Good day, and welcome to Genie Energy's Fourth Quarter and Full Year 2019 Earnings Call. [Operator Instructions]. In its presentation, Genie Energy's management team will discuss financial and operational results for the 3 and 12 month period ended December 31, 2019.

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 make or to update the factors that may cause actual results to differ materially from those that they forecast.

During their remarks, management may make reference to pro forma revenue and income, loss from operations and to adjusted EBITDA, which are non-GAAP measures. Management believes that Genie Energy's pro forma revenue, income, loss from operations and adjusted EBITDA provide useful information to both management and investors.

The Genie Energy earnings release, including a reconciliation of the pro forma results to their respective GAAP results and of adjusted EBITDA to net income, is available on the Investor Relations page of the Genie Corporation website at www.genie.com. The earnings release has also been filed on a Form 8-K with the SEC.

After today's presentation by Genie Energy's management, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded. I will now 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 fourth quarter earnings call. Today, we will discuss our operational and financial results for the 3-month and 12-month periods ended December 31, 2019. Avi Goldin, our Chief Financial Officer, will follow my discussion with a deeper dive into the quarter and full year’s financial results.

Following Avi's remarks, we will be glad to take your questions. Results for the fourth quarter and the fiscal year 2019 reflected our commitment to grow our retail energy business to further diversify geographically across regulatory jurisdictions and energy markets and to return value to our shareholders.

I'm very pleased with the progress we made in each of those three areas and believe we are well positioned for a strong 2020. Those of you that have followed us for a while know that the first three quarters of the year, were very strong from [meter] acquisition perspective.

Although the fourth quarter is typically the most challenging from gross meter acquisition standpoint, because of the holidays and weather we ended 2019 at 374,000 RCEs, an increase of 46% compared to a year earlier. That's our highest RCE level ever at year end. Our full year 2019 year growth was even more impressive.

At year end, we reached 497,000 meters, our highest level since 2012, and a 54% increase from the level a year earlier. Our growth was balanced across the United States and international markets. We added 56,000 net domestic RCEs and 61,000 overseas in 2019. At December 31, we served 309,000 RCEs here in the U.S.

and 65,000 RCEs between the U.K., Finland and Japan. International RCEs comprise 17% of our global customer base at December 31. This robust growth reflects our sustained investment in meter acquisition with an emphasis on new markets and focus on churn reduction.

At GRE, our domestic retail energy provider, gross meter adds in the fourth quarter were 56,000 an increase from 45,000 in the year ago quarter. Expected seasonal factors including the holidays and colder weather drove a sequential decrease in gross meter adds from 76,000 in the third quarter.

Gross meter adds have picked up so far in the first quarter of 2020, and we are working to continue the trend. We entered the very large and dynamic market in Texas in the second quarter of 2019, and our Southern Federal brand is beginning to pick up stream there.

Looking ahead, we expect to enter certain natural gas territories in Michigan early this year. We'll also expand our brand presence in Connecticut and we are exploring an opportunity in Georgia. GREs churn in the fourth quarter dropped to 6.1% compared to 7.1% a year earlier.

In the year ago quarter, the churn rate included the impact of the exploration of the municipal aggregation deal. Backing out the impact from the event, churn would have been constant year-over-year at 6.1%.

The fact that we added over 100,000 meters more growth in 2019 than we did in 2018, but we're able to maintain comparable rates of churn indicates that we're making good progress in our effort to extend average customer tenure.

At GRE International, we again invested significantly to expand our customer base at Orbit Energy, our JV operating in the U.K. We are hoping that Orbit is now adequately capitalized to continue to grow and operate for the foreseeable future.

In Finland, Lumo and Energia continue to successfully grow its book without requiring an additional cash infusion for the day-to-day operations. In the fourth quarter, we increased our ownership from 80% to 90% of the business by buying out one of the company's founders.

