Michael Stein - Chief Executive Officer Avi Goldin - Chief Financial Officer.

Aaron Shafter - Great Mountain Capital Management Dave Canum - Canum Wealth Management Anthony Marchese - Private Investor.

Good evening, and welcome to Genie Energy’s Third Quarter 2018 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions.

[Operator Instructions] In this presentation, Genie Energy’s management team will discuss financial and operational results for the three-month period ended September 30, 2018.

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 that 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. During the remarks, management may make reference to adjusted EBITDA, which is a non-GAAP measure.

Management believes that Genie Energy’s adjusted EBITDA provides useful information to both management and investors by excluding certain expenses that may not be indicative of Genie Energy’s or the relevant segment’s core operating results.

The Genie Energy earnings release, including a reconciliation of adjusted EBITDA or net income, is available on the Investor Relations page of the Genie Corporation website and that’s 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.

And I would now like to turn the conference over to Michael Stein, Genie Energy's Chief Executive Officer. Please go ahead, Mr. Stein..

Thank you, operator. Welcome to Genie Energy's third quarter 2018 earnings call. Today we will review our operational and financial results for the three-month period ended September 30, 2018 as well as some of our recent developments.

My remarks will focus on our strategic and operational progress and then Avi Goldin, our Chief Financial Officer, will discuss the quarter's financial results. Following Avi's remarks, we will be glad to take your questions Strategically, we made significant progress in the third quarter on each of our three previously announced priorities.

Simplifying our business by focusing intensively on our retail energy provider and energy service businesses while winding down our oil and gas exploration program, diversifying our sources of revenue and mitigate both market and regulatory risk and opening and investing in new offerings and geographic markets for long term growth.

In furtherance of the first goal, in September, we divested a majority interest in our team, our drilling services subsidiary operating in Israel. The deal accelerated our ability to curtail operations in Israel, and conserve significant cash while still preserving a minority stake in that business.

Also in Israel, Afek is awaiting the permitting engaged to initiate its final test in one of its completed wells and if all contingencies work out, could complete the work as early as the end of the year.

I expect that the total spend on our oil and gas program, including expenses at Afek and GOGAS will minimally impact our consolidated financial results in the fourth quarter, and possibly Q1 of next year.

Overall, the restructuring process continues to improve the profitability and is expected to positively impact year-over-year comparisons on our bottom line for several more quarters.

With the oil and gas exploration program no longer a substantial part of our story, we are assessing corresponding changes to our quarterly report and so that our reporting structure more closely aligns with our management structure and business strategy. In the fourth quarter, we expect to begin reporting a new segment Genie Energy Services.

GES will focus on commercial markets and will include results from Diversegy, a rapidly growing energy brokerage services, Genie Solar, including prison solar technologies, more on that in a moment, and other business initiatives focused on the efficient use of energy resources.

We also think it is likely that we will add a separate segment to report on our growing international retail energy provider businesses, once it reaches critical mass. We hope these changes will help our investors better understand our business and evaluate results going forward. Now I want to touch on our other strategic goals.

Risk mitigation through revenue diversification and investment in long term growth initiatives since they often go hand-in-hand. Last week, we announced the acquisition of the majority stake in Prism Solar Technologies, a manufacturer of high efficiency solar panels based in New York.

We will team with Prism’s second largest share holder plus energy to provide complete solar solutions for commercial clients. We expect Prism to play an important and synergistic role in the larger energy services business, as we extend our offerings along the commercial energy value chain.

From a growth perspective, we believe that Prism will be EBITDA accretive in 2019. We hope to share more information on our Solar Projects over the next few months. We are also seeking revenue diversification and growth by expanding to new retail energy markets overseas. In the U.K., Orbit Energy is doing well, adding customers at a healthy rate.

In Japan, we expect to begin enrolling customers as early as the end of the year. Both markets are very large with relatively favorable competitive environments. In aggregate, they offer significantly enhanced flexibility for optimizing our investment in customer acquisitions.

Now, with the big picture in place, I want to cover a few operational highlights from our current Genie Retail Energy business. The third quarter’s year-over-year revenue increase was driven by strong margins and increased electricity consumption, up 7.3% compared to the year ago quarter.

That increase reflects the warmer weather this summer compared to last year, as well as our efforts to acquire higher value meters while pulling back from certain markets with lower than average meter consumption and higher regulatory risk.

The return of low income customers in New York pursuant to orders from the New York Public Service Commission was also a factor as those meters were generally relatively lower consumption. These factors more than compensated for customer attrition over the past year. Our bottom line benefited substantially from the pullback in customer acquisitions.

