UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31, 20222023
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-35327
GENIE ENERGY LTD.
(Exact Name of Registrant as Specified in its Charter)
Delaware |
| 45-2069276 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
|
|
|
520 Broad Street, Newark, New Jersey |
| 07102 |
(Address of principal executive offices) |
| (Zip Code) |
(973) 438-3500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b)-2 of the Exchange Act:
Title of each Class | Trading Symbol | Name of exchange of which registered |
Class B common stock, par value $0.01 per share | GNE | New York Stock Exchange |
Series 2012-A Preferred stock, par value | GNE-PRA | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every InteractiveInteractive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes ☒ No ☐
Indicate by checkcheck mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☒ |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anyany new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒
As of May 6, 20228, 2023, the registrant had the following shares outstanding:
Class A common stock, $0.01 par value: | 1,574,326 shares |
Class B common stock, $0.01 par value: |
|
GENIE ENERGY LTD.
i |
GENIE ENERGY LTD.
(in thousands, except per share amounts)
| March 31, |
| December 31, |
| March 31, |
| December 31, |
| ||||||
| (Unaudited) |
| (Note 1) |
| (Unaudited) |
| (Note 1) |
| ||||||
Assets |
|
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|
|
|
|
|
| ||||||
Current assets: |
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents | $ | 88,185 |
| $ | 95,492 |
| $ | 105,220 |
| $ | 98,571 |
| ||
Restricted cash—short-term | 6,496 | 6,657 | 3,791 | 6,007 | ||||||||||
Marketable equity securities | 657 | 1,336 | 4,663 | 490 | ||||||||||
Trade accounts receivable, net of allowance for doubtful accounts of $6,781 and $6,365 at March 31, 2022 and December 31, 2021, respectively |
| 48,790 |
| 52,357 |
| |||||||||
Trade accounts receivable, net of allowance for doubtful accounts of $5,383 and $4,826 at March 31, 2023 and December 31, 2022, respectively |
| 65,203 |
| 55,134 |
| |||||||||
Inventory |
| 18,865 |
| 17,720 |
|
| 19,345 |
| 15,714 |
| ||||
Prepaid expenses |
| 6,638 |
| 4,994 |
|
| 7,855 |
| 6,822 |
| ||||
Other current assets |
| 17,393 |
|
| 21,789 |
|
| 5,363 |
|
| 6,207 |
| ||
Current assets of discontinued operations | 35,750 | 38,688 | ||||||||||||
Total current assets |
| 187,024 |
| 200,345 |
|
| 247,190 |
| 227,633 |
| ||||
Property and equipment, net |
| 350 |
| 297 |
| 964 | 891 | |||||||
Goodwill |
| 11,709 |
| 11,755 |
|
| 9,998 |
| 9,998 |
| ||||
Other intangibles, net |
| 3,529 |
| 3,648 |
|
| 3,033 |
| 3,133 |
| ||||
Deferred income tax assets, net |
| 5,204 |
| 4,259 |
|
| 5,799 |
| 5,799 |
| ||||
Other assets |
| 12,369 |
|
| 9,161 |
|
| 13,506 |
|
| 13,856 |
| ||
Noncurrent assets of discontinued operations | 12,520 | 16,305 | ||||||||||||
Total assets | $ | 220,185 |
| $ | 229,465 |
| $ | 293,010 |
| $ | 277,615 |
| ||
Liabilities and equity |
|
|
|
|
|
|
|
|
|
| ||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
| ||||
Trade accounts payable |
| 21,460 |
| 33,554 |
|
| 19,894 |
| 25,313 |
| ||||
Accrued expenses |
| 42,272 |
| 39,523 |
|
| 38,568 |
| 35,659 |
| ||||
Income taxes payable |
| 16,352 |
| 9,792 |
|
| 27,580 |
| 22,576 |
| ||||
Due to IDT Corporation, net |
| 141 |
| 532 |
|
| 98 |
| 165 |
| ||||
Other current liabilities |
| 1,848 |
|
| 2,125 |
|
| 7,580 |
|
| 4,549 |
| ||
Current liabilities of discontinued operations | 8,934 | 30,766 | 11,076 | 10,936 | ||||||||||
Total current liabilities |
| 91,007 |
| 116,292 |
|
| 104,796 |
| 99,198 |
| ||||
Other liabilities |
| 2,886 |
|
| 2,384 |
|
| 1,894 |
|
| 4,087 |
| ||
Noncurrent liabilities of discontinued operations | 686 | 686 | ||||||||||||
Total liabilities |
| 93,893 |
| 118,676 |
|
| 107,376 |
| 103,971 |
| ||||
Commitments and contingencies |
|
|
|
| — |
| — |
| ||||||
Equity: |
|
|
|
|
|
|
|
|
|
| ||||
Genie Energy Ltd. stockholders’ equity: |
|
|
|
|
|
|
|
|
|
| ||||
Preferred stock, $0.01 par value; authorized shares—10,000: |
|
|
|
|
|
|
|
|
|
| ||||
Series 2012-A, designated shares—8,750; at liquidation preference, consisting of 2,322 shares issued and outstanding at March 31, 2022 and December 31, 2021 | 19,743 | 19,743 | ||||||||||||
Class A common stock, $0.01 par value; authorized shares—35,000; 1,574 shares issued and outstanding at March 31, 2022 and December 31, 2021 | 16 | 16 | ||||||||||||
Class B common stock, $0.01 par value; authorized shares—200,000; 26,642 and 26,620 shares issued and 24,625 and 24,615 shares outstanding at March 31, 2022 and December 31, 2021, respectively | 266 | 266 | ||||||||||||
Series 2012-A, designated shares—8,750; at liquidation preference, consisting of 866 and 983 shares issued and outstanding at March 31, 2023 and December 31, 2022 | 7,359 | 8,359 | ||||||||||||
Class A common stock, $0.01 par value; authorized shares—35,000; 1,574 shares issued and outstanding at March 31, 2023 and December 31, 2022 | 16 | 16 | ||||||||||||
Class B common stock, $0.01 par value; authorized shares—200,000; 27,159 and 27,126 shares issued and 24,439 and 24,421 shares outstanding at March 31, 2023 and December 31, 2022, respectively | 271 | 271 | ||||||||||||
Additional paid-in capital |
| 144,089 |
| 143,249 |
|
| 147,445 |
| 146,546 |
| ||||
Treasury stock, at cost, consisting of 2,017 and 2,005 shares of Class B common stock at March 31, 2022 and December 31, 2021 | (14,105 | ) | (14,034 | ) | ||||||||||
Treasury stock, at cost, consisting of 2,720 and 2,705 shares of Class B common stock at March 31, 2023 and December 31, 2022 | (19,175 | ) | (19,010 | ) | ||||||||||
Accumulated other comprehensive income | 3,499 | 3,160 | 1,895 | 1,926 | ||||||||||
Accumulated deficit |
| (13,530 | ) |
| (29,115 | ) | ||||||||
Retained earnings |
| 61,333 |
| 49,010 | ||||||||||
Total Genie Energy Ltd. stockholders’ equity |
| 139,978 |
|
| 123,285 |
| 199,144 |
|
| 187,118 | ||||
Noncontrolling interests |
| (13,686 | ) |
| (12,496 | ) |
| (13,510 | ) |
| (13,474 | ) | ||
Total equity |
| 126,292 |
|
| 110,789 |
| 185,634 |
|
| 173,644 | ||||
Total liabilities and equity | $ | 220,185 |
| $ | 229,465 |
| $ | 293,010 |
| $ | 277,615 |
|
See accompanying notes to consolidated financial statements.
1 |
GENIE ENERGY LTD.
| Three Months Ended March 31, | ||||||
| 2022 | 2021 | |||||
| (in thousands, except per share data) | ||||||
Revenues: | |||||||
Electricity | $ | 71,784 | $ | 87,613 | |||
Natural gas | 24,504 | 17,280 | |||||
Other | 2,241 | 2,597 | |||||
Total revenues | 98,529 | 107,490 | |||||
Cost of revenues | 52,987 | 94,836 | |||||
Gross profit | 45,542 | 12,654 | |||||
Operating expenses and losses: | |||||||
Selling, general and administrative (i) | 21,109 | 18,119 | |||||
Income (loss) from operations | 24,433 | (5,465 | ) | ||||
Interest income | 17 | 84 | |||||
Interest expense | (50 | ) | (182 | ) | |||
Unrealized (loss) gain on marketable equity securities and investments | (652 | ) | 4,107 | ||||
Other (loss) income, net | (498 | ) | 407 | ||||
Income (loss) before income taxes | 23,250 | (1,049 | ) | ||||
Provision for income taxes | (6,514 | ) | (535 | ) | |||
Net income (loss) from continuing operations | 16,736 | (1,584 | ) | ||||
Loss from discontinued operations, net of taxes | 0— | (1,110 | ) | ||||
Net income (loss) | 16,736 | (2,694 | ) | ||||
Net loss attributable to noncontrolling interests | (1,153 | ) | (708 | ) | |||
Net income (loss) attributable to Genie Energy Ltd. | 17,889 | (1,986 | ) | ||||
Dividends on preferred stock | (370 | ) | (370 | ) | |||
Net income (loss) attributable to Genie Energy Ltd. common stockholders | $ | 17,519 | $ | (2,356 | ) | ||
| |||||||
Amounts attributable to Genie Energy Ltd. common stockholders | |||||||
Income (loss) from continuing operations | $ | 17,519 | $ | (1,246 | ) | ||
Loss from discontinued operations | 0— | (1,110 | ) | ||||
Net income (loss) attributable to Genie Energy Ltd. common stockholders | $ | 17,519 | (2,356 | ) | |||
Earnings (loss) per share attributable to Genie Energy Ltd. common stockholders: | |||||||
Basic: | |||||||
Income (loss) from continuing operations | $ | 0.68 | $ | (0.05 | ) | ||
Loss from discontinued operations | 0— | (0.04 | ) | ||||
Net income (loss) attributable to Genie Energy Ltd. common stockholders | $ | 0.68 | $ | (0.09 | ) | ||
Diluted | |||||||
Income (loss) from continuing operations | $ | 0.67 | $ | (0.05 | ) | ||
Loss from discontinued operations | 0— | (0.04 | ) | ||||
Net income (loss) attributable to Genie Energy Ltd. common stockholders | $ | 0.67 | $ | (0.09 | ) | ||
Weighted-average number of shares used in calculation of earnings (loss) per share: | |||||||
Basic | 25,764 | 26,004 | |||||
Diluted | 26,128 | 26,004 | |||||
| |||||||
Dividends declared per common share | $ | 0.075 | $ | 0— | |||
(i) Stock-based compensation included in selling, general and administrative expenses | $ | 840 | $ | 589 |
| Three Months Ended March 31, | |||||||
| 2023 | 2022 | ||||||
| (in thousands, except per share data) | |||||||
Revenues: | ||||||||
Electricity | $ | 74,487 | $ | 59,380 | ||||
Natural gas | 26,925 | 24,504 | ||||||
Other | 3,864 | 2,042 | ||||||
Total revenues | 105,276 | 85,926 | ||||||
Cost of revenues | 71,990 | 38,819 | ||||||
Gross profit | 33,286 | 47,107 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative (i) | 22,011 | 20,145 | ||||||
Income from operations | 11,275 | 26,962 | ||||||
Interest income | 974 | 17 | ||||||
Interest expense | (19 | ) | (50 | ) | ||||
Loss on marketable equity securities and investments | (71 | ) | (652 | ) | ||||
Other income (loss), net | 3,246 | (498 | ) | |||||
Income before income taxes | 15,405 | 25,779 | ||||||
Provision for income taxes | (4,068 | ) | (7,112 | ) | ||||
Net income from continuing operations | 11,337 | 18,667 | ||||||
Income (loss) from discontinued operations, net of taxes | 3,055 | (1,932 | ) | |||||
Net income | 14,392 | 16,735 | ||||||
Net loss attributable to noncontrolling interests, net | (39 | ) | (1,154 | ) | ||||
Net income attributable to Genie Energy Ltd. | 14,431 | 17,889 | ||||||
Dividends on preferred stock | (157 | ) | (370 | ) | ||||
Net income attributable to Genie Energy Ltd. common stockholders | $ | 14,274 | $ | 17,519 | ||||
| ||||||||
Amounts attributable to Genie Energy Ltd. common stockholders | ||||||||
Continuing operations | $ | 11,218 | $ | 19,294 | ||||
Discontinued operations | 3,056 | (1,775 | ) | |||||
Net income attributable to Genie Energy Ltd. common stockholders | $ | 14,274 | $ | 17,519 | ||||
Earnings per share attributable to Genie Energy Ltd. common stockholders: | ||||||||
Basic: | ||||||||
Continuing operations | $ | 0.44 | $ | 0.75 | ||||
Discontinued operations | 0.12 | (0.07 | ) | |||||
Earnings per share attributable to Genie Energy Ltd. common stockholders | $ | 0.56 | $ | 0.68 | ||||
Diluted | ||||||||
Continuing operations | $ | 0.42 | $ | 0.74 | ||||
Discontinued operations | 0.12 | (0.07 | ) | |||||
Earnings per share attributable to Genie Energy Ltd. common stockholders | $ | 0.54 | $ | 0.67 | ||||
Weighted-average number of shares used in calculation of earnings per share: | ||||||||
Basic | 25,326 | 25,764 | ||||||
Diluted | 26,620 | 26,128 | ||||||
| ||||||||
Dividends declared per common share | $ | 0.075 | $ | 0.075 | ||||
(i) Stock-based compensation included in selling, general and administrative expenses | $ | 899 | $ | 840 |
See accompanying notes to consolidated financial statements.
2 |
GENIE ENERGY LTD.
(Unaudited)
| Three Months Ended |
| Three Months Ended March 31, | |||||||||||
| 2022 |
| 2021 |
| 2023 | 2022 | ||||||||
| (in thousands) | (in thousands) | ||||||||||||
Net income (loss) | $ | 16,736 |
| $ | (2,694 | ) | ||||||||
Net income | $ | 14,392 | $ | 16,735 | ||||||||||
Other comprehensive loss: |
|
|
|
|
|
| ||||||||
Foreign currency translation adjustments | 302 |
|
| (342 | ) | (28 | ) | 303 | ||||||
Comprehensive income (loss) | 17,038 |
|
| (3,036 | ) | |||||||||
Comprehensive income | 14,364 | 17,038 | ||||||||||||
Comprehensive gain attributable to noncontrolling interests | 1,190 |
|
| 478 | 36 | 1,190 | ||||||||
Comprehensive income (loss) attributable to Genie Energy Ltd. | $ | 18,228 |
| $ | (2,558 | ) | ||||||||
Comprehensive income attributable to Genie Energy Ltd. | $ | 14,400 | $ | 18,228 |
See accompanying notes to consolidated financial statements.
3 |
GENIE ENERGY LTD.
Genie Energy Ltd. Stockholders
|
| Preferred |
| Class A |
| Class B |
| Additional |
|
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| Accumulated Other |
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| Preferred |
| Class A |
| Class B |
| Additional |
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| Accumulated Other |
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|
| Stock |
| Common Stock |
| Common Stock |
| Paid-In |
| Treasury |
| Comprehensive |
| Accumulated |
| Noncontrolling |
| Total |
|
| Stock |
| Common Stock |
| Common Stock |
| Paid-In |
| Treasury |
| Comprehensive |
| Retained |
| Noncontrolling |
| Total |
| ||||||||||||||||||||||||||||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Stock |
| Income |
| Deficit |
| Interests |
| Equity |
|
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Stock |
| Income |
| Earnings |
| Interests |
| Equity |
| ||||||||||||||||||||||
BALANCE AT JANUARY 1, 2022 | 2,322 | $ | 19,743 | 1,574 | $ | 16 | 26,633 | $ | 266 | $ | 143,249 | $ | (14,034 | ) | $ | 3,160 | $ | (29,115 | ) | $ | (12,496 | ) | $ | 110,789 | ||||||||||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock ($ 0.01594 per share) | — | 0— | — | 0— | — | 0— | 0— | 0— | 0— | (370 | ) | 0— | (370 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE AT JANUARY 1, 2023 | 983 | $ | 8,359 | 1,574 | $ | 16 | 27,126 | $ | 271 | $ | 146,546 | $ | (19,010 | ) | $ | 1,926 | $ | 49,010 | $ | (13,474 | ) | $ | 173,644 | |||||||||||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock ($ 0.1594 per share) | — | — | — | — | — | — | — | — | — | (157 | ) | — | (157 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends on common stock ($0.075 per share) | — | 0— | — | 0— | — | 0— | 0— | 0— | 0— | (1,934 | ) | 0— | (1,934 | ) | — | — | — | — | — | — | — | — | — | (1,951 | ) | — | (1,951 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 0— | 0— | 0— | 0— | 9 | 0— | 840 | 0— | 0— | 0— | 0— | 840 | — | — | — | — | 33 | — | 899 | — | — | — | — | 899 | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Class B common stock purchased from employees | — | 0— | — | 0— | — | 0— | 0— | (71 | ) | 0— | 0— | 0— | (71 | ) | — | — | — | — | — | — | — | (165 | ) | — | — | — | (165 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Redemption of preferred stock | (117 | ) | (1,000 | ) | — | — | — | — | — | — | — | — | — | (1,000 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | 0— | — | 0— | — | 0— | 0— | 0— | 339 | 0— | (37 | ) | 302 | — | — | — | — | — | — | — | — | (31 | ) | — | 3 | (28 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) for three months ended March 31, 2022 | — | 0— | — | 0— | — | 0— | 0— | 0— | 0— | 17,889 | (1,153 | ) | 16,736 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE AT MARCH 31, 2022 | 2,322 | 19,743 | 1,574 | 16 | 26,642 | 266 | 144,089 | (14,105 | ) | 3,499 | (13,530 | ) | (13,686 | ) | 126,292 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) for three months ended March 31, 2023 | — | — | — | — | — | — | — | — | — | 14,431 | (39 | ) | 14,392 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE AT MARCH 31, 2023 | 866 | $ | 7,359 | 1,574 | $ | 16 | 27,159 | $ | 271 | $ | 147,445 | $ | (19,175 | ) | $ | 1,895 | $ | 61,333 | $ | (13,510 | ) | $ | 185,634 |
4 |
GENIE ENERGY LTD.CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)thousands, except dividend per share) — (Continued)
Genie Energy Ltd. Stockholders
|
| Preferred |
| Class A |
| Class B |
| Additional |
|
|
| Accumulated Other |
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| |||||||||||||||||
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| Stock |
| Common Stock |
| Common Stock |
| Paid-In |
| Treasury |
| Comprehensive |
| Accumulated |
| Noncontrolling |
| Total |
| |||||||||||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Stock |
| Income |
| Deficit |
| Interests |
| Equity |
| |||||||||||
BALANCE AT JANUARY 1, 2021 | 2,322 | $ | 19,743 | 1,574 | $ | 16 | 25,811 | $ | 260 | $ | 140,746 | $ | (9,839 | ) | $ | 3,827 | $ | (56,658 | ) | $ | (12,016 | ) | $ | 86,079 | ||||||||||||
Dividends on preferred stock ($0.01594 per share) | — | 0— | — | 0— | — | 0— | 0— | 0— | 0— | (370 | ) | 0— | (370 | ) | ||||||||||||||||||||||
Stock-based compensation | 0— | 0— | 0— | 0— | 121 | 1 | 588 | 0— | 0— | 0— | 0— | 589 | ||||||||||||||||||||||||
Issuance of Class B common stock to Howard Jonas | 0— | 0— | 0— | 0— | 20 | 0— | 162 | 0— | 0— | 0— | 0— | 162 | ||||||||||||||||||||||||
Other comprehensive (loss) income | — | 0— | — | 0— | — | 0— | 0— | 0— | (572 | ) | 0— | 230 | (342 | ) | ||||||||||||||||||||||
Net loss for three months ended March 31, 2021 | — | 0— | — | 0— | — | 0— | 0— | 0— | 0— | (1,986) | (708) | (2,694) | ||||||||||||||||||||||||
BALANCE AT MARCH 31, 2021 | 2,322 | 19,743 | 1,574 | 16 | 25,952 | 261 | 141,496 | (9,839 | ) | 3,255 | (59,014 | ) | (12,494 | ) | 83,424 |
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| Preferred |
| Class A |
| Class B |
| Additional |
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| Accumulated Other |
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| Stock |
| Common Stock |
| Common Stock |
| Paid-In |
| Treasury |
| Comprehensive |
| Accumulated |
| Noncontrolling |
| Total |
| |||||||||||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Stock |
| Income |
| Deficit |
| Interests |
| Equity |
| |||||||||||
BALANCE AT JANUARY 1, 2022 | 2,322 | $ | 19,743 | 1,574 | $ | 16 | 26,633 | $ | 266 | $ | 143,249 | $ | (14,034 | ) | $ | 3,160 | $ | (29,115 | ) | $ | (12,496 | ) | $ | 110,789 | ||||||||||||
Dividends on preferred stock ($0.1594 per share) | — | — | — | — | — | — | — | — | — | (370 | ) | — | (370 | ) | ||||||||||||||||||||||
Dividends on common stock ($0.075 per share) | — | — | — | — | — | — | — | — | — | (1,934 | ) | — | (1,934 | ) | ||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 9 | — | 840 | — | — | — | — | 840 | ||||||||||||||||||||||||
Issuance of Class B common stock to Howard Jonas | — | — | — | — | — | — | — | (71 | ) | — | — | — | (71 | ) | ||||||||||||||||||||||
Other comprehensive (loss) income | — | — | — | — | — | — | — | — | 339 | — | (36 | ) | 303 | |||||||||||||||||||||||
Net loss for three months ended March 31, 2022 | — | — | — | — | — | — | — | — | — | 17,889 | (1,154 | ) | 16,735 | |||||||||||||||||||||||
BALANCE AT MARCH 31, 2022 | 2,322 | $ | 19,743 | 1,574 | $ | 16 | 26,642 | $ | 266 | $ | 144,089 | $ | (14,105 | ) | $ | 3,499 | $ | (13,530 | ) | $ | (13,686 | ) | $ | 126,292 |
5 |
GENIE ENERGY LTD.
