Note 5—Acquisitions and Discontinued Operations
Consolidation of Roded
In December 2022, the Company, entered into an investment agreement with Roded Recycling Industries Ltd. ("Roded") and it then owners to acquire a 45.0% noncontrolling interest in Roded for New Israel Shekel ("NIS")5.0 million (equivalent to $1.5 million at the date of the transaction). Roded is engaged in business of recycling used plastic materials into usable industrial products. The Company accounts for its ownership interest in Roded using the equity method.
From December 2022 to April 2024, the Company contributed an aggregate of $0.4 million to Roded gradually increasing its interest to a 51.2% controlling interest on April 12, 2024. Prior to April 12, 2024, the net book value of the Company's investment in Roded was $1.3 million. Following the transaction, the Company has control over the activities of Roded.
The Company recorded minimal revenue for Roded in its consolidated statements of operations and comprehensive income for three and nine months ended September 30, 2024. The net income or loss attributable to this acquisition cannot be identified on a stand-alone basis because it is in the process of being integrated into the Company's operations.
The Company conducted a preliminary assessment of assets and liabilities related to the acquisition of Roded. The impact of the acquisition's purchase price allocations on the Company’s consolidated balance sheets and the acquisition date fair value of the total consideration transferred were as follows (amounts in thousands):
Cash and other current liabilities | | $ | 200 | |
| Property, plant and equipment (1 to 10-year useful life) |
|
| 573 |
|
| Goodwill |
|
| 2,660 |
|
| Liabilities |
|
| (850 | ) |
| Noncontrolling interest |
|
| (1,243 | ) |
| Net assets |
| $ | 1,340 |
|
Goodwill was allocated to the Renewables segment. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill recognized as a result of the acquisition is not deductible for income tax purposes.
Acquisition of Solar System Facilities
On November 3, 2023, the Company acquired ten special-purpose entities that own and operate solar system facilities in Ohio and Michigan. The Company paid a total of $7.5 million, including $1.0 million held in escrow which was released in June 2024.
The acquisition has been accounted for as asset acquisition and the Company recorded $7.7 million in total purchase price, including $0.2 million of direct transaction costs allocated to solar array assets included in the property and equipment account in the consolidated balance sheets with estimated useful lives of 14 to 30 years.
On November 3, 2023, the Company also signed an agreement to purchase from the sellers another special purpose entity that owned and operated a solar system facility in Indiana, for $1.3 million, subject to the satisfaction of certain closing conditions. In February 2024, the purchase of the solar system facility in Indiana was completed. The acquisition has been accounted for as asset acquisition and the Company recorded $1.3 million to solar array assets included in the property and equipment account in the consolidated balance sheets with estimated useful lives of 30 years.
The acquired assets are allocated to the Renewables segment.
Lumo Finland and Lumo Sweden Operations
As a result of the sustained volatility of the energy market in Europe, in the third quarter of 2022, the Company decided to discontinue the operations 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. The sale price has been fixed 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.
The Company determined that the discontinuation of operations of Lumo Finland and Lumo Sweden represented a strategic shift that would 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 are presented separately and reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of September 30, 2024 and December 31, 2023. Lumo Sweden is continuing to liquidate its remaining receivables and to 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 equity ownership 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 effective November 9, 2022.
The following table represents summarized balance sheet information of assets and liabilities of the discontinued operations of Lumo Sweden:
| | September 30, 2024 | | | December 31, 2023 |
|
|
| (in thousands) |
|
Assets | | | | | | |
Cash | | $ | 1,845 | | | $ | 2,483 | |
Receivables from the settlement of derivative contract—current | | | 4,435 | | | | 10,699 | |
Current assets of discontinued operations | | $ | 6,280 | | | $ | 13,182 | |
|
|
|
|
|
|
|
|
|
| Receivables from the settlement of derivative contract—noncurrent |
| $ | — |
|
| $ | 2,362 |
|
| Other noncurrent assets |
|
| 5,184 |
|
|
| 5,078 |
|
| Noncurrent assets of discontinued operations |
| $ | 5,184 |
|
| $ | 7,440 |
|
|
|
|
|
|
|
|
|
|
Liabilities | | | | | | | | |
| Income taxes payable |
|
| 1,637 |
|
|
| 1,399 |
|
Accounts payable and other current liabilities | | | — |
| | | 91 | |
Current liabilities of discontinued operations | | $ | 1,637 | | | $ | 1,490 | |
|
|
|
|
|
|
|
|
|
| Deferred tax liabilities |
|
| 703 |
|
|
| 698 |
|
| Noncurrent liabilities of discontinued operations |
| $ | 703 |
|
| $ | 698 |
|
The summary of the results of operations of the discontinued operations of Lumo Sweden were as follows:
|
| Three Months Ended September 30, |
|
|
| Nine Months Ended September 30,
|
|
|
| 2024 |
|
|
| 2023 |
|
| 2024
|
|
| 2023
|
|
|
| (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations | $ | — | |
| $ | — | |
| $ | — |
|
| $ | — |
|
Other (loss) income, net | | (30 | ) |
|
| (395 | ) |
|
| (375 | ) |
|
| 800 |
|
Income before income taxes | | (30 | ) |
|
| (395 | ) |
|
| (375 | ) |
|
| 800 |
|
Benefit from (provision) for income taxes | | 5 | |
|
| 91 |
|
|
| (60 | ) |
|
| (314 | ) |
Net loss from discontinued operations, net of taxes | $ | (25 | ) |
| $ | (304 | ) |
| $ | (435 | ) |
| $ | 486 |
|
| Income before income taxes attributable to Genie Energy Ltd. | $ | 0.0 | |
| $ | (395 | ) |
| $ | 0.5 |
|
| $ | 800 |
|
The following table presents a summary of cash flows of the discontinued operations of Lumo Sweden:
|
| Nine Months Ended September 30,
|
|
| 2024
|
|
| 2023
|
|
|
| (in thousands) |
|
|
|
|
|
|
|
|
|
Net (loss) income | $ | (435 | ) |
| $ | 486 |
|
Non-cash items |
| 244 | |
|
| 1,170 |
|
Changes in assets and liabilities |
| 8,761 |
|
|
| 17,805 | |
Cash flows provided by operating activities of discontinued operations | $ | 8,570 |
|
| $ | 19,461 |
|
Prior to being treated as discontinued operations or being deconsolidated, the assets and liabilities of Lumo Finland and Lumo Sweden were included in the (former) GRE International segment.