We added 45,000 new meters this quarter, compared to 111,000 in the year ago quarter, and thereby nearly half their acquisition expense compared to the third quarter of 2017. At September 30, we served 342,000 meters comprising 275,000 RCEs.

Looking ahead, we expect to gradually increase our investment in high consumption meter acquisitions and stabilize if not build our customer base as measured in RCEs during the fourth quarter. To wrap up, we made good progress and pass some significant milestones in pursuit of our strategic objectives in the third quarter.

We continue to sharpen our strategic focus, mitigate risk and pursue growth with initiatives in promising new markets. Meanwhile, our shift to higher consumption meters and a modest spend on new meter acquisitions contributed to a very strong quarter financially. Now, here is Avi Goldin to discuss those financial results in greater detail..

Thank you, Mike. Thanks to everyone in the call for joining us this evening. My remarks today cover our financial results for the third quarter of 2018. The three month period ended September 30th.

Throughout my remarks, I will compare this quarter's results to the third quarter of 2017 focusing on the year-over-year rather than on a sequential comparisons removes from consideration the seasonal factors that are characteristic of our retail energy business.

The third quarter which covers the summer months typically captures our highest levels of electricity consumption for the year, driven by the demand for air conditioning. Sales and natural gas on the other hand, tend to be relatively low in the period.

As we discussed in our earnings release, results this quarter impacted by legal accruals that reduced revenue by $3 million and increased SG&A expense by $200,000. We also reversed a prior legal accrual that reduced SG&A expense by $1.7 million. The net impact of the two, reduced income from operations and EBITDA by $1.5 million.

For comparison purposes, it is important to note that the year ago quarter, GDP retail grew $1.5 million related to pending regulatory matter in New Jersey. The accrual decreased revenue by $1.3 million and increased SGA by $200,000. The third quarter of 2018 was a strong financial quarter, particularly with respect to our bottom line.

For reasons I will detail later in my comments. Consolidated revenue in third quarter increased to $71.8 million from $69.5 million. As Michael discussed, average electric consumption per meter increased 26% compared to the year ago quarter, more than enough to offset the year-over-year decrease in electric meter served.

Gross profit decreased to $21.3 million from $28 million, reflecting in part, the impact of the accruals and reversal of revenue. Consolidated SGA expense, decreased $13.9 million from $19.5 million primarily as a result of the reduced in new requisition expense and the reversal of the legal accrual.

We incurred no exploration expense in the quarter, pending the issuance of the offset well test permits. During the quarter, we completed the divestiture of the majority of our position in Atid.

The combined effects of the transaction and our Israel operations was the loss of $1.1 million, that compared to $1.2 million and expense in the year ago quarter. The accelerated meter acquisition program at Orbit Energy, our JV operating in the U.K. led to a $767,000 equity loss compared to $159,000 in the year ago quarter.

We expect to continue investing in the businesses as it scales for some time to come. Our consolidated income from operations was $6.5 million compared to $1.4 million in the year ago quarter. Consolidated adjusted EBTIDA was $8 million compared to $3.3 million in the third quarter of 2017.

Genie Retail Energy contributed $9.8 million for adjusted EBITDA in the quarter, compared to $5.4 million. GRE’s adjusted EBITDA contribution for the first nine months of the year totaled $24.5 million. EPS for the quarter totaled $0.21 per share compared to $0.02 in the year ago quarter. Our balance sheet continues to strengthen.

As September 30th, we reported $47.2 million in cash, cash equivalents and restricted cash, and networking capital $52.2 million. Supported by our financial and operating results this quarter, our Board of Directors again declared a quarterly dividend at our common stock of seven and a half cents a share.

To sum up our financial results this quarter, strong per meter consumption drove our top line increase, a significant decrease in domestic customer acquisition expense results in year-over-year improvement in our bottom line results even as we ramped up our investment in customer acquisition in the U.K.

Our bottom line results also continue to benefit from curtailed spending on oil and gas exploration. That concludes my remarks in the third quarter financial results. I'll now turn the call back to the operator for Q&A..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first questioner today will be [Indiscernible]. Please go ahead.

Yes, thank you. I actually have a couple of questions, for the well in Israel, you said, you hopefully, you can get some information by the end of the end of the year.

Are you going to be holding off to reported -- in other words, are you going to be giving information as soon as you have it, or is it going to be held off to the next conference call?.

Hi, thanks for the question. This is Michael Stein. I would say that if the -- if the results are material one way or another, we would likely report on it in some way before the next earnings call. I would say that positive or negative..

Okay, fair enough. The second question I have is that, if the well is dry.

Are there any other wells in the hopper, is any of the wells out there or any other areas to explore? Or if this well is dry, then it pretty much it’s going to be completely over?.

I think for Genie Energy and the Golan Heights, I think it's safe to say that it will likely be over. Never say never, but we are not currently planning to drill any other wells beyond that one at this site..

Okay. Thank you very much..

And the next questioner will Aaron Shafter with Great Mountain Capital Management. Please go ahead..

First, congratulations on what looks to be a very good quarter of your solid. First, sort of an offbeat question. I’m wondering why you switched the earnings release and conference call too after the close and it's going to before the closes, you've done in previous quarters.

Is there a reason why?.

Honestly, it's mostly out of out of convenience. We have one member of our team, driving a very very long way, and I think it's a little bit better for him in the morning, to do it in the afternoon. Also, I feel like we're a little bit more shocked at the end of the day than we might be at the beginning of the day..

Okay. My second, regarding Prism, the Prism acquisition. You talked about – you mentioned some synergies at the top of the earnings announcement. I’m wondering if you can expand on that at all..

Yes, so one of the visions, we hadn't really, we never really had been talking about the Genie Retail Energy Services division, but that division has been engaging in commercial medium sized to large commercial sales for quite some time. So we think that there's certainly some synergy there in terms of -- in terms of the sales activities.

We also believed that kind of being a fully -- in a way a fully integrated retail provider gives us advantages in both directions, both for our legacy retail base and for the retail services division across the board..

And finally on Afek, which the previous caller asked some questions about, you think that the – you expressed earlier in the call that there is a possibility that they'll get the results of the testing before the end of the year.

Does that mean that, you think that the final approvals are imminent? Last time, on last call, you thought would be a month it could be three months.

You really didn't know, and I’m wondering if you can just expand upon that at all?.

So I believe the way you describe it is where we're feeling -- we're feeling increasingly confident that it'll be relatively soon, and that we're looking to do on the well shouldn't take any period of time.

Our initial hope is that it's going to be reasonably small scope of activity, and that’s sort of supporting the statement about things like rest of the year. The potential does exist for some of this to either get dragged out, because the work requires an extended period of time. But the hope is that we'll be able to get on and off pretty quickly..

Okay. Thanks, very much..

And the next questioner is Dave Canum with Canum Wealth Management. Please go ahead..

Hi, Michael congratulations on a very short quarter. Couple of questions. The first one is, if you could speak about the International JV in the U.K. I apologize; I am driving, so I wasn't able to pick a part of the press release. My desktop, so if you could just reiterate what you said.

What was the loss that was contributed and approximately what is the timeline for that to start being cash generative? And then the second question relates to capital allocation, that despite that drain there off, it looks like I believe we've generated about $16 million, $17 million dollars of free cash flow after CapEx dividend year-to-date finding ourselves in an over capitalized position.

Why aren't, why are we not buying back our stock aggressively at these prices while we still have the opportunity..

Hi, thank you very much for the question. This is Avi. So take in order, the equity loss in the U.K. was $800,000 for the quarter. We expect that for the foreseeable future, that's going to be an investment for us.

So let’s call it sort of through the initial phases 2019, so that -- that should be an expectation, and its part of a broader strategy as was outlined for a little bit.

In answer to your second question, you're taking some of the cash generating performance and investing in some places that we think can be part of the sort of long term growth story as well driving 2019, 2020 timeframe. As related to your same question about the cash flow generation.

We are very pleased with the financial performance that we've been able to do with the balance sheet.

That being said, as you've seen with some of the things we've been doing we have some exciting places to put some of that money within the short term as well as you know continuing to pay a dividend and continue to sort of investigate other avenues for growth.

Specifically as it relates to buybacks, we do have an authorization, it's something that we would consider and we keep an active eye on a regular basis, as a stock that we want to, I mean in part of the picture that we do evaluate on a recurring basis. So where we sit right now, we're pretty pleased, with the capitalization balance sheet.

We think we have the capitalization that we need to do, pretty much execute on the plan that we have in front of us, and in front of strategic initiatives that we want to put into place. But, surely, the cash position could grow, we would continue to consider places to put it and everything is on the table..

Michael, year-to-date, what is our adjusted EBITDA for the first time months and the anticipated CapEx for the full year?.

So CapEx for the full year is not, you know not --it's not material. You don't know it from a capital perspective, we don't have a tremendous amount of spending on capital -- most of what we capitalized in terms of this is known some small investments in our sort of internal platform like that.

If you're looking at general corporate, adjusted EBITDA today at the consolidated level, so [Indiscernible] for a full year-to-date.

