Genie Energy(GNE) - 2023 Q4 - Annual Report

Part I Business Genie Energy Ltd operates as an end-to-end energy services provider through two primary segments: Genie Retail Energy (GRE) and Genie Renewables - The company operates through two reportable segments: Genie Retail Energy (GRE) and Genie Renewables[12][22] - Operations in the United Kingdom, Finland, and Sweden have been discontinued and are accounted for as such The former GRE International segment's remaining assets were combined with corporate[16][21] - In November 2023, the company acquired a portfolio of ten operating solar system facilities in Ohio and Michigan[29] - All remaining outstanding shares of the company's Series A 2012 Preferred Stock were redeemed in June 2023[30] Genie Retail Energy (GRE) GRE constitutes the core of Genie's business, representing 95.6% of consolidated revenue in 2023, operating as a Retail Energy Provider (REP) in 18 states and Washington D.C GRE Key Metrics (as of Dec 31, 2023 vs 2022) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Meters | 361,000 | 275,000 | | Electric Meters | 279,000 | 196,000 | | Natural Gas Meters | 82,000 | 79,000 | | Total RCEs | 350,000 | 262,000 | | Electric RCEs | 272,000 | 181,000 | | Natural Gas RCEs | 78,000 | 81,000 | GRE Revenue Breakdown (2023 vs 2022) | Revenue Source | 2023 Revenue | 2022 Revenue | | :--- | :--- | :--- | | Electricity Sales | $350.8 million | $241.8 million | | Natural Gas Sales | $56.0 million | $62.1 million | | Total GRE Revenue | $409.9 million | $304.0 million | - GRE's revenue represented approximately 95.6% of the company's total consolidated revenue in 2023[43] - As of December 31, 2023, 84.4% of GRE's net accounts receivable were under a Purchase of Receivables (POR) program, mitigating credit risk[55] Genie Renewables The Genie Renewables segment operates in the solar and commercial energy markets through three main businesses: Genie Solar, CityCom Solar, and Diversegy, with growth influenced by government incentives - Genie Renewables consists of three main businesses: Genie Solar (solar project development), CityCom Solar (community solar marketing), and Diversegy (energy brokerage)[82][83][84] Genie Renewables 2023 Revenue Contribution | Business | % of Segment Revenue | % of Consolidated Revenue | | :--- | :--- | :--- | | Diversegy | 39.3% | 1.7% | | CityCom Solar | 36.9% | 1.6% | | Genie Solar | 23.8% | 1.0% | - Genie Solar's current portfolio includes a 9.4 MW operating portfolio, ~10 MW of community solar projects under construction, and an additional 72 MW of projects under site control[92] - The Inflation Reduction Act (IRA) extended the Investment Tax Credit (ITC) and established a base level of 30% for qualifying projects, with potential for additional credits, supporting the solar business[100] Risk Factors The company faces significant risks primarily related to its Genie Retail Energy (GRE) segment, including intense competition, potential adverse regulatory changes, and financial impacts from weather and commodity price volatility - The company faces risks from potential regulatory changes in key states As of Dec 31, 2023, New York, Maryland, and Massachusetts represented 16.1%, 3.2%, and 10.9% of GRE's total meters, respectively[129][130][131] - Unusual weather conditions, such as the 2021 Texas winter storm, can significantly impact financial results The 2021 storm had an approximate $10.6 million negative impact on consolidated profitability[133][137] - The company faces uncertainty from its exit from the Finnish market, including a claim filed by the bankruptcy administrator for €35.2 million (approx $38.9 million) related to the sale of swap instruments[175] - The company is controlled by its Chairman, Howard S Jonas, who as of March 13, 2024, controlled approximately 61.0% of the combined voting power of the company's capital stock[183][184] Unresolved Staff Comments There are no unresolved staff comments - None[186] Cybersecurity The company's cybersecurity risk management program is based on industry frameworks such as NIST and ISO, with Board oversight and management handling day-to-day assessment - The cybersecurity risk management strategy is based on recognized industry frameworks, including those from the National Institute of Standards and Technology (NIST) and the International Organization for Standardization (ISO)[187] - The Audit Committee assists the Board of Directors with oversight by reviewing and discussing cybersecurity risks with management[191] Properties The company's headquarters are in leased office space in Newark, New Jersey, with additional leased offices for GRE and owned/operated solar arrays for Genie Renewables - The company's headquarters are leased at 520 Broad St, Newark, New Jersey[194] - Genie Solar owns and operates a portfolio of 12 solar arrays totaling 9.4 megawatts in Ohio and Michigan[196] Legal Proceedings Information regarding certain legal proceedings is incorporated by reference from Note 15 of the Notes to Consolidated Financial Statements - Details on legal proceedings are provided in Note 15 to the Consolidated Financial Statements[197] Mine Safety Disclosures This item is not applicable to the company - Not applicable[198] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class B common stock trades on the NYSE under "GNE", and in June 2023, all outstanding preferred stock was redeemed, with limited share repurchases in Q4 2023 - The company's Class B common stock is traded on the New York Stock Exchange under the symbol "GNE"[200] - On June 16, 2023, the company completed the redemption of all outstanding shares of its Series 2012-A Preferred Stock[203] Issuer Purchases of Equity Securities (Q4 2023) | Period | Total Shares Purchased | Average Price per Share | Shares Remaining in Program | | :--- | :--- | :--- | :--- | | Oct 1 – 31, 2023 | — | $ — | 4,665,195 | | Nov 1 - 30, 2023 | 26,683 | $ 20.62 | 4,661,417 | | Dec 1 – 31, 2023 | — | $ — | 4,661,417 | | Total | 26,683 | $ 20.62 | 4,661,417 | Selected Financial Data As a smaller reporting company, Genie Energy Ltd is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide this information[210] Management's