

If the court didn’t hear us at a timeframe it established and the results is in our favor, we should be able to begin drilling in the first half of 2015. Nevertheless, this is a significant challenge and we cannot rule out the possibility of additional delays were not verse [ph] of ruling.

Once we begin drilling, we will drill one well at time and proceed based on the results we find from each wells. At IEI, we were deeply disappointed when in early September the Jerusalem District Planning and Building Committee decline to issue a permit for the construction and operation of our pilot plan.

We believe the committee's decision reflected limitations inherent in their application process and ignore the scientific evidence IEI submitted. IEI demonstrated that there is a tremendous resource available to Israel in the Shfela and that it has an environmentally appropriate approach to produce high quality oil and gas from that resource.

We are evaluating options to continue to move this project forward, including alternative sites, as well as legal and regulatory remedies. One thing is certain; we intend to keep fighting for this project. Since its inception, we've said that IEI was a long-term project with commercialization in a number of years off.

We remain committed to produce in commercial oil to institute heating of shale in Israel. While we took a third peck [ph] at IEI, we took a major step forward at Genie Mongolia. In September they signed a prospecting agreement with the Petroleum Authority of Mongolia covering 25,000 additional square kilometers in Central Mongolia.

Genie Mongolian now has exclusive rights to identify and characterize oil shale resources on approximately 60,000 square kilometers in aggregate and have already begun resource characterization activities.

This new agreement is the first to be signed under recent legislation, which provides a legal framework for commercialization of unconventional oil and gas. We can request the commercial production agreement once a specific suitable resource inside are identified.

We believe we have identified a superb resource and could apply for a production sharing agreement as early as next year subject to the passage of oil and shale specific regulations. Here in the United States, our joint venture with Total and so LLC continue to review alternative heating system solution for the in-situ plan that we constructed.

This evaluation and qualification process will carry on at least since the next year. Wrapping up this update at Genie Oil and Gas, this quarter we achieved a number of important advancements and suffered some set backs, which is just what you would expect given the nature of our ground breaking long-term projects.

We need to deploy our capital prudently and exploit every opportunity to move these projects forward. Now turning to Genie's domestic retail energy business. As our business matures, we had developed a growing portfolio of brands, marketing channels and retail offerings.

They have transformed our business well beyond the variable rate offering that we have been selling under the IDT Energy brand to residential and small business customers via door-to-door and telemarketing since 2004.

Our success going forward depends on this diversified strategy with multiple product offerings tailored for a variety of market conditions with new marketing channels to reach a broader customer base and the development of related synergistic energy businesses such as the Diversegy energy brokerage service.

Reflective of this maturation, we are changing the name of this division to Genie Retail Energy and going forward Avi and I will refer to it by that name or simply as Genie Retail.

For some time the cheap challenges in Genie Retail apart from the impact of theoretic weather events, have been associated with growing the business and mature utility territories. Over the past several years, we had been unable to sustain gross meter adds at level sufficient to offset churn and mature utility territories.

While we were not able to add new territories, we generally were not able to grow in our customer base.

As I detailed for you last quarter, we have launched several interim related initiatives that we believe will reverse this trend and return Genie Retail to positive net meter growth in our existing markets even as we continue to evaluate potential opportunities to expand our service area.

In aggregate, we expect these initiatives to accelerate the taste of gross meter acquisition and low return by making our relationships with customers more sticky than ever before. Afek Energy, the network marketing business we acquired in December 2013 began operations within the ComEd territory in Illinois last quarter.

In the third quarter Afek expanded its meter sales to certain utility areas in New York and New Jersey within our footprint and as we projected started to contribute a meaningful number of new meters in the third quarter.

Although, integrating Afek into Genie Retail operations took us a little longer than we initially anticipated, the results this quarter confirmed that Afek and its network marketing approach offer tremendous potential. I expect Afek to become a key driver of gross meter additions in 2015.