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||
|
| 2022 |
| 2021 |
|
| 2023 |
|
| 2022 |
| |||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Net income (loss) |
| $ | 16,736 |
| $ | (2,694 | ) | |||||||||
Net loss from discontinued operations, net of tax | 0— | (1,110 | ) | |||||||||||||
Net income (loss) from continuing operations | 16,736 | (1,584 | ) | |||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
| |||||||||
Net income |
| $ | 14,392 |
| $ | 16,735 | ||||||||||
Net income (loss) from discontinued operations, net of tax | 3,055 | (1,932 | ) | |||||||||||||
Net income from continuing operations | 11,337 | 18,667 | ||||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
|
| 284 |
|
| 380 |
|
|
| 96 |
|
|
| 96 |
| |
Deferred income taxes |
|
| (87 | ) |
| 228 | ||||||||||
Impairment of assets |
|
| 19 |
|
| — | ||||||||||
Provision for doubtful accounts receivable |
|
| 398 |
|
| 430 |
|
|
| 574 |
|
|
| 392 |
| |
Unrealized loss (gain) marketable equity securities and investment | 652 | (4,107 | ) | |||||||||||||
Unrealized loss on marketable equity securities and investment | 71 | 652 | ||||||||||||||
Stock-based compensation |
|
| 840 |
|
| 589 |
|
|
| 899 |
|
|
| 814 |
| |
Equity in the net income in equity method investees |
|
| (125 | ) |
| (110 | ) |
|
| (195 | ) |
|
| (125 | ) | |
Change in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Trade accounts receivable |
|
| 3,169 |
| (5,201 | ) |
|
| (10,643 | ) |
|
| (2,368 | ) | ||
Inventory |
|
| (1,145 | ) |
| (2,090 | ) |
|
| (3,631 | ) |
|
| (1,145 | ) | |
Prepaid expenses |
|
| (1,644 | ) |
| (1,451 | ) |
|
| (1,032 | ) |
|
| (1,904 | ) | |
Other current assets and other assets |
|
| 2,746 |
| 390 |
|
| 1,138 |
|
| (5,638 | ) | ||||
Trade accounts payable, accrued expenses and other current liabilities |
|
| (9,653 | ) |
| 7,618 | ||||||||||
Due to IDT Corporation |
|
| (391 | ) |
| (68 | ) | |||||||||
Trade accounts payable, accrued expenses and other liabilities |
|
| (2,051 | ) |
|
| 2,589 | |||||||||
Due to IDT Corporation, net |
|
| (66 | ) |
|
| (391 | ) | ||||||||
Income taxes payable |
|
| 6,560 |
|
| (768 | ) |
|
| 5,004 |
|
| 6,560 | |||
Net cash provided by (used in) operating activities of continuing operations | 18,340 | (5,744 | ) | |||||||||||||
Net cash used in discontinued operations | 0— | (4,209 | ) | |||||||||||||
Net cash provided by (used in) operating activities |
|
| 18,340 |
| (9,953 | ) | ||||||||||
Net cash provided by operating activities of continuing operations | 1,520 | 18,199 | ||||||||||||||
Net cash provided by operating activities of discontinued operations | 9,714 | 141 | ||||||||||||||
Net cash provided by operating activities |
|
| 11,234 |
|
| 18,340 | ||||||||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Capital expenditures |
| (59 | ) |
| (20 | ) |
|
| (98 | ) |
|
| (59 | ) | ||
Proceeds from the sale of marketable equity securities | 343 | — | ||||||||||||||
Purchase of marketable equity securities and other investment |
|
| (4,559 | ) |
|
| (200 | ) | ||||||||
Proceeds from settlement of equity method investment | 133 | — | ||||||||||||||
Investment in notes receivables with related party | (1,388 | ) | 0— | — | (1,388 | ) | ||||||||||
Purchase of marketable equity securities and other investment |
| (200 | ) |
| (1,000 | ) | ||||||||||
Repayment of notes receivable |
|
| 19 |
|
|
| 13 |
|
|
| 19 |
|
|
| 19 |
|
Net cash used in investing activities of continuing operations | (1,628 | ) | (1,007 | ) | (4,162 | ) | (1,628 | ) | ||||||||
Net cash used in investing activities of discontinued operations | (21,832 | ) | 0— | — | (21,832 | ) | ||||||||||
Net cash used in investing activities |
| (23,460 | ) |
| (1,007 | ) |
|
| (4,162 | ) |
|
| (23,460 | ) | ||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Dividends paid |
| (2,304 | ) |
| (370 | ) |
|
| (2,108 | ) |
|
| (2,304 | ) | ||
Repurchases of Class B common stock from employees |
|
| (71 | ) |
|
| 0— |
|
| (165 | ) |
|
| (71 | ) | |
Net cash used in by financing activities |
| (2,375 | ) |
| (370 | ) | ||||||||||
Redemption of preferred stock | (1,000 | ) | — | |||||||||||||
Net cash used in financing activities |
|
| (3,273 | ) |
|
| (2,375 | ) | ||||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
|
| 27 |
|
| (69 | ) |
|
| (10 | ) |
|
| 27 | ||
Net decrease in cash, cash equivalents, and restricted cash, including cash balances classified as held for sale |
| (7,468 | ) |
| (11,399 | ) | ||||||||||
Less: Cash balances classified as held for sale | 0— | (587 | ) | |||||||||||||
Net decrease in cash, cash equivalents, and restricted cash | (7,468 | ) | (11,986 | ) | ||||||||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash |
|
| 3,789 |
|
| (7,468 | ) | |||||||||
Cash, cash equivalents, and restricted cash (including discontinued operations) at beginning of period |
|
| 102,149 |
|
|
| 43,184 |
|
|
| 106,080 |
|
|
| 102,149 |
|
Cash, cash equivalents and restricted cash (including discontinued operations) at end of the period | 94,681 | 31,198 | 109,869 | 94,681 | ||||||||||||
Less: Cash of discontinued operations at end of period | 0— | `1,156 | 858 | 1,726 | ||||||||||||
Cash, cash equivalents, and restricted cash (excluding discontinued operations) at end of period |
| $ | 94,681 |
|
| $ | 30,042 |
|
| $ | 109,011 |
|
| $ | 92,955 |
|
See accompanying notes to consolidated financial statements.
6 |
Note 1—Basis of Presentation and Business Changes and Development
The accompanying unaudited consolidated financial statements of Genie Energy Ltd. and its subsidiaries (the “Company” or “Genie”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 108 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 20222023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.2023. The balance sheet at December 31, 20212022 has been derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021,2022, as filed with the U.S. Securities and Exchange Commission (the “SEC”).
The Company owns 99.5% of Genie Energy International Corporation (“GEIC”), which owns 100% of Genie Retail Energy (“GRE”), 100% of Genie Retail Energy International LLC ("GRE International" or "GREI") and 95.5% ofvaried interests in entities within Genie Renewables.
GRE owns and operates retail energy providers (“REPs”), including IDT Energy Inc. (“IDT Energy”), Residents Energy Inc. (“Residents Energy”), Town Square Energy LLC and Town Square Energy East LLC (collectively, "TSE"), Southern Federal Power LLC ("Southern Federal") and Mirabito Natural Gas LLC (“Mirabito”). GRE's REP businesses resell electricity and natural gas to residential and small business customers primarily in the Eastern and Midwestern United States and Texas. Texas.
GRE International holds the Company's 90.8% controlling interest in Lumo Energia Oyj ("Lumo Finland"), a REP serving residential customers in Finland, and its 97.7% interest in Lumo Energi AB ("Lumo Sweden"). GRE International also held the Company's 98.8% interest in venture in Japan, which the Company sold on May 11, 2021. GRE International also holds 100% interest in Orbit Energy, a REP operating in the United Kingdom ("U.K."), which was discontinued in November 2021 as discussed below.
Genie Renewables consists of 95.5% interest in Genie Solar, Energy ("Genie Solar"), a rooftop solar system sales and general contractingenergy company, a 93.5%92.8% interest in CityCom Solar, a marketer of community solar energy solution,solutions, a 96.0% interest in Diversegy LLC ("Diversegy"), an energya broker for commercial customers, and a GRE's60%60.0% interest in Prism Solar Technology Inc. ("Prism"), a solar solutions company that is engaged in U.S.-basedthe manufacturing of solar panels, solar installation design and solar energy project management.
Discontinued Operations in United Kingdom
One-Time Tax Credit
In the first quarter of 2023, the Company received $3.1 millionrelated to a one-time tax credit related to payroll taxes incurred in prior years, which the Company recognized as a gain included in other income (expense), net in the accompanying consolidated statements of operations for the three months ended March 31, 2023.
Discontinued Operations in Finland and Sweden
Previously, the Company had a third segment, Genie Retail Energy International, or GRE International, which supplied electricity to residential and small business customers in Scandinavia. However, as a result of volatility in the energy market in Europe, in the third quarter of 2021, 2022, the natural gasCompany decided to discontinue the operations of LumoEnergiaOyj("Lumo Finland") and energy marketLumo Energi AB ("Lumo Sweden"). In July 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Sweden. The Company also entered into a series of transactions to transfer the customers of Lumo Finland and Lumo Sweden to other suppliers.
The Company determined that the discontinued operations in Finland and Sweden represented a strategic shift that will have a major effect on the Company's operations and financial statements. The Company has accounted for these businesses as discontinued operations and accordingly, has presented the results of operations and related cash flows as discontinued operations. The results of operations and related cash flows are presented as discontinued operations for all periods presented. Any remaining assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the United Kingdom deterioratedaccompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022. Lumo Finland and Lumo Sweden are continuing to liquidate their remaining receivables and settle any remaining liabilities.
InNovember 2022, Lumo Finland declared bankruptcy and the administration of Lumo Finland was transferred to an administrator (the "Lumo Administrators"). All assets and liabilities of Lumo Finland remain with Lumo Finland, in which promptedGenie retains its interest, however, the management and control of Lumo Finland were transferred to the Lumo Administrators. Since the Company lost control of the management of Lumo Finland in favor of the Lumo Administrators, the accounts of Lumo Finland were deconsolidated effectiveNovember 9, 2022.
Following the discontinuance of operations of Lumo Finland and Lumo Sweden, GRE International ceased to startbe a segment and the processremaining assets and liabilities and results of orderly withdrawal from thecontinuing operations of GRE International were combined with corporate.
Discontinued Operations in United Kingdom market.
In October 2021, as part of the orderly exit process from the United Kingdom market, Orbit Energy Limited ("Orbit"), a REP owed by the Company that used to operate in U.K., and Shell U.K. Limited ("Shell") agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell.
Following the termination of the contract with Shell, Orbit filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered the current customers to be transferred to “supplier of last resort” and transferred the administration of Orbit to Administrators effective December 1, 2021. All of the customers of Orbit were transferred to a third-party supplier effective December 1, 2021 as ordered by the Court. All assets and liabilities of Orbit, including cash and receivables remain with Orbit, in which Genie retains a 100% interest, however, the management and control of Orbit was transferred to the Administrators.
The Company determined that the discontinued operations in the United Kingdom represented a strategic shift that will have a major effect on the Company's operations and financial statements. Since the appointment of the Administrators, the Company has accounted for these businessesthe Orbit business as discontinued operations and accordingly, has presented the results of operations and related cash flows as discontinued operations. The results of operations and related cash flows are presented as discontinued operations for all periods presented. Any remaining assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 20222023 and December 31, 2021.2022. Since the Company lost control of the management of Orbit in favor of the Administrators, the accounts of Orbit were deconsolidated effective December 1, 2021 and the Company estimated the remaining liability related to its ownership of Orbit..
Energy PriceSeasonality and Weather; Climate Change and Volatility in Texas and JapanPricing
In January 2021, weather volatility and the lack of adequate gas reserves significantly increased the price of energy at Japan Electric Power Exchange ("JEPX") for an extended period of time. The spike in demand associated with this situation, exposed Genie Japan to unexpected cost increases. Genie Japan incurred approximately $2.5 million in additional costs related to the price increases, which were included in the cost of revenue in the three months ended March 31, 2021.
In February of 2021, the State of Texas experienced unprecedented cold weather and snow, with was named Winter Storm Uri. With the grid overtaxed due to demand and weather-related reduced supply and rolling blackouts being enforced, by order of the Electricity Reliability Council of Texas ("ERCOT"), real-time commodity prices during the crisis escalated significantly. Although GRE's commitment for their customers in Texas was hedged for foreseen winter weather conditions, the market conditions exposed the Company to significant unexpected cost increases. GRE recognized approximately $13.0 million in additional costs of revenue for the three months ended March 31, 2021.
In June 2021, the state legislature of the State of Texas passed House Bill 4492 (“HB 4492”) which includes certain provisions for financing certain costs associated with electric markets caused by Winter Storm Uri. Pursuant to HB 4492, two categories of charges associated with Winter Storm Uri are to be securitized and the proceeds of the securitization will be provided to the load serving entities who originally incurred the charges. Under HB 4492, the Company is entitled to recover a portion of the costs incurred from the effect of Winter Storm Uri with a calculated range of $1.5 million to $2.6 million. In the second quarter of 2021, the Company recorded a reduction in cost of revenues of $1.5 million.
In September 2021, the Public Utility Commission of Texas ("PUC") approved the Debt Obligation Order to grant ERCOT's application for a debt financing mechanism to pay for certain costs associated with Winter Storm Uri. Under the Debt Obligation Order, the amount that the Company is entitled to recover increased to approximately $3.4 million. In the third quarter of 2021, the Company recorded an additional reduction in the cost of revenues of $1.9 million for an aggregate amount of $3.4 million for the year ended December 31, 2021.
Seasonality and Weather
The weather and the seasons, among other things, affect GRE’s revenues. Weather conditions have a significant impact on the demand for natural gas used for heating and electricity used for heating and cooling. Typically, colder winters increase demand for natural gas and electricity, and hotter summers increase demand for electricity. Milder winters or summers have the opposite effect. Unseasonable temperatures in other periods may also impact demand levels. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately 44.5%39.7% and 47.7%44.5% of GRE’s natural gas revenues for the relevant years were generated in the first quarters of2022 and 2021, and 2020 respectively, when demand for heating was highest.Although the demand for electricity is not as seasonal as natural gas (due, in part, to usage of electricity for both heating and cooling), approximately 30.3% 30.5% and 31.8%30.3% of GRE’s electricity revenues for the relevant years were generated in the third quarters of2022 and2021 and 2020,, respectively. GRE’s REPs’ revenues and operating income are subject to material seasonal variations, and the interim financial results are not necessarily indicative of the estimated financial results for the full year.
In addition to the direct physical impact that climate change may have on the Company's business, financial condition and results of operations because of the effect on pricing, demand for our offerings and/or the energy supply markets, we may also be adversely impacted by other environmental factors, including: (i) technological advances designed to promote energy efficiency and limit environmental impact; (ii) increased competition from alternative energy sources; (iii) regulatory responses aimed at decreasing greenhouse gas emissions; and (iv) litigation or regulatory actions that address the environmental impact of our energy products and services.
8 |
Note 2—Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet and the corresponding amounts reported in the consolidated statements of cash flows:
| March 31, 2022 |
| December 31, 2021 |
|
| March 31, 2023 |
| December 31, 2022 |
| |||||||
(in thousands) | (in thousands) | |||||||||||||||
Cash and cash equivalents |
| $ | 88,185 |
|
| $ | 95,492 |
|
| $ | 105,220 |
|
| $ | 98,571 |
|
Restricted cash—short-term |
|
| 6,496 |
|
|
| 6,657 |
|
|
| 3,791 |
|
|
| 6,007 |
|
Total cash, cash equivalents, and restricted cash |
| $ | 94,681 |
|
| $ | 102,149 |
|
| $ | 109,011 |
|
| $ | 104,578 |
|
Restricted cash—short-term includes amounts set aside in accordance with theGRE's Amended and Restated Preferred Supplier Agreement with BP Energy Company (“BP”) (see Note 18) and Credit Agreement with JPMorgan Chase (see Note 19).
Included in the cash and cash equivalents as of March 31, 20222023 and December 31, 20212022 is cash received from Orbit EnergyLumo Sweden (see Note 5).
Note 3—Inventories
Inventories consisted of the following:
| March 31, 2022 |
| December 31, 2021 |
|
| March 31, 2023 |
| December 31, 2022 |
| |||||||
(in thousands) | (in thousands) | |||||||||||||||
Natural gas |
| $ | 445 |
|
| $ | 1,891 |
|
| $ | 315 |
|
| $ | 3,302 |
|
Renewable credits |
| 18,029 |
| 15,610 |
|
| 15,839 |
|
| 10,531 | ||||||
Solar Panels: |
|
|
|
|
|
|
|
| ||||||||
Finished goods | 391 | 219 | 3,191 | 1,881 | ||||||||||||
Totals |
| $ | 18,865 |
|
| $ | 17,720 |
| $ | 19,345 |
|
| $ | 15,714 |
Note 4—4—Revenue Recognition
Revenue from the single performance obligation to deliver a unit of electricity and/or natural gas is recognized as the customer simultaneously receives and consumes the benefit. Variable quantities in requirements contracts are considered to be options for additional goods and services because the customer has a current contractual right to choose the amount of additional distinct goods to purchase. GRE and Genie Japan (prior to its sale in May 2021) record unbilled revenues for the estimated amount customers will be billed for services rendered from the time meters were last read to the end of the respective accounting period. The unbilled revenue is estimated each month based on available per day usage data, the number of unbilled days in the period and historical trends.
ManyIncumbent utility companies offer purchase of receivable, or POR, programs in most of the service territories in which GRE operates,GRE's REPs operate offer purchase of receivable, or POR programs, and GRE’sREPs participate in POR programs for a majority of their receivables. The Company estimates variable consideration related to its rebate programs using the expected value method and a portfolio approach. The Company’s estimates related to rebate programs are based on the terms of the rebate program, the customer’s historical electricity and natural gas consumption, the customer’s rate plan, and a churn factor. Taxes that are imposed on the Company’s sales and collected from customers are excluded from the transaction price.
9 |
Revenue from sales of solar panels are recognized at a point in time following the transfer of control of the solar panels to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For sales contracts that contain multiple performance obligations, such as the shipment or delivery of solar modules, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer, in satisfaction of the corresponding performance obligations. Revenues from salesales of solar panels are included in other revenues in the consolidated statements of operations.
The Company recognizes the incremental costs of obtaining a contract with a customer as an asset if it expects the benefit of those costs to be longer than one year. The Company determined that certain sales commissions to acquire customers meet the requirements to be capitalized. For GRE, the Company applies a practical expedient to expense costs as incurred for sales commissions to acquire customers as the period would have been one year or less.Incremental customer acquisition cost of certain GRE International entities are capitalized and amortized over the range of between eighteen and twenty-four months. These costs and the related amortization are recorded within sales and marketing expenses. Total capitalized customer acquisition costs to obtain customer contracts were $0.2 million and $0.3 million for the three months ended March 31, 2022 and 2021, respectively. At March 31, 2022, customer acquisition costs of $0.5 million and $0.2 million included in other current assets and other assets, respectively, on the consolidated balance sheet. The Company recognized $0.2 million of amortization of capitalized customer acquisition cost, in each of the three months ended March 31, 2022 and 2021. The Company continuously monitors its customer relationship periods to ensure compliance with the application of the standard.
Disaggregated Revenues
The following table shows the Company’s revenues disaggregated by pricing plans offered to customers:
| Electricity |
| Natural Gas |
| Other |
| Total |
|
| Electricity |
|
| Natural Gas |
|
| Other |
|
| Total |
| ||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Fixed rate |
| $ | 29,505 |
|
| $ | 5,615 |
|
| $ | — |
|
| $ | 35,120 |
| ||||||||||||||||
Variable rate |
|
| 44,982 |
|
| 21,310 |
|
| — |
|
| 66,292 |
| |||||||||||||||||||
Other |
|
| — |
|
|
| — |
|
|
| 3,864 |
|
|
| 3,864 |
| ||||||||||||||||
Total |
| $ | 74,487 |
|
| $ | 26,925 |
|
| $ | 3,864 |
|
| $ | 105,276 |
| ||||||||||||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Three Months Ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Fixed rate |
| $ | 21,354 |
| $ | 3,784 |
| $ | 0— |
| $ | 25,138 |
|
| $ | 18,618 |
|
| $ | 3,784 |
|
| $ | — |
|
| $ | 22,402 |
| |||
Variable rate |
|
| 50,430 |
| 20,720 |
| 0— |
| 71,150 |
|
|
| 40,762 |
|
| 20,720 |
|
| — |
| 61,482 |
| ||||||||||
Other |
|
| 0— |
|
| 0— |
|
| 2,241 |
|
| 2,241 |
|
|
| — |
|
|
| — |
|
|
| 2,042 |
|
|
| 2,042 |
| |||
Total |
| $ | 71,784 |
| $ | 24,504 |
| $ | 2,241 |
| $ | 98,529 |
|
| $ | 59,380 |
|
| $ | 24,504 |
|
| $ | 2,042 |
|
| $ | 85,926 |
| |||
|
|
| ||||||||||||||||||||||||||||||
Three Months Ended March 31, 2021 |
| |||||||||||||||||||||||||||||||
Fixed rate |
| $ | 39,097 |
| $ | 1,741 |
| $ | 0— |
| $ | 40,838 |
| |||||||||||||||||||
Variable rate |
|
| 48,516 |
| 15,539 |
| 0— |
| 64,055 |
| ||||||||||||||||||||||
Other |
|
| 0— |
|
| 0— |
|
| 2,597 |
|
| 2,597 |
| |||||||||||||||||||
Total |
| $ | 87,613 |
| $ | 17,280 |
| $ | 2,597 |
| $ | 107,490 |
|
Fixed and variable rate revenues are from GRE. Other revenues are revenues from Genie Renewables which includes revenues from solar projects by Genie Solar, commissions from marketing energy solutions by CityComm Solar and Diversegy and selling solar panels by Prism.
