Genie Energy(GNE) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited statements show increased assets and revenue but decreased net income due to lower income from discontinued operations for the six months ended June 30, 2023 Consolidated Balance Sheets Total assets and equity increased as of June 30, 2023, compared to year-end 2022, while total liabilities decreased Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $110,827 | $98,571 | | Total current assets | $243,243 | $227,633 | | Total assets | $285,957 | $277,615 | | Liabilities & Equity | | | | Total current liabilities | $87,195 | $99,198 | | Total liabilities | $89,972 | $103,971 | | Total Genie Energy Ltd. stockholders' equity | $209,310 | $187,118 | | Total equity | $195,985 | $173,644 | Consolidated Statements of Operations Revenues grew in Q2 and the first half of 2023, but net income declined year-over-year primarily due to a significant drop in income from discontinued operations Q2 2023 vs Q2 2022 Performance (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Total Revenues | $93,463 | $66,940 | | Gross Profit | $38,208 | $29,820 | | Income from Operations | $15,035 | $11,772 | | Net Income from Continuing Operations | $12,166 | $8,055 | | Income from Discontinued Operations | $3,173 | $29,318 | | Net Income Attributable to Genie | $15,156 | $34,479 | | Diluted EPS | $0.57 | $1.30 | Six Months 2023 vs 2022 Performance (in thousands, except per share data) | Metric | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | | Total Revenues | $198,739 | $152,865 | | Gross Profit | $71,494 | $76,926 | | Income from Operations | $26,310 | $38,734 | | Net Income from Continuing Operations | $23,503 | $26,721 | | Income from Discontinued Operations | $6,227 | $27,388 | | Net Income Attributable to Genie | $29,586 | $52,368 | | Diluted EPS | $1.12 | $1.97 | Consolidated Statements of Cash Flows Net cash from operations decreased in the first half of 2023, while significantly lower cash was used in investing activities compared to the prior year Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $20,240 | $27,551 | | Net cash used in investing activities | ($1,563) | ($51,675) | | Net cash used in financing activities | ($9,597) | ($11,154) | | Net increase (decrease) in cash | $9,043 | ($35,398) | Notes to Consolidated Financial Statements The notes detail accounting policies, the discontinuation of European operations, segment information, and significant equity transactions including a preferred stock redemption - The company operates through two reportable segments: Genie Retail Energy (GRE) and Genie Renewables, with the GRE International segment discontinued in Q3 2022[22][115] - In Q1 2023, the company received a one-time tax credit of $3.1 million related to payroll taxes from prior years, recognized as a gain in other income[25] - Operations in Finland and Sweden were discontinued in Q3 2022 due to market volatility, with the Finnish subsidiary declaring bankruptcy and being deconsolidated[26][27][28] - In June 2023, the company completed the redemption of all outstanding shares of its Series 2012-A Preferred Stock for an aggregate amount of $6.5 million plus accrued dividends[89][217] - In June 2023, warrants to purchase 1,048,218 shares of Class B common stock were exercised for $5.0 million[90] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased GRE revenue offset by compressed margins, Genie Renewables' expansion-related losses, and the company's strong liquidity position Results of Operations Higher gross profit from the GRE segment drove an increase in consolidated income from operations in Q2 2023, though six-month results were down year-over-year Genie Retail Energy (GRE) Performance - Q2 2023 vs Q2 2022 (in thousands) | Metric | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $89,733 | $63,161 | 42.1% | | Gross Profit | $37,476 | $29,002 | 29.2% | | Income from Operations | $18,417 | $14,413 | 27.8% | - GRE's electricity revenue increased 51.1% in Q2 2023 YoY, driven by a 44.9% increase in the average number of meters served and a 2.7% increase in the average rate per kWh[168] - GRE's gross meter acquisitions were 75,000 in Q2 2023, compared to 34,000 in Q2 2022, following the resumption of customer acquisition activities[173] Genie Renewables Performance - Q2 2023 vs Q2 2022 (in thousands) | Metric | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $3,730 | $3,779 | (1.3)% | | Gross Profit | $732 | $818 | (10.5)% | | Loss from Operations | ($1,276) | ($517) | 146.8% | - Genie Renewables' SG&A expenses increased 50.4% in Q2 2023 YoY, primarily due to increased headcount, consulting fees, and warehousing costs[187] Liquidity and Capital Resources The company maintains a strong liquidity position with significant cash and working capital, while continuing to return capital to shareholders and fund solar projects - As of June 30, 2023, the company had $110.8 million in unrestricted cash and cash equivalents and working capital of $156.0 million[198][199] - In the first six months of 2023, the company paid $3.9 million in common stock dividends and $0.9 million in preferred stock dividends[213][214] - The company completed the full redemption of its Preferred Stock in June 2023, paying a total of $8.5 million to retire all outstanding shares[216][217] - The company has purchase commitments of $122.9 million at June 30, 2023, with $108.1 million for future electricity purchases[205][129] - The company has a $3.0 million credit line facility with JPMorgan Chase, maturing on December 31, 2023, with no outstanding letters of credit[220][133] Quantitative and Qualitative Disclosures About Market Risks The company's primary market risk is energy price volatility, which it manages with derivatives, resulting in a significant loss in H1 2023 versus a large gain in H1 2022 - The primary market risk exposure is the price of natural gas and electricity purchases and sales[223] - The company uses derivative instruments (options, swaps) to hedge against price volatility but does not apply hedge accounting[224] Recognized (Loss) Gain on Derivatives (in millions) | Period | Amount | | :--- | :--- | | Three Months Ended June 30, 2023 | ($6.0) | | Six Months Ended June 30, 2023 | ($17.1) | | Three Months Ended June 30, 2022 | $22.6 | | Six Months Ended June 30, 2022 | $60.2 | Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2023[225] - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2023[226] PART II. OTHER INFORMATION Legal Proceedings The company resolved a complaint with the Illinois Attorney General and settled other regulatory reviews without significant financial impact - In April 2023, the Office of the Attorney General of the State of Illinois dismissed its complaint against Residents Energy, concluding an investigation that began in 2019[126] - The company has settled disputes with regulators in Connecticut and Maine, involving temporary market withdrawals and marketing pauses[124][128] Risk Factors No material changes have been reported from the risk factors disclosed in the company's most recent Annual Report on Form 10-K - No material changes from the risk factors included in the Annual Report on Form 10-K for the year ended December 31, 2022[229] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase common stock under its public program but completed the full redemption of its outstanding Preferred Stock in Q2 2023 - No shares of Class B common stock were purchased under the publicly announced repurchase program in Q2 2023, with 4,668,973 shares remaining available[230] - 158,109 shares of Class B common stock were repurchased from an officer at an average price of $15.34 per share to cover costs related to stock option exercises[230][231] - In Q2 2023, the company redeemed a total of 865,711 shares of its Preferred Stock at a price of $8.50 per share, completing the full redemption of the series[232] Defaults upon Senior Securities The company reports no defaults upon its senior securities - None[233] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[233] Other Information The company reports no other information for this period - None[233] Exhibits This section lists the required CEO and CFO certifications and XBRL data files filed with the report - Exhibits filed include CEO and CFO certifications and XBRL interactive data files[234]