Although network marketing will become a key sales channel for Genie Retail, execution of door-to-door sales and telemarketing remains our bread and butter for customer acquisition. In the third quarter, we deployed a modest internal door-to-door sales force.

This effort is primarily a way for us to better evaluate interaction with customers and test messages and offerings. We will use what we learnt to reform the work of the third party vendors upon whom we rely for the acquisition of the majority of our new meters.

Turning to brands and offerings, we expand marketing under the Residents Energy brand in New York this quarter and plan to launch the brand throughout our footprint in the coming year. Additionally, we hope to expand our guaranteed rate offering to new utility areas in New York, Netherlands and New Jersey.

This compliments our previously released guaranteed rate offerings marketed under the IDT Energy name in ComEd and key Pennsylvania utility areas. Next year we plan to introduce a brand focused on our green energy offerings. The early results of these initiatives help to stabilize our meter base during the quarter.

We increased gross meter acquisitions to 56,000, churn meanwhile decreased to 6.2% from 8% in the prior quarter. Consequently our net meter count decreased by just 2,000 an improvement from recent periods. I am also encouraged by the fact that in September we achieved slightly positive month-over-month net meter growth.

Although the various initiatives I've discussed are relatively early stage and have not yet reached their full potential, they are in aggregate doing as well as or better than we expected and should continue to drive increases in gross meter adds. If we continue to execute, we should begin to grow our meter base and expand our market share in 2015.

Before wrapping up, I also want to make note, that over the last several months state legislatures and regulators have a taken a renewed interest in retail energy markets.

As always, we are very careful to make sure that our business model remains in compliance with changes in regulatory policy in order to ensure that we continue to meet our business objectives. In summary, there were many reasons for optimism throughout the company.

I am excited about Genie's future and look forward to reporting on our continued progress in coming quarters. Now, I will turn the call over to Genie Energy's Chief Financial Officer, Avi Goldin to discuss Genie's financial results..

Thank you, Geoff. And thanks to everyone listening and for joining us this morning. My remarks will cover our financial results for the third quarter of 2014, the three months ended September 30th. Except, where indicated otherwise, all comparisons in my remarks are to the results for the comparable year ago period, the third quarter of 2013.

Please note that, as discussed in the earnings release and by Geoff, I will refer to the retail energy side of the business as Genie Retail Energy or Genie Retail. In prior quarters we reported the results of these lines of business as IDT Energy. Our financial results for this quarter are inline with expectations.

We were pleased the financial performance of Genie Retail business and as Geoff described by the sequential stability in net meter served. Genie Retail again accounted for all Genie's revenue, cost to consulting gross profit.

Revenue decreased to $46.2 million in the third quarter from $71.6 million, reflective of attrition of our meter base over the past year and lower consumption per meter. Electricity sales totaled $43.4 million, 35.2% less than a year ago quarter and accounted for 94% of revenue.

The decrease in revenue reflects a decline in consumption as kilowatt hour sold decreased 36.7% compared to the year ago quarter.

The decline was a function of the both decrease in our meter base, including higher than average rates of attrition among the high consumption meters in Pennsylvania, as well as the cooler weather December compared to a year ago. Average meters served decreased 20.8%, while consumption per electric meter declined 20%.

The decrease in consumption was partially offset by a slight 2.3% increase in revenue per kilowatt hour sold. On the national gas side, revenue was $2.8 million compared to $4.7 million in the year ago quarter. The gas revenue decrease is driven by both declining gas prices and reduced consumption as our average revenue per therm sold declined 22.3%.

Gas consumption is seasonably low in summer months, decrease is a result of the past years declines in meters served following 22.8%. The average number of gas meter served decreased 20.3%, while consumption per meter also declined slightly following 3.1%.

Gross profit on a consolidated basis decreased 10.6% to $17.8 million from $19.9 million a year ago. The gross profit on electric sales was $17.2 million compared to $18.4 million in the year ago quarter. Gross margin increased 1,210 basis points to 39.7%.