10 |
The following table shows the Company’s revenues disaggregated by non-commercial and commercial channels:
| Electricity |
| Natural Gas |
| Other |
| Total |
|
| Electricity |
|
| Natural Gas |
|
| Other |
|
| Total |
| ||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Non-Commercial Channel |
| $ | 60,123 |
|
| $ | 20,783 |
|
| $ | — |
|
| $ | 80,906 |
| ||||||||||||||||
Commercial Channel |
|
| 14,364 |
|
|
| 6,142 |
|
|
| — |
|
| 20,506 |
| |||||||||||||||||
Other |
|
| — |
|
|
| — |
|
|
| 3,864 |
|
|
| 3,864 |
| ||||||||||||||||
Total |
| $ | 74,487 |
|
| $ | 26,925 |
|
| $ | 3,864 |
|
| $ | 105,276 |
| ||||||||||||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Three Months Ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Non-Commercial Channel |
| $ | 62,175 |
| $ | 19,638 |
| $ | 0— |
| $ | 81,813 |
|
| $ | 50,622 |
|
| $ | 19,638 |
|
| $ | — |
|
| $ | 70,260 |
| |||
Commercial Channel |
|
| 9,609 |
|
| 4,866 |
|
| 0— |
| 14,475 |
|
|
| 8,758 |
|
|
| 4,866 |
|
| — |
|
| 13,624 |
| ||||||
Other |
|
| 0— |
|
| 0— |
|
| 2,241 |
|
| 2,241 |
|
|
| — |
|
|
| — |
|
|
| 2,042 |
|
|
| 2,042 |
| |||
Total |
| $ | 71,784 |
| $ | 24,504 |
| $ | 2,241 |
| $ | 98,529 |
|
| $ | 59,380 |
|
| $ | 24,504 |
|
| $ | 2,042 |
|
| $ | 85,926 |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Three Months Ended March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Non-Commercial Channel |
| $ | 73,147 |
| $ | 15,171 |
| $ | 0— |
| $ | 88,318 |
| |||||||||||||||||||
Commercial Channel |
|
| 14,466 |
|
| 2,109 |
| 0— |
| 16,575 |
| |||||||||||||||||||||
Other |
|
| 0— |
|
| 0— |
|
| 2,597 |
|
| 2,597 |
| |||||||||||||||||||
Total |
| $ | 87,613 |
| $ | 17,280 |
| $ | 2,597 |
| $ | 107,490 |
|
Note 5—Discontinued Operations
Lumo Finland and DivestitureLumo Sweden Operations
As a result of the sustained volatility of the energy market in Europe, in July 2022, the Company initiated a plan to dispose of certain assets and liabilities of Lumo Finland and Lumo Sweden. From July 13, 2022 to July 19, 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Sweden for a gross aggregate amount of €41.1 million (equivalent to approximately $41.4 million at the dates of the transactions) before fees and other costs. The sale price has been, and is expected to continue to be settled monthly based on the monthly commodity volume specified in the instruments from September 2022 to March 2025.
In July 2022, Lumo Sweden entered into a transaction to transfer, effective August 5, 2022, its customers to a third party for a nominal consideration. In August 2022,Lumo Finland entered into a transaction to transfer its variable rate customers to a third party for €1.9 million (equivalent to $2.0 million) and terminated the contracts of fixed rate customers.
The Company determined that exiting operations in Lumo Finland and Lumo Sweden represented a strategic shift that will have a major effect on the Company's operations and financial statements and accordingly, the results of operations and related cash flows are presented as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022. Lumo Finland and Lumo Sweden are continuing to liquidate their remaining receivables and settle any remaining liabilities.
In November 2022, Lumo Finland declared bankruptcy and the administration of Lumo Finland was transferred to the Lumo Administrators. All assets and liabilities of Lumo Finland remain with Lumo Finland, in which Genie retains its interest, however, the management and control of Lumo Finland were transferred to the Lumo Administrators. Since the Company lost control of the management of Lumo Finland in favor of the Lumo Administrators, the accounts of Lumo Finland were deconsolidated effect November 9, 2022.
11 |
The following table represents summarized balance sheet information of assets and liabilities of the discontinued operations of Lumo Sweden:
| March 31, 2023 |
|
| December 31, 2022 | ||||
(in thousands) | ||||||||
Assets |
|
|
|
|
|
| ||
Cash |
| $ | 858 |
|
| $ | 1,503 |
|
Receivables from the settlement of derivative contract—current |
|
| 18,053 |
|
|
| 23,351 |
|
Current assets of discontinued operations |
| $ | 18,911 |
|
| $ | 24,854 |
|
Receivables from the settlement of derivative contract—noncurrent | $ | 8,652 | $ | 12,689 | ||||
Other noncurrent assets | 3,868 | 3,616 | ||||||
Noncurrent assets of discontinued operations | $ | 12,520 | $ | 16,305 | ||||
Liabilities |
|
|
|
|
|
|
|
|
Income taxes payable | 10,959 | 10,894 | ||||||
Other current liabilities |
|
| 117 |
|
| 42 | ||
Current liabilities of discontinued operations |
| $ | 11,076 |
|
| $ | 10,936 |
|
Deferred tax liabilities | 686 | 686 | ||||||
Noncurrent liabilities of discontinued operations | $ | 686 | $ | 686 |
The summary of the results of operations of the discontinued operations of Lumo Finland and Lumo Sweden were as follows:
| Three Months Ended March 31, | ||||||
| 2023 | 2022 | |||||
| (in thousands) | ||||||
Revenues | $ | — | $ | 12,603 | |||
Cost of revenues | — | 14,169 | |||||
Gross loss | — | (1,566 | ) | ||||
Selling, general and administrative expenses | — | 965 | |||||
Loss from operations | — | (2,531 | ) | ||||
Other income | 250 | — | |||||
Income before income taxes | 250 | (2,531 | ) | ||||
(Provision for) benefit from income taxes | (68 | ) | 599 | ||||
Net income (loss) from discontinued operations, net of taxes | $ | 182 | $ | (1,932 | ) | ||
Income (loss) before income taxes attributable to Genie Energy Ltd. | $ | 250 | $ | (2,343 | ) |
12 |
The following table presents a summary of cash flows of the discontinued operations:
The summary of presents a summary of cash flows of the discontinued operations ofLumo Finland andLumo Sweden:
| Three Months Ended March 31, | ||||||
| 2023 | 2022 | |||||
| (in thousands) | ||||||
Net income (loss) | $ | 182 | $ | (1,932 | ) | ||
Non-cash items | 62 | 132 | |||||
Changes in assets and liabilities | 9,470 | 1,941 | |||||
Cash flows provided by operating activities of discontinued operations | $ | 9,714 | $ | 141 |
In furtherance of the Company's exit from the retail energy markets in Finland and Sweden and to facilitate the maximization of value at Lumo Sweden, on November 3, 2022, the Company acquired additional minority interests in Lumo Finland and Lumo Sweden from an employee for 132,302 restricted Class B common stock of the Company, which will vest ratably from November 2022 to May 2025. The Company increased its interest in Lumo Finland from 91.6% to 96.6% and in Lumo Sweden from 98.8% to 100%.
Prior to being treated as discontinued operations or consolidated, the assets and liabilities of Lumo Finland and Lumo Sweden were included in GRE International segment.
United Kingdom Operations
On July 17, 2017, the Company’s subsidiary, Genie Energy UK Ltd. (“GEUK”), entered into a definitive agreement with Energy Global Investments Pty Ltd (“EGC”) to launch Shoreditch Energy Limited (“Shoreditch”), a joint venture to offer electricity and natural gas service to residential and small business customers in the U.K., under the trade name Orbit Energy. In the second quarter of 2020, the Company contributed $1.5 million to Shoreditch, which increased GEUK's total contribution to $9.5 million as of October 8, 2020. Prior to October 8, 2020, the Company owned 77.0% of the outstanding equity of Shoreditch.
Prior to the Company acquiring the 23.0% of Shoreditch it did not previously own, EGC had significant participation rights in the management of Shoreditch that limited GEUK’s ability to direct the activities that most significantly impact Shoreditch’s economic performance. GEUK, therefore, accounted for its ownership interest in Shoreditch using the equity method since GEUK had the ability to exercise significant influence over its operating and financial matters, although it did not control Shoreditch.
OnOctober 8, 2020, the Company entered into an agreement (the “Purchase Agreement”) with EGC under which GEUKpurchased EGC’s remaining interest in Shoreditch, in exchange for a cash payment of £1.3 million (equivalent to $1.7 million onthe date of closing) offset by £0.2 million (equivalent to $0.2 million on the date of closing) in amounts owing from EGC to the Company under a loan provided to EGC in 2018 related to EGC’s capital contributions to Shoreditch. Prior to October 8, 2020, the estimated fair value and net book value of the Company's investment in Shoreditch was $5.5 million and nil, respectively. Following the transaction, Shoreditch is a wholly-owned subsidiary of GEUK.
In the third quarter of 2021, the natural gas and energy market in the U.K. deteriorated which prompted the Company to start the process of orderly withdrawal from the U.K. market. In October 2021, as part of the orderly exit process, Orbit and Shell U.K. Limited ("Shell") agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell.
Following the termination of the contract with Shell, Orbit filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered the current customers to be transferred to “supplier of last resort” and transfer the administration of Orbit to Administrators effective December 1, 2021. All of the customers of Orbit were transferred to a third-party supplier effective December 1, 2021 as ordered by the Court. All assets and liabilities of the Orbit, including cash and receivables remain with Orbit and the management and control of which was transferred to Administrators. The Company expects that the administration of Orbit will be completed in 20222023.
In the fourth quarter of 2021, Orbit transferred to GEIC a net amount of $49.7 million from the proceeds of the settlement of the contactcontract with Shell which is included in cash and cash equivalents in the consolidated balance sheet as of December 31, 2021. In January 2022, the Company transferred $21.5 million to the Administrators of Orbit Energy to fund the settlement of the expected remaining liabilities of Orbit of $30.8 million, which were included in the current liabilities of discontinued operations in the consolidated balance sheet as of December 31, 2021. In February 2022, the Company deposited $28.3$28.3 million into an attorney trust account to hold, preserve, and dispense funds to the extent needed in connection with the administration process. On February 24, 2022, the Administrators filed a petition under Chapter 15 of the U.S. Bankruptcy Code with the Bankruptcy Court of the Southern District of New York seeking (i) recognition of the U.K. administration proceeding as a foreign main proceeding and the U.K. Administrators as its foreign representatives, and (ii) entrusting distribution of the funds the Company deposited into its attorney’s trust fund to the U.K. Administrators. Following a hearing held on March 30, 2022,In the Court issued an order dated April 4, 2022 which granted the Administrator’s petition to recognize the U.K. administration proceeding as a foreign main proceeding, and the U.K. Administrators as its foreign representatives, along with related relief.Although the Court's order did recognize that the realization of any Orbit assets located in the United States, other than the funds (the status of which remain subject to dispute), would be entrusted to the Administrators, rather than redirect or transfer the funds to the Administrators (per their petition), the Court ordered that the entirety of the funds would be deposited in the Court’s registry and subject to its control. On April 4,second quarter of 2022, the $28.3 million was transferred to the Court's registry. Subsequent to the first quarter of 2022, the Administrators filed an application to transfer the funds back to the Administrators’ control in the U.K. Subject to certain representations and expectations regarding use and application of the funds to efficiently and expeditiously pay off creditors and bring a timely close to the insolvency administration, the Company decided not to oppose the application, and expects the transfer$28.3 million was transferred to take placethe account of the Administrator. In August 2022, the Administrator paid the Company a partial return of its interest in short order. Orbit of £4.6 million (equivalent to $5.4 million).The Company believes that the funds remaining with the Administrators are more than sufficient to pay any remaining creditors of Orbit (with aany surplus, which the Company expects to be significant, surplus to be returned to it)the Company).
At March 31, 2022, the $28.3 million fund remained deposited in the Company's attorney trust account and was included as unrestricted cash and cash equivalent account in the consolidated balance sheet.
The Company determined that exiting operations in the United Kingdom represented a strategic shift that will have a major effect on the Company's operations and financialfinancial statements and accordingly, the results of operations and related cash flows are presented as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 20222023 and December 31, 2021.2022.
As a result of loss of control, the Company deconsolidated Orbit effective December 1, 2021 and and estimated the remaining liability related to its ownership of Orbit.
The summary of results of operations of the discontinued operations forIn the three months ended March 31, 2021 was as follows:2023, the Company recognized income from discontinued operation, net of taxes of $2.9 million mainly from the increase in the estimated value of our investments in Orbit due to a change in estimated net assets of Orbit after the Administrator settles the liabilities.
Total revenues |
|
|
| $ | 27,851 |
| ||
Cost of revenues |
|
|
|
| 22,976 | |||
Gross profit |
|
|
|
| 4,875 | |||
Selling, general and administrative expenses | 5,985 | |||||||
Net loss before taxes | (1,110 | ) | ||||||
Net loss before taxes | 0— | |||||||
Loss from discontinued operations, net of taxes |
|
|
| $ | (1,110 | ) |
The carrying value of the Company's interest in Orbit was net liabilitiesinvestments of $8.9$16.8 million and $30.8$13.8 million as of March 31, 20222023 and December 31, 2021,2022, respectively. The carrying value was determined by estimating the net realizable values of assets and fair values of remaining liabilities which approximates its carrying values as of March 31, 20222023 and December 31, 2021. 2022.
The following table presents a summary of cash flows of thePrior to being treated as discontinued operations forand consolidated, the three months ended March 31, 2021:
Net loss |
|
|
| $ | (1,110 | ) | ||
Non-cash items |
|
|
|
| 1,649 | |||
Changes in assets and liabilities | (4,748 | ) | ||||||
Cash flows used in operating activities of discontinued operations |
|
|
| $ | (4,209 | ) |
The assets and liabilities of Orbit were included in the GRE International segment.
Divestiture of Genie Japan
In March 2021, the Company initiated a plan to sell certain assets and liabilities of Genie Japan. In the first quarter of 2021, certain assets and liabilities of Genie Japan were reclassified as assets and liabilities held for sale and reported at lower of fair value less cost to sell and net book value.
On April 26, 2021, the Company entered into an Equity Purchase Agreement ("Purchase Agreement") with Hanhwa Q Cells Japan Co., Ltd. ("Hanhwa"), pursuant to which, the Company agreed to sell its interest in Genie Japan for ¥570.0 million (equivalent to approximately $5.3 million at April 26, 2021) subject to certain terms and conditions set forth in the Purchase Agreement. On May 11, 2021, upon the terms and subject to the conditions of Purchase Agreement, the Company completed the divestiture of Genie Japan for an aggregate cash consideration of ¥570.0 million (equivalent to approximately $5.2 million at May 11, 2021). Hanhwa also assumed the outstanding balance of the loan payable of Genie Japan. The Company paid $0.6 million of commission to certain former employees of Genie Japan and recognized a pre-tax gain of $4.2 million from the divestiture.
The carrying values of assets and liabilities divested at May 11, 2021 which were previously classified as held for sale included the following: :
(in thousands) |
|
|
| |
Cash | $ | 83 | ||
Trade accounts receivable |
| 1,737 |
| |
Prepaid and other current assets |
|
| 391 |
|
Intangible (license) | 540 | |||
Other noncurrent assets | 296 | |||
Accounts payables |
|
| (611 | ) |
Accrued expenses and other current liabilities |
|
| (588 | ) |
Loan payable | (1,372 | ) | ||
Cumulative translation adjustment |
|
| (181 | ) |
Noncontrolling interest | 114 | |||
Net assets |
| $ | 409 |
|
The assets and liabilities of Genie Japan were included in GRE International segment.
Note 6—Fair Value Measurements
The following table presents the balance of assets and liabilities measured at fair value on a recurring basis:
|
| Level 1 (1) |
| Level 2 (2) |
| Level 3 (3) |
| Total |
|
| Level 1 (1) |
| Level 2 (2) |
| Level 3 (3) |
|
| Total |
| |||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
March 31, 2022 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
March 31, 2023 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Marketable equity securities | $ | 657 | $ | 0— | $ | 0— | $ | 657 | $ | 4,663 | $ | — | $ | — | $ | 4,663 | ||||||||||||||||
Derivative contracts |
| $ | 15,972 |
| $ | 0— |
| $ | 0— |
| $ | 15,972 |
|
| $ | 1,626 |
| $ | — |
| $ | — |
|
| $ | 1,626 |
| |||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Derivative contracts |
| $ | 587 |
| $ | 0— |
| $ | 0— |
| $ | 587 |
|
| $ | 3,559 |
| $ | — |
| $ | — |
|
| $ | 3,559 |
| |||||
December 31, 2021 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Marketable equity securities | $ | 1,336 | $ | 0— | $ | 0— | $ | 1,336 | $ | 490 | $ | — | $ | — | $ | 490 | ||||||||||||||||
Derivative contracts |
| $ | 14,405 |
| $ | 44 |
| $ | 0— |
| $ | 14,449 |
|
| $ | 4,060 |
| $ | — |
| $ | — |
|
| $ | 4,060 |
| |||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Derivative contracts |
| $ | 1,230 |
| $ | 0— |
| $ | 0— |
| $ | 1,230 |
|
| $ | 2,857 |
| $ | — |
| $ | — |
|
| $ | 2,857 |
|
(1) – quoted prices in active markets for identical assets or liabilities
(2) – observable inputs other than quoted prices in active markets for identical assets and liabilities
(3) – no observable pricing inputs in the market
The Company’s derivative contracts consist of natural gas and electricity put and call options and swaps. The underlying asset in the Company’s put and call options is a forward contract. The Company’s swaps are agreements whereby a floating (or market or spot) price is exchanged for a fixed price over a specified period.
The Company did not have any transfers of assets or liabilities between Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the three months ended March 31, 20222023 and 2021.2022.
Fair Value of Other Financial Instruments
The estimated fair value of the Company’s other financial instruments was determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting this data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
Restricted cash—short-term, trade receivables, due to IDT Corporation, other current assets and other current liabilities. At March 31, 20222023 and December 31, 2021,2022, the carrying amounts of these assets and liabilities approximated fair value. The fair value estimate for restricted cash—short-term was classified as Level 1. The carrying value of other current assets, due to IDT Corporation, and other current liabilities approximated fair value.
Other assets. At March 31, 20222023 and December 31, 2021,2022, other assets included notes receivable. At March 31, 2022,2023, the outstanding balance of the sellers of Lumo Finlands's one-time put option was not significant and was included in other liabilities account in the consolidated balance sheet. The carrying amount of the notenotes receivable and loans payable approximated fair value. The fair values were estimated based on the Company’s assumptions, and were classified as Level 3 of the fair value hierarchy.
The primary non-recurring fair value estimates typically are in the context of goodwill impairment testing, which involves Level 3 inputs, and asset impairments (Note 9) which utilize Level 3 inputs.
Concentration of Credit Risks
The Company holds cash, cash equivalents, and restricted cash at several major financial institutions, which may exceed Federal Deposit Insurance Corporation insured limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings of those institutions. While the Company may be exposed to credit losses due to the nonperformance of the holders of its deposits, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition.
For the three months ended March 31, 2022 and 2021 no single customer accounted for 10.0% or greater of our consolidated revenues.
The following table summarizes the percentage of consolidated trade receivable by customers that equal or exceed 10.0% 10.0% of consolidated net trade receivables at March 31, 2023 and December 31, 2022 (no other single customer accounted for 10.0% or greater of our consolidated net trade receivable as March 31, 2023 or December 31, 2022):
| March 31, 2023 |
|
| December 31, 2022 |
| |||
Customer A |
| 10.9 | % |
| 10.2 | % | ||
Customer B | 11.0 | na |
na—less than 10.0% of consolidated net trade receivables
The following table summarizes the percentage of revenues by customers that equal or exceed 10.0% of consolidated net trade receivables at March 31, 20222023 and December 31, 2021 (no2022 (no other single customer accounted for 10.0% 10.0% or greater of our consolidated net trade receivable as March 31, 2022 or December 31, 2021)revenues in these periods):
|
|
|
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Customer A | na | % | 10.4 | % |
na-lessna—less than 10.0% of consolidated revenue in the period
Note 7—Derivative Instruments
The primary risk managed by the Company using derivative instruments is commodity price risk, which is accounted for in accordance with Accounting Standards Codification 815 — Derivatives and Hedging. Natural gas and electricity put and call options and swaps are entered into as hedges against unfavorable fluctuations in market prices of natural gas and electricity. The Company does not apply hedge accounting to these options or swaps, therefore the changes in fair value are recorded in earnings. By using derivative instruments to mitigate exposures to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company minimizes the credit or repayment risk in derivative instruments by entering into transactions with high-quality counterparties. At March 31, 2022,2023, GRE’s swaps and options were traded on the Intercontinental Exchange. GRE International's swaps and options were traded through counterparties.