On November 8, 2023, the Lumo Administrators, acting on behalf of the Bankruptcy Estate, filed a claim in the District Court of Helsinki against Genie Nordic, a wholly owned subsidiary of the Company and the parent company of Lumo Finland, its directors, officers and affiliates, in which it alleges that the gain from the sale of swap instruments owned by Lumo Sweden amounting to €35.2 million (equivalent to $39.2 million as of September 30, 2024) belongs to the Bankruptcy Estate. The Bankruptcy Estate filed an additional claim with the District Court on May 27, 2024 against Lumo Sweden for €4.8 million (equivalent to $5.3 million as of September 30, 2024), also alleging that the gain from the sale of the swap instruments belongs to the Bankruptcy Estate, bringing the aggregate sum of claims related to the gain from sale of swap instruments to €40.0 million (equivalent to $44.5 million as of September 30, 2024). The Company believes that the Lumo Administrators' position is without merit, and it intends to vigorously defend its position.
Genie was also notified that the Lumo Administrators filed a claim against one of Lumo Finland’s suppliers, seeking to recover payments made by Lumo Finland amounting to €4.2 million (equivalent to $4.5 million as of September 30, 2024) prior to the bankruptcy. Related to such payment, the Lumo Administrators have filed a recovery claim jointly against the Company and the supplier for €1.6 million (equivalent to $1.7 million as of September 30, 2024) alleging that a portion of the payment by Lumo Finland effectively reduced the Company's liability under the terms of a previously supplied parental guarantee (this €1.6 million is included within and not additive to the €4.2 million). The Lumo Administrators allege that the payments represented preferential payments and therefore belong to the bankruptcy estate which are recoverable under the laws of Finland. The Company intends to challenge the Lumo Administrators' claims. Should the Lumo Administrators succeed in clawing back the funds from the supplier, it is possible that the supplier may seek to recover its losses against the Company, under terms of the parental guarantee. At this time, there is insufficient basis to assess an amount of any probable loss.
U.K. Operations
In the third quarter of 2021, the natural gas and energy market in the United Kingdom deteriorated which prompted the Company to start the process of orderly withdrawal from the United Kingdom. In October 2021, as part of the orderly exit process, Orbit and 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 the Orbit Administrators effective December 1, 2021, which transfer was effective December 1, 2021. All assets and liabilities of Orbit, including cash and receivables remained with Orbit and the management and control of which was transferred to Orbit Administrators. As a result of loss of control, the Company deconsolidated Orbit effective December 1, 2021 and estimated the remaining liability related to its ownership of Orbit.
The Company determined that the discontinued operations of Orbit represented a strategic shift that would 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 effective December 1, 2021.
On November 21, 2023, the Court issued an order to cease the administration and revert the control of Orbit from the Orbit Administrators to the Company effective November 28, 2023. Following the Company regaining control of the management of Orbit, the accounts of Orbit were reconsolidated effective November 28, 2023. In 2023, the Orbit Administrators paid the Company a return of its interest in Orbit of £18.8 million (equivalent to $23.7 million on the dates of transfer).
There was no income or loss from discontinued operations recognized in the three and nine months ended September 30, 2024. In the nine months ended September 30, 2023, the Company recognized income from discontinued operation, net of taxes of $5.4 million, mainly from the increases in the estimated value of our investments in Orbit due to a change in estimated net assets of Orbit after the expected settlement of the liabilities by the Orbit Administrators.
Prior to being treated as discontinued operations and deconsolidation, the assets and liabilities of Orbit were included in the (former) GRE International segment.
The 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, 2023, 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 Section 21E 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, 2023. 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, 2023.
Overview
We are comprised of Genie Retail Energy ("GRE") and Genie Renewables.
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 REPs' 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.
Genie Renewables holds our 95.5% interest in Genie Solar, an integrated solar energy company, our 92.8% interest in CityCom Solar, a marketer of community solar and alternative products and services complimentary to our energy offerings, and our 96.0% interest in Diversegy, our energy procurement advisor.
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 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"). In July 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Sweden. 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 Company also entered into a series of transactions to transfer the customers of Lumo Finland and Lumo Sweden to other suppliers.
We determined that the discontinuance of operations of Lumo Finland and Lumo Sweden represented a strategic shift that would have a major effect on our operations and financial statements. We account for these businesses as discontinued operations and accordingly, present the results of operations and related cash flows as discontinued operations for all periods presented. Any remaining assets and liabilities of the discontinued operations are presented separately and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of September 30, 2024 and December 31, 2023. Lumo Sweden are continuing to liquidate its remaining receivables and to settle any remaining liabilities.
On November 7, 2022, Lumo Finland filed a petition for bankruptcy, which was approved by the Helsinki District Court on November 9, 2022. The administration of Lumo Finland was transferred to the Lumo Administrators. All assets and liabilities of Lumo Finland remain with Lumo Finland, in which we retain our equity ownership 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 effective November 9, 2022.
Net loss from discontinued operations of Lumo Finland and Lumo Sweden, net of taxes was minimal and $0.3 million for the three months ended September 30, 2024 and 2023, respectively. Net loss from discontinued operations of Lumo Finland and Lumo Sweden, net of taxes was $0.4 million and $0.5 million for the nine months ended September 30, 2024 and 2023, 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.
On November 8, 2023, the Lumo Administrators, acting on behalf of the Bankruptcy Estate, filed a claim in the District Court of Helsinki against Genie Nordic, its directors, officers and affiliates, in which it alleges that the gain from the sale of swap instruments owned by Lumo Sweden amounting to €35.2 million (equivalent to $39.2 million as of September 30, 2024) belongs to the Bankruptcy Estate. The Bankruptcy Estate filed an additional claim with the District Court on May 27, 2024 against Lumo Sweden for €4.8 million (equivalent to $5.3 million as of September 30, 2024), also alleging that the gain from the sale of the swap instruments belongs to the Bankruptcy Estate, bringing the aggregate sum of claims related to the gain from sale of swap instruments to €40.0 million (equivalent to $44.5 million as of September 30, 2024). The Company believes that the Lumo Administrators' position is without merit, and it intends to vigorously defend its position.
We have also been notified that the Lumo Administrators filed a claim against one of Lumo Finland’s suppliers, seeking to recover payments made by Lumo Finland amounting to €4.2 million (equivalent to $4.7 million as of September 30, 2024) prior to the bankruptcy. Related to such payment, the Lumo Administrators have filed a recovery claim jointly against us and the supplier for €1.6 million (equivalent to $1.8 million as of September 30, 2024) alleging that a portion of the payment by Lumo Finland effectively reduced our liability under the terms of a previously supplied parental guarantee (this €1.6 is included within and not additive to the €4.2 million). The Lumo Administrators allege that the payments represented preferential payments and therefore belong to the bankruptcy estate which are recoverable under the laws of Finland. We intend to challenge the Lumo Administrators' claims. Nevertheless, should the Lumo Administrators succeed in clawing back the funds from the supplier, it is possible that the supplier will seek to recover its losses against us, under terms of the parental guarantee. At this time there is insufficient basis to assess an amount of any probable loss.
