Good morning, and welcome to Genie Energy's Second Quarter 2021 Earnings Call. [Operator Instructions]. On this morning's call, Michael Stein, Genie Energy's Chief Executive Officer; and Avi Goldin, Genie Energy's Chief Financial Officer, will discuss operational and financial results for the 3-month period ended June 30, 2021.

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. During their remarks, management may make reference to adjusted EBITDA, a non-GAAP measure.

Management believes that Genie Energy's measure of adjusted EBITDA provides useful information to both management and investors that supplement Genie Energy's core operating results.

The Genie Energy earnings release 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 each reporting segment is reconciled to its prospective segment's income from operations for all periods presented. The Genie Energy earnings release is posted on the Investor Relations page of the Genie Corporation website, genie.com, and has been filed on a Form 8-K with the SEC. [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 Second Quarter 2021 Earnings Call. Today, we plan to start the call by educating investors about our current business and our growth strategy, followed by a discussion of the value proposition that we believe will drive business results and stockholder value going forward.

I will also provide a review of our operational and high-level financial results for the 3 months ended June 30, 2021. Avi Goldin, our Chief Financial Officer, will then provide a deeper dive into the quarter's financial results, and then we will be glad to take your questions.

We believe Genie Energy offers unique investment opportunity within the energy space. Genie operates in 2 core parts of the energy industry, retail and renewables.

Our global retail energy businesses are asset-light operations that market and resell electricity and natural gas to consumers and small enterprises in deregulated markets, while our renewables business sells services and installs solar solutions. Currently, our U.S.

retail business is the primary driver of our profits, but we believe the other segments have tremendous potential. Our current businesses are supported by our enterprise function, which is responsible for customer acquisition, risk management and customer care.

Our marketing and sales professionals leverage deep data analysis to identify market opportunities and efficiencies that our sales and marketing teams can then exploit through a variety of sales channels, offering green or traditional options as well as fixed and variable rate plans.

This data analysis also allows us to segment current and potential customers with specific payback periods based on product and customer type, while also enabling us to bring a higher level of customer care and retention and also offer customer reward programs.

Finally, our risk management function acquires both green energy and carbon-based supply and utilizing hedging strategies to reduce commodity volatility risk. From the total enterprise viewpoint, we believe 3 key areas differentiate us from the competition and will allow us to create outsized stockholder returns over time.

First, we have derisked the company through market product and geographical diversification with retail energy operations across 16 U.S. jurisdictions, The U.K. and Scandinavia and the rapidly growing solar energy business in the U.S.

Second, we differentiate ourselves from the competition through our strong balance sheet with minimal to no debt, an asset-light business model, which not only reduces our relative cost of capital but allows us to self-fund and invest in growth opportunities, such as expanding our international retail energy and domestic solar businesses.

It also provides us the flexibility to opportunistically grow our U.S. retail business through a disciplined approach to taking share in existing markets or enter new markets as conditions permit. Finally, we believe the operational excellence we have gained in deregulated markets in the U.S. help drive growth and profits in our European business.

Ultimately, we believe these factors provide us with competitive advantages and will help us drive higher returns on the competition.

Moving into each of our businesses, we have 3 reporting segments, 2 of these are emerging growth businesses, Genie Retail International and Genie Renewables, and the third, Genie Retail USA, consistently generates cash in up or down markets on an annualized basis. Our retail energy business operates under several different names in both the U.S.

and Europe. Our core business today, Genie Retail U.S., is the largest and most mature of the 3 segments, generating the most revenue and highest margins and profits. It currently operates in 15 states and Washington, D.C. under a variety of names reselling electricity from both carbon-based and green sources as well as natural gas.

This business has proven to be financially stable and has made money in a variety of market environments, which has allowed the company to remain principally debt-free and make disciplined investments in growth. The competitive environment is fragmented with few large players and many independent small players.

We believe our competitive advantages, including our ability to self-fund expansion without borrowing, our strong risk management and trading programs that reduce commodity volatility, strong data and analytics capabilities and the depth and breadth of experience in our various sales channels. Our current U.S.

strategy revolves around opportunistically taking incremental share in our existing 16 markets. We also plan to leverage our installed base and marketing prowess to add new products and services.

Bottom line, we believe we have market-leading capabilities that will allow us to take share, introduce and upsell new products and successfully expand into new states as conditions warrant.

