SPKE - Earnings call transcript Q4 2017

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Operator

Good morning, ladies and gentlemen. Welcome to the Spark Energy Inc. Fourth Quarter 2017 Earnings Conference Call. My name is Bridget and I'll be your operator for today. At this time, all participants are in a listen-only mode. a time. and conduct given will will that at we question-and-answer instructions session be Later As reminder, be Instructions] purposes Energy [Operator a website. and for being Inc.’s this replay recorded call will posted Spark this on conference is conference I to turn Mr. over would to now like the with Energy Spark Hettick Christian Inc. Please ahead. go

Christian Hettick

Presentations quarter under are webcast, being today the morning over reasonable Robert believe these actual broadcast statements sparkenergy.com. in President Good condition. that our fourth Lane. differ the are economic statements. welcome Events Please of that which This and of call. phone as concerning discussion at cause CFO, of Nathan operations, note our may Vice Spark to to and that uncertainties and earnings and via Kroeker; which on can from performance President live to future located be based morning's and we from today's Inc.'s and make section our website be may Relations materially Energy, XXXX call could is results date. statements, this Investor subject and CEO, financial management Management assumptions is and projections to forward-looking our risks us With statements expectations, forward-looking These contain

or required of that earnings new in publicly the as result we statements, urge or future forward-looking SEC believe We everyone provided review events, revise whether expectations as filings. give undertake no well factors we update otherwise, to expectations statement the obligation by to contained risk forward-looking our be as reasonable, as in a law. except such yesterday's We information, realized. any Although Safe no reflected such statements are in will assurance that release the Harbor

we company's and During will financial of GAAP results. measures to the non-GAAP financial operating refer this both and call, morning's

to comparable would Regulation our our it check financial web please like the to Executive and President to yesterday's is directly material Kroeker, With and GAAP ir.sparkenergy.com. We you under that release. FD, For nonpublic obligations turn our invite reconciliation to also regularly address disclose use because I'll to to information and Chief most call we information regarding over Officer. earnings Nathan comply measures with measures, that, our to website the non-GAAP refer

Nathan Kroeker

Thank last adjusted welcome you, and Christian. is topped results year I North our the since and any storm organically of metric, has we opportunities and Spark then shareholders winter M&A both the mild continue. want XXXX call. and $XXX.X in these think been EBITDA that our XXXX. phenomenal straight analysts million Mid-West hit today's XXXX Hurricane will another by the by earnings including summer, XX% despite record challenges By our during and surprised adjusted weather to with to achieved followed growth third in the through year’s a double-digit holidays. East EBITDA and growth IPO Harvey

call our and call We financials. will full press volumes the a year million Provider discuss recorded as Then for the over as was due of acquisitions. our CFO, This million well on that year the adjusted details who margin in moves to year I to to compared and the provide EBITDA $XX the of of and $XXX XXXX. listed release we strategic from today, our of acquisitions and the will Major full I additional financial Lane, Perigee During Verde for drivers our Rob night. results last discuss our a will turn few

RCEs, of $XX.X X.X%. results highlighted XX% margin Spark, XX% base. retail for acquisitions for the we to compared from $X for We EBITDA extraordinary $XX.X year compared compared For year, the over Xst. to Energy, which internal with was and having XXXX, increase to followed was gross an year driven steady the of three fourth a year In by million Verde business. million of of at customer closed our Retail closed a fourth XXXX $XX.X year-over-year million mainly July with the initiatives year-over-year quarter prior prior year-over-year, to out we this ended volume purchase an costs trajectory, similar $XXX.X quarter for XXXX launched at million by $XX.X million the the while a the adjusted margin quarter, gross full for increased in on design of year. additional drive million number $XXX.X XXXX fourth million monthly of of held attrition larger

of some to quarter realize first of the We this already year. have these savings in begun

employees to flexible credit without syndicate serve and but our during trying with our larger And more facility Harvey, interruption. profitability joint help of international several only will briefly and replaced well. we on the customers times ahead Our come facility venture new each saw lenders as together our We we group. Hurricane not during into in schedule other achieved to touch that Japan welcome

As number with we there forward, exciting share today. are to we look happy a developments of that are you

acquisition On gas is on seven states in Mid-West. already and North this has customers one the a front, both retail East natural which acquisition and electricity electric month, closed Spark provider, in serving the

$XX pay our affiliate, on will working also consideration, cash total, and XX,XXX RCEs we Gas $XX In book have to capital acquisitions adjusted EBITDA transactions in customers as agreed add deal. the the to over of purchase National least We and of balance at third-party from expect two a both These approximately be million deals million will some Electric. accretive the plus in XXXX. we generate from should immediately

XXXX. focusing in RCE growth, quality the even more While we on RCE are we love

these highest margin. and our our mainly internal sales and customer our costs a margin are initiatives little We around on our streamline channel. to continue integration, earlier, return I enhancing focus gross simplifying our centered our acquisition mentioned operating both to structure

be quarter. retail week, services, we agreed Co. complete we As its we this earnout Verde substantially into to to on Spark. on the Spark, integration terminated services reintegrate aggressively expect second the and Retail January into announced we working the are back XXth, in full which Earlier

As there be reductions formed were month improvements that and the because at our customers. investors our time, costs we $X million served to how the first through At annual believe we those may savings G&A be Retail we over in to achieved XX significant systems the in end recall, XXXX, Co. roughly period. estimated we of a achievable

fully immediately. moved that Retail shareholder for Co. that to into those majority Keith these now Our felt Co. to operations was operations time in Maxwell, been We realize improvements allowed bring formed to Spark back we that which exchange Retail back the our savings and it pricing employees office achieved. us have

a million communicate synergies in Co. believe the our story service this will us lenders from third-party Retail additional of that rate savings cost as to additional and our at the simplifying same management redundant investors. reintegration, allow provider including identified much achieve reintegration, We while run $X of number have as we time, and we that to the

mentioned the press agreed and As consideration to transaction. has our for committee has the release, in reintegration approved Keith special facilitate this no

this reintegration weeks. coming to expect the complete in be We

our whole, million partners. that areas processes We mentioned certain the by believe that our $XX call run also in on annual initiatives or rate to end initiatives brands more at number looking us these our XXXX. savings international on. in efficient Japan, will integrations third-party last additional that our all achieve in as of Building and certain have a include some a we relationships automating working taken consolidate of other and in of earnings These we working on We help strongest our to success most to and manual been we should opportunities. markets, had internal consolidating have be

working three enhancing of that product them each currently market investing supply. offerings, separate In management in are while local working experience, these and marketing business and on existing we would on be opportunities. We with teams energy have

and with banks of for the not acquisition the $XX did lot that this investment million future. well also any A our I our large $XX XXXX all to We exception of first believe Preferred of are enhance facility new hard a $XXX want their the foresee of foreseeable bankers has issued capitalized quarter Stock from year thank and to capital credit in put liquidity. external commitments. for a the million we public Series and million work. to grown additional We needing a together We that of over including do markets

elected at how and provide look as Board quantitative with is January. Our in XXXX XXXX. not by markets that and Midwest early XXXX, for our to guidance up, Northeast believe we hit has but at results impacted late January we the this largely shaping time in-line bomb cyclone December was be will

is our event history. higher cost said, During volumes normal we've year that the being load. time than in incremental not for That that experienced XX this adverse weather first we experienced and

last value to coming Board that opportunities team of growth and long-term over growth Rob the exit always an organic the the maximize our price I are small Since we've consolidation of to the we on stock ensuring And turn thing, Our continues for additional evaluate IPO, opportunity. call current the our retailers before alternatives. last does in shareholder we long-term not reflect if combination opportunities, to deals additional our business. repeats highlighted the financial our of or time over months of history strategic we retain that night, press to accretive the M&A his look as making and see that to have management shareholders. find will as our we Board we review, One release has itself, focused for whenever a be been value. underlying And advantage Stanly believe Morgan outlook taking are decisions accurately achieved

further provide becomes updates information will Rob? on We as this available.

Robert Lane

$XX.X to year of million, XX%. Thank retail increase as compared to XX%, Full to $XX.X the was Both due quarter effect Verde primarily achieved last you, from gross and compared margin fourth for $XX.X volumes fourth the was EBITDA, Retail In well of Major with XX%. of as Provider Perigee Perigee margin increases gross million of and morning, $XX.X EBITDA transactions. of of compared Verde while these $XX.X both year's year $XXX.X million, adjusted of Energy. year increase the full our an to Good contributions from the This compared to were quarter XXXX, we an in was $XXX.X increased adjusted XX% Nathan. for $XXX.X million and an full million, year, was increase an due million. million, last increase quarter, everyone. million

Turning to increased a of to $XXX.X customers expenses serve, in due last book commissions commercial bad G&A, number year and increased increase million, to XX% in an primarily larger the increase debt. we operating to paid from an

Perigee and to drive ended the larger We additional we year the and of of as termination again initiatives through As acquisitions reintegration million early earnout number Verde over gross operating synergies with the mentioned, a services. RCEs result the and Verde Nathan of including book. retail our continue C&I a of X

derivative million the the at held expenses $XX.X million year taxes as the Interest related the million course and in of revaluation Income $XX.X spent over of to paid the of acquisition year. to million we million non-cash for non-cash income compared customer performance. biggest receivable result steady tax earnout Meanwhile, our costs, a tax monthly liability $XX.X because The our receivable year liabilities of as to $XX.X compared result $XX.X $XX.X primarily accretion the Legislation and of here of as Other X.X%. on factor included gains customer financial the increased our greater tax passed the of non-cash expense Tax in $XX.X and utilization in effects year-over-year For million the to sellers of tax strong prior the million tax facility of note, from credit rose $X.X of December million, attrition was of a of XXXX. non-cash revaluation XXXX. year. liability, to non-operating the our average income the additional

by recent passed income, our most position well a Turning the we expect net federal going government, positive the a to the to effect as forward. on as change for moment have tax cash legislation our

account tax as state rate, both roughly the well taxes have as the as the rates tax laws to new our by that federal taking related cut rules, as tax distributions into and well we XX% new pay. our is estimation will Our

$XX.X $XX.X positively Our year for the mark-to-market split by the million a revaluation after per adjusted tax to compared diluted fully net of basis. million was share gain, XXXX per $X.XX income on as million and was $XX.X a non-cash from receivable or tax fully the affected a well XXXX $X.XX for of $XX.X as diluted liability. income shares, million

While was million by XXXX $XX.X affected mark-to-market positively a gain.

ultimately we As reminded when we have price gain receive being in contracts. we does cash all non-cash position expect rise, that those equal fixed mark-to-market things investors on past, change to not other experience actual commodity the a curves the

million. balance commitments our sheet, of have our total in Looking $XXX we now at

also our Stock planned $XX Preferred international additional to we We use Series acquisitions January, A recently million to expansions. and which an raised in of help fund

position Preferred On XXth, dividend we we on A our end Stock. on had XX, $X.XXXXX on paid of per dividend be preferred no April paid stock on liquidity our of $X.XXXXX dividend quarter paid dividend Series fourth A December XXth. million. the announced at share total January we our On our the the fourth to quarterly of Looking at on Class cash be our year, March common share of we of to per XXth, stock $XX cash XXth, quarter and paid stock common January quarterly a and

all dividends to on have. to Back a That's you, we've the Nathan. quarterly basis. past, grow As in go-forward these expect I we stated

Nathan Kroeker

Thanks, Rob.

everyone Spark thresholds. $X to the for adjusted at EBITDA break us RCE very helping million $XXX We of are million proud here and

As XXXX beyond, focus we integration international organic we will sales, continue look expansion. and and to on acquisitions, both through top bottom-line towards and continued our growing

line from analysts. questions our for Operator? now open up will We the

Operator

[Operator line Riley B. from Instructions] with of Driscoll comes FBR. first Carter question the Our

Carter Driscoll

Good in and morning XXXX. nice gentlemen job

Nathan Kroeker

Thank you.

Carter Driscoll

guidance if First two assume exclude potentially can it I million include talked question, to M&A, that then and but year, made today you recognize you And would exclude just about that $XX it the any annualized you. doesn’t I the factors Help commodity understand Thank does events of moving the you obviously a this book the be And probably it of lot adjusted positive of announce? [indiscernible] a of XXXX? would so anything announcement moving trying I and all? pushed maybe may that and savings you your that [indiscernible] me into forward maybe how year parts. understand bulk for the cost hedge assume different is this then some going interplay at prices

Nathan Kroeker

then believe Okay, weather factored cost the first And are the of into factored that in of the a incremental event the in projections, up are great international will or weather impact whether doing the we domestic. January, question. have event the two the result it’s rate show Couple that anticipate referenced on those achieving million now, we but majority in, a not then And of things, beginning negative we M&A our will XXXX. working savings $XX those those as quarter. any but is on run we acquisitions of

Carter Driscoll

think Okay. obviously were say last quickly be a of And some current raise north liquidity facilities; of position is? of that or obviously how A, you big had feel position correct? it able preferred different between maybe you on to on do would $XXX would I moving you your is just so if outstanding facilitate added liquidity the opportunity then gives found M&A approximately sufficient liquidity and you partners, you understand you the this if year size something today facility you you heard And to Verde, I be act you that the able what then, resized have syndication from I million credit

Robert Lane

Hey, Carter, this is Rob.

of the Nathan first Let I tackle and me together. question, will part second part answer the

We have you LCs. actually know million that of $XXX a of with commitment lot our as is

the at it’s I actually that So it’s draw, actually $XXX the lower what’s other our year is that drawn is but not of the that’s and end believe not available of little then is than a drawn. piece now. to million And of

well. then are this look that’s we also well. as provides not as cash short-term some the right another use look well. say from standpoint something probably cash believe on now, some side preferred of And have, there that, on that acquisition, us be and debt the plus have don’t any liquidity to there I utilizing do So would as if have plus At $XXX we point be some to got really really and the utilization capacity able might preferred combination stock utilization would good that to and we our full we sort If that that we common we not sponsor we we how to a is stuff the we stock hand available that on that room million look of anticipate. of finance do

Carter Driscoll

so related feel to comfortable payout comfortable obviously And a at you make with then there dividend sure with follow-up. is to just Nathan more want nice XXXX one preferred And XXXX because comfortable is feel as cost that, Okay. your alluded feel the parts to ratio. I then pays last just have impacting you payout savings ratio you moving obviously with for least the

Robert Lane

is and focused they We are spend something time well. that’s comfortable that, Broad with and very on tightly on as our that very

we feel comfortable do So there.

Carter Driscoll

Okay. be big in me stock IPPs opportunity it Stanley, the envision the it sheets broached, engagement expansion there the maybe been past guys opportunistic book some international obviously change other was your seeing all And prices maybe aforementioned? Morgan characterized coming over to a like and looking those of the the you much strategy, or engagement an be depressed then like room just in business you you and your give an to of with question lastly years, just buy to engagement how to could facilitate just is what maybe idea or balance several with are parties have

Robert Lane

both Yes, the price Carter, as recently and as months the management of such does Morgan assist believe We’ve And us. to and some the business. engaged stock we’ve engaged we that underlying Stanley I management think mean, earlier said Board had reflect not interest I have I current them. several the over just value last the

will we as but do time, be this at report to else becomes available. anything happy information have don’t so, really to So

Carter Driscoll

you. in gentlemen. answering appreciate questions, back Thank get the queue I my Okay, I’ll

Robert Lane

Thank you.

Operator

Janney. Mike next line comes with Gyure Our of the question from

Your open. is line

Mike Gyure

I maybe get on I you could was wondering to and Yes, about everyday guess, New your it I thinking York your the guys get us an questions if give kind I perspective? And what’s environment, of regulatory update there? and just maybe guess,

Nathan Kroeker

of Mike. really XXXX, said adapt process negotiations I do this the anticipate the and audience them. group say enter settling governor’s requirements of be and other am Sure I and anything to hasn’t set has I sort there to out are some dollars. When plays with rule anticipate with continue the to we’ll we in Really large sometime the trying the York we the potential settlement, what early sort other years office. not by the into New disclosure settlement, our on want with we’ll of don’t we’ll to business. operate in view continue the about summer, point, And two year, changes able we end of or this or on talking any work markets with until commission, a that of to things with changed and are court other familiar they rule At and maybe from an commission retailers, our get to get it, changes,

highlight in other grow in both to The to other and growing markets, New and we’ve we XX% overall business about other of with top geographies. and expand would on is as that continued our thing focus bottom-line, I is -- continue York, only today

years where of we issue. been So, for that we’re on kind have two

Mike Gyure

same, just far Okay, what with thinking XXXX, looking great. maybe more, are maybe XXXX, at you as are there? for one you as acquisition costs. customer view on directionally compared it And as what then you if I the more spending guess

Nathan Kroeker

So areas will part channels. of to acquisitions we as amount a X% behind is On savings, do of end on of two that and the CAC think we were the costs is adds customers big us terms focused of on there’s the sales earnout. internal near by highlight more cost this reducing realize large And integrate spend to earnout pools basis, reduced down. of year-over-year to the consolidated certain get dollars. for we the as Verde’s very we adding these costs been get in costs I us, can Those have significantly of down drive the Major we initiatives the customer one one that and is think I now

that dollars consistent. So go customer XXXX you I adds number but the will tell of CAC our are underlying view, the down,

Mike Gyure

Great, much. thanks very

Operator

not I And questions Instructions] time. further any showing [Operator this at

Nathan Kroeker

All right.

today's thanks talking want and soon. call Just for everybody in we to to say to again to forward look participating you

Operator

conclude program. the Ladies and gentlemen, this does

now a You have disconnect. may day. great Everyone

Via Renewables (VIASP) 9 Mar 182017 Q4 Earnings call transcript