Discontinued Operations in the United Kingdom
On November 29, 2021 Orbit Energy Limited ("Orbit"), which operated in United Kingdom was declared and its customers were transferred to a “supplier of last resort.” Effective December 1, 2021, the administration of Orbit was transferred to a third party Administrators (the "Orbit Administrators"). The accounts of Orbit were deconsolidated from those of the Company effective December 1, 2021.
We determined that the discontinued operations of Orbit represented a strategic shift that would have a major effect on our operations and the financial statements. Since the appointment of the Orbit Administrators, we accounted their businesses as discontinued operations and accordingly, have presented the results of operations and related cash flows as discontinued operations. 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 December 31, 2022. Since the Company lost control of the management of Orbit in favor of the Orbit Administrators, the accounts of Orbit were deconsolidated effective December 1, 2021.
On November 28, 2023, the administration of Orbit ceased and the control of Orbit reverted back to the Company from the Orbit Administrators. The accounts of Orbit were reconsolidated with those of the Company effective November 28, 2023.
There were no income or loss from discontinued operations recognized in the three and nine months ended September 30, 2024 and in the three months ended September 30, 2023. In the nine months ended September 30, 2023, the Company recognized income from discontinued operation, net of taxes of $5.4 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 Orbit Administrators settle the liabilities.
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, Texas, Rhode Island, and Washington, D.C. GRE’s revenues represented approximately 94.5% and 94.6% of our consolidated revenues in the three and nine months ended September 30, 2024, respectively and 96.2% and 96.2% of our consolidated revenues in the three and nine months ended September 30, 2023, 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 48.1% and 39.7% of GRE’s natural gas revenues for the relevant years were generated in the first quarter of 2023 and 2022 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 32.5% and 30.5% of GRE’s electricity revenues for 2023 and 2022 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, extraordinary weather has and can lead to extreme spikes in the prices of wholesale electricity and natural gas in markets where GRE and other retail providers purchase their supply, or in challenges to the grid or supply markets in affected areas. Such events could have material impacts on our margins and operations.
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 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.
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 and nine months ended September 30, 2024 the associated cost was approximately 1.3% of GRE's revenue and approximately 3.5% of GRE's revenue for the three and nine months ended September 30, 2023. At September 30, 2024 and December 31, 2023, 80.2% and 84.4% , respectively, of GRE’s net accounts receivable were under POR programs. 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.
The following table summarizes the percentage of consolidated trade receivables by customers that equal or exceed 10.0% of consolidated net trade receivables at September 30, 2024 and December 31, 2023 (no other single customer accounted for 10.0% or greater of our consolidated net trade receivable as of September 30, 2024 or December 31, 2023).
|
| September 30, 2024 |
|
| December 31, 2023 |
|
Customer A | |
| 16.0 | % | |
| 21.4 | % |
The following table summarizes the percentage of revenues by customers that equal or exceed 10.0% of consolidated revenues for the three months ended September 30, 2024 or 2023 (no other single customer accounted for 10.0% or greater of our consolidated revenues for the three months ended September 30, 2024 or 2023):
|
| | Three Months Ended September 30,
|
|
| Nine Months Ended September 30, |
|
|
| 2024
|
|
| 2023
|
|
| 2024 | | | 2023 |
|
Customer A
|
|
| 20.9 | % |
|
| 24.1 | % |
|
| 21.9 | % |
|
| 17.4 | % |
Legal Proceedings
Although GRE endeavors to maintain best sales and marketing practices, such practices have been the subject of class action lawsuits in the past.
See Note 19, Commitments and Contingencies, in this Quarterly Report on Form 10-Q, which is incorporated by reference.
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 Note 19, Commitments and Contingencies, in the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q, which is incorporated by reference, for further detail on agency and regulatory proceedings.
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 our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. 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, 2023.
Recently Issued Accounting Standards
Information regarding new accounting pronouncements is included in Note 21—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 our consolidated results of operations.
Three and Nine Months Ended September 30, 2024 Compared to Three and Nine Months Ended September 30, 2023
Genie Retail Energy Segment
| | Three months ended September 30, |
| | Change | |
| Nine months ended September 30, | | | Change |
|
(amounts in thousands) | | 2024 | | | 2023 | | | $ | | | % | |
| 2024 | | | 2023 | | | $ | | % |
|
Revenues: | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electricity | | $ | 100,694 | | | $ | 114,002 | | | $ | (13,308 | ) | | (11.7) | % |
| $ | 268,390 |
|
| $ | 268,688 |
|
| $ | (298 | ) |
| (0.1) | % |
Natural gas | | | 5,055 | | | | 4,990 | | | | 65 | | | 1.3 | |
|
| 35,867 |
|
|
| 40,890 |
|
|
| (5,023 | ) |
| (12.3 | ) |
| Others |
|
| 51 |
|
|
| 1,321 |
|
|
| (1,270 | ) |
| nm |
|
|
| 725 |
|
|
| 1,880 |
|
|
| (1,155 | ) |
| (61.4 | ) |
Total revenues | | | 105,800 | | | | 120,313 | | | | (14,513 | ) | | (12.1 | ) |
|
| 304,982 |
|
|
| 311,458 |
|
|
| (6,476 | ) |
| (2.1 | ) |
Cost of revenues | | | 70,028 | | | | 79,484 | | | | (9,456 | ) | | (11.9 | ) |
|
| 204,748 |
|
|
| 200,613 |
|
|
| 4,135 | |
| 2.1 | |
Gross profit | | | 35,772 | | | | 40,829 | | | | (5,057 | ) | | (12.4 | ) |
|
| 100,234 |
|
|
| 110,845 |
|
|
| (10,611 | ) |
| (9.6 | ) |
Selling, general and administrative expenses | | | 20,734 | | | | 18,831 | | | | 1,903 | | | 10.1 | |
|
| 56,337 |
|
|
| 53,983 |
|
|
| 2,354 | |
| 4.4 | |
Income from operations | | $ | 15,038 | | | $ | 21,998 | | | $ | (6,960 | ) | | (31.6 | ) |
| $ | 43,897 |
|
| $ | 56,862 |
|
| $ | (12,965 | ) |
| (22.8 | ) |
nm—not meaningful
Revenues. Electricity revenues decreased by 11.7% in the three months ended September 30, 2024 compared to the same period in 2023. The decrease was due to a decrease in electricity consumption slightly offset by an increase in the average price per kilowatt hour charged to customers in the three months ended September 30, 2024 compared to the same period in 2023. Electricity consumption by GRE’s REPs' customers decreased by 12.6% in the three months ended September 30, 2024, compared to the same period in 2023, reflecting 2.3% and 10.5% decreases in the average number of meters served and average consumption per meter, respectively. The decrease in meters served was due to an increase in the churn rates of customers related to the growth in meters served during the first half of 2024, as new customers tend to have higher rates of churn than long-standing customers. The decrease in per meter consumption in the three months ended September 30, 2024 compared to the same period in 2023 was due to cooler than usual weather during the 2024 summer cooling season and standard fluctuations in customer consumption patterns. The average rate per kilowatt hour sold slightly increased by 1.0% in the three months ended September 30, 2024 compared to the same period in 2023 due to general market conditions.