With respect to our current growth investments, we've been investing in and generating customer growth with expanding margins in Genie Retail International through an established presence in unregulated markets in the U.K. and Scandinavia. We believe this opportunity is comparable to the U.S.

opportunity with a few differentiators that we believe bode well for value creation. Between The U.K. and Scandinavia, there are roughly 60 million energy meters installed with about 80% of them in the U.K. We initially penetrated the U.K., which has shown strong growth, expanding margins and is now nearly capable self-funding continued growth.

In Scandinavia, we initially acquired our way into filling 2019, which similar to the U.K. is starting to mature, and we'll soon have the ability to sell on future growth in Finland while also expanding into new markets, such as our recent expansion into Sweden.

Our Scandinavian strategy is to centralize our enterprise functions to efficiently manage operations and create significant operating leverage as we continue to gain scale and in the years to come, move into other markets such as Denmark, Norway and possibly others. Finally, moving to Genie Renewables.

Our strategy here today is to leverage our existing geographic footprint and sales channels in the U.S. to offer a range of residential and commercial solar solutions. We aspire to capture a larger part of the solar value chain to both drive growth and higher margins.

While we are not ready to talk in full detail publicly about these plans, we have a robust pipeline of solar installations and projects that we expect will generate meaningful revenue and profits. We believe our Renewables segment has excellent potential, and we will provide more details as appropriate.

Today, we benefit from diversification both at the state level and with our international operations in solar business.

However, we realized that with 3 business segments, each of which is in a different stage of maturity, we have to prioritize growth investments and, therefore, can only take advantage of opportunities on a business-by-business basis.

Additionally, we believe that our valuation doesn't reflect the individual prospects and performance of each business as there are different value propositions for investors due to the higher growth in international energy operations and the moderate growth and cash flow generation of the U.S. retail business.

Given these factors, we have been conducting a strategic review of our businesses and are currently evaluating opportunities to unlock shareholder value by separating our international operations from the U.S.

business, potentially through a spin-off to existing Genie stockholders of a new publicly traded entity as we don't believe the combined company is being valued appropriately by investors. We believe doing so accomplishes several goals, and the rationale here is typical for companies carving out operations.

First, with a dedicated management team, the international operation can be solely focused on aggressive expansion in current and new markets through both organic and inorganic mechanisms without diluting Genie Energy stockholders. With less internal competition for resources, it will also allow Genie to grow more aggressively in its U.S.

retail business through market share gains in existing markets as well as potential expansion into new states as well as provide additional capital to expand our renewables operations as discussed earlier. We are currently still in the evaluation process, and we'll continue to provide updates on any material progress.

Now I'll talk briefly about our second quarter business trends and results as well as provide some insight in the third and fourth quarter expectations. Q2 was a strong quarter despite ongoing issues related to COVID-19.

We did have some moving parts in the financials due to the sale of our Japanese business and in Texas as the Governor signed relief legislation into law, which is expected to provide a minimum of $1.5 million of relief. We hope and expect the relief amount to grow as the legislature in Texas continues to discuss fair outcomes from the February storm.

In the U.S., our door-to-door marketing efforts are still not back to full strength due to government restrictions, but they are growing again. That growth, of course, continues to be dependent on what happens with COVID. In the meantime, our U.S.

Retail business contributed strong profitability even as the second quarter is usually the seasonally weakest part of our year. International operations revenue and gross profits increased as we continue to invest in our U.K. and Sweden operations, and the Finland business recorded material profitability.

The Renewables division was still small, executed on another profitable quarter and is poised for both revenue and gross profit growth in the future. We are excited about our potential and look forward to updating you further on the potential spin-off and other initiatives. Now over to Avi Goldin for his discussion of our Q2 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 3 months ended June 30, 2021. Throughout my remarks, I compare second quarter 2021 results to the second quarter of 2020.

Focusing on the year-over-year rather than sequential comparisons removes from consideration the seasonal factors that are characteristic of our retail energy business.

I do want to point out, however, that the second quarter, like our fourth, is characterized by low commodity consumption relative to peak heat and cooling seasons during the first and third quarters, respectively. I'd also like to point out that there are some moving parts this quarter that make an apples-to-apples comparison somewhat challenging.

For example, we acquired the part of Orbit Energy that we didn't already own in the fourth quarter of 2020. So our second quarter 2020 results were not fully consolidated into our financials as they are in the second quarter of 2021 under Genie Retail Energy International.

On the other side, we sold our Japanese operations in early 2Q '21, which generated a gain, but we recorded minimal revenue during the quarter. While in Q2 2020, a full quarter of Genie Japan revenue was recorded under Genie Retail Energy International.