As we've said before, we intend to leverage Lumo’s infrastructure to address other countries in the Scandinavian market. And in fact, we expect to acquire our first Scandinavian customers outside of Finland this month.

Genie Japan has just begun to ramp up its customer acquisition program and so far, we are very early in the process still has produced solid results.

In our Genie Energy Services or GES business, our Energy Advisory Service Diversegy achieved an important milestone becoming net income positive in the fourth quarter, and we look for it to be net income positive on a go forward basis.

Prism Solar, on the other hand, has not met its targets, and we had begun streamlining its operations in order to return its profitability. On a consolidated basis, we invested significantly to pursue growth opportunities and diversify our business in 2019. While still delivering strong financial results and returning value to our shareholders.

Our strong performance and liquid balance sheet enabled us to repurchase an additional 262,000 shares of our outstanding Class B common stock for $2.2 million during the fourth quarter.

During the full year 2019, we’ve repurchased $5.6 million worth of stock or 2.7% of our common shares outstanding and paid an additional $9.6 million in dividends to our common and preferred stock holders.

We are proud of our record of returning value to our shareholders and look forward to continuing to produce significant growth and shareholder returns in 2020. Now with more on the quarter’s financial results, here's our Chief Financial Officer Avi Goldin..

Thank you, Michael, and thanks to everyone on the call for joining us this morning. My remarks today cover our financial results for the 3 and 12-month period ended December 31, 2019. Throughout my remarks, I compare the fourth quarter 2019 results to the fourth quarter of 2018 and the full year 2019 results to full year 2018.

Regarding our quarterly results, focusing on the year-over-year rather than the sequential comparison removes from consideration the seasonal factors characteristic of our retail energy business.

The fourth quarter is a shoulder quarter, with relatively modest levels of per meter consumption falling between the peak cooling season third quarter and the peak heating season in the first quarter. Picking up where Michael left off.

Fourth quarter’s financial highlights included a record level of revenue, significant year-over-year revenue and gross profit increases and increased investment in customer acquisition costs, especially in our international markets. Income from operations and adjusted EBITDA improved substantially from the year ago quarter.

EPS decreased slightly on an increased provision for income taxes. Our continued performance allowed to the additional fourth quarter buyback that Michael mentioned and enabled us to continue our quarterly preferred and common stock dividend.

Consolidated revenue in the fourth quarter increased $19.2 million year-over-year to $82 million, the highest level of revenue we have generated in any fourth quarter in our history.

The increase was primarily result of growth in our domestic meter base and a shift to higher consumption meters, as well as the meter growth at Genie Retail International. Full year revenue increased by $35 million to $315.3 million in 2019, reflecting increased revenue at both GRE International and Genie Retail Energy.

In the fourth quarter Genie Retail Energy, our domestic energy supply business contributed $74 million of revenue, an increase of $15.2 million compared to year ago quarter, reflecting growth in our meter base and a shift toward higher consumption meters.

At Genie Retail International, the acquisition of Lumo in January subsequent expansion and growth as Genie Japan enabled us to achieve revenue in the fourth quarter of $5.8 million and full year revenue of $16.6 million. GRE International had no revenue in 2018.

As discussed in our earnings release, we account for the results of Orbit Energy or joint venture operating in the U.K. using the equity method, and its results of operations are not consolidated in our revenue gross profit in SG&A. Our Genie Energy Services division generated revenue of $2.1 million compared to $4 million in the year ago quarter.

The decrease reflects the timing of delivery of solar panels within the Prism Solar business. Consolidate gross profit in the fourth quarter increased $7.2 million to $22 million substantially all of its generated at Genie Retail Energy as a result of increased electricity consumption, and decreased electricity supply costs.

For the full year 2019, gross profit increased $6.4 million to $82.9 million primarily because it increased per meter electricity consumption in Genie Retail Energy, driven by the shift to higher consumption meters.