The summarized volume of GRE’s outstanding contracts and options at March 31, 20222023 was as follows (MWh – Megawatt hour and Dth – Decatherm):
Settlement Dates |
| Volume |
|
| Volume |
| ||||||||||
|
| Electricity (in MWH) |
| Gas (in Dth) |
|
| Electricity (in MWH) |
| Gas (in Dth) | |||||||
Second quarter 2022 | 123,938 | 260,500 | ||||||||||||||
Third quarter 2022 | 89,153 | 347,090 | ||||||||||||||
Fourth quarter 2022 | 75,250 | 741,000 | ||||||||||||||
First quarter 2023 | 51,592 | 814,740 | ||||||||||||||
Second quarter 2023 | 31,005 | 97,900 | 31,728 | 13,072 | ||||||||||||
Third quarter 2023 | 33,170 | 73,700 | 45,056 | — | ||||||||||||
Fourth quarter 2023 | 38,918 | 75,900 | 108,332 | 610,000 | ||||||||||||
First quarter 2024 | 18,000 | 70,600 | 6,160 | 910,000 | ||||||||||||
Second quarter 2024 | 10,849 | 43,500 | — | — | ||||||||||||
Third quarter of 2024 | 10,666 | 26,200 | 16,592 | — | ||||||||||||
Fourth quarter of 2024 | 10,667 | 17,700 | — | — | ||||||||||||
First quarter of 2025 | 9,312 | 231,900 | 13,520 | 225,000 | ||||||||||||
Second quarter of 2025 | 0— | 227,600 | — | 227,500 | ||||||||||||
Third quarter of 2025 | 6,080 | 230,000 | — | 230,000 | ||||||||||||
Fourth quarter of 2025 | 0— | 230,000 | — | 230,000 | ||||||||||||
First quarter of 2026 | — | — | ||||||||||||||
Second quarter of 2026 | — | — | ||||||||||||||
Third quarter of 2026 | 3,520 | — |
The fair value of outstanding derivative instruments recorded in the accompanying consolidated balance sheets were as follows:
Asset Derivatives |
| Balance Sheet Location |
| March 31, |
| December 31, |
|
| Balance Sheet Location |
| March 31, |
| December 31, |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Derivatives not designated or not qualifying as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Energy contracts and options1 | Other current assets | $ | 13,760 | $ | 13,750 | Other current assets | $ | 586 | $ | 2,799 | ||||||||||
Energy contracts and options | Other assets | 2,212 | 699 | Other assets | 1,040 | 1,261 | ||||||||||||||
Total derivatives not designated or not qualifying as hedging instruments — Assets |
|
| $ | 15,972 |
| $ | 14,449 |
|
|
| $ | 1,626 |
| $ | 4,060 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Liability Derivatives |
|
|
|
|
|
| Balance Sheet Location |
| March 31, 2023 |
| December 31, 2022 |
| ||||||||
|
|
|
|
| (in thousands) |
| ||||||||||||||
Derivatives not designated or not qualifying as hedging instruments: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Energy contracts and options1 | Other current liabilities | $ | 298 | 697 | Other current liabilities | $ | 3,444 | $ | 1,800 | |||||||||||
Energy contracts and options | Other liabilities | 289 | 533 | Other liabilities | 115 | 1,057 | ||||||||||||||
Total derivatives not designated or not qualifying as hedging instruments — Liabilities |
| $ | 587 |
| $ | 1,230 |
|
| $ | 3,559 |
| $ | 2,857 |
|
(1)(1) The Company classifies derivative assets and liabilities as current based on the cash flows expected to be incurred within the following 12 months.
The effects of derivative instruments on the consolidated statements of operations was as follows:
| Amount of Gain Recognized on Derivatives | |||||||||
Derivatives not designated or not qualifying as |
| Location of Gain Recognized | Three Months Ended March 31, | |||||||
hedging instruments |
| on Derivatives | 2022 |
| 2021 | |||||
|
|
| (in thousands) | |||||||
Energy contracts and options |
| Cost of revenues | $ | 37,728 | $ | 2,887 |
| Amount of (Loss) Gain Recognized on Derivatives | |||||||||
Derivatives not designated or not qualifying as |
| Location of Gain Recognized | Three Months Ended March 31, | |||||||
hedging instruments |
| on Derivatives | 2023 | 2022 | ||||||
|
|
| (in thousands) | |||||||
Energy contracts and options |
| Cost of revenues | $ | (11,175 | ) | $ | 37,512 |
Note 8—Other Current Assets
Other current assets consisted of the following:
| March 31, 2022 |
|
| December 31, 2021 |
| |||
(in thousands) | ||||||||
Fair value of derivative contracts |
| $ | 13,760 |
|
| $ | 13,750 |
|
Receivables from the settlement of derivative contracts |
|
| 1,290 |
|
|
| 4,655 |
|
Other current assets |
|
| 2,343 |
|
|
| 3,384 |
|
Total other current assets |
| $ | 17,393 |
|
| $ | 21,789 |
|
March 31, 2023 |
| December 31, 2022 |
| |||||
(in thousands) | ||||||||
Security deposit |
| $ | 7,336 |
|
| $ | 7,341 |
|
Right-of-use assets, net of amortization |
|
| 1,796 |
|
|
| 1,892 |
|
Fair value of derivative contracts—noncurrent | 1,040 | 1,261 | ||||||
Other assets |
|
| 3,334 |
|
|
| 3,362 |
|
Total other assets |
| $ | 13,506 |
|
| $ | 13,856 |
|
Note 9—Goodwill and Other Intangible Assets
The table below reconciles the change in the carrying amount of goodwill for the period from January 1, 20222023 to March 31, 2022:2023:
| GRE | GRE International | Genie Renewables | Total | ||||||||||||
(in thousands) | ||||||||||||||||
Balance at January 1, 2022 |
| $ | 9,998 | $ | 1,757 | $ | 0— | $ | 11,755 | |||||||
Cumulative translation adjustment | 0— | (46 | ) | 0— | (46 | ) | ||||||||||
Balance at March 31, 2022 |
| $ | 9,998 | $ | 1,711 | $ | 0— | $ | 11,709 |
| GRE | Genie Renewables | Total | |||||||||
(in thousands) | ||||||||||||
Balance at January 1, 2023 |
| $ | 9,998 | $ | — | $ | 9,998 | |||||
Additions/deductions during the period | — | — | — | |||||||||
Balance at March 31, 2023 |
| $ | 9,998 | $ | — | $ | 9,998 |
The table below presents information on the Company’s other intangible assets:
| Weighted Average Amortization Period |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
| Net |
|
| Weighted Average Amortization Period |
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net |
| |||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
March 31, 2022 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Patents and trademarks |
| 17.1 years |
|
| $ | 3,796 |
|
| $ | (1,171 | ) |
| $ | 2,625 |
|
|
| 18.1 years |
| $ | 3,510 |
|
| $ | (1,212 | ) |
| $ | 2,298 |
| ||
Customer relationships |
| 9.0 years |
|
|
| 1,100 |
|
|
| (560 | ) |
|
| 540 |
|
|
| 9.0 years |
|
| 1,100 |
|
|
| (682 | ) |
|
| 418 |
| ||
Licenses |
| 10.0 years |
|
|
| 479 |
|
|
| (115 | ) |
|
| 364 |
|
| 10.0 years |
|
|
| 479 |
|
|
| (162 | ) |
|
| 317 |
| ||
Total |
|
|
| $ | 5,375 |
|
| $ | (1,846 | ) |
| $ | 3,529 |
|
|
|
| $ | 5,089 |
|
| $ | (2,056 | ) |
| $ | 3,033 |
| ||||
December 31, 2021 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Trademark |
| 17.1 years |
| $ | 3,805 |
| $ | (1,103 | ) |
| $ | 2,702 |
| |||||||||||||||||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Patent and trademark |
|
| 18.1 years |
| $ | 3,510 |
|
| $ | (1,154 | ) |
| $ | 2,356 |
| |||||||||||||||||
Customer relationships |
| 9.0 years |
| 1,100 |
| (530 | ) |
| 570 |
|
|
| 9.0 years |
|
| 1,100 |
|
|
| (652 | ) |
|
| 448 |
| |||||||
Licenses |
|
| 10.0 years |
|
|
| 479 |
|
| (103 | ) |
|
| 376 |
|
|
| 10.0 years |
|
|
| 479 |
|
|
| (150 | ) |
|
| 329 |
| |
Total |
|
|
| $ | 5,384 |
| $ | (1,736 | ) |
| $ | 3,648 |
|
|
|
| $ | 5,089 |
|
| $ | (1,956 | ) |
| $ | 3,133 |
|
Amortization expense of intangible assets (including minimal amounts reported in cost of revenues) was $0.2 million and $0.1 million for each of the three months ended March 31, 20222023 and 2021, respectively.2022. The Company estimates that amortization expense of intangible assets will be $0.3 million, $0.4 million, $0.4 million, $0.4$0.3 million, $0.3 million and $1.7$1.4 million for the remainder of 2022,2023, and for 2023, 2024, 2025, 2026, 2027 and thereafter, respectively.
Note 10—Accrued Expenses
Accrued expenses consisted of the following:
| March 31, 2022 |
| December 31, 2021 |
|
| March 31, 2023 |
| December 31, 2022 |
| |||||||
(in thousands) | (in thousands) | |||||||||||||||
Renewable energy |
| $ | 26,855 |
|
| $ | 23,247 |
|
| $ | 24,574 |
|
| $ | 18,444 |
|
Liability to customers related to promotions and retention incentives |
|
| 9,034 |
|
| 9,071 |
|
|
| 9,385 |
|
| 9,111 |
| ||
Payroll and employee benefit | 2,806 | 3,297 | 2,054 | 4,251 | ||||||||||||
Other accrued expenses |
|
| 3,577 |
|
|
| 3,908 |
|
|
| 2,555 |
|
|
| 3,853 |
|
Total accrued expenses |
| $ | 42,272 |
|
| $ | 39,523 |
|
| $ | 38,568 |
|
| $ | 35,659 |
|
Note 11—Leases
|
| March 31, 2022 |
| December 31, 2021 |
| March 31, 2023 |
| December 31, 2022 | ||||||
(in thousands) | (in thousands) | |||||||||||||
ROU Assets | $ | 1,585 | $ | 1,656 | $ | 1,796 | $ | 1,892 | ||||||
Current portion of operating lease liabilities | 217 | 229 | 258 | 250 | ||||||||||
Noncurrent portion of operating lease liabilities | 1,441 | 1,495 | 1,599 | 1,699 | ||||||||||
Total |
| $ | 1,658 |
| $ | 1,724 |
| $ | 1,857 |
| $ | 1,949 |
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | (in thousands) | (in thousands) | ||||||||||||
Operating cash flows from operating activities | $ | 143 | $ | 183 | $ | 130 | $ | 119 | ||||||
ROU assets obtained in the exchange for lease liabilities | ||||||||||||||
Operating leases | $ | 0— | $ | 0— | $ | — | $ | — |
(in thousands) | ||||||||
Remainder of 2022 |
| $ | 240 |
| ||||
2023 | 316 | |||||||
Remainder of 2023 |
| $ | 295 |
| ||||
2024 | 282 | 350 | ||||||
2025 | 233 | 277 | ||||||
2026 | 239 | 272 | ||||||
2027 | 277 | |||||||
Thereafter | 833 | 1,616 | ||||||
Total future lease payments | 2,143 | 3,087 | ||||||
Less imputed interest | (485 | ) | 1,230 | |||||
Total operating lease liabilities |
| $ | 1,658 |
|
| $ | 1,857 |
|
Note 12—Equity
Dividend Payments
The following table summarizes the quarterly dividends paiddeclared by the Company during the three months ended March 31, 20222023 (in thousands, except per share amounts):
Declaration Date |
| Dividend Per Share |
| Aggregate Dividend Amount |
| Record Date |
| Payment Date |
| Dividend Per Share |
| Aggregate Dividend Amount |
| Record Date |
| Payment Date | ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Series 2012-A Preferred Stock ("Preferred Stock") | Series 2012-A Preferred Stock ("Preferred Stock") | Series 2012-A Preferred Stock ("Preferred Stock") | ||||||||||||||||||||||
January 14, 2022 |
| $ | 0.1594 |
| $ | 370 |
| February 7, 2022 |
| February 15, 2022 | ||||||||||||||
January 12, 2023 |
| $ | 0.1594 |
| $ | 157 |
| February 7, 2023 |
| February 15, 2023 | ||||||||||||||
Class A Common Stock and Class B Common Stock | Class A Common Stock and Class B Common Stock | Class A Common Stock and Class B Common Stock | ||||||||||||||||||||||
February 7, 2022 | $ | 0.0750 | $ | 1,934 | February 22, 2022 | March 1, 2022 | ||||||||||||||||||
February 9, 2023 | $ | 0.0750 | $ | 1,951 | February 21, 2023 | March 1, 2023 |
In March 2021, in light of the losses incurred from the effects of events in Texas and Japan discussed above, the Company suspended the payment of quarterly dividends on its common stock. However, in February 2022, the Company reinstated the quarterly dividends on our Class A and Class B common stock.
OnIn the year ended December 31, 2021,2022, the Company accrued Additional Dividends of $0.0848$0.5301 per share on its Preferred Stock, equal to $0.2$0.5 million in the aggregate in respect of the GRE results of operations through December 31,, 2021, 2022, which is expectedthe Company expects to be paid around pay in May 15, 2022.2023.
On April 14, 2022,17, 2023, the Company’s Board of Directors declared aggregate dividends of $0.6895 per share on its the Preferred Stock, consisting of a quarterly Base Dividend of $0.1594$0.1594 per share on the Preferred Stock for the first quarter of 2023, and Additional Dividends of $0.5301 per share in respect of the GRE results of operations during the year ended December 31, 2022. as discussed above. The dividend will be paid on or about May 16, 202215, 2023 to stockholders of record as of the close of business May 16, 2022.5, 2023 and to the holders of Preferred Stock that was redeemed by the Company in the three months ended March 31, 2023.
On May 3, 2022,2023, the Company’s Board of Directors declared a quarterly dividend of $0.0750 per share on its Class A common stock and Class B common stock for the first quarter of 2022.2023. The dividend will be paid on or about May 31, 20222023 to stockholders of record as of the close of business on May 20, 2022.2023.
The Delaware General Corporation Law allows companies to declare dividends out of “Surplus,” which is calculated by deducting the par value of the company’s stock from the difference between total assets and total liabilities. The Company has elected to record dividends declared against accumulated deficit.
Stock Repurchases and Redemption; Treasury Shares
On March 11, 2013, the Board of Directors of the Company approved a program for the repurchase of up to an aggregate of 7.0 million shares of the Company’s ClassB common stock. There were no repurchases purchases under this program in the three months ended March 31, 2022 and 2021.2023 or 2022. At March 31, 2022, 5.32023, 4.7 million shares of Class B common stock remained available for repurchase under the stock repurchase program.
As of March 31, 20222023 and December 31, 2021,2022, there were 2.02.7 million outstanding shares of Class B common stock held in the Company's treasury, respectively, with a cost of $14.1$19,175 million and $19.0 million, respectively, at a weighted average cost per share of $7.01.
$7.05.and $7.03, respectively.
On March 21, 2020, the Board of Directors of the Company approved a program to redeem up to $4.0 million worth of the Company's Preferred Stock in accordance with the Certificate of Designations for the preferred stock. There was no redemption under this program in three months ended March 31, 2022 and 2021.
On February 7, 2022, the Board of Directors of the Company authorized a program to redeem up to $1.0 million per quarter of the Company's Preferred Stock at the liquidation preference of $8.50 per share beginning in the second quarter of 2022. In the three months ended March 31, 2023, the Company redeemed 117,647 Preferred Stock under this program for an aggregate amount of $1.0 million. There was no redemption under this program in the three months ended March 31, 2022.
On April 17, 2023, the Company's Board of Directors approved the redemption of 117,647 shares of outstanding Preferred Stock on May 15, 2023 (the "Redemption Date") at a price of $8.50 per share equivalent to approximately $1.0 million in the aggregate, together with an amount equal to all dividends accrued and unpaid up to, but not including, the Redemption Date.
21 |
On May 3, 2022, the Board of Directors authorized to redeem $2.0the redemption of $2.0 million of the Company's Preferred Stock during the second quarter of 2022, which the Company redeemed on June 13, 2022.
Warrants to Purchase Class B Common Stock
On June 8, 2018, the Company sold to Howard S. Jonas, the Chairman of the Company’s Board of Directors and then the holder of the controlling portion of the Company's common stock, shares of the Company’s Class B common stock and warrants to purchase an additional 1,048,218 shares of the Company’s Class B common stock at an exercise price of $4.77 per share for an aggregate exercise price of $5.0 million. The warrants will expire in June 2023.2023. In addition, on June 12, 2018, the Company sold to a third-party investor treasury shares of the Company’s Class B common stock for an aggregate sales price of $1.0 million and warrants to purchase an additional 209,644 shares of the Company’s Class B common stock at an exercise price of $4.77 per share, for an aggregate exercise price of $1.0 million.
In May 2022, a holder of warrants exercised warrants to purchase 209,644 shares of Class B common stock warrants through a cashlessexercise and the Company issued 72,657 common shares with the remaining 136,987 warrants being cancelled in payment of the exercise price.
As of March 31, 20222023, there were outstanding 1,257,862 warrants to purchase1,048,218 shares of the Company’s Class B common stock at $4.77$4.77 per share, all of which will expire in June 2023.
Purchase of Equity of Subsidiaries
In September 2021,November 2022, the Company purchased from Howard S. Jonas, the Chairman of the Board of Directors of the Company, Michael Stein, the Chief Executive Officer of the Company, Avi Goldin, the Chief Financial Officer of the Company,a certain employeesemployee 5.1% and consultant an aggregate of 4.3% fully vested interest2.3% interests in GRE InternationalLumo Finland and Lumo Sweden, respectively, by issuing 218,862123,302 shares of the Company's Class B restricted common stock.
In October 2021, the Company purchased from Wes Perry, the Chairman of the Audit Committee of the Company's Board of Directors,stock, which will ratably vest on a 0.2% interest in GEIC by issuing 36,591 of the Company's Class B common stock.bi-annual basis between May 2023 and up to May 2025.
Stock-Based Compensation
The Company’s 2011 Stock Option and Incentive Plan (as amended, the "2011 Plan") is intended to provide incentives to executives, employees, directors and consultants of the Company. Incentives available under the Plan include stock options, stock appreciation rights, limited rights, deferred stock units, and restricted stock. The 2011 Plan expired in 2021 and no new grants are to be issued thereunder, however, outstanding grants are not impacted by the expiration of the plan.
On March 8, 2021, thethe Board of Directors adopted the Company 2021 Stock Option and Incentive Plan (the "2021 Plan"), subject to the approval of the Company's stockholders instockholders. In May 2021, the 2021 Plan became effective and replaced the 2011 Plan on May12, 2021.Plan. Similar to the 2011 Plan, the 2021 Plan provides incentives to executives, employees, directors and consultants of the Company. Incentives available under the 2021 Plan include stock options, stock appreciation rights, limited stock appreciation rights, deferred stock units, and restricted stock. The Plan is administered by the Compensation Committee of the Company’s Board of Directors. The maximum number of shares reserved for the grant of awards under the 2021 Plan is 1.0 million shares of Class B Common Stock.
In February 2022, the Company granted certain employees and members of its Board of Directors an aggregate of 290,000 deferred stock units which will vest in two tranches contingent upon the achievement of a specified thirty-day average closing price of the Company's Class B common stock within a specified period of time (the "2022 market conditions") and the satisfaction of service-based vesting conditions. Each deferred stock unit entitles the recipient to receive, upon vesting, up to two shares of Class B common stock of the Company depending on market conditions. The Company used a Monte Carlo simulation model to estimate the grant-date fair value of the awards. Assumptions and estimates utilized in the model include the risk-free interest rate, dividend yield, expected stock volatility based on a combination of the Company’s historical stock volatility. In the second quarter of 2022, the 2022 market conditions were partially achieved and the Company issued 290,000 shares of its restricted Class B common stock. In February 2023, the remaining portion of the 2022 market conditions was achieved and, subject to amending the Company's 2021 Stock Option and Incentive Plan to reserve additional shares for issuance thereunder, the Company will issue an additional 290,000 restricted shares of its Class B common stock. The restricted shares to be issued will be subject to service-based vesting conditions as described above.
As of March 31, 2022,2023, there were approximately $5.9 $2.9million of total unrecognized stock-based compensation costs related to outstanding and unvested equity-based grants. These costs are expected to be recognized over a weighted-average period of approximately 2.011.2 years.
Note 13—Variable Interest Entity
Citizens Choice Energy, LLC (“CCE”), is a REP that resells electricity and natural gas to residential and small business customers in the State of New York. The Company does not own any interest in CCE. Since 2011, the Company has provided CCE with substantially all of the cash required to fund its operations. The Company determined that it has the power to direct the activities of CCE that most significantly impact its economic performance and it has the obligation to absorb losses of CCE that could potentially be significant to CCE on a stand-alone basis. The Company therefore determined that it is the primary beneficiary of CCE, and as a result, the Company consolidates CCE within its GRE segment. The net income or loss incurred by CCE was attributed to noncontrolling interests in the accompanying consolidated statements of operations.
The Company has an option to purchase 100% of the issued and outstanding limited liability company interests of CCE for one dollar plus the forgiveness of $0.5 million that the Company loaned to CCE in October 2015. The option expires on October 22, 2023.
Net loss related to CCE and aggregate net funding provided by the Company were as follows:
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net loss | $ | 986 | $ | 322 | $ | 92 | $ | 986 | ||||||||
Aggregate funding provided by the Company, net | $ | 1,458 | $ | 403 | ||||||||||||
Aggregate provided by the Company, net | $ | 79 | $ | 1,458 |
Summarized combined balance sheet amounts related to CCE was as follows:
| March 31, |
| December 31, 2021 |
|
| March 31, |
| December 31, 2022 |
| |||||||
(in thousands) | (in thousands) | |||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash, cash equivalents and restricted cash |
| $ | 918 |
|
| $ | 559 |
|
| $ | 328 |
|
| $ | 295 |
|
Trade accounts receivable |
|
| 661 |
|
|
| 544 |
|
|
| 480 |
|
|
| 549 |
|
Prepaid expenses and other current assets |
|
| 358 |
|
|
| 367 |
|
|
| 322 |
|
|
| 363 |
|
Other assets |
|
| 359 |
|
|
| 359 |
|
|
| 359 |
|
|
| 359 |
|
Total assets |
| $ | 2,296 |
|
| $ | 1,829 |
|
| $ | 1,489 |
|
| $ | 1,566 |
|
Liabilities and noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
| $ | 543 |
|
| $ | 547 |
|
| $ | 641 |
|
| $ | 700 |
|
Due to IDT Energy |
|
| 7,126 |
|
|
| 5,668 |
|
|
| 6,076 |
|
|
| 5,997 |
|
Noncontrolling interests |
|
| (5,373 | ) |
|
| (4,386 | ) |
|
| (5,228 | ) |
|
| (5,131 | ) |
Total liabilities and noncontrolling interests |
| $ | 2,296 |
|
| $ | 1,829 |
|
| $ | 1,489 |
|
| $ | 1,566 |
|
The assets of CCE may only be used to settle obligations of CCE, and may not be used for other consolidated entities. The liabilities of CCE are non-recourse to the general credit of the Company’s other consolidated entities.
Note 14—Income Taxes
The following table provides a summary of Company's effective tax rate:
| Three Months Ended March 31, |
| ||||
| 2022 | 2021 |
| |||
Reported tax rate | 28.0 | % | (51.0) | % |
| Three Months Ended March 31, | |||||
| 2023 | 2022 | ||||
Reported tax rate | 26.4 | % | 27.6 | % |
The change in the reported tax rate for the three months ended March 31, 2022 2023 was 26.4%, a decrease compared to the same period in 20212022. The decrease is a result of favorable results of operations inmainly from the U.S. and changeschange in the mix of tax rates in the jurisdictions in whichwhere the Company earned taxable income was earned which was not offset by income tax benefit in some jurisdictions that had losses due to valuation allowances in those jurisdictions.income.
Note 15—Earnings (Loss) Per Share
Basic earnings per share is computed by dividing net income or loss attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increases is anti-dilutive.
The weighted-average number of shares used in the calculation of basic and diluted earnings per share attributable to the Company’s common stockholders consists of the following:
| Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||
2022 | 2021 | 2023 | 2022 | ||||||||||||
(in thousands) | (in thousands) | ||||||||||||||
Basic weighted-average number of shares | 25,764 | 26,004 | 25,326 | 25,764 | |||||||||||
Effect of dilutive securities: | |||||||||||||||
Stock options and warrants | 308 | 0— | 805 | 308 | |||||||||||
Non-vested restricted Class B common stock | 56 | 0— | 441 | 56 | |||||||||||
Unissued vested deferred stock units | 48 | — | |||||||||||||
Diluted weighted-average number of shares | 26,128 | 26,004 | 26,620 | 26,128 |
Unissued vested deferred stock units in three months ended March 31, 2023 pertain to the weighted average of restricted shares of the company's Class B common stock that the Company expects to issue related to satisfaction of 2022 market conditions (see Note 12 — Equity).
The following shares were excluded from the diluted earnings per share computations:
| Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||
2022 | 2021 | 2023 | 2022 | ||||||||||||
(in thousands) | (in thousands) | ||||||||||||||
Shares underlying options and warrants | 126 | 579 | — | 126 | |||||||||||
Non-vested restricted Class B common stock | 0— | 71 | |||||||||||||
Non-vested deferred stock units | 580 | 610 | — | 580 |
Stock options were excluded from the diluted earnings per share computation infor the three months ended March 31, 2022 because the exercise prices of the stock options were greater than the average market prices of the Company's stock during the period.
In three months ended March 31, 2021, the diluted loss per share computation equals basic loss per share because the Company had a net loss and the impact of the assumed exercise of stock options and warrants and the vesting of the restricted stock and deferred stock units would have been anti-dilutive.
Non-vested deferred stock units were excluded from the basic and diluted weighted average shares outstanding calculation because the market conditionconditions for vesting of those deferred stock units were not met as of March 31, 2022 and 2021.2022.
Note 16—Related Party Transactions
On December 7, 2020, the Company invested $5.0$5.0 million to purchase 218,245 shares of Class B common stock of Rafael Holdings, Inc. ("Rafael"). Rafael, a publicly-traded company, is also a related party. Rafael is a former subsidiary of IDT that was spun off from IDT in March 2018. Howard S. Jonas is the Executive Chairman and Chairman of the Board of Directors of Rafael. In connection with the purchase, Rafael issued to the Company warrants to purchase an additional 43,649 shares of Rafael's Class B common stock with an exercise price of $22.91$22.91 per share. The warrants had a term expiring on June 6, 2022. The Company exercised the warrants in full on March 31, 2021 for a total exercise price of $1.0$1.0 million. The Company does not exercise significant influence over the operating or financial policies of Rafael. ForIn thethree months ended March 31, 2022,2023, the Company recognized unrealized loss on investmentsold 195,501shares of Class B common stock of Rafael for $0.70.3million. For the three months ended March 31, 2021,2023 and 2022 the Company recognized unrealized gainlosses on investment of $0.1 million and $0.7 million, respectively, in connection with the investment.$4.1 million. At March 31, 2022,2023, the carrying values of investmentsthe remaining investment in the common stock of Rafael was $0.7million.$0.1 million.
The Company was formerly a subsidiary of IDT Corporation (“IDT”). On October 28, 2011, the Company was spun-off by IDT. The Company entered into various agreements with IDT prior to the spin-off including an agreement for certain services to be performed by the Company and IDT. The Company also provides specified administrative services to certain of IDT’s foreign subsidiaries. Howard Jonas is the Chairman of the Board of IDT.
The Company leases office space and parking in New JerseyJersey. Until August 2022, the space was leased from Rafael. The leases expire in April 2025. On August 22, 2022, Rafael completed the sale of the leased office space and parking in New Jersey, including the lease of the Company, to a third-party buyer.
The charges for services provided by IDT to the Company, and rent charged by Rafael, net of the charges for the services provided by the Company to IDT, are included in “Selling, general and administrative” expense in the consolidated statements of operations.
| Three Months Ended March 31, | Three Months Ended | |||||||||||||
| 2022 | 2021 | 2023 | 2022 | |||||||||||
| (in thousands) | (in thousands) | |||||||||||||
Amount IDT charged the Company | $ | 406 | $ | 250 | $ | 322 | $ | 406 | |||||||
Amount the Company charged IDT | $ | 37 | $ | 39 | $ | 37 | $ | 37 | |||||||
Amount Rafael charged the Company | $ | 58 | $ | 57 | $ | — | $ | 58 |
The following table presents the balance of receivables and payables to IDT and Rafael:
| March 31, 2022 |
| December 31, 2021 |
|
| March 31, 2023 |
| December 31, 2022 |
| |||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Due to IDT |
| $ | 168 |
|
| $ | 239 |
|
| $ | 118 |
|
| $ | 185 |
|
Due from IDT |
| $ | 27 |
|
| $ | 51 |
|
| $ | 20 |
|
| $ | 20 |
|
Due to Rafael |
| $ | 0— |
|
| $ | 0— |
|
| $ | — |
|
| $ | — |
|
On August 31, 2018, the Company extended a loan to a former employee for $0.1 million. The loan agreement requires scheduled payments from December 31, 2020 to December 2052. The loan bears the same interest equivalent to a minimum rate, in effect from time to time required by local regulations and is compounded annually. The Company recorded nominal amounts of interest income for the three months ended March 31, 20222023 and 20212022 related to this debt. The outstanding balance, including accrued interest was $0.1 million as of March 31, 2022.2023.
The Company obtains insurance policies from several insurance brokers, one of which is IGM Brokerage Corp. (“IGM”). IGM is owned by the mother of Howard S. Jonas and Joyce Mason, who is a Director and Corporate Secretary of the Company. Jonathan Mason, husband of Joyce Mason and brother-in-law of Howard S. Jonas, provides insurance brokerage services via IGM. Based on information the Company received from IGM, the Company believes that IGM received commissions and fees from payments made by the Company (including payments from third party brokers). The Company paid IGM a total of $0.3$0.5 million in 20212022 related to premium of various insurance policies that were brokered by IGM. There was 0no outstanding payable to IGM was as of March 31, 2022.2023. Neither Howard S. Jonas nor Joyce Mason has any ownership or other interest in IGM other than via the familial relationships with their mother and Jonathan Mason.
In the September and October of 2021, the Company purchased from certain related parties interests in GRE International and GEIC (see Note 12 —Equity).
InOn February 21, 2022, the Company entered into ana Loan and Security Agreement to extend up to ILS5.55.5 million New Israel Shekel, or NIS (equivalent to $1.7 million as at March 31, 2022)$1.5 million) with Natan Ohayon (the "Ohayon Loan"). Natan Ohayon is a the holder ofholds a minority interest in Petrocycle Ltd ("Petrocycle"), a subsidiary of the Company. Petrocycle is a preoperating entity engaged in the development of a process to recycle used engine oil into usable gasoline. TheOhayonLoan, which is secured by all assets that Mr. Ohayon is acquiring fromacquired using the proceeds of the loan bears a minimum interest as set by the Income Tax Regulations of Israel (3.23% in 2022) and is due, together with the principal amount on or before December 31, 2023. As of March 31,In 2022, the outstanding balance, including accrued interest, of the Ohayon Loan was ILS4.5 Company extended an additional NIS0.7million (equivalent to $1.4 $0.2million), included in other assets in to Mr.Ohayon related to his share of operations ofPetrocycle. In December 2022, the consolidated balance sheets. Company suspended the development of business operations ofPetrocycle after it was determined that it will not meet the expected results.Petrocycle provided full impairment of its property and equipment, theOhayon Loan and advances to Mr.Ohayon for an aggregate amount of $2.1 million.
Investments in Atid 613
In September 2018, the Company divested a majority interest in Atid Drilling Ltd. in exchange for a 37.5% interest in a contracting drilling company in Israel ("Atid 613") which the Company accountsaccounted for using equity method of accounting. The Company did not recognize any equity in net loss from Atid 613 for the Three Months Ended March 31, 2023 and 2022. In March 2023, the Company received $0.1 million from Atid 613 for the full settlement of its investments in Atid 613. The Company recognized a minimal gain from settlement of investment included in other income (loss), net in its consolidated statements of operations for the three months ended March 31, 2022 and 2021.2023. The carrying value of the Company's investments in Atid was $0.1 million at MarchDecember 31, 2022 and December 31, 2021 included in other noncurrent assets in the consolidated balance sheets.
The Company also entered into a Shareholder Agreement with Atid 613's other shareholders to govern certain issues regarding management of the new company. Under the Shareholder Agreement, among other things, a Company subsidiary agreed to make available to Atid 613 working capital financing up to $0.4 million ("Credit Facility"). Any outstanding borrowing under the Credit Facility would bear interest at a variable rate as described in the Shareholder Agreement. As of March 31, 2022, the outstanding balance of Credit Facility was 0nil.
On August 12, 2019, the Company, together with the other shareholders of Atid 613 signed a Funding Agreement to provide aggregate loans to Atid 613 in an amount of up to New Israeli Shekel or NIS5.1 million (equivalent to $1.5 million at March 31, 2022), including the Company's commitment to extend up to NIS1.9 million (equivalent to $0.5 million at March 31, 2022) of such amount. In August 2019, the Company extended NIS0.8 million (equivalent to $0.2 million) in loans. The loans which are secured by Atid 613’s assets bore 0 interest until March 1, 2020 and bear interest at 5.5% for all subsequent periods. In May 2021, Atid 613 paid the outstanding balance of the loan of $0.2 million. At March 31, 2022, the balance of loan receivables from Atid 613 was 0nil.
The Company has 3two reportable business segments: GRE and Genie Renewables. Prior to In the third quarter 2022, following the discontinuance of operations ofLumo Finland andLumo Sweden, GRE International ceased to be a segment and Genie Renewables (formerly Genie Energy Services, or GES). the remaining assets and liabilities and results of continuing operations of GRE International were combined with corporate. GRE owns and operates REPs, including IDT Energy, Residents Energy, TSE, Southern Federal and Mirabito. GRE's REP businesses resell electricity and natural gas to residential and small business customers in the Eastern and Midwestern United States and Texas. GRE International, operates REPs in Finland and Sweden. Genie Renewables designs, manufactures and distributes solar panels, offers energy brokerage and advisory services and also sells third-party products to customers. Corporate costs include unallocated compensation, consulting fees, legal fees, business development expenses and other corporate-related general and administrative expenses. Corporate does not generate any revenues, nor does it incur any cost of revenues.
The Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision-maker.
The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its business segments based primarily on income (loss) from operations. There are no significant asymmetrical allocations to segments.
26 |
Operating results for the business segments of the Company were as follows:
(in thousands) |
| GRE | GRE International |
|
| Genie Renewables |
|
| Corporate |
|
| Total |
| |||||||
Three Months Ended March 31, 2022 | ||||||||||||||||||||
Revenues | $ | 83,884 | $ | 12,603 | $ | 2,042 | $ | 0— | $ | 98,529 | ||||||||||
Income (loss) from operations | 30,176 | (2,808 | ) | (479 | ) | (2,456 | ) | 24,433 | ||||||||||||
Depreciation and amortization | 85 | 188 | 11 | 0— | 284 | |||||||||||||||
Stock-based compensation | 246 | 36 | 0— | 558 | 840 | |||||||||||||||
Provision for (benefit from) income taxes | 7,833 | (821 | ) | 0— | (498 | ) | 6,514 | |||||||||||||
Three Months Ended March 31, 2021 | ||||||||||||||||||||
Revenues | $ | 90,667 | $ | 14,335 | $ | 2,488 | $ | 0— | $ | 107,490 | ||||||||||
Income (loss) from operations | 1,204 | (5,551 | ) | 559 | (1,677 | ) | (5,465 | ) | ||||||||||||
Depreciation and amortization | 118 | 250 | 12 | 0— | 380 | |||||||||||||||
Stock-based compensation | 162 | 32 | 0— | 395 | 589 | |||||||||||||||
Provision for (benefit from) income tax | 1,186 | (837 | ) | 128 | 58 | 535 |
(in thousands) |
| GRE | Genie Renewables |
|
| Corporate |
|
| Total |
| |||||
Three Months Ended March 31, 2023 | |||||||||||||||
Revenues | $ | 101,412 | $ | 3,864 | $ | — | $ | 105,276 | |||||||
Income (loss) from operations | 16,445 | (1,148 | ) | (4,022 | ) | 11,275 | |||||||||
Depreciation and amortization | 83 | 13 | — | 96 | |||||||||||
Stock-based compensation | 273 | 1 | 575 | 849 | |||||||||||
Provision for doubtful accounts receivables | 574 | — | — | 574 | |||||||||||
Provision for (benefit from) income taxes | 4,650 | (315) | (267 | ) | 4,068 | ||||||||||
Three Months Ended March 31, 2022 | |||||||||||||||
Revenues | $ | 83,884 | $ | 2,042 | $ | — | $ | 85,926 | |||||||
Income (loss) from operations | 30,176 | (479 | ) | (2,735 | ) | 26,962 | |||||||||
Depreciation and amortization | 85 | 11 | — | 96 | |||||||||||
Stock-based compensation | 246 | — | 558 | 840 | |||||||||||
Provision for doubtful accounts receivables | 392 | — | — | 392 | |||||||||||
Provision for (benefit from) income taxes | 7,833 | — | (721 | ) | 7,112 |
Total assets for the business segments of the Company were as follows:
(in thousands) |
| GRE | GRE International |
|
| Genie Renewables |
|
| Corporate |
|
| Total |
| |||||||
Total assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
March 31, 2022 |
| $ | 149,263 | $ | 22,953 |
|
| $ | 5,005 |
|
| $ | 42,964 |
|
| $ | 220,185 |
| ||
December 31, 2021 | 174,442 | 34,674 | 3,946 | 16,403 | 229,465 |
(in thousands) |
| GRE | Genie Renewables |
|
| Corporate |
|
| Total |
| ||||||
Total assets: |
|
|
|
|
|
|
|
|
|
| ||||||
March 31, 2023 |
| $ | 209,483 | $ | 15,680 |
|
| $ | 67,847 |
|
| $ | 293,010 |
| ||
December 31, 2022 | 191,839 | 12,191 | 73,585 | 277,615 |
The total assets of corporate segment includes total assets of discontinued operations of Orbit, Lumo Finland and Lumo Sweden with aggregate net book value of $48.3 million and $55.0 million at March 31, 2023 and December 31, 2022, respectively.
Note 18—Commitments and Contingencies
Legal Proceedings
The Company may from time to time be subject to legal proceedings that arise in the ordinary course of business. Although there can be no assurance in this regard, the Company does not expect any of those legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows or financial condition.
Refer to Note 5—Discontinued Operations and Divestiture, for discussion related to the administration of Orbit.
Agency and Regulatory Proceedings
From time to time, the Company receives inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes, and the Company responds to those inquiries or requests. The Company cannot predict whether any of those matters will lead to claims or enforcement actions or whether the Company and the regulatory parties will enter into settlements before a formal claim is made.
State of Connecticut Public Utilities Regulatory Authority
Town Square
On September 19, 2018, the State of Connecticut Public Utilities Regulatory Authority (“PURA”) commenced an investigation into Town Square following customer complaints of allegedly misleading and deceptive sales practices on the part of Town Square. The Connecticut Office of Consumer Counsel subsequently joined in the investigation. On June 17, 2020, PURA notified Town Square that it was advancing its investigation by assigning Prosecutorial staff for the purpose of investigating Town Square’s compliance with licensed electric supplier billing, marketing, and licensing requirements, and, if appropriate, facilitating settlement discussions among the parties.
Although Town Square denies any basis for those complaints and any wrongdoing on its part, in July 2021, the parties settled the dispute. Pursuant to the terms of the settlement agreement, Town Square paid $0.4 million.Town Square has also agreed to voluntarily refrain from in-person marketing activities in Connecticut for a period of 15 months. For the three months ended March 31, 2022 and 2021, Town Square’s gross revenues from sales in Connecticut was $3.7 million and $9.4 million, respectively.
Residents Energy
In August 2020, Residents Energy began marketing retail energy services to Connecticut. For the year ended December 31, 2021, Residents Energy's gross revenues from sales in Connecticut was $0.2 million. During the fourth quarter of 2020, the enforcement division of PURA contacted Residents Energy concerning customer complaints received in connection with alleged door-to-door marketing activities in violation of various rules and regulations. On March 12, 2021, the enforcement division filed a motion against Resident Energy with the adjudicating body of PURA, seeking the assessment of $1.5 million in penalties, along with a suspension of license, auditing of marketing practices upon reinstatement and an invitation for settlement discussions.
In June 2021,2022, the parties settled the dispute. Pursuant to the terms of the settlement agreement, Residents Energy paid $0.3 million and volunteered to withdraw from the market in Connecticut for a period of 36 months.
Other Reviews or Investigations
From time to time regulators may initiate reviews, compliance checks or issue subpoenas for information as means to evaluate the Company and its subsidiaries’ compliance with applicable laws, rules, regulations and practices.
On October 25,In 2019, the Office of the Attorney General of the State of Illinois ("IL AG") notified Residents Energy (by way of subpoena) that it iswas conducting an investigation to assess compliance with the Illinois Consumer Fraud and Deceptive Business Practices Act. The notice was issued inFollowing a dispute between the form of a subpoena inCompany and the course of the foregoing. The Company, which has responded as required, has challengedIL AG regarding the merits of the subpoena and investigation. Residents Energy denies any wrongdoing on its part. Asinvestigation, the IL AG filed and complaint in the Circuit Court of March 31, 2022, 0 claims or demands have been made against Residents Energy byCook County, Illinois (Chancery Division) seeking to enforce compliance. The scope of the subpoena was later modified in response to subsequent negotiations between the Company and the IL AG, and there is insufficient basis to deem any loss probable or to assess the amountCompany has satisfied the requirements of any possible loss. the subpoena. In April 2023, the IL AG dismissed its complaint against the Company. For the three months ended March 31, 20222023 and 2021,2022, Resident Energy’s gross revenues from sales in Illinois was $8.3were $13.6 million and $8.0$8.3 million, respectively.
In response to certain customerscustomer complaints, the State of Maine Public Utility Commission ("MPUC") has opened a review of the door to door marketing practices of Town Square. In connection with the review, the MPUC has requested information from Town Square demonstrating compliance in the form of an order to show cause as to why its marketing practices are in compliance and it should be permitted to continue licensed operations in Maine. In August 2021, the parties settled the dispute without any obligation for payment by Town Square. In connection with the settlement, Town Square has agreed to voluntarily refrain from door-to-door marketing activities in Maine through June 30, 2023, and to voluntarily refrain from outbound telemarketing to obtain new residential customers for a period of six months, along with certain compliance procedures.For the three months ended March 31, 20222023 and 2021,2022, Town Square’s gross revenues from sales in Maine waswere $0.40.8 million and $0.5 $0.4million, respectively.
Other Commitments
Purchase Commitments
The Company had future purchase commitments of $132.5$132.5 million at March 31, 2022,2023, of which $94.9$114.8 million was for future purchase of electricity. The purchase commitments outstanding as of March 31, 20222023 are expected to be paid as follows:
(in thousands) |
|
|
|
|
|
| ||
Remainder of 2022 |
| $ | 62,296 |
|
| $ | 71,164 |
|
2023 |
|
| 52,707 |
|
|
| 41,673 |
|
2024 |
|
| 16,530 |
|
|
| 16,701 |
|
2025 | 1,006 | 2,964 | ||||||
2026 | 0— | — | ||||||
Thereafter |
|
| 0— |
|
|
| — |
|
Total payments |
| $ | 132,539 |
|
| $ | 132,502 |
|
In the three months ended March 31, 2022,2023, the Company purchased $20.1$15.8 million and $4.1$8.2 million of electricity and renewable energy credits, respectively, under these purchase commitments. In the three months ended March 31, 20212022, the Company purchased $20.179.2 million and $4.13.0 million of electricity and renewable energy credits, respectively, under these purchase commitments.
Renewable Energy Credits
GRE must obtain a certain percentage or amount of its power supply from renewable energy sources in order to meet the requirements of renewable portfolio standards in the states in which it operates. This requirement may be met by obtaining renewable energy credits that provide evidence that electricity has been generated by a qualifying renewable facility or resource. At March 31, 2022,2023, GRE had commitments to purchase renewable energy credits of $37.7$17.7 million.
Performance Bonds and Unused Letters of Credit
GRE has performance bonds issued through a third party for certain utility companies and for the benefit of various states in order to comply with the states’ financial requirements for REPs. At March 31, 2022,2023, GRE had aggregate performance bonds of $15.5$14.9 million outstanding and minimal amount of unused letters of credit.
BP Energy Company Preferred Supplier Agreement
Certain of GRE’s REPs are party to an Amended and Restated Preferred Supplier Agreement with BP, which is to be in effect through November 30, 2023. Under the agreement, the REPs purchase electricity and natural gas at market rate plus a fee. The obligations to BP are secured by a first security interest in deposits or receivables from utilities in connection with their purchase of the REPs’ customer’s receivables, and in any cash deposits or letters of credit posted in connection with any collateral accounts with BP. The ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. At March 31, 2022,2023, the Company was in compliance with such covenants. At March 31, 2022,2023, restricted cash—short-term of $1.3$0.6 million and trade accounts receivable of $47.9$63.1 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $10.8$14.2 million at March 31, 2022.2023.
Note 19—Debt
Loan with Tokyo Star Bank
On May 13, 2020, Genie Japan entered into a Loan Agreement with Tokyo Star Bank for a ¥150.0 million (equivalent to $1.4 million) short-term credit facility ("May 2020 Loan") with maturity date of November 13, 2020. On November 13, 2020, Genie Japan and Tokyo Star Bank amended the May 2020 Loan to extend the maturity date to May 13, 2021. Genie Japan provided a letter of credit issued by JPMorgan Chase in the amount of ¥150.0 million (equivalent to $1.4 million) as collateral. The outstanding principal amount incurred interest at 3.0% per annum and was payable monthly. In May 2021, the Company completed the divestiture of Genie Japan including balance of the May 2020 Loan (see Note 5)
Credit Agreement with JP Morgan Chase Bank
On December 13, 2018, the Company entered into a Credit Agreement with JPMorgan Chase Bank (“Credit Agreement”). On December 23, 2021,27, 2022, the Company entered into the third amendment of its existing Credit Agreement to extend the maturity date to December 31, 2022.2023. The Company continues to have the aggregate principal amount of $5.0was reduced to $3.0 million credit line facility (“Credit Line”). The Company pays a commitment fee of 0.1% per annum on the unused portion of the Credit Line as specified in the Credit Agreement. The borrowed amounts will be in the form of letters of credit which will bear interest of 1.0% per annum. The Company will also pay a fee for each letter of credit that is issued equal to the greater of $500 or 1.0% of the original maximum available amount of the letter of credit. The Company agreed to deposit cash in a money market account at JPMorgan Chase Bank as collateral for the line of credit equal to $5.1$3.1 million. As of March 31, 2022,2023, there are no letters of credit issued by JP Morgan Chase Bank. At March 31, 2022,2023, the cash collateral of $5.2$3.8 million was included in restricted cash—short-term in the consolidated balance sheet.
Note 20—Recently Issued Accounting Standards
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except the losses will be recognized as allowances instead of reductions in the amortized cost of the securities. In addition, an entity will have to disclose significantly more information about allowances, credit quality indicators and past due securities. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. The Company will adoptadopted the new standard on January 1, 2023. The Company is currently evaluating the requirements of this guidance and has not yet determined the2023 with no significant impact ofon its adoption on the Company's consolidated financial statements.
The following following information should be read in conjunction with the accompanying consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, as filed with the U.S. Securities and Exchange Commission (or SEC).
As used below, unless the context otherwise requires, the terms “the Company,” “Genie,” “we,” “us,” and “our” refer to Genie Energy Ltd., a Delaware corporation, and its subsidiaries, collectively.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends,” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those discussed below under Part II, Item IA and under Item 1A to Part I “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Overview
We are comprised of Genie Retail Energy ("GRE"), and Genie Renewables. In the third quarter of 2022, we discontinued the operations of Lumo Finland and Sweden as discussed below. Following this discontinuance of operations, Genie Retail Energy International ("GRE International") ceased to be a segment and Genie Renewables.the remaining assets and liabilities and results of any continuing operations of GRE International were combined with corporate.
GRE owns and operates retail energy providers ("REPs"), including IDT Energy, Residents Energy, Town Square Energy ("TSE"), Southern Federal and Mirabito Natural Gas. GRE's REPREPs' businesses resell electricity and natural gas primarily to residential and small business customers, with the majority of the customers in the Eastern and Midwestern United States and Texas.
GRE InternationalGenie Renewables holds the Company'sa 95.5% interest in REPs that serve retail customers in Scandinavia. It holds 90.8% controllingGenie Solar, a solar energy company, a 92.8% interest in Lumo Energia Oyj ("Lumo Finland"), a REP serving residential customers in Finland and 97.7% interest in LumoEnergi AB ("Lumo Sweden"). GREI previously held 98.8% in Genie Japan that was sold in May 2021. GRE International also holds a 100% ownership of Orbit Energy, a REP operating in the U.K., which was discontinued in November 2021 as discussed below.
Genie Renewables holds Genie Solar Energy, a rooftop solar system sales and general contracting company, a 93.5% interest in CityCom Solar, a marketer of community solar energy solutions, a 96.0% interest in Diversegy LLC ("Diversegy"), an energya broker for commercial customers, and a 60.0% controlling interest in Prism Solar Solar Technology ("Prism"), a solar solutions company that is engaged in U.S. manufacturing of solar panels, solar installation design and solar energy project management.
As part of our ongoing business development efforts, we seek out new opportunities, which may include complementary operations or businesses that reflect horizontal or vertical expansion from our current operations. Some of these potential opportunities are considered briefly and others are examined in further depth. In particular, we seek out acquisitions to expand the geographic scope and size of our REP businesses.
Discontinued Operations in Finland and Sweden
As a result of continued volatility in the energy market in Europe, in the third quarter of 2022, we decided to discontinue the operations of Lumo Energia Oyj ("Lumo Finland") and Lumo Energi AB ("Lumo Sweden"). From July 13, 2022 to July 19, 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Sweden for a gross aggregate amount of €41.1 million (equivalent to approximately $41.4 million at the dates of the transactions) before fees and other costs. The sale price is to be settled monthly based on the monthly commodity volume specified in the instruments from September 2022 to March 2025. The net book value of the instruments sold was €34.2 million (equivalent to $35.8 million).
In July 2022, Lumo Sweden entered into a transaction to transfer, effective August 5, 2022, its customers to a third party for nominal consideration. In August 2022 Lumo Finland entered in a transaction to transfer its variable rate customers to a third party for €$1.9 million (equivalent to $2.0 million), and transferred the fixed rate customers to other utilities with no considerations.
We determined that exiting Finland and Sweden markets represented a strategic shift that would have a major effect on our operations and accordingly, presented the results of operations and related cash flows as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022.Lumo Finland and Lumo Sweden will continue to liquidate their remaining receivables and settle any remaining liabilities.
In November 2022, Lumo Finland declared bankruptcy and the administration of Lumo Finland was transferred to an administrator (the "Lumo Administrator"). All assets and liabilities of Lumo Finland remain with Lumo Finland, in which Genie retains its interest, however, the management and control of Lumo Finland were transferred to the Lumo Administrator. Since the Company lost control of the management of Lumo Finland in favor of the Lumo Administrator, the accounts of Lumo Finland were deconsolidated effective November 9, 2022.
On November 3, 2022, we acquired additional minority interests in Lumo Finland and Lumo Sweden from an employee for 132,302 of our restricted Class B common stock, which will vest ratably from November 2022 to May 2025. We increased our interest in Lumo Finland from 91.6% to 96.6% and increased from 97.1% to 100% in Lumo Sweden.
Net loss from discontinued operations of Lumo Finland and Lumo Sweden, net of taxes was $0.2 million and $1.9 million for the three months ended March 31, 2023 and 2022, respectively.
Following the discontinuance of operations of Lumo Finland and Lumo Sweden, GRE International ceased to be a segment and the remaining assets and liabilities and results of continuing operations of GRE International were combined with corporate.
Discontinued Operations in United Kingdom
In 2021, the natural gas and energy market in the United Kingdom deteriorated which prompted us to suspend the then contemplated spin-off of our international operations and start the process of orderly withdrawal from the United KingdomU.K. market. In October 2021, as part of the orderly exit process from the United KingdomU.K. market, Orbit Energy Limited ("Orbit"), a REP that used to operate in the U.K., and Shell U.K. Limited ("Shell") agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell. A portion of the net cash proceeds was transferred to us (see Note 5, Discontinued Operations and Divestiture, to our financial statements included elsewhere in this Quarterly Report on Form 10-Q).
Following the termination of the contract withbetween Orbit and Shell, we filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent based on the Insolvency Act of 1986, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered that Orbit's current customers be transferred to a “supplier of last resort” and transferred the administration of Orbit to Administrators effective December 1, 2021. All of the customers of Orbit were transferred to a third-party supplier effective December 1, 2021 as ordered by the Court. All assets and liabilities of Orbit, including cash and receivables remain with Orbit, the management and control of which was transferred to Administrators.
We determined that exiting the United Kingdom represented a strategic shift that would have a major effect on our operations and accordingly, presented the results of operations and related cash flows as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 20222023 and December 31, 2021.2022.
Coronavirus Disease (COVID 19)(COVID-19)
Starting in the first quarter 2020, the world and the United States experienced the unprecedented impactsimpact of the coronavirus disease 2019 (COVID-19) pandemic.
For the year ended December 31, 2021,The COVID-19 pandemic has impacted our business, however, as we progressed through 2022 and have entered 2023, our service territories have reopened, and we expect the impacts of COVID-19 are evidentthe pandemic will be less severe than in several key aspects of our business operations andprior years. This was the corresponding financial impact has been mixed. Our consolidated income from operations forcase in the three months period ended March 31, 2022 increased by $29.9 million compared2023. COVID-19 pandemic has affected and may continue to affect our results of operations, financial conditions and cash flows in the same period in 2021.future.
Our customer base is predominantly residential, so we benefited from the increased demand for electricity when customers are working from their homes. On the other hand, like other retail energy providers, we suspended our face-to-face customer acquisition programs in March 2020 as public health measures were implemented to combat COVID-19, resulting in a decrease in gross meter acquisitions and a decrease in U.S. domestic meters served. The reduction in gross meter acquisitions decreased our customer acquisition expense in the year ended December 31, 2021 and 2020 compared to the period before the pandemic. Churn for three months ended March 31, 2022 and 2021, is below historical levels, in part, due to our competitors reducing face to face marketing programs.
We did not experience any significant changes in our workforce composition and were able to implement our business continuity plans with no significant impact to our ability to maintain our operations. We continue to maintain strong physical and cybersecurity measures in order to both serve our operational needs with a remote workforce and to ensure that we continue to provide services to our customers. We face challenges due to the need to operate with a remote workforce and are continuing to address those challenges so as to minimize the impact on our ability to operate.
Beginning in 2021, public health restrictions were eased in most of our markets which has allowed us to resume face-to-face sales and marketing. Looking ahead, we expect to see a modest rebound in meter acquisition, however, any reversal of the easing of restrictions would impact that expected rebound.
There are many uncertainties regarding the impactsimpact of the COVID-19 pandemic, and we are closely monitoring those impacts of on all aspects of itsour business, including how it will impact our customers, employees, suppliers, vendors and business partners. We are currently unable to predict the impact that COVID-19 will have on our financial position and operating results due to the complexities of the impacts and numerous uncertainties that are beyond the Company's control. We expect to continue to assess the evolving impact of COVID-19 on our business and assets and intend to make adjustments accordingly.
Genie Retail Energy
GRE operates REPs that resell electricity and/or natural gas to residential and small business customers in Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Florida, Texas, Rhode Island, and Washington, D.C. GRE’s revenues represented approximately 85.1%96.3% and 84.3%97.6% of our consolidated revenues in the three months ended March 31, 20222023 and 2021,2022, respectively.
.
Seasonality and Weather; Climate Change and Volatility in Pricing
The weather and the seasons, among other things, affect GRE’s REPs' revenues. Weather conditions have a significant impact on the demand for natural gas used for heating and electricity used for heating and cooling. Typically, colder winters increase demand for natural gas and electricity, and hotter summers increase demand for electricity. Milder winters and/or summers have the opposite effects. Unseasonable temperatures in other periods may also impact demand levels. Potential changes in global climate may produce, among other possible conditions, unusual variations in temperature and weather patterns, resulting in unusual weather conditions, more intense, frequent and extreme weather events and other natural disasters. Some climatologists believe that these extreme weather events will become more common and more extreme, which will have a greater impact on our operations. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately 44.5%39.7% and 47.9%44.5% of GRE’s natural gas revenues for the relevant years were generated in the first quarter of 20212022 and 2020,2021 respectively, when demand for heating was highest. Although the demand for electricity is not as seasonal as natural gas (due, in part, to usage of electricity for both heating and cooling), approximately 30.8%30.5% and 31.8%30.3% of GRE’s electricity revenues for 20212020,2022 and 2021 respectively, were generated in the third quarters of those years. GRE's REP's revenues and operating income are subject to material seasonal variations, and the interim financial results are not necessarily indicative of the estimated financial results for the full year.
In addition to the direct physical impact that climate change may have on our business, financial condition and results of operations because of the effect on pricing, demand for our offerings and/or the energy supplesupply markets, we may also be adversely impacted by other environmental factors, including: (i) technological advances designed to promote energy efficiency and limit environmental impact; (ii) increased competition from alternative energy sources; (iii) regulatory responses aimed at decreasing greenhouse gas emissions; and (iv) litigation or regulatory actions that address the environmental impact of our energy products and services.
Winter Storm in Texas
In February of 2021, the State of Texas experienced unprecedented cold weather and snow, which was named Winter Storm Uri. With the grid overtaxed due to demand and weather-related reduced supply and rolling blackouts being enforced, by order of the Electricity Reliability Council of Texas ("ERCOT"), real-time commodity prices during the crisis escalated significantly. Although GRE's commitment for their customers in Texas was hedged for foreseen winter weather conditions, the market conditions exposed the Company to significant unexpected cost increases. In the year ended December 31, 2021, GRE recognized approximately $13.0 million in additional costs related to the situation, which were included in the cost of revenue in the consolidated statements of operation.
In June 2021, the state legislature of the State of Texas passed House Bill 4492 (“HB 4492”) which includes certain provisions for financing certain costs associated with electric markets caused by Winter Storm Uri. Pursuant to HB 4492, two categories of charges associated with Winter Storm Uri are to be securitized and the proceeds of the securitization will be provided to the load serving entities who originally incurred the charges. Under HB 4492, the Company is entitled to recover a portion of the costs incurred from the effect of Winter Storm Uri with a calculated range of $1.5 million to $2.6 million. In the second quarter of 2021, the Company recorded a reduction in cost of revenues of $1.5 million.
In September 2021, the Public Utility Commission of Texas ("PUC") approved the Debt Obligation Order to grant ERCOT's application for a debt financing mechanism to pay for certain costs associated with Winter Storm Uri. Under the Debt Obligation Order, the amount that the Company is entitled to recover increased to approximately $3.4 million. In the third quarter of 2021, the Company recorded an additional reduction in the cost of revenues of $1.9 million for an aggregate amount of $3.4 million for the year ended December 31, 2021.
Purchase of Receivables and Concentration of Credit Risk
Utility companies offer purchase of receivable, or POR, programs in most of the service territories in which GRE operates. GRE’s REPs reduce their customer credit risk by participating in POR programs for a majority of their receivables. In addition to providing billing and collection services, utility companies purchase those REPs’ receivables and assume all credit risk without recourse to those REPs. GRE’s REPs’ primary credit risk is therefore nonpayment by the utility companies. In the three months ended March 31, 20222023 the associated cost was approximately 1.2%0.9% of GRE'sGRE revenue. At March 31, 2022, 80.6%2023, 83.8% of GRE’s net accounts receivablesreceivable were under a POR program. Certain of the utility companies represent significant portions of our consolidated revenues and consolidated gross trade accounts receivable balance during certain periods, and such concentrations increase our risk associated with nonpayment by those utility companies.
For the three months ended March 31, 2022 and 2021 no single customer accounted for 10.0% or greater of our consolidated revenues.
The following table summarizes the percentage of consolidated trade receivable by customers that equal or exceed 10.0% of consolidated net trade receivables at March 31, 20222023 and December 31, 20212022 (no other single customer accounted for 10.0% or greater of our consolidated net trade receivable as of March 31, 20222023 or December 31, 2021):2022).
|
|
|
March 31, 2023 | December 31, 2022 | |||||||
Customer A |
| 10.9 | % |
| 10.2 | % | ||
Customer B | 11.0 | na |
na-lessna—less than 10.0% of consolidated net trade receivables
The following table summarizes the percentage of revenues by customers that equal or exceed 10.0% of consolidated revenues for the March 31, 2023 and December 31, 2022 (no other single customer accounted for 10.0% or greater of our consolidated revenues for the March 31, 2023 and December 31, 2022):
Three Months Ended September 30 | ||||||||
2023 | 2022 | |||||||
Customer A | na | % | 10.4 | % |
na—less than 10.0% of consolidated revenue in the period
Legal Proceedings
Although GRE endeavors to maintain best sales and marketing practices, such practices have been the subject of certain class action lawsuits.lawsuits in the past.
See Note 18, Commitments and Contingencies, in this Quarterly Report on Form 10-Q, which is incorporated by reference.
Agency and Regulatory Proceedings
From time to time, the Company responds to inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes. The Company cannot predict whether any of those matters will lead to claims or enforcement actions or whether the Company and the regulatory parties will enter into settlements before a formal claim is made. See Notes 18, Commitments and Contingencies, in this Quarterly Report on Form 10-Q, which is incorporated by reference, for further detail on agency and regulatory proceedings.
State of Connecticut Public Utilities Regulatory Authority
Town Square
On September 19, 2018, the State of Connecticut Public Utilities Regulatory Authority (“PURA”) commenced an investigation into Town Square following customer complaints of allegedly misleading and deceptive sales practices on the part of Town Square. The Connecticut Office of Consumer Counsel joined in the investigation.On June 17, 2020, the PURA notified Town Square that it was advancing it’s investigation by assigning Prosecutorial ("PRO") staff for the purpose of investigating Town Square’s compliance with licensed electric supplier billing, marketing, and licensing requirements, and, if appropriate, facilitating settlement discussions among the parties.
Although Town Square denies any basis for those complaints and any wrongdoing on its part, in May 2021, the parties reached a settlement in principle, subject to finalization of a definitive settlement agreement, pursuant to which Town Square paid $0.4 million.Town Square has also volunteered to refrain, from door-to-door marketing activities in Connecticut for a period of 15 months.
As of March 31, 2022, Town Square’s Connecticut customer base represented 6.9% of GRE’s total meters served and 8.1% of the total RCEs of GRE’s customer base. For three months ended March 31, 2022 and 2021, Town Square’s gross revenues from sales in Connecticut were $3.7 million and $9.4 million, respectively.
An RCE represents a natural gas customer with annual consumption of 100 mmbtu or an electricity customer with annual consumption of 10 MWh. Because different customers have different rates of energy consumption, RCEs are an industry standard metric for evaluation the consumption profile of a given retail customer base.
Residents Energy
In August of 2020, Residents Energy began marketing retail energy services in Connecticut. For the year ended December 31, 2021 Residents Energy's gross revenues from sales in Connecticut was $0.2 million. During the fourth quarter of 2020, the enforcement division of PURAthe State of Connecticut Public Utilities Regulatory Authority ("PURA") contacted Residents Energy concerning customer complaints received in connection with alleged door-to-door marketing activities in violation of various rules and regulations. On March 12, 2021, the enforcement division filed a motion against Resident Energy with the adjudicating body of PURA, seeking the assessment of $1.5 million in penalties, along with a suspension of license for eighteen months, auditing of marketing practices upon reinstatement and an invitation for settlement discussions.
In May 2021, the parties reached a settlement, pursuant to which Residents will pay $0.3 million. Residents Energy has also volunteered to withdraw from the market in Connecticut for a period of 36 months.
Critical Accounting Policies
Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our significant accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.2022. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting policies are those that require the application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies include those related to revenue recognition, allowance for doubtful accounts, acquisitions, goodwill, and income taxes. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For additional discussion of our critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Recently Issued Accounting Standards
Information regarding new accounting pronouncements is included in Note 20—Recently Issued Accounting Standards, to the current period’s consolidated financial statements.
Results of Operations
We evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, the income and expense line items below income (loss) from operations are only included in our discussion of the consolidated results of operations.
35 |
Three Months Ended March 31, 20222023 and Compared to Three Months Ended March 31, 20212022
Genie Retail Energy Segment
Three months ended March 31, | Change | Three months ended March 31, | Change | |||||||||||||||||||||||||||||
(amounts in thousands) | 2022 | 2021 | $ | % | 2023 | 2022 | $ | % | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Electricity | $ | 59,380 | $ | 73,387 | $ | (14,007 | ) | (19.1 | )% | $ | 74,487 | $ | 59,380 | $ | 15,107 | 25.4 | % | |||||||||||||||
Natural gas | 24,504 | 17,280 | 7,224 | 41.8 | 26,925 | 24,504 | 2,421 | 9.9 | ||||||||||||||||||||||||
Total revenues | 83,884 | 90,667 | (6,783 | ) | (7.5 | ) | 101,412 | 83,884 | 17,528 | 20.9 | ||||||||||||||||||||||
Cost of revenues | 37,301 | 75,701 | (38,400 | ) | (50.7 | ) | 68,874 | 37,301 | 31,573 | 84.6 | ||||||||||||||||||||||
Gross profit | 46,583 | 14,966 | 31,617 | 211.3 | 32,538 | 46,583 | (14,045 | ) | (30.2 | ) | ||||||||||||||||||||||
Selling, general and administrative expenses | 16,407 | 13,762 | 2,645 | 19.2 | 16,093 | 16,407 | (314 | ) | (1.9 | ) | ||||||||||||||||||||||
Income from operations | $ | 30,176 | $ | 1,204 | $ | 28,972 | (2,406.3 | )% | $ | 16,445 | $ | 30,176 | $ | (13,731 | ) | (45.5 | )% |
Revenues. Electricity revenues decreasedincreased by 19.1%25.4% in thethree months ended March 31, 20222023 compared to the same period in 20212022. The decrease isincrease was due to a declineincreases in electricity consumption partially offset by an increase inand the average price charged per kilowatt hour charged to customers in thethree months ended March 31, 20222023compared to the same period in 2021. 2022. Electricity consumption byGRE’sREPs' customers decreasedincreased by 36.7% in the three months ended March 31, 2022, compared to the same period in 20214.5. The decrease in electricity consumption reflected a 5.1% decrease in average consumption per meter and a 33.3% decrease in the average number of meters served. The decrease in per meter consumption reflects a decrease in residential electricity consumption as many COVID-19 "stay-at-home" measures have been lifted thus reversing prior year increased levels of consumption related to those measures. The reduction in meters served was driven, in part, by the decision to pause certain customer acquisitions efforts and allow certain lower margin customers, including those acquired through municipal aggregation deals to move to other suppliers. The average rate per kilowatt hour sold increased 27.8% in the three months ended March 31, 2023, compared to the same period in 2022, reflecting a 16.2% increase in the average number of meters served partially offset by a 10.1% decrease in average consumption per meter. Electricity consumption per meter decreased in the three months ended March 31, 2023 due to milder weather conditions in our service areas compared to the same period in 2022. The increase in meters served was driven by a restart of customer acquisition efforts. The average rate per kilowatt hour sold increased 20.1% in thethree months ended March 31, 2023 compared to the same period in 2021. The increase is2022 due to the increaseincreases in the average wholesale price of electricityelectricity.
GRE’snatural gas revenues increased by 9.9% in the three months ended March 31, 2022 2023 compared to the same period in 2021. 2022.
GRE’s natural gas revenues increased by 41.8% in the three months ended March 31, 2022 compared to the same period in 2021. The increase in natural gas revenues in the three months ended March 31, 20222023 compared to the same period in 20212022 was a result of increases in natural gas consumption partially offset by a decreasean increase in average revenue per therm sold. Naturalsold partially offset by a slight decrease in natural gas consumption by GRE’s.The average revenue per REPs’therm customerssold increased by 20.0%10.8% in thethree months ended March 31, 20222023, compared to the same period in 2021,2022. Natural gas consumption byGRE’sREPs’ customers decreased by 0.8% in the three months ended March 31, 2023 compared to the same period in2022, reflecting a 13.6% increasean 8.1% decrease in average consumption per meter partially and a 5.7%offset by 7.9% increase in average meters served in the three months ended March 31, 20222023 compared to the same period in 2021. The average revenue per therm sold increased by 18.1% in the three months ended March 31, 2022 compared to the same period in 2021. .
36 |
The customer base for GRE’s REPs as measured by meters served consisted of the following:
(in thousands) |
| March 31, 2022 | December 31, 2021 |
| September 30, 2021 |
| June 30, 2021 |
| March 31, 2021 |
|
| March 31, 2023 | December 31, 2022 |
| September 30, 2022 |
| June 30, 2022 |
| March 31, 2022 |
| ||||||||||||||||||
Meters at end of quarter: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Electricity customers |
| 209 |
| 210 |
| 289 |
| 292 |
| 308 |
|
| 271 |
| 196 |
|
| 193 |
|
| 203 |
|
| 209 |
| |||||||||||||
Natural gas customers |
| 77 |
| 75 |
|
| 72 |
|
| 69 |
|
| 65 |
|
| 78 |
| 79 |
|
| 77 |
|
| 77 |
|
| 77 |
| ||||||||||
Total meters |
| 286 |
| 285 |
|
| 361 |
|
| 361 |
|
| 373 |
|
| 349 |
| 275 |
|
| 270 |
|
| 280 |
|
| 286 |
|
Gross meter acquisitions in the three months ended March 31, 2022,2023, were 44,000129,000 compared to 62,00044,000 for the same period in 2021. 2022. The decreaseincrease in the gross meter acquisitions for the three months ended March 31, 20222023 compared to the same period in 20212022 was due to a “strategic pause” on certain customer acquisition channels to protect margins due to unfavorable market conditions that started in the fourth quarter 2021. In the first quarter of 2023, we resumed customer acquisition activities using a variety of new channels.
Meters served slightly increased by 1,000 meters or 0.4% from December 31, 2021 to March 31, 2022. The increase in the number of meters served at March 31, 2022 compared to December 31, 2021 was due to a decrease in average churn during the period. In three months ended March 31, 2022, average monthly churn decreased to 4.5% compared to 4.9% for same period in 2021. Meters served decreasedincreased by 87,00074,000 meters or 25.1%26.9% from MarchDecember 31, 20212022 to March 31, 20222023. Meters served increased by 63,000 meters or 22.0% fromMarch 31, 2022toMarch 31, 2023. The decreaseincreases in the number of meters served at March 31, 20212023 compared to December 31, 2022 and March 31, 20212022 was due to the "strategic pause"resumption of customer acquisition activities as discussed above.GRE's REPs also returned some customersIn the three months ended March 31, 2023, average monthly churn increased to their underlying utility4.4% compared to 4.5% for same period in certain markets in the fourth quarter of 2021 to minimize the impact of expected higher prices on our margins.2022.
The average rates of annualized energy consumption, as measured by RCEs, are presented in the chart below. An RCE represents a natural gas customer with annual consumption of 100 mmbtu or an electricity customer with annual consumption of 10 MWh. Because different customers have different rates of energy consumption, RCEs are an industry standard metric for evaluating the consumption profile of a given retail customer base.
(in thousands) |
| March 31, 2022 | December 31, 2021 |
| September 30, 2021 |
| June 30, 2021 |
| March 31, 2021 |
|
| March 31, 2023 | December 31, 2022 |
| September 30, 2022 |
| June 30, 2022 |
| March 31, 2022 |
| ||||||||||||||||||
RCEs at end of quarter: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Electricity customers |
| 182 |
| 189 |
| 276 |
| 272 |
| 291 |
|
| 276 |
| 181 |
| 174 |
| 185 |
| 182 |
| ||||||||||||||||
Natural gas customers |
| 78 |
| 71 |
|
| 60 |
|
| 58 |
|
| 56 |
|
| 77 |
| 81 |
|
| 77 |
|
| 77 |
|
| 78 |
| ||||||||||
Total RCEs |
| 260 |
| 260 |
|
| 336 |
|
| 330 |
|
| 347 |
|
| 353 |
| 262 |
|
| 251 |
|
| 262 |
|
| 260 |
|
37 |
RCEs decreasedincreased 25.135.8% at March 31, 20222023 compared to March 31, 2021 primarily 2022. RCEs increased by 34.7% at March 31, 2023 compared to December 31, 2022. The increase is due to the "strategic pause" onresumption of customer acquisitions and transfer of some customers to their underlying utilitiesacquisition activities as discussed above.
Cost of Revenues and Gross Margin Percentage. GRE’s cost of revenues and gross margin percentage were as follows:
Three months endedMarch 31, | Change | Three Months Ended March 31, | Change | |||||||||||||||||||||||||||||
(amounts in thousands) | 2022 | 2021 | $ | % | 2023 | 2022 | $ | % | ||||||||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||||||||||
Electricity | $ | 25,197 | $ | 66,460 | $ | (41,263 | ) | (62.1 | )% | $ | 45,766 | $ | 25,197 | $ | 20,569 | 81.6 | % | |||||||||||||||
Natural gas | 12,104 | 9,241 | 2,863 | 31.0 | 23,108 | 12,104 | 11,004 | 90.9 | ||||||||||||||||||||||||
Total cost of revenues | $ | 37,301 | $ | 75,701 | $ | (38,400 | ) | (50.7 | )% | $ | 68,874 | $ | 37,301 | $ | 31,573 | 84.6 | % |
Three months endedMarch 31, | Three months ended March 31, | ||||||||||||||||||||||
(amounts in thousands) | 2022 | 2021 | Change | 2023 | 2022 | Change | |||||||||||||||||
Gross margin percentage: | |||||||||||||||||||||||
Electricity | 57.6 | % | 9.4 | % | 48.2 | % | 38.6 | % | 57.6 | % | (19.0 | )% | |||||||||||
Natural gas | 50.6 | 46.5 | 4.1 | 14.2 | 50.6 | (36.4 | ) | ||||||||||||||||
Total gross margin percentage | 55.5 | % | 16.5 | % | 39.0 | % | 32.1 | % | 55.5 | % | (23.4 | )% |
Cost of revenues for electricity decreasedincreased in the three months ended March 31, 20222023 compared to the same period in 2021 2022primarily because of decreasesincreases in electricity consumption by GRE’s REPs’ customers and the average unit cost of electricity. The average unit cost of electricity decreased 40.1increased 73.9% in the three months ended March 31, 20222023 compared to the same period in 20212022. AThe significant portion of the decreaseincrease is due to a rise in the average costwholesale price of electricity resulted fromduring the favorable results of hedging activities for the three months ended March 31, 2022 2023compared to the same period in 2021 and the incremental cost incurred2022. The gross margin on electricity sales decreased in the three months ended March 31, 2021 as an effect of a major winter storm in Texas as discussed above. Gross margin on electricity sales increased in the three months ended March 31, 20222023 compared to the same period in 20212022 because the average rate charged to customers increased whileless than the increase in the average unit cost of electricity decreased. electricity.
Cost of revenues for natural gas increased in the three months ended March 31, 2022 2023 compared to the same period in 2021 2022 primarily because of increases in natural gas consumption by GRE's REPs' customers and in the average unit cost of natural gas. The average unit cost of natural gas increased 9.1%by 92.5% per therm in the three months ended March 31, 2023 compared to the same period in2022. The significant increase is due to a rise in the wholesale price of natural gas during the three months ended March 31, 2023compared to the same period in 2021. 2022. Gross margin on natural gas sales increaseddecreased in the three months ended March 31, 2022 2023 compared to the same period in 2021 2022 because the average rate charged to customers increased moreless than the increase in the average unit cost of natural gas.
Selling, General and Administrative. The increasedecrease in selling, general and administrative expenseexpenses in the three months ended March 31, 20222023 compared to the same period in 20212022 was primarily due to increasesdecreases in employee-related costs and POR program fees, partially offset by an increase in marketing and customer acquisition costs and employee-related costs partially offset by a decrease in legal settlement costs. cost. Employee-related expenses increaseddecreased by $1.1$0.5 million in the three months ended March 31, 20222023 compared to the same period in 20212022 primarily due to an increasea decrease in accrued bonuses as a result of improved resultsa decrease in the income from operations of operations during the period.GRE. Marketing and customer acquisition expenses increased by $2.0$0.3 million in the three months ended March 31, 20222023 compared to the same period in 20212022 as a result of expansionan increase in the number of marketing activitiesmeters acquired. POR program fees decreased by $0.1 million in the three months ended March 31, 2023compared to offset the effectsame period in2022 as a result of COVID-19 related to public health restrictions to traditional customer acquisition methods. changes in rates implemented by several utilities. As a percentage of GRE’s total revenues, selling, general and administrative expense increased from 15.2% in the three months ended March 31, 2021 to 19.6% in the three months ended March 31, 2022.
GRE International Segment
GRE International holds our stakes in REPs outside of North America. These businesses currently include our controlling stakes in Lumo Finland and Lumo Sweden and included Genie Japan prior to its sale in May 2021. GRE International also holds our stake in Orbit, which discontinued operations at the end of November 2021.
In January 2021, weather volatility and the lack of adequate gas reserves drove the prices on the Japan Electric Power Exchange to $2,390 per megawatt hour for an extended period of time. Although our supply commitment for our customers in Japan was hedged reasonably for expected winter weather conditions, the extreme price spike exposed us to further unexpected cost increases. The impact on our 2021 consolidated result of operations was approximately $2.5 million.
On April 26, 2021, we entered into an Equity Purchase Agreement ("Purchase Agreement") with Hanhwa Q Cells Japan Co., Ltd. ("Hanhwa"), pursuant to which, we agreed to sell our interest in Genie Japan for ¥570.0 million (equivalent to approximately $5.3 million at April 26, 2021) subject to certain terms and conditions set forth in the Purchase Agreement. On May 11, 2021, upon the terms and subject to the conditions of Purchase Agreement, we completed the divestiture of Genie Japan for an aggregate cash consideration of ¥570.0 million (equivalent to approximately $5.2 million at May 11, 2021). Hanhwa also assumed the outstanding loans payable of Genie Japan. We paid $0.6 million of commission to certain former employees of Genie Japan and recognized a pre-tax gain of $4.2 million from the divestiture. For the three months ended March 31, 2021, Genie Japan had revenues and cost of revenues of $3.2 million and $5.4 million, respectively.
Three Months Ended March 31, | Change | |||||||||||||||
(amounts in thousands) | 2022 | 2021 | $ | % | ||||||||||||
Revenues | ||||||||||||||||
Electricity | $ | 12,404 | $ | 14,226 | $ | (1,822 | ) | (12.8 | )% | |||||||
Others | 199 | 109 | 90 | 82.6 | ||||||||||||
Total revenues | $ | 12,603 | $ | 14,335 | $ | (1,732 | ) | (12.1 | ) | |||||||
Cost of revenue | 14,168 | 17,765 | (3,597 | ) | (20.2 | ) | ||||||||||
Gross loss | (1,565 | ) | (3,430 | ) | 1,865 | (54.4 | ) | |||||||||
Selling, general and administrative expenses | 1,243 | 2,121 | (878 | ) | (41.4 | ) | ||||||||||
Loss from operations | $ | (2,808 | ) | $ | (5,551 | ) | $ | (2,743 | ) | (49.4 | )% |
Meters served by GRE International's REPs decreased to 61,000 at March 31, 2022 from 67,000 at December 31, 2021 primarily a “strategic pause” on customer acquisition to protect margins due to unfavorable market conditions that started in the fourth quarter 2021.
RCEs of GRE International at March 31, 2022 decreased to 38,000 from 40,000 at December 31, 2021 primarily from the "strategic pause" as discussed above.
Revenues.GRE International's revenues decreased in the three months ended March 31, 2022 compared to the same period in 2021 primarily due to the sale of Genie Japan in May 2021 partially offset by increases in revenues in Lumo Finland and Lumo Sweden. Revenues from Genie Japan were $3.2 million for the three months ended March 31, 2021. The increase in revenues from Lumo Finland and Lumo Sweden from the three months ended March 31, 2022 compared to the same period in 2021 was due to an increase in the average price charged to customers which increased by 138.0%, partially offset by the decrease in electricity consumption which decreased by 39.5%. The increase in the average price charged to customers in the three months ended March 31, 2022 compared to the same period15.9% in 2021 is due to a significant increase in the price of electricity in the wholesale market.
Cost of Revenues.GRE International's cost of revenue decreased in three months ended March 31, 2022 compared to the same period in primarily due to the sale of Genie Japan in May 2021 partially offset by an increase in the cost of revenue in Lumo Finland and Lumo Sweden. Cost of revenue from Genie Japan was $5.4 million for the three months ended March 31, 2021. The increases in cost of revenues from Lumo Finland and Lumo Sweden from the three months ended March 31, 2022 compared to the same period in 2021 was due to an increase in the average cost of electricity which increased by 141.7%, partially offset by the decrease in electricity consumption as discussed above.2023.
Selling, General and Administrative Expenses. The decrease in selling, general and administrative expenses in three months ended March 31, 2022 compared to the same period in 2021 was primarily due to the sale of Genie Japan in May 2021.
38 |
Genie Renewables Segment
The Genie Renewables (formerly GES) segment is composed of Genie Solar, CityCom Solar, Diversegy and Prism in which we hold. Genie Solar is an integrated solar energy company. CityComm Solar is a marketer of community solar energy solutions. Diversegy provides energy brokerage and advisory services to commercial customers. Prism provides solar and manufacturing of solar panels, solar installation design and solar energy project management. 60.0% controlling interest.
Three Months Ended March 31, | Change | Three Months Ended March 31, | Change | ||||||||||||||||||||||||||||||
(amounts in thousands) | 2022 | 2021 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||||||||||
Revenues | $ | 2,042 | $ | 2,488 | $ | (446 | ) | (17.9 | )% | $ | 3,864 | $ | 2,042 | $ | 1,822 | 89.2 | % | ||||||||||||||||
Cost of revenue | 1,518 | 1,370 | 148 | 10.8 | 3,116 | 1,518 | 1,598 | 105.3 | |||||||||||||||||||||||||
Gross profit | 524 | 1,118 | (594 | ) | (53.1 | ) | 748 | 524 | 224 | 42.7 | |||||||||||||||||||||||
Selling, general and administrative expenses | 1,003 | 559 | 444 | 79.4 | 1,896 | 1,003 | 893 | 89.0 | |||||||||||||||||||||||||
(Loss) income from operations | $ | (479 | ) | $ | 559 | $ | 1,038 | (185.7 | )% | ||||||||||||||||||||||||
Loss from operations | $ | (1,148 | ) | $ | (479 | ) | $ | 669 | 139.7 | % |
Revenue. Genie Renewables' revenues decreasedincreased in the three months ended March 31, 20222023 compared to the same period in 20212022. The decreaseincrease in revenues was the result of a decreaseincreases in the activities of Genie Solar projects andrevenues from commissions from selling third-party products to customers by CityCom Solar.Solar and Revenuesrevenues from Diversegy includethat includes commissions, entry fees and other fees from our energy brokerage and marketing services businesses.
Cost of Revenues. Cost of revenue increased in the three months ended March 31, 20222023 compared to the same period in 2021.2022. The increase in the cost of revenues was due to anreflects the increase in commissions paid out by Diversegy. revenues of CityCom Solar and Diversegy.
Selling, General and Administrative. Selling, general and administrative expenses increased in the three months ended March 31, 20222023 compared to the same period in 20212022 primarily due to increases in headcount in Genie Solar and Diversegy and consulting fees and warehousing costs at Genie Solar.
Corporate
Corporate doesAs discussed above, the remaining accounts of GRE International were transferred to corporate starting in the third quarter of 2022. Entities under corporate do not generate any revenues, nor does it incur any cost of revenues. Corporate costs include unallocated compensation, consulting fees, legal fees, business development expense and other corporate-related general and administrative expense.expenses.
Three Months Ended March 31, | Change | ||||||||||||||||||||||||||||||||
(amounts in thousands) | Three months ended March 31, | Change | 2023 | 2022 | $ | % | |||||||||||||||||||||||||||
2022 | 2021 | $ | % | ||||||||||||||||||||||||||||||
General and administrative expenses and loss from operations | $ | 2,456 | $ | 1,677 | $ | 779 | 46.5 | % | $ | (4,022 | ) | $ | (2,735 | ) | $ | 1,287 | 47.1 | % |
Corporate general and administrative expenses increased in the three months ended March 31, 20222023 compared to the same period in 20212022 primarily because of increasesincrease in employee related cost and in stock-based compensation expense.cost. As a percentage of our consolidated revenues, Corporate general and administrative expense increased to 2.5%3.8% in the three months ended March 31, 20222023 from 1.6%3.2% in the three months ended March 31, 2021.2022.
Consolidated
Selling, general and administrative expenses. Stock-based compensation expense included in consolidated selling, general and administrative expense was $0.8$0.9 million and $0.6 million in each of the three months ended March 31, 20222023 and 2021, respectively.2022. At March 31, 2022,2023, the aggregate unrecognized compensation cost related to non-vested stock-based compensation was $5.9$4.1 million. The unrecognized compensation cost is recognized over the expected service period.
The following is a discussion of our consolidated income and expense line items below income from operations:
Three months ended March 31, | Change | Three Months Ended March 31, | Change | ||||||||||||||||||||||||||||||
(amounts in thousands) | 2022 | 2021 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||||||||||
Income from operations | $ | 24,433 | $ | (5,465) | $ | 29,898 | 547.1 | % | $ | 11,275 | $ | 26,962 | $ | (15,687 | ) | (58.2 | )% | ||||||||||||||||
Interest income | 17 | 84 | (67 | ) | (79.8 | ) | 974 | 17 | 957 | nm | |||||||||||||||||||||||
Interest expense | (50 | ) | (182 | ) | 132 | (72.5 | ) | (19 | ) | (50 | ) | (31 | ) | (62.0 | ) | ||||||||||||||||||
Other income (loss), net | (498 | ) | 407 | (905 | ) | (222.4 | ) | 3,246 | (498 | ) | 3,744 | nm | |||||||||||||||||||||
Unrealized gain on marketable equity securities and investments | (652 | ) | 4,107 | (4,759 | ) | nm | |||||||||||||||||||||||||||
Loss on marketable equity securities and investments | (71 | ) | (652 | ) | (581 | ) | (89.1 | ) | |||||||||||||||||||||||||
Provision for benefit from income taxes | (6,514 | ) | (535 | ) | (5,979 | ) | 1,117.6 | (4,068 | ) | (7,112 | ) | (3,044 | ) | (42.8 | ) | ||||||||||||||||||
Net income (loss) from discontinued operations | 16,736 | (1,584 | ) | 18,320 | 1,156.6 | ||||||||||||||||||||||||||||
Loss from discontinued operations, net of tax | — | (1,110 | ) | 1,110 | 100.0 | ||||||||||||||||||||||||||||
Net income (loss) | 16,736 | (2,694 | ) | 19,430 | 721.2 | ||||||||||||||||||||||||||||
Net (loss) income attributable to noncontrolling interests | (1,153 | ) | (708 | ) | (445 | ) | 62.9 | ||||||||||||||||||||||||||
Net income attributable to Genie | $ | 17,889 | $ | (1,986 | ) | $ | 19,875 | 1,000.8 | % | ||||||||||||||||||||||||
Net income from continuing operations | 11,337 | 18,667 | (7,330 | ) | (39.3 | ) | |||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax | 3,055 | (1,932 | ) | 4,987 | 258.1 | ||||||||||||||||||||||||||||
Net income | 14,392 | 16,735 | (2,343 | ) | (14.0 | ) | |||||||||||||||||||||||||||
Net loss attributable to noncontrolling interests | (39 | ) | (1,154 | ) | (1,115 | ) | (96.6 | ) | |||||||||||||||||||||||||
Net income attributable to Genie Energy Ltd. | $ | 14,431 | $ | 17,889 | $ | (3,458 | ) | (19.3 | )% |
nm—not meaningful
Interest income. Interest income increased in the threemonths ended March 31, 2023, compared to the same period in 2022 primarily due to increases in average cash and cash equivalents during the period and significant increases in average effective interest rates on those balances.
Other Income (loss)(Loss), net. Other income (loss), net in thethree months ended March 31, 2023 consisted primarily of on-time tax credit related to payroll taxes incurred in prior years. Other income (loss), net in thethree months ended March 31, 2023 also includes net equity in net income of equity methods investees. Other income (loss), net in the three months ended March 31, 2022 and 2021 consisted primarily of foreign currency transactions.transactions and equity in net loss in equity method investees.
Provision for Income Taxes. The change in the reported tax rate for the three months ended March 31, 20222023 compared to the same periodperiods in 2021,2022, is athe result of favorable results of operations in the U.S. and changes in the mix of jurisdiction in which taxable income was earned which was not offset by income tax benefit in some jurisdictions that had losses due to valuation allowances in those jurisdictions.earned.
Net Loss Attributable to Noncontrolling Interests. The increasedecrease in net loss attributable to noncontrolling interests in the three months ended March 31, 20222023 compared to the same periodperiods in 20212022 was primarily due to an increasea decrease in the share of noncontrolling interest in the net income of Lumo Sweden and Lumo Finland as well as a decrease in losses of CCE. incurred by Citizens Choice Energy.
Unrealized gainLoss on marketable equity securitiesMarketable Equity Securities and investments.Investments. The unrealized gain (loss)loss on marketable equity securities and investment for the three months ended March 31, 20222023 pertains to the appreciationchange in fair value of the Company's investments in common stock of Rafael Holdings, Inc. ("Rafael") which the Company acquired in December 2020. As discussed above, we sold a large portion of our holdings in the common stock of Rafael in the first quarter of 2023.
Income (Loss) from discontinued operations,Discontinued Operations, net of tax. Income from discontinued operations, net of tax in the three months ended March 31, 2021 2023 is mainly from an increase in the estimated value of our investments in Orbit and foreign exchange gain in Lumo Sweden. Loss from discontinued operations, net of tax in the three months ended March 31, 2022is mainly due to losses incurred from theresults of operations of Orbit.Lumo Finland andLumo Sweden.
Liquidity and Capital Resources
General
We currently expect that our cash flow from operations and the $88.2$105.2 million balance of unrestricted cash and cash equivalents that we held at March 31, 20222023 will be sufficient to meet our currently anticipated cash requirements for at least the period from April 1, 2022 to May 9, 2022.2024.
At March 31, 2022,2023, we had working capital (current assets less current liabilities) of $96.0$142.4 million.
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| Three Months Ended March 31, |
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| Three Months Ended March 31, |
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| 2021 |
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| 2023 |
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| 2022 |
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Cash flows provided by (used in): |
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Operating activities |
| $ | 18,340 |
| $ | (5,744 | ) |
| $ | 1,520 |
| $ | 18,199 | |||
Investing activities |
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| (1,628 | ) |
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| (1,007 | ) |
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| (4,162 | ) |
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| (1,628 | ) |
Financing activities |
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| (2,375 | ) |
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| (370 | ) |
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| (3,273 | ) |
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| (2,375 | ) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
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| 27 |
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| (69 | ) | (10 | ) | 27 | ||||||
Cash balances transferred to assets held for sale | — | (587 | ) | |||||||||||||
Increase in cash, cash equivalents and restricted cash of continuing operations | 14,364 | (7,777 | ) | (5,925 | ) | 14,223 | ||||||||||
Cash flows used in discontinued operations | (21,832 | ) | (4,209 | ) | ||||||||||||
Net decrease in cash, cash equivalents and restricted cash |
| $ | (7,468 | ) |
| $ | (11,986 | ) | ||||||||
Cash flows provided by (used in) discontinued operations | 9,714 | (21,691 | ) | |||||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
| $ | 3,789 |
| $ | (7,468 | ) |
Operating Activities
Cash, cash equivalents and restricted cash provided by operating activities of continuing operations was $18.3$1.5 million in the three months ended March 31, 20222023 compared to net cash used in operating activities of $5.7continuing operations of $18.2 million in the three months ended March 31, 2021. Net income after non-cash adjustments of continuing operations increased cash flows by $22.9 million for the three months ended March 31, 2022, compared to the same period in 2021.2022. The increasedecrease is primarily the result of favorablefluctuation in the results of operations in the three months ended March 31, 20222023 compared to the same period in 2021.2022.
Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable. Changes in assets and liabilities increaseddecreased cash flows by $1.2$9.0 million for the three months ended March 31, 2022,2023, compared to the same period in 2021.2022.
Certain of GRE's REPs are party to an Amended and Restated Preferred Supplier Agreement with BP Energy Company, or BP, which is to be in effect through November 30, 2023. Under the agreement, the REPs purchase electricity and natural gas at market rate plus a fee. The obligations to BP are secured by a first security interest in deposits or receivables from utilities in connection with their purchase of the REP’s customer’s receivables, and in any cash deposits or letters of credit posted in connection with any collateral accounts with BP. The ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. At March 31, 2022,2023, we were in compliance with such covenants. At March 31, 2022,2023, restricted cash—short-term of $1.3$0.6 million and trade accounts receivable of $47.9$63.1 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $10.8$14.2 million at March 31, 2022.2023.
We had purchase commitments of $132.5 million at March 31, 20222023, of which $94.9114.8 million was for purchases of electricity.
From time to time, we receive inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes, and we respond to those inquiries or requests. We cannot predict whether any of those matters will lead to claims or enforcement actions.
Investing Activities
Our capital expenditures were minimal in$0.1 million for each of the three months ended March 31, 20222023 and 2021.2022. We currently anticipate that our total capital expenditures in the twelve months ending December 31, 20222023 will be between $0.5$15.0 to $1.0 million.$20.00 million mostly related to the solar projects of Genie Renewables.
In December 2020 and 2021, we invested $5.0an aggregate of $6.0 million infor 261,984 shares of Class B common stock of Rafael.Rafael Holdings, Inc. ("Rafael"). Rafael, a publicly-traded company, that is also a related party. In connection with the purchase, Rafael issued to us warrants to purchase an additional 43,649 shares of Rafael's Class B common stock with an exercise price of $22.91 per share. The warrants had a term expiring on June 6, 2022. We exercised the warrants in full on March 31, 2021 for a total exercise price of $1.0 million. We do not exercise significant influence over the operating or financial policies of Rafael. In the three months ended March 31, 2023, we sold 195,501 shares of our Class B common stock of Rafael for $0.3 million. At March 31, 2023, the carrying value of the remaining investments in the Class B common stock of Rafael was $0.1 million.
In the three months ended March 31, 2023, we invested $4.6 million to purchase the common stock of a publicly traded company. At March 21, 2023, the carrying value of our investments in the marketable equity securities was $4.6 million.
InMarch 2023, the Company received $0.1million fromAtid613 Drilling Ltd. ("Atid 613") for the full settlement of its investment inAtid 613. The Company recognized a minimal gain from settlement of investment included in other income (loss), net in its consolidated statements of operations for thethree months ended March 31, 2023.
In the three months ended March 31, 2022, we acquired minimal interests in various ventures for an aggregate amount of investments of $0.2 million.
On February 21, 2022, we entered into a Loan and Security Agreement to extend up to 5.5 million New Israel Shekel, or NIS (equivalent to $1.5 million as at March 31, 2023) with Natan Ohayon (the "Ohayon Loan"). Natan Ohayon holds a minority interest in Petrocycle Ltd ("Petrocycle"), a subsidiary of the Company. Petrocycle is a preoperating entity engaged in the development of a process to recycle used engine oil into usable gasoline. TheOhayonLoan, which is secured by all assets that Mr. Ohayon acquired using the proceeds of the loan bears a minimum interest as set by the Income Tax Regulations of Israel (3.23% in 2022) and is due, together with the principal amount on or before December 31, 2023. In December 2022, the Company suspended the development of business operations of Petrocycle after it was determined that the current operations will not meet the expected results. Petrocycle provided full impairment of its property and equipment and notes and other receivables from its minority interest partner for an aggregate amount of $2.1 million.
In the fourth quarter of 2021, Orbit transferred to GEIC a net amount of $49.7 million from the proceeds of the settlement of the contactcontract with Shell which is included in cash and cash equivalents in the consolidated balance sheet as of December 31, 2021. In January 2022, we transferred $21.5 million to the Administrators of Orbit Energy to fund the settlement of the expected remaining liabilities of Orbit of $30.8 million, which were included in the current liabilities of discontinued operations in the consolidated balance sheet as of December 31, 2021. In February 2022, we deposited $28.3 million into an attorney trust account to hold, preserve, and dispense funds to the extent needed in connection with the administration process. On February 24, 2022, the Administrators filed a petition under Chapter 15 of the U.S. Bankruptcy Code with the Bankruptcy Court of the Southern District of New York seeking (i) recognition of the U.K. administration proceeding as a foreign main proceeding and the U.K. Administrators as its foreign representatives, and (ii) entrusting distribution of the funds the Company deposited into its attorney’s trust fund to the U.K. Administrators. Following a hearing held on March 30, 2022, the Court issued an order dated April 4, 2022 which granted the Administrator’s petition to recognize the U.K. administration proceeding as a foreign main proceeding, and the U.K. Administrators as its foreign representatives, along with related relief. Although the Court's order did recognize that the realization of any Orbit assets located in the United States, other than the funds (the status of which remain subject to dispute), would be entrusted to the Administrators, rather than redirect or transfer the funds to the Administrators (per their petition), the Court ordered that the entirety of the funds would be deposited in the Court’s registry and subject to its control. OnApril 4, In the second quarter of 2022, the $28.3million was transferred to the Court's registry. Subsequent to the first quarter of 2022, the Administrators filed an application to transfer the funds back to the Administrators’ control in the U.K. Subject to certain representations and expectations regarding use and application of the funds to efficiently and expeditiously pay off creditors and bring a timely close to the insolvency administration, we decided not to oppose the application, and expects the transferCourt transferred the $28.3 million to take placethe Administrator. In August 2022, the Administrator paid the Company a partial return of its interest in short order. Orbit of £4.6 million (equivalent to $5.4 million). In the three months ended March 31, 2023, the Administrator paida partial return of its interest in Orbit of£0.4 million (equivalent to $0.5 million). We believe that the funds are more than sufficient to pay any remaining creditors of Orbit (with aany surplus, which we expect to be significant, surplus to be returned to us).
Financing Activities
In each of the three months ended March 31, 20222023 and 2021,2022, we paid aggregate quarterly Base Dividends of $0.1594 per share $0.4 million in the aggregate, onof our Series 2012-A2021-A Preferred Stock or Preferred Stock. We paid $0.2 million and $0.4 million for the three months ended March 31, 2023 and 2022, respectively. On April 14, 2022,17, 2023, our Board of Directors declared aggregate dividends of $0.6895per share on the Preferred Stock, consisting of aquarterly Base Dividend of $0.1594 $0.1594 per share for thefirstquarter of2023, and Additional Dividends of our Preferred Stock. $0.5301 per share in respect of the GRE results of operations during the year ended December 31, 2022. The dividend will be paid on or aboutMay 16, 202215, 2023 to stockholders of record as of the close of business on May 6, 2022.
5, 2023 and to the holders of Preferred Stock that we redeemed in theInthree months ended March 2021, in light of the losses incurred from the effects of the events in Texas and Japan discussed above, the Company suspended the payment of quarterly dividends on its common stock to rebuild cash position.31, 2023.
On February 7,
In the three months ended March 31, 2023 and 2022, the Board of Directors reversed its earlier suspension ofwe paid aggregate quarterly dividends and declared a quarterly dividend of $0.075 per share onto stockholders of our Class aA common stock and Class B Common Stock.common stock. The dividend wasCompany paid on$2.0 million and $1.9 million for the three months ended March 1,31, 2023 and 2022.On May 3, 2022,2023, our Board of Directors declared a quarterly dividend of $0.075 per share ofon our Class A common stock and Class B Common Stock.common stock. The dividend will be paid on or about May 31, 20222023 to stockholders of record as of the close of business on May 20, 2022.2023.
On March 11, 2013, our Board of Directors approved a program for the repurchase of up to an aggregate of 7.0 million shares of our Class B common stock. There were no repurchases under this program in the three months ended March 31, 20222023 and 2021.2022. At March 31, 2022, 5.32023, 4.7 million shares of Class B common stock remained available for repurchase under the stock repurchase program.
On March 21, 2020, our Board of Directors approved a program to redeem up to $4.0 million worth of our Preferred Stock in accordance with the Certificate of Designations for the preferred stock. There were no redemptions under this program in the three months ended March 31, 2022 and 2021.
On February 7, 2022, our Board of Directors of the Company authorized a program to redeem up to $1.0$1.0 million per quarter of our Preferred Stock at the liquidation preference of $8.50$8.50 per share beginning in the second quarter of 2022. 2022. In the three months ended March 31, 2023, the Company redeemed 117,647 Preferred Stock under the stock purchase program for an aggregate amount of $1.0 million.
On May 3, 2022, ourApril 17, 2023,the Company's Board of Directors authorized to redeem $2.0 millionapproved the redemption of our117,647 shares of outstanding Preferred Stock duringon May 15, 2023 (the "Redemption Date") at a price of $8.50 per share equivalent to approximately $1.0 million, together with an amount equal to all dividends accrued and unpaid up to, but not including, the second quarter of 2022.Redemption Date.
On May 13, 2020, Genie Japan entered into a Loan Agreement with Tokyo Star Bank for a ¥150.0 million (equivalent to $1.4 million) short-term credit facility ("May 2020 Loan") with maturity date of November 13, 2020. On November 13, 2020, Genie Japan and Tokyo Star Bank amended the May 2020 Loan to extend the maturity date to May 13, 2021. Genie Japan provided a letter of credit issued by JPMorgan Chase in the amount of ¥150.0 million (equivalent to $1.4 million) as collateral. The outstanding principal amount incurred interest at 3.0% per annum and was payable monthly. At March 31, 2022, $0 million was outstanding under the loan agreement. March 31, 2022 and December 31, 2021, the effective interest rate was 3.0%. In May 2021, the Company completed the divestiture of Genie Japan including balance of the May 2020 Loan.
In March 2021, certain assets and liabilities of Genie Japan were classified as assets and liabilities held for sale including the outstanding balance of the May 2020 Loan of $1.4 million.
On April 4, 2017, GRE, IDT Energy, and other GRE subsidiaries entered into a Credit Agreement with Vantage Commodities Financial Services II, LLC ("Vantage"), for a $20 million revolving loan facility. The borrowers consist of our subsidiaries that operate REP businesses, and those subsidiaries’ obligations are guaranteed by GRE. The borrowers have provided as collateral a security interest in their receivables, bank accounts, customer agreements, certain other material agreements and related commercial and intangible rights. The outstanding principal amount incurred interest at LIBOR plus 4.5% per annum. Interest is payable monthly, and all outstanding principal and any accrued and unpaid interest matured on April 3, 2020. In April 2020, the revolving line of credit expired and we paid outstanding balance of $3.5 million.
On December 13, 2018, we entered into a Credit Agreement with JPMorgan Chase Bank (“Credit Agreement”). On December 23, 2021,27, 2022, the Company entered into the third amendment of its existing Credit Agreement to extend the maturity date of December 31, 2022.2023. The Company continues to have an aggregate principal amount of $5.0was reduced to $3.0 million credit line facility (“Credit Line”). The Company pays a commitment fee of 0.1% per annum on the unused portion of the Credit Line as specified in the Credit Agreement. The borrowed amounts will be in the form of letters of credit which will bear interest of 1.0% per annum. The Company will also pay a fee for each letter of credit that is issued equal to the greater of $500 or 1.0% of the original maximum available amount of the letter of credit. We agreed to deposit cash in a money market account at JPMorgan Chase Bank as collateral for the line of credit equal to $5.1$3.1 million. As of March 31, 2022,2023, there is no issued letter of credit from the Credit Line. At March 31, 2022,2023, the cash collateral of $5.2$3.8 million was included in restricted cash—short-termshort-term in the consolidated balance sheet.
In the three months ended March 31, 2022,2023, we paid $0.1 millionpaid $0.2 million to repurchase 12,49215,986 shares of our Class B common stock of our Class B common stock tendered by our employeeemployees and an officer to satisfy tax withholding obligations in connection with the lapsing of restrictions on awards of restricted stock. Such shares were repurchased by us based on their fair market value on the trading day immediately prior to the vesting date.
Off-Balance Sheet Arrangements
We do not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources, other than the following. GRE has performance bonds issued through a third party for the benefit of certain utility companies and for various states in order to comply with the states’ financial requirements for retail energy providers. At March 31, 2022,2023, the Company had outstanding aggregate performance bonds of $15.5$14.9 million and a minimal amount of unused letters of credit.
Our primary market risk exposure is the price applicable to our natural gas and electricity purchases and sales. The sales price of our natural gas and electricity is primarily driven by the prevailing market price. Hypothetically, for our GRE segment, if our gross profit per unit in the three months ended March 31, 20222023 had remained the same as in the three months ended March 31, 2021,2022, our gross profit from electricity sales would have decreasedincreased by $29.8$7.0 million and our gross profit from natural gas sales would have increased by $2.7$8.5 million in the three months ended March 31, 2022.2023.
Hypothetically, for our GRE International segment, if our gross loss per unit in the three months ended March 31, 2022 had remained the same as in the three months ended March 31, 2021, our gross loss from electricity sales would have increased by $3.2 million in the three months ended March 31, 2022.
The energy markets have historically been very volatile, and we can reasonably expect that electricity and natural gas prices will be subject to fluctuations in the future. In an effort to reduce the effects of the volatility of the price of electricity and natural gas on our operations, we have adopted a policy of hedging electricity and natural gas prices from time to time, at relatively lower volumes, primarily through the use of put and call options and swaps. While the use of these hedging arrangements limits the downside risk of adverse price movements, it also limits future gains from favorable movements. We do not apply hedge accounting to these options or swaps, therefore the mark-to-market change in fair value is recognized in cost of revenue in our consolidated statements of operations. We recognized losses from derivative instruments of $11.2 million for the three months ended March 31, 2023 and gains of $37.5 million in the three months ended March 31, 2022 from our derivative instruments. Refer to Note 7 – Derivative Instruments, for details of the hedging activities.
Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in RulesRules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2022, due to the material weakness in internal control over financial reporting that was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.2023.
Remediation. As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2021, we began implementing a remediation plan to address the material weakness mentioned above. The weakness will not be considered remediated, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed in 2022.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended March 31, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Legal proceedings in which we are involved are more fully described in Note 18 to the Consolidated Financial Statements included in Item1 to Part I of this Quarterly Report on Form 10-Q.
There are no material changes from the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2022.
The following table provides information with respect to purchases by us of shares of our Class B common stock during the first quarter of 2022:2023:
|
| Total |
|
| Average |
|
| Total Number |
|
| Maximum |
| ||||
January 1–31, 2022 |
|
| 12,492 | (2) |
| $ | 5.65 |
|
|
| — |
|
|
| 5,308,366 | |
February 1–28, 2022 |
|
| — |
|
| — |
|
|
| — |
|
|
| 5,308,366 |
| |
March 1–31, 2022 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,308,366 | |
Total |
|
| 12,492 |
|
| $ | — |
|
|
| — |
|
|
|
|
|
|
| Total |
|
| Average |
|
| Total Number |
|
| Maximum |
| ||||
January 1–31, 2023 |
|
| 14,217 |
|
| $ | 10.14 |
|
|
| — |
|
|
| 4,668,973 | |
February 1–28, 2023 |
|
| — | (2) |
|
| — |
|
|
| — |
|
|
| 4,668,973 |
|
March 1–31, 2023 |
|
| 1,769 |
|
|
| 11.59 |
|
|
| — |
|
|
| 4,668,973 | |
Total |
|
| 15,986 |
|
| $ | 10.30 |
|
|
| — |
|
|
|
|
|
(1) | Under our existing stock repurchase program, approved by our Board of Directors on March 11, 2013, we were authorized to repurchase up to an aggregate of 7.0 million shares of our Class B common stock. |
(2) |
The following table provides information with respect to redemption by us of shares of our Preferred stock during the first quarter of 2023:
|
| Total |
|
| Average |
|
| Total Number |
|
| Maximum |
| ||||
January 1–31, 2023 |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | 983,835 | |
February 1–28, 2023 |
|
| 117,647 |
|
| 8.50 |
|
|
| 117,647 |
|
|
| 866,188 |
| |
March 1–31, 2023 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 866,188 | |
Total |
|
| 117,647 |
|
| $ | 8.50 |
|
|
| 117,647 |
|
|
|
|
|
None
Not applicable
None
Exhibit |
| Description |
|
|
|
31.1* |
| |
|
|
|
31.2* |
| |
| ||
32.1* |
| |
|
|
|
32.2* |
| |
|
|
|
101.INS* |
| XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed or furnished herewith. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Genie Energy Ltd. | |
|
|
|
May 9, | By: | /s/ Michael M. Stein |
|
| Michael M. Stein |
|
|
|
May 9, | By: | /s/ Avi Goldin |
|
| Avi Goldin |