Discussion and Analysis of Financial Condition and Results of Operations In 2023, consolidated revenue increased to $428.7 million, but gross profit and income from operations decreased significantly due to a captive insurance liability and lower GRE margins, while maintaining a strong liquidity position Results of Operations For fiscal year 2023, consolidated revenue grew 35.9% to $428.7 million, but gross profit fell to $146.2 million and income from operations plummeted 87.1% to $10.0 million, primarily due to a $45.1 million captive insurance liability Consolidated Results of Operations (2023 vs 2022) | (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Total Revenues | $428,708 | $315,539 | | Gross Profit | $146,206 | $154,782 | | Income from Operations | $10,009 | $77,754 | | Net Income from Continuing Operations | $13,869 | $56,486 | | Net Income Attributable to Genie Energy Ltd. | $19,538 | $87,805 | Genie Retail Energy (GRE) Performance (2023 vs 2022) | (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Total Revenues | $409,879 | $303,972 | | Gross Profit | $143,360 | $152,982 | | Income from Operations | $71,911 | $92,557 | Genie Renewables Performance (2023 vs 2022) | (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Revenue | $18,829 | $11,567 | | Gross Profit | $2,846 | $1,800 | | (Loss) from Operations | $(5,789) | $(3,528) | - Corporate loss from operations increased significantly to $(56.1) million in 2023 from $(11.3) million in 2022, primarily due to a $45.1 million provision for a newly established captive insurance liability[280][281] Liquidity and Capital Resources As of December 31, 2023, the company maintained a strong liquidity position with $107.6 million in unrestricted cash and cash equivalents, $131.6 million in working capital, and $50.9 million in cash flow from continuing operations - The company held $107.6 million in unrestricted cash and cash equivalents and had working capital of $131.6 million at December 31, 2023[291] Summary of Cash Flows (2023 vs 2022) | (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Cash from Operating Activities | $50,938 | $66,004 | | Cash used in Investing Activities | $(10,005) | $(5,234) | | Cash used in Financing Activities | $(15,157) | $(25,523) | - Key financing activities in 2023 included paying $8.0 million in common stock dividends and redeeming $8.4 million in preferred stock[310][312] - The company has outstanding purchase commitments of $144.1 million as of December 31, 2023, with $128.3 million for electricity purchases[296] Quantitative and Qualitative Disclosures about Market Risks As a smaller reporting company, this section is not required, but the company notes its primary market risk is the price of natural gas and electricity, which it mitigates using hedging instruments - The company's primary market risk exposure is the price of its natural gas and electricity purchases and sales[319] - To reduce the effects of commodity price volatility, the company uses hedging instruments, including put and call options and swaps These are not designated for hedge accounting[320] Financial Statements and Supplementary Data This section incorporates by reference the company's Consolidated Financial Statements and the report of the independent registered public accounting firm, included from page F-1 onwards - The Consolidated Financial Statements are incorporated by reference and begin on page F-1 of the report[321] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure - None[322] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2023, a conclusion affirmed by the independent auditor's unqualified opinion - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of December 31, 2023[323] - Management assessed internal control over financial reporting using the COSO framework and concluded it was effective as of December 31, 2023[327][328] - The company's independent auditor, Zwick CPA, PLLC, audited the effectiveness of internal control over financial reporting and issued an unqualified opinion[329] Other Information There is no other information to report - None[331] Disclosure Regarding Foreign Jurisdictions that Prevent Inspection This item is not applicable - Not applicable[332] Part III Directors, Executive Officers and Corporate Governance The company lists its executive officers and Board of Directors, with further information incorporated by reference from its definitive proxy statement - The company's executive officers are Michael Stein (CEO) and Avi Goldin (CFO)[334] - Howard S Jonas serves as the Chairman of the Board of Directors[334] - Additional required information is incorporated by reference from the company's Proxy Statement[335] Executive Compensation The information required for this item will be contained in the company's Proxy Statement for its Annual Stockholders Meeting and is incorporated by reference - Information is incorporated by reference from the Proxy Statement[339] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required for this item will be contained in the company's Proxy Statement for its Annual Stockholders Meeting and is incorporated by reference - Information is incorporated by reference from the Proxy Statement[340] Certain Relationships and Related Transactions, and Director Independence The information required for this item will be contained in the company's Proxy Statement for its Annual Stockholders Meeting and is incorporated by reference - Information is incorporated by reference from the Proxy Statement[341] Principal Accounting Fees and Services The information required for this item will be contained in the company's Proxy Statement for its Annual Stockholders Meeting and is incorporated by reference - Information is incorporated by reference from the Proxy Statement[342] Part IV Exhibits, Financial Statement Schedules This section lists the documents filed as part of the Form 10-K report, including independent auditor reports and various corporate and legal exhibits - This section contains a list of all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and required certifications[345][346] Form 10-K Summary No Form 10-K summary was provided - None[347]