Electricity revenues slightly decreased by 0.1% in the nine months ended September 30, 2024 compared to the same period in 2023. The decrease was due to a decrease in in the average price per kilowatt hour charged to customers partially offset by an increase in electricity consumption in the nine months ended September 30, 2024 compared to the same period in 2023. The average rate per kilowatt hour sold decreased by 2.6% in the nine months ended September 30, 2024 compared to the same period in 2023 due to general market conditions. Electricity consumption by GRE’s REPs' customers increased by 2.6% in the nine months ended September 30, 2024, compared to the same period in 2023 reflecting a 3.6% increase in the average number of meters served partially offset by a 0.4% decrease in average consumption per meter. The increase in meters served was driven by strong customer acquisitions during the third quarter of 2024. Electricity consumption per meter decreased in the nine months ended September 30, 2024 compared to the same period in 2023 due to cooler than usual weather during the 2024 summer cooling season and standard fluctuations in customer consumption patterns.
Natural gas revenues increased by 1.3% in the three months ended September 30, 2024 compared to the same period in 2023. The increase was a result of an increase in natural gas consumption partially offset by a decrease in average revenue per therm sold in the three months ended September 30, 2024 compared to the same period in 2023. Natural gas consumption by GRE’s REPs’ customers increased by 4.3% in the three months ended September 30, 2024 compared to the same period in 2023, reflecting a 6.9% increase in average meters served, partially offset by a 2.4% decrease in average consumption per meter. The increase in meters served was due to high levels of customer acquisitions in the three months ended September 30, 2024. The average revenue per therm sold decreased by 2.9% in the three months ended September 30, 2024, compared to the same period in 2023 due to general market conditions.
Natural gas revenues decreased by 12.3% in the nine months ended September 30, 2024 compared to the same period in 2023. The decrease in natural gas revenues in the nine months ended September 30, 2024 compared to the same period in 2023 was a result of a decrease in average revenue per therm sold partially offset by an increase in natural gas consumption. Average revenue per therm sold decreased by 17.8% in the nine months ended September 30, 2024, compared to the same period in 2023 due to general market conditions. Natural gas consumption by GRE’s REPs’ customers increased by 6.7% in the nine months ended September 30, 2024 compared to the same period in 2023, reflecting increases in average meters served and average consumption per meter of 6.5% and 0.1%, respectively, in the nine months ended September 30, 2024 compared to the same period in 2023. The increase in meters served was driven by customer acquisition efforts during 2023 and continued through 2024.
Other revenues in the three and nine months ended September 30, 2024 and 2023 included revenues from the sale of petroleum products in Israel and customer termination fees from commercial customers.
The customer base for GRE’s REPs as measured by meters served consisted of the following:
(in thousands) | | September 30, 2024 | | | June 30, 2024 | | | March 31, 2024 | | | December 31, 2023 | | | September 30, 2023 | |
Meters at end of quarter: | |
| | | | | | | | | | | | | | |
Electricity customers | |
| 311 | | | | 278 | | | | 281 | | | | 279 | | | | 304 | |
Natural gas customers | |
| 88 | | | | 84 | | | | 83 | | | | 82 | | | | 81 | |
Total meters | |
| 399 | | | | 362 | | | | 364 | | | | 361 | | | | 385 | |
Gross meter acquisitions in the three months ended September 30, 2024, were 104,000 compared to 60,000 for the same period in 2023. Gross meter acquisitions in the nine months ended September 30, 2024, were 234,000 compared to 264,000 for the same period in 2023. In the first quarter of 2023, we resumed customer acquisition activities using a variety of new and existing channels after a "strategic pause" implemented from the fourth quarter of 2021 through 2022. The gross meter acquisition for the three months ended September 30, 2024 increased compared to the same period in 2023 due to a significant customer aggregation deal that started in September 2024. The gross meter acquisitions for the nine months ended September 30, 2024 decreased compared to the same periods in 2023 as customer acquisition efforts returned to historically normalized level.
Meters served increased by 37,000 between June 30, 2024 to September 30, 2024. Meters served increased by 35,000 meters from December 31, 2023 to September 30, 2024. The increase in the number of meters served at September 30, 2024 compared to June 30, 2024 and December 31, 2023. was due to a significant aggregation deal that started in September 2024.
In the three months ended September 30, 2024, average monthly churn increased to 5.6% compared to 4.4% for same period in 2023. In the nine months ended September 30, 2024, the average monthly churn increased to 5.4% compared to 4.4% for same period in 2023, as a result of higher churn rates related to newly acquired customers.
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) | | September 30, 2024 | | | June 30, 2024 | | | March 31, 2024 | | | December 31, 2023 | | | September 30, 2023 | |
RCEs at end of quarter: | | | | | | | | | | | | | | | |
Electricity customers | | 301 | | | | 267 | | | | 267 | | | | 272 | | | | 298 | |
Natural gas customers | | 79 | | | | 78 | | | | 81 | | | | 78 | | | | 77 | |
Total RCEs | | 380 | | | | 345 | | | | 348 | | | | 350 | | | | 375 | |
RCEs at September 30, 2024 increased 10.1% compared to June 30, 2024. The increase is due to a customer aggregation deal that started in September 2024 as discussed above.