Consistent with our prior guidance this quarter’s electricity gross margin is above what we expect on average to be obtainable over the long run. Gross profit on gas sales is $627,000 million compared to $1.5 million in a year ago quarter as for competitive reasons we reduced our rates compared to the declining cost of the gas commodity.

Gross margin on gas sales in third quarter was 22.2%, 980 basis points below the level in the year ago quarter. In general, the retail market for natural gas continues to be challenging throughout our service area. Nevertheless, gas contribution to our bottom line will ramp up with the onset of colder weather in the fourth quarter.

On a consolidate basis, SG&A expense including stock-based compensation increased to $18.9 million from $12.7 million. Stock-based compensation in the quarter was $4.9 million compared to $1 million in the year ago quarter.

The increase in stock-based compensation is almost entirely attributable to the modification of our Chairman and CEO, Howard Jonas’ employment renew with the company. Absence stock-based compensation SG&A expense is $14 million compared to a $11.6 million. At Genie Retail SG&A expense increased to $12.2 million from $10.3 million.

We continued our investment in integration and rollout with Diversegy and Epiq and as Geoff discussed, we have recruited in prudent [ph] operation in internal door-to-door sales force to compliment our outsource acquisition resources.

These factors were partially offset by a decrease in purchase of receivable fees paid reflecting the reduced volume of billings compared to the year ago quarter. At Genie Oil and Gas, SG&A expense decreased to $250,000 from $375,000, primarily reflecting a reduction in stock-based compensation.

Corporate SG&A expense increased to $6.4 million in the third quarter from $1.9 million in the year ago reflecting a one-time stock-based compensation charge I mentioned previously..

Also at GOGAS for our 2014 we have elected not to fund the AMSO, LLC capital calls, under our agreements totalistic of our share of the cost which is being approximately $3 million year-to-date thereby diluting our equity stake in the project from 50% to approximately 44.3%.

This equity dilution also reduces our share of future funding proportionately. Adjusted EBITDA on a consolidated basis was $856,000 million compared to an adjusted EBITDA of $5 million in the year ago quarter. Keep mind that our measure of our adjusted EBITDA excludes stock-based compensation.

Adjusted EBITDA at Genie Retail is $5.8 million compared to $9.9 million driven by the reduction in electric consumption and increase in SG&A expense. The adjusted EBITDA loss at GOGAS is $3.2 million compared to $3.5 million, primarily reflecting a decision not to fund AMSO's capital calls, partially offset by higher spending at Afek.

Corporate generated net adjusted EBITDA loss of $1.7 million compared to $1.3 million. The increase is primarily related to a one time severance expense. Genie did not incur significant depreciation or amortization expenses during the quarter.

On a consolidated basis the loss from operations was $4.1 million compared to income from operations of $3.9 million in the third quarter of 2013. Income from operations at Genie Retail is $5.6 million compared to $9.6 million.

The loss from operations at GOGAS is $3.3 million compared to $3.7 million a year go and corporate overhead contributed an additional $6.4 million in losses compared to the loss of $1.9 million a year ago. Interest expense, financing fees, and other income was also an income of $251,000 compared to an expense of $829,000 in the year ago quarter.

The provision for income taxes was $467,000 in the third quarter compared to $1.1 million a year ago.

Adjusting for non-controlling interest, the net loss attributable to Genie shareholder after preferred stock dividends is $4.8 million or $0.22 per fully diluted share compared to income of $1.7 million or $0.08 per fully diluted share in the year ago quarter.

Net cash used in operating activities in the third quarter was $994,000 compared to $2 million in the year ago quarter. Total working capital, with current assets, with current liabilities at September 30 was $118.1 million compared to $106 million at September 30 of 2013.

As we disclosed last quarter and I referenced earlier on in my remarks, during the quarter our Chairman, CEO, Howard Jonas purchased 3.6 million shares of our Class B common stock from a company for $24.65 million in cash pursuing to his amended employment agreement.