That said, results this quarter were strong and comparable to the outstanding second quarter results we reported a year ago. Consolidated revenue increased 28% to $98 million, the highest level for any second quarter in our history.

The top line increase was generated predominantly by Genie Retail Energy International, where revenue increased to $28 million from $5 million in the year ago quarter. Results from Orbit Energy in the U.K. were not consolidating to repurchase the outstanding stake in the fourth quarter. In the year ago quarter, Orbit generated $15 million in revenue.

Setting aside the impact of consolidating Orbit revenue in the current period, the international business increased revenue by $8 million year-over-year, driven by the robust growth of our business in The U.K. and Scandinavia. Revenue at Genie Retail Energy, our domestic retail business, increased 1% to $67 million.

Electricity and natural gas consumption per meter, both increased compared to year ago quarter, which suggests that the boost in per meter consumption we've seen since the shift to work from home could have an enduring impact.

The increase in assumption was augmented by higher average sales per commodity unit, partially offset by a decrease in overall meters served. The net meter count decreased in the quarter as churn outpaced sales.

Both churn and sales are below historical levels as the industry continues to be limited and access to face-to-face marketing channels that traditionally drive growth.

Revenue for our Renewables business was $2.3 million, a decrease from $4.6 million in the year ago quarter, when we delivered the remainder of a large solar panel manufacturing order at a very low margin.

As Michael mentioned, we are excited about the potential of this segment as we continue to expand into higher-margin renewables-focused businesses, including our community solar installations and community solar projects.

Consolidated gross profit increased 22% to $24 million, a very strong second quarter results with increased contributions from all 3 of our reporting segments. Consolidated SG&A increased to $22.4 million from $16 million.

The increase was primarily at GRE International and reflects the consolidation of Orbit Energy, including Orbit customer acquisition expense, but also at Genie Retail Energy, driven by the partial resumption in door-to-door sales channel as well as other marketing spending.

Our consolidated income from operations totaled $1.4 million compared to $2.7 million in the year ago quarter. The key driver here was again the consolidation of Orbit Energy, which, while it is nearing the ability to self fund, is still losing money as we continue to invest in customer acquisition.

Adjusted EBITDA was $3.1 million compared to $3.5 million in the year ago quarter. Although the scale is small, it's worth noting that our Renewables business achieved positive income from operations and adjusted EBITDA for the second straight quarter. Genie Energy's income per diluted share was $0.19 compared to $0.06 in the year ago quarter.

Our bottom line benefited from a $4.2 million gain on the sale of Genie Japan and an unrealized gain of $2.9 million on marketable equity investments, predominantly our investment in Rafael Holdings that are mark-to-market. Turning now to the balance sheet.

At quarter end, cash, restricted cash and marketable equity securities totaled $50.9 million at June 30, a strong increase from $41.7 million 3 months earlier and our highest levels in recent years. From a working capital perspective, we have more than fully recovered from the impact of winter storm area in the first quarter.

To wrap up, our operating results were strong even compared to outstanding year ago quarter, and our bottom line results were positively impacted by the nonroutine gains, I mentioned earlier. Our balance sheet is in very good shape and provides us the flexibility to invest in the growth programs, as Michael discussed.

Now operator, I'll turn it back to you for Q&A..

[Operator Instructions]. And our first question today is coming from Aaron Shafter of Great Mountain Capital Management..

Congratulations on a solid quarter. The growth internationally was very impressive. You mentioned the sale of operations in Japan and adding to your bottom line.

About how many cents per share to that add to the quarter's gain?.

So the sale of the Japan business, the proceeds were about $4.2 million. I don't know when new factor tax, how many cents per share that is.

Avi, do you know offhand?.

I don't have the number, Aaron. I can follow-up with you afterwards on a closed room..

Sure. Okay.

So -- and you mentioned that you're exploring the splitting operations and spin-offs, and I'm wondering if you have any kind of timetable for that?.

We're hoping that the market will get an update in the next few weeks on our timing. We're hoping that we could potentially do the spin-off beforehand. But lot depends in the next few weeks..

Okay. So you've done a nice job of expanding internationally. I saw that meters really were pretty much flat in the U.S.

And I'm wondering if there's any new markets that you're going to be going in the U.S.?.

So no new -- brand-new markets that we're going into this quarter, but we are starting with some of our stronger sales channels into the existing markets that we had not yet used those marketing channels. And in Georgia, we expect to be starting telemarketing pretty soon..

Okay. And you just mentioned near the end of the call that your -- the situation with your financial assets was basically at an all-time high.