Cost of Revenues and Gross Margin Percentage. GRE’s cost of revenues and gross margin percentage were as follows:
| | | Three Months Ended September 30, | | | Change | |
| Nine Months Ended September 30, | | | Change |
|
| (amounts in thousands) | | 2024 | | | 2023 | | | $ | | | % | |
| 2024 | | 2023 | | | $ | | | % |
|
| Cost of revenues: | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Electricity | | $ | 67,032 | | | $ | 75,117 | | | $ | (8,085 | ) | | | (10.8 | ) |
| $ | 181,492 |
|
| $ | 166,206 |
|
| $ | 15,286 | |
|
| 9.2 | |
| Natural gas | | | 2,996 | | | | 3,327 | | | | (331 | ) | | | (9.9 | ) |
| | 22,591 |
|
|
| 32,858 |
|
|
| (10,267 | ) |
|
| (31.2 | ) |
| Others |
|
| — |
|
|
| 1,040 |
|
|
| (1,040 | ) |
|
| nm |
|
| | 665 |
|
|
| 1,549 |
|
|
| (884 | ) |
|
| nm |
|
| Total cost of revenues | | $ | 70,028 | | | $ | 79,484 | | | $ | (9,456 | ) | | | (11.9 | ) |
| $ | 204,748 |
|
| $ | 200,613 |
|
| $ | 4,135 | |
|
| 2.1 | |
nm—not meaningful
| | | Three months ended September 30, |
|
| Nine months ended September 30, |
|
| (amounts in thousands) | | 2024 | | | 2023 | | | Change |
|
| 2024 |
|
| 2023 |
|
| Change |
|
| Gross margin percentage: | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
| Electricity | | 33.4 | % | | 34.1 | % | | (0.7 | ) |
| 32.4 | % |
| 38.1 | % |
| (5.8 | ) |
| Natural gas | | 40.7 | | | 33.3 | | | 7.4 | |
| 37.0 | |
| 19.6 |
|
| 17.4 |
|
| Others |
| 100.0 |
|
| 21.3 |
|
| 78.7 |
|
| 8.3 | |
| 17.6 |
|
| (9.3 | ) |
| Total gross margin percentage | | 33.8 | % | | 33.9 | % | | (0.1 | ) |
| 32.9 | % |
| 35.6 | % |
| (2.7 | ) |
Cost of revenues for electricity decreased in the three months ended September 30, 2024 compared to the same period in 2023 primarily because of a decrease in the electricity consumption by GRE’s REPs’ customers partially offset by an increase in the average unit cost of electricity. The average unit cost of electricity increased 2.0% in the three months ended September 30, 2024 compared to the same period in 2023 due to an increase in the average wholesale price of electricity. The gross margin on electricity sales decreased in the three months ended September 30, 2024 compared to the same period in 2023 because the average unit cost of electricity increased more than the average rate charged to customers. The decrease in gross margin is due to the change in the mix type of customers in the three months ended September 30, 2024 compared to the same periods in 2023.
Cost of revenues for electricity increased in the nine months ended September 30, 2024 compared to the same period in 2023 primarily because of increases in electricity consumption by GRE’s REPs’ customers and the average unit cost of electricity. The average unit cost of electricity increased 6.4% in the nine months ended September 30, 2024 compared to the same period in 2023, due to higher wholesale prices of electricity during the nine months ended September 30, 2024 compared to the same period in 2023. Gross margin on electricity sales decreased in the nine months ended September 30, 2024 compared to the same period in 2023 because the average unit cost of electricity increased while the average rate charged to customers decreased.
Cost of revenues for natural gas decreased in the three months ended September 30, 2024 compared to the same period in 2023 primarily because of a decrease in the average unit cost of natural gas partially offset by an increase in the natural gas consumption by GRE's REPs' customers. The average unit cost of natural gas decreased by 13.7% per therm in the three months ended September 30, 2024 compared to the same period in 2023 due to a decrease in the wholesale price of natural gas. Gross margin on natural gas sales increased in the three months ended September 30, 2024 compared to the same period in 2023 because the average unit cost of natural gas increased more than the increase in the average rate charged to customers.
Cost of revenues for natural gas decreased in the nine months ended September 30, 2024 compared to the same period in 2023 primarily because of a decrease in the average unit cost of natural gas partially offset by an increase in natural gas consumption by GRE's REPs' customers. The average unit cost of natural gas decreased 35.5% in the nine months ended September 30, 2024 compared to the same period in 2023 due to a decrease in the wholesale price of natural gas during the nine months ended September 30, 2024 compared to the same period in 2023. Gross margin on natural gas sales increased in the nine months ended September 30, 2024 compared to the same period in 2023 because the average unit cost of natural gas decreased more than the decrease in the average rate charged to customers.
Selling, General and Administrative. Selling, general and administrative expenses increased by 10.1% in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to increases in marketing and customer acquisition costs, management fees, POR program fees and processing fees partially offset by a decrease in employee-related expenses. Marketing and customer acquisition expenses increased by $0.9 million in the three months ended September 30, 2024 compared to the same period in 2023 as a result of an increase in the number of meters acquired during the 2024 period. Management fees increased by $0.5 million in the three months ended September 30, 2024 compared to the same period in 2023 as a result of a favorable results in Mirabito. POR program fees increased by $0.1 million in the three months ended September 30, 2024 compared to the same period in 2023 as a result of changes in rates implemented by several utilities. Processing fees increased by $0.5 million in the three months ended September 30, 2024 compared to the same period in 2023 as a result of an increase in meters served with billing fees incurred by GRE. Employee-related expenses decreased by $0.5 million in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to a decrease in bonus accrual. As a percentage of GRE’s total revenues, selling, general and administrative expense increased from 15.7% in the three months ended September 30, 2023 to 19.6% in the three months ended September 30, 2024.
Selling, general and administrative expenses increased by 4.4% in the nine months ended September 30, 2024 compared to the same period in 2023. The increase in selling, general and administrative expense in the nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to increases in processing fees, POR program fees, management fees, and marketing and customer acquisition costs. Processing fees increased by $0.9 million in the nine months ended September 30, 2024 compared to the same period in 2023 as a result of an increase in meters served with billing fees. POR processing fees increased by $0.6 million in the nine months ended September 30, 2024 compared to the same period in 2023 as a result of changes in rates implemented by several utilities. Management fees increased by $0.6 million in the nine months ended September 30, 2024 compared to the same period in 2023 as a result of a favorable results in Mirabito. Marketing and customer acquisition expenses slightly increased by $0.1 million in the nine months ended September 30, 2024 compared to the same period in 2023. As a percentage of GRE’s total revenues, selling, general and administrative expense increased from 17.3% in the nine months ended September 30, 2023 to 18.5% in the nine months ended September 30, 2024.
Genie Renewables Segment
The Genie Renewables (formerly GES) segment is composed of Genie Solar, CityCom Solar and Diversegy. Genie Solar is an integrated solar energy company that develops, constructs and operates solar energy projects. CityCom Solar is a marketer of community solar and alternative products and services complementary to our energy offerings. Diversegy provides energy procurement advisory services to commercial and industrial customers.
On November 3, 2023, Genie Solar acquired ten special-purpose entities that own and operate solar system facilities in Ohio and Michigan for an aggregate purchase price of $7.5 million. On November 3, 2023, Genie Solar also signed an agreement to purchase from the sellers another special purpose entity that owned and operated a solar system facility in Indiana, for $1.3 million, subject to the satisfaction of certain closing conditions. In February 2024, the purchase of the solar system facility in Indiana was completed.
The acquisitions have been accounted for as an asset acquisition with a total purchase price of $9.0 million, including $0.2 million of direct transaction cost allocated to solar arrays assets included in the property and equipment account in our consolidated balance sheets.
| | Three Months Ended September 30, | | | Change | |
| Nine Months Ended September 30, |
|
| Change |
|
| (amounts in thousands) | | 2024 | | | 2023 | | | $ | | | % | |
| 2024
| | | 2023
| | | $
| | | %
|
|
Revenues | | $ | 6,117 | | | $ | 4,736 | | | $ | 1,381 | | | | 29.2 | % |
| $ | 17,318 |
|
| $ | 12,329 |
|
| $ | 4,989 | |
|
| 40.5 | % |
Cost of revenue | | | 3,982 | | | | 4,483 | | | | (501 | ) | | | (11.2 | ) |
| | 12,523 |
|
|
| 10,598 |
|
|
| 1,925 | |
|
| 18.2 | |
Gross profit | | | 2,135 | | | | 253 | | | | 1,882 | | | | 743.9 | |
| | 4,795 |
|
|
| 1,731 |
|
|
| 3,064 | |
|
| 177.0 | |
| Selling, general and administrative expenses | | | 2,298 | | | | 2,304 | | | | (6 | ) | | | (0.3 | ) |
| | 6,875 |
|
|
| 6,208 |
|
|
| 667 | |
|
| 10.7 | |
| Impairment of assets |
|
| 80 |
|
|
| — |
|
|
| 80 |
|
|
| nm |
|
|
| 199 |
|
|
| — |
|
|
| 199 |
|
|
| nm |
|
Loss from operations | | $ | (243 | ) | | $ | (2,051 | ) | | $ | (1,808 | ) | | | (88.2) | % |
| $ | (2,279 | ) |
| $ | (4,477 | ) |
| $ | 2,198 |
|
|
| (49.1) | % |
nm—not meaningful
Revenue. Genie Renewables' revenues increased in the three and nine months ended September 30, 2024 compared to the same periods in 2023. The increase in revenues were the result of increases from Diversegy that includes commissions, entry fees and other fees revenue contributions from the portfolio of operating solar projects at Genie Solar and revenues from the development of solar projects for customers from Genie Solar partially offset by a decrease in revenues from commissions from selling alternative products and services to customers by CityCom Solar.
Cost of Revenues. The variations in the cost of revenues for the three and nine months ended September 30, 2024 compared to the same periods in 2023 are due to changes in the mix of products from which the revenues were generated during the periods. In the first quarter of 2024, we recorded a $0.4 million charge to the cost of revenues of Genie Solar to write down the carrying value of solar panel inventories to the estimated net realizable value.
Selling, General and Administrative. Selling, general and administrative expenses increased in the three and nine months ended September 30, 2024 compared to the same periods in 2023 primarily due to increases in headcount in Genie Solar and Diversegy, consulting fees, warehousing costs at Genie Solar and depreciation from the solar arrays acquired by Genie Solar in the last nine months.
Impairment of assets. The impairment of assets recorded in the three and nine months ended September 30, 2024 relates to capitalized cost at Genie Solar for solar projects that were discontinued in the second quarter of 2024.
Corporate
As discussed above, the remaining accounts of GRE International were transferred to corporate starting in the third quarter of 2022. (when GRE International ceased being treated as a separate segment). 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 expenses.
| | Three Months Ended September 30, | | | Change | |
| Nine Months Ended September 30, | | | Change |
|
| (amounts in thousands) | | 2024 | | | 2023 | | | $ | | | % | |
| 2024 | | | 2023 | | | $ | | | % |
|
| General and administrative expenses |
| 2,128 |
|
| 2,061 | |
| 67 | |
| 3.3 | |
| | 6,864 |
|
|
| 8,189 | |
|
| (1,325 | ) |
|
| (16.2 | ) |
| Provision for captive insurance liability |
| 991 |
|
| — |
|
| 991 |
|
| nm |
|
| | 2,667 |
|
|
| — |
|
|
| 2,667 |
|
|
| nm |
|
General and administrative expenses and loss from operations | | $ | 3,119 | | | $ | 2,061 | | | $ | 1,058 | | | | 51.3 | % |
| $ | 9,531 |
|
| $ | 8,189 | |
| $ | 1,342 | |
|
| (16.4) | % |
nm—not meaningful
Corporate general and administrative expenses slightly increased in the three months ended September 30, 2024 compared to the same period in 2023. Corporate general and administrative expenses decreased in the nine months ended September 30, 2024 compared to the same period in 2023 primarily because of decreases in employee-related cost and professional and consulting fees. As a percentage of our consolidated revenues, Corporate general and administrative increased to 1.9% in the three months ended September 30, 2024 from 1.6% in the three months ended September 30, 2023 and decreased to 2.1% in the nine months ended September 30, 2024 from 2.5% in the nine months ended September 30, 2023.
In December 2023, we established a wholly-owned captive insurance subsidiary (the "Captive") with the primary purpose of enhancing our risk financing strategies. In December 2023, we paid $51.2 million premiums to Captive, which amount is included in restricted cash in our consolidated balance sheet as of December 31, 2023. The Captive must maintain a sufficient level of cash to fund future reserve payment and secure the insurer's liabilities, particularly those related to the insured risks. We also recognized $1.0 and $ $2.7 million provision for captive insurance liability for the three and nine months ended September 30, 2024 related to Captive's exposure for the insured risks.
Consolidated
Selling, general and administrative expenses. Stock-based compensation expense included in consolidated selling, general and administrative expenses was $0.6 million for each of the three months ended September 30, 2024 and 2023 respectively, and $1.8 million and $2.3 million for the nine months ended September 30, 2024 and 2023. At September 30, 2024, the aggregate unrecognized compensation cost related to non-vested stock-based compensation was $6.5 million. The unrecognized compensation cost is recognized over the expected vesting period.