Other then cash compensation of $50,000 per year, the right to purchase these shares shows us Howard's base compensation to 2019. All in all, I am pleased with the results this quarter, Genie Retail as you saw our financial results albeit on a smaller meter base in the prior year.

The management team there has put in place a multi pronged approach to increase gross new acquisitions and return to net via growth and we achieved rough stabilization in our meter count this quarter.

In the meantime, our balance sheet remains strong and liquid and we have the capital to carry out the expected oil and oil shale exploration operations at GOGAS for this foreseeable future. As always Geoff and I are happy to take any questions about the business that you may have. I'll now turn the call back to the operator for Q&A..

We will now begin the question and answer session. (Operator Instructions) First question comes from Marco Rodriguez of Stonegate Securities. Please go ahead..

Good morning, guys. Thanks for taking my questions. Just want to talk a little bit here about the revenue on top line you know, normal seasonality typically share the sequential improvement for you guys yet, you showed a decline of revenue sequentially. And I know you talked a little bit about you know core summer.

The top line was also for you like, there is a little bit more behind that.

Can you kind of provide some more color on what happened in the quarter?.

Sure. Hi, Marco. How are you? It’s Geoff. Sure, I think that certainly as you said Q2 the seasonality and what we experienced during the quarter that certainly impact revenues.

But in addition to that, probably the larger factor which affected that or impacted some of the other underlying assumptions for the model was that we are looking based – as a result of the polar vortex, and the churn that resulted from there, there is certainly a drop in the overall consuming customer base for us and because the consumption is certainly linked to revenues, you are seeing that that drop in the revenues on a parallel basis..

I see, okay. And then kind of shifting your gears a little bit, but in the same topic of revenues. I mean, we've talked now here couple of quarters about these new initiatives that you guys are putting forth. Can you kind of give us a sense here now, I mean, what sort of meter growth are you guys expecting in 2015.

I mean, are low single digits fair and how do you kind of see that growth developing as the quarters pass-by?.

So, first I'll talk – let me try to respond to you in terms of some general planning and share with you a little bit how I am approaching it right now.

First of all, as we noted in the – in my comments, in the results, the very positive news is that for the first time probably in over 2 years the quarter numbers reported, represented in almost for a given that of churn for our meters. Now obviously that’s not our goal.

Our goal is to grow and September as an example was the first month in that time spent, the two years plus, that we formerly did surpass and have positive meters net of churn. I do believe that that will continue.

I think that it will probably be a quarter or so of stabilizing a lot of the key factors that contributed to that, which is not only on the growth on a gross meter side, but additionally the reduction of churn thereby allowing us to stabilize and have some small growth.

I do believe that through some of the more material initiatives, such as Afek signing up and acquiring more meters in IDT Energy territories; through the continued success for a launch and additional licensing of our second brand Residents Energy that to will be a major contributor.

So there are other example, but I think that those two predominantly stands out. I think its fair to say that it will take probably the first half of 2015 to really start to see what I expect to be some real, some real growth start take hold.

And I think it’s a second half of 2015 that my expectation is borrowing any unforeseen events that we could start looking – we could start to see meter growth similar to what we saw prior to, I would say prior to the last two years or so. So, I think that it will – this is the beginning.

I think that it will slowly stabilize, start to grow and it’s really second half of next year that it will start to very materially impact our numbers in terms of the contribution margin, in terms of the EBITDA and obviously certainly related to revenues and other key metrics for the business..

Okay. So to make sure, I am kind of clear here.

So for the next three quarters, lets call it the expectation is maybe meters are kind of flattish if you will and then Q3, Q4 of 2015 its – you will start to see some growth there?.

I think no, I think that a little bit firmly what I would say is probably the next, I would say next quarter, next quarter to quarter and half is probably flat then I think that we – after that I think we start to see some modest growth and then I think we see the growth chart starting to pick up as the – as we move through the three quarters of 2015..