In the fourth quarter, increased rates of customer acquisition both GRE and GRE International drove a $4 million increase in consolidated SG&A expense to $19.2 million. The full year increase in SG&A expense was $10.9 million to $72.5 million.

Equity in the net loss, equity method investees, which is comprised of Orbit Energy and our minority stake in Atid increased to $2.7 million in the fourth quarter from $1.3 million in the fourth quarter of 2018. The increase reflects the timing of additional capital we provided to finance Orbit Energy meter acquisition program.

The full year net loss increased $1.4 million to $4.8 million. We are hopeful that Orbit Energy now has sufficient capital to conduct its meter acquisition program during 2020. Our consolidate income from operations was $2.3 million compared to a loss from operations of $458,000 in the year ago quarter.

The increase in gross profit generated by Genie Retail Energy was only partially offset by increases in GREs customer acquisition expense and the increase loss equity of equity method investees. The full year 2019 income from operations was $9.8 million a year-over-year decrease of $2.2 million.

Adjusted EBITDA for the quarter was [$850,000], an increase of $1.3 million compared to the year ago quarter. Full year adjusted EBITDA decreased $7.8 million to $10.1 million, primarily as a result of increased customer acquisition expense at GRE and GRE International.

We recorded no net income in the fourth quarter compared to EPS of $0.47 in the year ago quarter when we recorded a one-time $40.1 million benefit from income taxes. The tax benefit was also the main driver behind historically high EPS of $0.83 per share in 2018. EPS in 2019 was $0.10 per fully diluted share.

Our balance sheet remain strong, at December 31, we reported $156.2 million in total assets including $38.6 million in cash, cash equivalents and restricted cash. Liabilities totaled $75.3 million, which is $3.2 million were non-current and working capital totaled $40.8 million.

The strength of our balance sheet and underlying performance enables us to again repurchase shares in the fourth quarter. For the full year, we bought back 2.7% for outstanding common stock for $5.6 million and paid an additional $9.6 million in dividends to holders of our common and preferred stock.

And speaking of dividends, our Board of Directors again declared quarterly dividend on our common stock of $0.075 a share.

To wrap up, fourth quarter revenue is the highest for the shoulder quarter in the company's history, and a significant increase from a year ago largely because of our investments in meter base growth, new markets and higher consumption meters.

Gross profit was robust, but its impact is balanced by significantly higher rates of new customer acquisition. Nevertheless, income from operations and adjusted EBITDA improves significantly compared to the year ago quarter.

This capped off of the 2019 where we successfully balanced meter growth underlying financial performance that was in line with our expectations. Now I will turn the call back to the operator for Q&A..

We will now begin the question and answer session. [Operator Instructions]. At this time, we will pause momentarily to assemble our roster. And our first question will come from Aaron Shafter with Great Mountain Capital..

Hi. Congratulations, gentlemen, on a quarter of good solid customer acquisition and great year of strong customer growth.

I'm wondering if -- everyone's talking about Corona virus if you can tell us if there's any impact if any of Corona virus on Genie’s operations and earnings?.

Hi, Aaron. Thanks, thanks for the -- for calling in and thanks for the question. We have not yet seen any material impact from the Corona virus on our activities so far this year 2020. Obviously, that that could change, we have included a few business related risks, due to Corona virus in our 10-K.

And one of them would be potentially seeing a slowdown in door-to-door sales. Other than that, I can't think of anything. But, like I said, to-date, we haven't seen a slowdown in sales..

Okay. And the Corona virus has caused a lot of fear in the market to sell-off in the stock in general. I attribute at least the sell-off in Genie to that type of fear. You mentioned, talked about the stock buyback program.

I'm wondering if you can tell us anything about future stock buybacks, if any, you have planned and how you see the decline in stock is an opportunity to purchase shares back cheaply?.

So, we do have the authority from the Board to continue our buyback program. And we'll continue to assess as things go on in the market. We did buyback a lot in the year of 2019. And one of the goal of 2020 is to build back our cash hoard -- put it on the upward trajectory again. So I would say there's always a possibility that we're doing buybacks.

But today as of this time, we are not doing one right now..

Right. And finally, I'm wondering if you can share anything -- tell us anything more about affect the press release really doesn't say much except it's expected the first half of 2020.

On the last call, you would explain that the drill that was being used by Atid had been -- had some problem in that is why the program really couldn't begin to the testing program.

I'm wondering if you can tell us anything more?.

Yes. So that's true. The drill was experiencing some delays in the well test was pushed off as a result. But, we do still believe that we're going to get the well test done before the first half ends, meaning in the second quarter..

And you can't be -- give us any more than just that or is there any -- you want to be cautious?.

Yes, I'm hesitant too just because we've experienced all these delays. We were hoping to get this done a long time ago..

Great..

And so, a number of factors -- permitting, scheduling with some of the people who use the land during the -- throughout the year, namely the army, and the rig – the rig having some, -- some trouble. I'm just hesitant to put anything definitive, but we really do believe that it's -- that we should get it done in the second quarter..

Okay, that’s all my questions..

[Operator Instructions]. And our next question comes from Mike Heim with Noble Financial..

Michael, you made some comments about how the churn rate was perhaps a little abnormally large this time. And I didn't quite catch the reasoning behind that.

Could you repeat that?.

Yes, so, I think I was -- I think I mentioned that last year it was abnormally high, last year was abnormally high because of a regulatory requirement to drop some customers..

Okay..

Sorry, not as that wasn't a regulatory requirement. We – that churn was abnormally high last year because, we had an aggregation deal. An aggregation deal is when an entire municipality opt-in to take service from us. And it's a fixed time period that we serve them for. And when that time period ends, they all drop at once.

So when you normalize for them meaning when you exclude them, our churn rate in the fourth quarter of 2018. And our churn rate in the fourth quarter of 2019 was just about even..

Okay.

And then there was a small impairment of goodwill, not a big number, but can you explain what that was?.

Sure. So, that was within the -- within Prism Solar from the acquisition, as Michael referenced the business while is something that we're excited about, hasn’t been performing as expected and we're working on some future planning that required a small goodwill impairment..

Yes, as long as we're talking about Prism, you mentioned streamlining operations.

Can you expand upon what that exactly means?.

Sure, we've -- we essentially just tried to cut some expenses, we parted ways with the CEO and trying to bring in a different vision for the business. So on a go forward basis, the expenses should be lower and hopefully we'll focus on the bread and butter of sales..

Okay, and then finally, just wanted -- kind of gauge your comfort level and the losses at the JV it's certainly understandable as you expand in the new areas, but, how do you see those turning to gain, is it a question of one-time cost as you enter new areas or brand recognition to be established per year? Or is it more a case that you expect them to be slow gradual gains towards profitability?.

So the international businesses, I guess I'll speak to them as a unit, not just the JV if that's okay. The international businesses generated on a pro forma basis meaning when you -- if you were to consolidate Orbit in the U.K.

business into Genie International, the business did just north of $47 billion of revenue, basically, more or less from a standstill at the beginning of 2019. So we're pretty excited about the potential and the rapid growth that we've been able to achieve there. In our business, the retail supply business, acquiring customers is expensive.

And you need a critical mass of customers in each jurisdiction to help to offset not just the G&A costs, but the additional acquisition costs you do as you try to grow the business. So, of the three, of the three international projects that we have, they're all different -- they're all at different, they're kind of operating at different paces.

I would say the U.K. business and the Scandinavian business have some critical mass that will help them to achieve profitability a little bit faster. We are hoping that that in the U.K., we turn the corner towards profitability, towards the end of the year. We expect the Scandinavian market to be profitable this year.

And Japan, we expect to continue investing..

Okay, that's helpful. Thank you for your answers..

Sure..

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