The following is a discussion of our consolidated income and expense line items below income from operations:
| | | Three Months Ended September 30, | | | Change | |
| Nine Months Ended September 30, | | | Change |
|
| (amounts in thousands) | | 2024 | | | 2023 | | | $ | | | % | |
| 2024 |
|
| 2023 |
|
| $ |
|
| % |
|
| Income from operations | | $ | 11,676 | | | $ | 17,886 | | | $ | (6,210 | ) | | | (34.7) | % |
| $ | 32,087 | |
| $ | 44,196 |
|
| $ | (12,109 | ) |
|
| (27.4) | % |
| Interest income | | | 2,346 | | | | 1,331 | | | | 1,015 | | | | 76.3 | |
| | 5,049 | |
|
| 3,313 |
|
|
| 1,736 | |
|
| (52.4 | ) |
| Interest expense | | | (22 | ) | | | (27 | ) | | | (5 | ) | | | (18.5 | ) |
| | (385 | ) |
|
| (75 | ) |
|
| (310 | ) |
|
| (413.3 | ) |
| Other income, net | | | 56 | | | | (4 | ) | | | 60 | | | | nm | |
| | 1,398 | |
|
| 3,137 |
|
|
| (1,739 | ) |
|
| (55.4 | ) |
| Gain on marketable equity securities and investments | | | 122 | | | | 334 | | | | (212 | ) | | | 63.5 | |
| | 349 | |
|
| 385 |
|
|
| (36 | ) |
|
| (9.4 | ) |
| Provision for income taxes | | | (3,924 | ) | | | (5,018 | ) | | | (1,094 | ) | | | (21.8 | ) |
| | (10,309 | ) |
|
| (12,951 | ) |
|
| 2,642 |
|
|
| 20.4 |
|
| Net income from continuing operations | | | 10,254 | | | | 14,502 | | | | (4,248 | ) | | | (29.3 | ) |
| | 28,189 | |
|
| 38,005 |
|
|
| (9,816 | ) |
|
| (25.8 | ) |
| (Loss) income from discontinued operations, net of tax | | | (25 | ) | | | (304 | ) | | | 279 | | | | (91.8 | ) |
| | (435 | ) |
|
| 5,923 |
|
|
| (6,358 | ) |
|
| (107.3 | ) |
| Net income | | | 10,229 | | | | 14,198 | | | | (3,969 | ) | | | (28.0 | ) |
| | 27,754 | |
|
| 43,928 |
|
|
| (16,174 | ) |
|
| 36.8 |
|
| Net (loss) income attributable to noncontrolling interests | | | 30 | | | | (261 | ) | | | 291 | | | | (111.5 | ) |
| | (179 | ) |
|
| (118 | ) |
|
| (61 | ) |
|
| 51.7 | |
| Net income attributable to Genie Energy Ltd. | | $ | 10,199 | | | $ | 14,459 | | | $ | (4,260 | ) | | | (29.5) | % |
| $ | 27,933 | |
| $ | 44,046 |
|
| $ | (16,113 | ) |
|
| 36.6 | % |
nm—not meaningful
Interest income. Interest income increased in the three and nine months ended September 30, 2024, compared to the same periods in 2023 primarily due to increase in average balances of cash and cash equivalents and restricted cash during the period.
Other Income, net. Other income, net in the three months ended September 30, 2024 and 2023 and in the nine months ended September 30, 2024 and 2023 consisted primarily of foreign currency transactions and equity in net loss in equity method investees. Other income (loss) income, net, in the three months ended September 30, 2023 consisted primarily of a one-time tax credit related to payroll taxes incurred in prior years.
Provision for Income Taxes. The change in the reported tax rate for the three and nine months ended September 30, 2024 compared to the same periods in 2023 is the result of changes in the mix of jurisdictions in which taxable income was earned.
Net Loss Attributable to Noncontrolling Interests. The decreases in net loss attributable to noncontrolling interests in the three and nine months ended September 30, 2024 compared to the same periods in 2023 was primarily due to the share of noncontrolling interest in the operations of Citizens Choice Energy.
Gain on Marketable Equity Securities and Investments. The gain on marketable equity securities and investment for the three and nine months ended September 30, 2024 pertains to the change in fair value of the Company's investments in common stock of Rafael which the Company acquired in December 2020 and various investments in equity of several entities.
Net (loss) income from Discontinued Operations, net of tax. Loss from discontinued operations, net of tax in the three and nine months ended September 30, 2024 is mainly related to foreign exchange differences in Lumo Sweden during the period. Gain from discontinued operations, net of tax in the three and nine months ended September 30, 2024 is mainly from an increase in the estimated value of our investments in Orbit and foreign exchange differences in Lumo Sweden.
Liquidity and Capital Resources
General
We currently expect that our cash flow from operations and the $136.3 million balance of unrestricted cash and cash equivalents that we held at September 30, 2024 will be sufficient to meet our anticipated cash requirements for at least the period to November 7, 2025.
At September 30, 2024, we had working capital (current assets less current liabilities) of $138.8 million.
| | Three Months Ended September 30, | |
| | 2024 | | | 2023 | |
| | (in thousands) | |
Cash flows provided by (used in): | | | | | | |
Operating activities | | $ | 49,174 | | | $ | 32,561 | |
Investing activities | | | (11,545 | ) | | | (749 | ) |
Financing activities | | | (18,461 | ) | | | (12,515 | ) |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | | | (120 | ) | | | 61 | |
| Decrease in cash, cash equivalents and restricted cash of continuing operations |
|
| 19,048 | |
|
| 19,358 | |
| Cash flows provided by discontinued operations |
|
| 8,570 | |
|
| 22,039 | |
Net increase in cash, cash equivalents and restricted cash | | $ | 27,618 | | | $ | 41,397 | |
Operating Activities
Cash, cash equivalents and restricted cash provided by operating activities of continuing operations was $6.3 million in the nine months ended September 30, 2024 compared to net cash used in operating activities of continuing operations of $32.6 million in the nine months ended September 30, 2023. The decrease is due primarily to the fluctuation in the results of operations in the nine months ended September 30, 2024 compared to the same period in 2023.
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 decreased cash flows by $24.5 million for the three months ended September 30, 2024, compared to the same period in 2023.
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 September 30, 2024, we were in compliance with such covenants. At September 30, 2024, restricted cash—short-term of $0.5 million and trade accounts receivable of $56.8 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $17.6 million at September 30, 2024.
We had purchase commitments of $92.5 million at September 30, 2024, of which $76.4 million was for purchases of electricity.
As discussed above, in December 2023, we established the Captive insurance subsidiary. At September 30, 2024, the balance of short-term and long-term restricted cash and cash equivalents of the Captive are $3.9 million and $47.3 million, respectively. We also recognized $2.7 million provision for captive insurance liability for the three months ended September 30, 2024, related to Captive's exposure for the insured risks. At September 30, 2024, the current captive insurance liability of $0.5 million is included in other current liabilities in our consolidated balance sheet. The amount of the expected loss liability for each risk is based on an analysis performed by a third-party actuary which assumed historical patterns. The key assumptions used in developing these estimates are subject to variability.
We are a lessee under operating lease agreements primarily for office space in locations where we operate and for our solar development projects with lease periods expiring between 2024 and 2052. Our future lease payments under the operating leases as of September 30, 2024 were $3.6 million.
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 September 30, 2024, we had outstanding aggregate performance bonds of $26.7 million and a minimal amount of unused letters of credit.
Investing Activities
Our capital expenditures increased $3.1 million to $4.0 million for the nine months ended September 30, 2024 compared to the same period in 2023. The capital expenditures are mainly for the construction of solar projects at Genie Solar. In the nine months ended September 30, 2024, we transferred $1.9 million worth of solar panels that are intended to be used in Genie Solar projects from inventories to construction in progress related to solar panels expected to be used in the solar project by Genie Solar. We currently anticipate that our total capital expenditures in the twelve months ending December 31, 2024 will be between $6.0 million to $10.0 million mostly related to the solar projects of Genie Renewables.
On November 3, 2023, we acquired ten special-purpose entities that own and operate solar system facilities in Ohio and Michigan for an aggregate purchase price of $7.5 million. The acquisition has been accounted for as an asset acquisition with a total purchase price of $7.7 million, including $0.2 million of direct transaction cost allocated to solar arrays assets included in the property and equipment account in our consolidated balance sheets.