I'm wondering -- after the crazy once in 100 years weather event in Texas, were you decided to suspend the dividend and suspend buybacks when or not you feel that you're in a position to start paying dividends again and/or to buy back shares?.

So we didn't suspend buybacks. Actually, we bought back, in this quarter, 393,000 shares. That was this quarter. Last quarter, also bought back some stock. So our buyback program continues in an opportunistic way, and we continue to have that authority from the Board to continue that program as we see the opportunity arise.

In terms of the dividend, we are still keeping the dividend on hold. We believe that right now, our money is better spent on growth in the company. That is subject to change as we continue to assess in future quarters, but now we're trying to focus on growth..

Okay. And getting back to international and new markets, the previous Israeli government announced that it was going to be allowing competition in electricity market.

And just a couple of months ago, even less than 2 months ago, CalCom Energy, the sister company of the telecom company, announced that it was beginning to compete in the Israeli electricity market, and I'm wondering if that's something that the company has explored?.

We had some exploratory conversations about it already 2 or 3 years ago. My guess is we'll have more exploratory conversations about it, and we put it on hold at the time. And I imagine we'll have some more exploratory conversations now that the market is officially open.

Our thinking at the time was that the market is a bit small, given -- and that knowing how things go in Israel, players like the telecom businesses have just such a tremendous advantage -- first-mover advantage.

We thought at the time that it would be very difficult for us to get involved and really make profits, but it's absolutely something that we expect we'll be looking at in the next few months, next year..

And also in regards to Israel, I never got a chance in the last 2 calls, unfortunately, to ask about -- you announced that the Ness 10 well was a bust, but can you say exactly what you found at the Ness 10 well?.

What we were looking for in the Ness 10 well were signs of liquid hydrocarbons of oil that flows freely into the well, and that's just now went down. We continue to believe....

Was it just more bitumen?.

Yes. I mean we -- nothing really was flowing into the well. Nothing that could possibly be commercially viable is flowing into the well. We still -- we believe there's organic matter there. We have not been able to find it. And we've decided at this point in time, we just don't have the bandwidth and the right team to try to find it.

And given kind of where oil and gas is going, we just don't think it's the right to play right now..

Okay. And also near the end of the call, you mentioned the $1.5 million in relief that Governor Abbott had signed in Texas and the possibility of more to come.

And I'm wondering if you've got any kind of idea about how much more relief the company will see from the overpriced energy that you were forced to buy?.

Yes. So in -- the $1.5 million is our kind of minimum estimate for how much we should be able to get from the relief bill that was signed by the governor in the beginning of June. There is some question in the legislation as to who gets -- bids on some of that money.

And our contention is that if the money is divided in the way we believe it should be, our portion of that money could go up to $2.5 million just on that bill alone, but we've only accrued for the very minimum that we should see from the pool of money that was approved by Congress.

In terms of what else might be coming down the pipe, the lieutenant governor in the last congressional session did commit to trying to put together a special session in the next few months to address some of the other items that came out of the February storm that were unfair to our industry. Some of those items could be bigger tickets for us.

But until they get the session together and until there's a bill on the table, we don't have much more to say about it other than we will be actively fighting to get a bill on the table and get it passed by Congress. So we get the maximum really we can..

Our next question today is coming from Kevin Kenner, a Private Investor..

In the previous call, I asked about the net income that was attributable to Japan and the second one -- cent the per share. And you did refer to that it was $4.2 million. So that would be -- the press release says there was $5 million of net income. So we only have $800,000 of net income, which would probably be about $0.03 per common share.

Am I looking at that correct?.

Avi, do you want to take it?.

Yes, I'm not 100% clear on some of the math that you're doing there. But remember, between sort of the operating income and the net income line, it would be both the activities in Japan and also some mark-to-market on marketable securities. So those would all account for the difference net of taxes between those 2 lines.

So I'm not 100% clear on the math. But like Michael said, the gain on the sale was about $4.2 million..

Okay. Anyway, I'm going to be very honest about something here. I'm a retail investor in your stock, and you're a utility that doesn't pay a dividend. And you -- I guess you cut the dividend probably on the March 11, when you reported the previous quarter. And your stock went on like, I guess, it was like $7.30 down to $5.90.

I think the reason why is because you don't pay a dividend, okay. I'll just draw it out there because now you're talking about trying to increase shareholder value by splitting the company into part. That, I see, too, wasting coming out of that. That is my opinion. You are free to run this company as you want, and I'm free to sell.

And you look more like a seller today than did yesterday. Thank you for your time..

Appreciate your comments..

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