Is that correct?.

Yes, it’s adjusted EBITDA for the first nine months..

So it’s $18.4 million. And then from there obviously from dividends and investments we’ll be making..

Okay, we're -- we're at a run rate probably to generate $25 million free cash flow for the year.

So we -- basically have an investment that’s yielding 25% and perhaps we're deploying some of our cash to other areas that don't have that same return, such as I don't know in the long run, maybe this solar acquisition, will generate returns significantly higher than that, but the U.K.

GDP [ph] I don't know, I have no problem with a balanced approach. But why, it just seems to me that the sure thing is investing in a company with a 25% free cash flow yield. You just can't make sense anymore. Maybe full stop. Just a small message for the [Indiscernible] there. Keep up the good work.

And if you could just touch a little bit off the opportunity in Japan.

I believe you had mentioned that simply when I was out there a number of months ago, if you could give me an update there on what the opportunity is?.

Sorry. So, just two things I guess. I know one of them will be for Japan point. We do generally think that the opportunities that we're investing in do have either similar or greater expectations for not just for long term -- for long term. You know similar returns to us, and the investor put together.

So that goes for solar, that goes for the JV in the U.K. and that goes for Japan. Some of those things have a more near term horizon, and some of them have a longer term horizon.

But all of those or three of those activities and all other activities that we look at, we look at from with the ones you know, with the perspective of we're trying to build a long term business that has no real opportunities for growth. So -- you know we're not content continuing to be just a $25 million a year EBITDA business.

We want to be -- we want to be a lot -- a lot better than that. In particular, when it comes to Japan, so Japan is probably the largest deregulated market in the world. It is about twice the size of the residential deregulated market in the U.S. as the one in the U.S. and it is a brand, a brand new market.

It's only a little over a year old, and we see in terms of the way they structured things, they structured the regular tour – deregulating framework there in terms of where the regulators structured it. We see that it is a good sustainable model.

So just like our business started with entering the deregulated space early on and as a result gave us a little bit of an advantage over our competitors, we came in a little bit later in our in our in our space today, and we think Japan can be can be something similar.

We think, we've hired the right management team to execute on our plan and we're extremely excited about it. So we thank our shareholders for being excited with us and encouraging us and our productivity..

Thank you..

And the next question today will be Anthony Marchese of Private Investor. Please go ahead..

Hi, guys. You’ve done a great job in terms of generating cash EBITDA etcetera, what are your plans for investor outreach. I realized last time you mentioned that all of a sudden you have a different investor page, one that is not focused obviously on oil and gas.

If you’re not going to buy stock back, then it would seem to me that are there rate to enhanced shareholder value, may want to spend some money going to some conferences perhaps non-deal road show just to get more people interested and what I think purposely is a materially undervalued stock?.

Hi, Anthony, thanks for the question and the encouragement as always. Obviously we agree with you in terms of its being undervalued. We are actually suppose to attend the conference I think this month if I’m not mistaken, next week, sorry in Florida..

Next week in Texas..

Next week in Texas, sorry, so we’re certainly going to that conference we definitely have, we continue to have shareholder, potential shareholder calls. It’s a process.

I think it’s a little bit of a process and I think we’ve seen a little bit of positive moment over the last let’s six months and hopefully with the things we’re doing we’ll continue to see positive moment..

And if I could make a suggestion, I think in prior call or another – one and other prior call we’ve made suggestion, having conference call the 5.30 in the evening is really unusual. In my opinion it make more sense to release the results in the evening than have something in the morning.

People have a change to digest the information they had a chance to potential even look at the Q. It just seems more in cupping with what companies ordinary do rather than sort of releasing your results and then an hour and half later in the evening have a call.

I just think what you’re doing is shooting yourself in the foot unless people are apt to do or to want to join a conference call at 5.30 in the evening as if my opinion, but most company business unusual, so I’ll leave it at that..

Thanks. Thanks again. I hear you and we definitely take advice on the advising, but just to being the most active shareholder call we’ve had in years.

The number of questions the number of time, the more active show, I don’t know if that’s because we reached out to the shareholders, the potential shareholders in the last few month and kind of more are joining or maybe more ask me questions or maybe just happen to a coincidence to work out that way.

I would suggest the reason you had more interest is because your results are outstanding. It is a direct correlation we’ve seen a number people I would ask questions and your results. All I can say that I think you’ve been better served at the conference call in the morning. That’s all..

All right. Appreciated..

[Operator Instructions] Okay. And it looks to be no further questions at this time. So this will conclude our question and answer session and today’s conference call. Thank you for attending today’s presentation and you may now disconnect your lines..