On November 3, 2023, we also signed an agreement to purchase from the sellers another special purpose entity that owned and operated a solar system facility in Indiana, for $1.3 million, subject to the satisfaction of certain closing conditions. In February 2024, the purchase of the solar system facility in Indiana was completed after the closing conditions were met. The acquisition has been accounted for as asset acquisition and we recorded $1.3 million to solar arrays assets included in the property and equipment account in the consolidated balance sheet.
In February 2024, we purchased from a certain investor 0.5% interest in Genie Energy International Corporation ("GEIC"), which holds our interest in our operating subsidiaries for $1.2 million. Following this transaction, GEIC is a wholly owned subsidiary of the Company.
In July 2024, the Company acquired an investment property with an aggregate cost of $3.6 million. The investment property was acquired through a subsidiary in which the Company holds a 51.0% interest with the remaining 49.0% held by Howard Jonas, the Chairman of our Board of Directors. The Company paid $1.8 million to the seller and signed a note payable to the seller for $1.8 million, payable in full on February 1, 2026. The note payable carries a 5.0% interest rate payable in full on February 1, 2026. In the third quarter of 2024, Howard Jonas, reimbursed the Company $0.9 million, representing the purchase price for his 49.0% share in the investment property and is included in the noncontrolling interest in our consolidated balance sheets. At September 30, 2024, $3.6 million was outstanding under the note payable with an effective interest rate of 5.0%.
In the nine months ended September 30, 2024 and 2023, we acquired minimal interests in various ventures for an aggregate amount of investments of $4.0 million and $5.9 million, respectively.
In 2020 and 2021, we invested an aggregate of $6.0 million for 261,984 shares of Class B common stock of Rafael Holdings, Inc. ("Rafael"). Rafael, a publicly-traded company and a related party. 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. In the second quarter of 2023, we acquired 150,001 shares of our Class B common stock of Rafael for $0.3 million. We do not exercise significant influence over the operating or financial policies of Rafael. At September 30, 2024, the carrying value of the remaining investments in the Class B common stock of Rafael was $0.4 million.
In the three months ended March 31, 2023, we invested $4.6 million to purchase the common stock of a publicly traded company which we sold for $3.9 million in the second quarter of 2023.
In March 2023, the Company received $0.1 million from Atid 613 Drilling Ltd. ("Atid 613") for the full settlement of its investment 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, 2023.
On November 29, 2021, Orbit, which operated in the United Kingdom, was declared insolvent and its customers were transferred to the “supplier of last resort.” Effective December 1, 2021, the administration of Orbit was transferred to Orbit Administrators. The accounts of Orbit were deconsolidated from those of the Company effective December 1, 2021. In 2022, we transferred $49.7 million to the Orbit Administrators as part of the administration process. On November 28, 2023, the administration of Orbit ceased and the control of Orbit reverted back to the Company from the Administrators. The accounts of Orbit were reconsolidated with those of the Company effective November 28, 2023. In 2023, the Orbit Administrators paid us a return of our interest in Orbit of £18.8 million (equivalent to $23.7 million on the dates of transfer).
Financing Activities
In the nine months ended September 30, 2024 and 2023, we paid dividends of $0.075 per share to stockholders of our Class A common stock and Class B common stock, or aggregate dividends of $6.2 million and $3.9 million in the nine months ended September 30, 2024 and 2023, respectively. On October 30, 2024 our Board of Directors declared a quarterly dividend of $0.075 per share on our Class A common stock and Class B common stock. The dividend will be paid on or about November 20, 2024 to stockholders of record as of the close of business on November 12, 2024.
In the nine months ended September 30, 2023, we paid Base Dividends of $0.1594 per share of our 2012-A Preferred Stock or Preferred Stock in an aggregate amount of $0.2 million.
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. In the nine months ended September 30, 2024, we acquired 492,032 Class B common stock under the stock purchase program for an aggregate amount of $0.0 million. There are no repurchases under this program in the three months ended September 30, 2023. At September 30, 2024, 4.2 million shares of Class B common stock remained available for repurchase under the stock repurchase program.
On November 2, 2023, we made a charitable donation to the Genie Energy Charitable Foundation (the "Genie Foundation") by issuing 50,000 shares of Class B common stock from its treasury with value of on the date of the donation of approximately $1.0 million. On April 17, 2024, we repurchased 50,000 shares of Class B common stock from the Genie Foundation for $0.8 million. The Company is the sole member of the Genie Foundation and the Company's Chief Executive Officer and Chief Financial Officer serve as members of the board of directors of the Genie Foundation.
On February 7, 2022, our Board of Directors authorized a program to redeem up to $1.0 million per quarter of our Preferred Stock at the liquidation preference of $8.50 per share beginning in the second quarter of 2022. In the nine months ended September 30, 2024, the Company redeemed 117,647 shares of Preferred Stock under the stock purchase program for an aggregate amount of $1.0 million.
On May 16, 2023, our Board of Directors approved the redemption of all outstanding Preferred Stock on June 16, 2023 (the "Redemption Date") at the liquidation preference of $8.50 per share, together with an amount equal to all dividends accrued and unpaid up to, but not including, the Redemption Date. On the Redemption Date, we completed the redemption of 748,064 shares of Preferred Stock for an aggregate amount of $6.5 million and the related accrued dividends of $0.1349 per share equivalent to $0.1 million. Following the redemption, there are no shares of Preferred Stock outstanding, all rights of Preferred Stockholders have terminated, and the Preferred Stock’s ticker symbol, "GNEPRA", has been retired.
In the nine months ended September 30, 2024 and 2023, we paid $3.6 million and $2.3 million, respectively, to repurchase our Class B common stock of our Class B common stock tendered by our employees (including one officer) to satisfy tax withholding obligations in connection with the lapsing of restrictions on awards of restricted stock and exercise of stock options. Such shares were repurchased by us based on their fair market value on the trading day immediately prior to the vesting date.
On December 13, 2018, we entered into a Credit Agreement with JPMorgan Chase Bank (“Credit Agreement”). On February 14, 2024, the Company entered into the third amendment of its existing Credit Agreement to extend the maturity date of December 31, 2024. The aggregate principal amount was 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 $3.1 million. As of September 30, 2024, there is no issued letter of credit from the Credit Line. At September 30, 2024, the cash collateral of $4.5 million was included in restricted cash—short-term in our consolidated balance sheet.
Cash flows from discontinued operations
Cash provided by operating activities of discontinued operations was $8.6 million in the nine months ended September 30, 2024 compared to $19.5 million in the same period in 2023. The cash provided by operating activities of discontinued operations in the three months ended September 30, 2024 and 2023 pertains to the proceeds from the settlement of hedges of Lumo Sweden.