Okay.

And are you expecting in those assumptions to enter any new markets there or is that just all Afek?.

No, this is – this – it’s reflective of not taking into account any new markets for IDT Energy and notwithstanding that there are several jurisdictions, several utility areas that we do have, that we are waiting on licensing for.

But what I've learnt in the past is not to count the benefits from entering into new territories and new areas until licensing is finished just because it’s a process that’s highly bureaucratic and one that we cannot control.

So that being the ability to move into new expansion, into new territories for IDT Energy would represent incremental growth when that happens..

Got it. Thanks. That’s helpful. And then on the RCEs, I am understanding when you enter a single family homes obviously you have higher consumption rates; you had some seasonality effects in the quarter.

So I am just trying to kind of understand here that – are you seeing maybe more single family homes terminating versus your historical apartments [ph] goals that you guys have dealt with?.

No, so I think that there is direct correlation with the drop, the drop that we've seen in RCEs as related to Pennsylvania specifically where from the onset of acquiring meters in Pennsylvania we had definitely seen an average RCE somewhat larger than what was typically our history and our experience in New York, New Jersey and some of the other jurisdictions.

When the polar vortex hit Pennsylvania was probably for us the hardest hit states in terms of resulting churn. So the reduction that you're seeing is really reflective of the fact that that Pennsylvania was hardest hit and that’s where the majority of the churn resulted in and that’s what you're seeing.

But I think, in terms of our acquisition efforts, whether in our legacy states, in our “Newer States’ newer areas like ComEd in the Illinois. We're continuing to see the same patterns, the same assumptions that we build the business on..

Got it.

And switching gears here on to GOGAS on Afek has there been actual date set for the panel?.

So, there is a preliminary date that we did receive, that is December 22, what we're waiting to confirm right now is with that date two of three judges have been confirmed and we just, I guess just trying to be conservative we want make sure that before we officially publish that date, we want to make sure its confirmed with three justices.

But certainly it seems that as the Supreme Court stated when they issued their statement on wanting to pursuit [ph] through a session, they stressed that this would be a – they would be scheduling it quickly within two months and certainly for the Supreme Court in Israeli that is quite quick, normally infrastructure projects take in excess of a year to schedule..

Okay.

And then procedure wise, I mean, once they hear your arguments on the similar, is this like a day event, is this a week even and then how quickly is the expectation that they rule if you will?.

So, it’s hard to answer your question with facts because there is no written process that will govern this. However, based on number one, our prior experience with the Supreme Court couple years back with IEI, as well as what we've seen and what we've heard vis-à-vis in this case and the strong desire.

We have filed brace to the Supreme Court as part of our responses to make it clear that we have equipment on the ground. We have received all of the permits, the license everything is been signed of. So we did request the quick response by them. So we do expect – we hope and we do expect that it will be done quickly.

We hope that it won't take more than one session, it could take two, we would be shocked if it did. And we do expect a very timely response and hopeful dismiss for others case, which would then allow us to get back to work peacefully.

We had started actually, we had started our second day of ground prep for the rig to be moved to the area and then we had to stop. So, we do hope and expect to move fairly quickly once the session takes place..

Got it.

And last quick question, I – when do you think realistically you might have a clear picture of what's kind of going on there as thoughts or direction they are going to be taking?.

I think it’s probably fair to say with – I am hoping that the beginning of 2015 within the next several months.

There are several different alternative options that we're looking at right now and as you could imagine, they are quite complicated, there are many different, many different avenues that have to be explored and we want to make sure that the court that which gives us the best chance in not having a repeat of where we ended up a short while ago.

So I think that we'll start to hear responses back both from the legal side, as well as pure regulatory and I would say probably within the next, let say three months or so..

Got it. Thanks a lot guys..

You're welcome..

(Operator Instructions) This concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect..