SPKE - Earnings call transcript Q3 2018

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Operator

Good morning, ladies and gentlemen. Welcome to the Spark Energy, Inc.

Third Quarter 2018 Earnings Conference Call. My name is Ashley, and I will be your operator for today. At this time, all participants are in a listen-only mode. a and conduct at will will time. that we question-and-answer instructions session follow Later, a conference posted reminder, for As Instructions] [Operator this and Inc's call Energy, replay is this will Spark be on website. purposes, recorded being would to over this Mr. like turn I now conference to with Energy, Spark Hettick Christian Inc. Please ahead. go

Christian Hettick

events Energy, find via morning's forward-looking With believe presentations you, based being call website and assumptions our expectations, performance date. Thank concerning Spark broadcast statements risks statements. Good Robert and on webcast, XXXX our Lane. Vice Please materially Relations quarter operating uncertainties, live be note our President differ to Management subject statements and management and and financial economic to morning, conditions. Nathan third that Ashley. these also as CEO, which us number which that actual may on is is can may statements you earnings the today's to and of Investor Kroeker; of results we future and the and welcome Inc.'s call. from in projections, a discussion President today reasonable accurate CFO, This and our section sparkenergy.com. forward-looking this are regarding make are from and These at contains

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

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

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

Nathan Kroeker

our of contributed in Earlier drivers compared and there year, summer. Christian. this you, respectively, analysts EBITDA look, providing shareholders to line retail year. the power events brief by call. and today's X this a begin quarter Lane, in questions margin results weather that against insurance Robert want Thank of any $XX.X gross the to are will $XX.X summary from with for CFO, the we retail provide over the our third of XXXX. quarter, I lower quarter. reported welcome last close to the third we and Texas of for details gross adverse we'll more our million to closer I'll margin additional third the million, $XX.X million analysts. then that, performance provide opening purchased million, in a before Taking and $XX.X financials, on In to the some our remarks After earnings adjusted

still mitigate capacity increased place in experiencing as last in first we mentioned addition, along calls the have with put costs of we to England. New in weather, year, other the cold In winter's we this residual extreme on are hedges the the effects quarter

item. been third G&A improved and EBITDA XX% margins we contingent and liabilities, see historical our quarter unit XXXX As would adjusted year-over-year one mix have that returning more a by these from actually reduction customer our revaluation towards hedges the mass-market for roll of off onetime levels. customers, for Absent our as to the without higher shifts XX% of

by portfolio. the winter's the expect customer C&I the as portion impact of hedges to we of the manage end year, our decrease continue that last fiscal low-margin spring impacts forward, contracts and off to of Looking the roll this by we from to

done the $XX job were range of business, that savings driving has not exceed out announce year-end our done. expect run $XX yesterday's We expect excellent we're an team by and million generate now to but to rate in savings. cost we to costs very Our G&A of of release targeted pleased between We XXXX. million

value book, best way and discussed And to over utilizing turn the operations we've our streamlining we my calls, his I opportunistic that, core to mass-market complemented prior on channels, acquisitions. sales As long-term customer concludes organic to financial is will That by shareholders to on the remarks. our with Rob call for focusing believe review. deliver continue our prepared now

Robert Lane

$XX.X Good retail a you, G&A million unit credit, million In In million. million we year. declined by million $XX.X third Total but the expenses last quarter, $XX.X from margin Thank Nathan. retail G&A a increased last adjusted and compared were as which, was In segment, increasing versus $X.X of third gross compared morning. absent the margin $XX.X gross achieved strategies overall of a our market offset $X.X the our of segment we million to for lower This EBITDA as partially prior million by gross $XX.X last with result year. higher relatively the million year, book quarter quarter XX%. hedging in year's $XX.X year-over-year of earlier. Volumes segment, million last million that $X.X third lower as were retail slight was quarter $XX.X the than as as a proportion actually result Again, million, expenses $X.X was last a compared to quarter commercial flat year quarter. in natural third of included was of decrease margins G&A margins. third year's volumes, well gas mentioned quarter the the last in electricity were decrease our year. of margin movements

reduce cost commercial savings. in progress the annualized as in result count $XX we RCE XXX,XXX and a RCEs, and third As to second down from quarter. was acquisitions, compared to growth quarter made year the Total have X.X% G&A to prior of exceed discussed, and the Nathan X.X% million this up expect year excellent expenses

year, Our attrition from brand increased the compared up ago for a X.X% Interest of tax due flat taxable quarter a in increase as $X.X compared million. quarter expense prior million expense as in slightly our roughly last was million at the was consolidations. Income to to income. for the year result the $X.X X%, to primarily $X.X to year

contracts. by had hedges million accounting diluted margins a $XX.X year. in The place net compared to gain of we driven fully million of to mark-to-market associated per income for income net mark-to-market increase primarily the the non-cash share Our in diluted our $X.X to $XX.X a $XX.X share income is ago. with prior retail lock quarter in on million compared or or $X.XX $X.XX the fully net year We per was million put

the a reminded on we XX, fixed-price Class our we've paid we dividend to on And preferred investors Series As our past, XX, dividend our contracts. quarterly October the on receive not stock. On on quarterly the actual in A do stock. September cash non-cash movements expect paid common affect mark-to-market we A a

on preferred will we share pay December announced, share dividend and stock of per XX, stock of previously our dividend $X.XXXXX XX. per on As $X.XXXXX common January

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

Nathan Kroeker

One Rob. for turn note strategy quick winter Thanks, on over we the questions. before our call

snap extreme like We the cold are we buying event approaching summer, this an in much downside protection length of last last experienced additional like winter approached year. to provide we

safety just forward in Our maximize value goal EBITDA the confident the for keep hedged With growth that in is right questions. I adjusted net next looking with we're year. case. for delivering and year-over-year strategies We're added to line the to that, open will is up book now we're this shareholders, implementing fully to Operator?

Operator

Carter question first Riley our with from B. And comes Driscoll of Instructions] [Operator you. the FBR. line Thank

Your now open. line is

Carter Driscoll

of Just on First I end this fully parts economic about one plans proactive impact go-forward already that those severe the was XX% of your and your effects the year, really your earlier baked talk context your cost hedges trying Or is, one? have achievement achieved basis to trying to this to anticipate targets? savings mean, implementing operational could different in the could as in into weather book? down had moving the you off a on context savings or to year maybe you of get basis, of operational higher you a potentially of a that hedge you quantify into the the approach ward drill well. of a that sense the go-forward

Nathan Kroeker

Carter, question. Yes. good

this case, option item. the I that and in we're actually think separate of out our premiums, some the savings in is hedges, options, gross The items. G&A X all so a about money all are talking margin. incremental in call line line The cost it's G&A of it's cost

Carter Driscoll

Got it.

Okay.

overlapping. will it none So of be

think first a be had available? nice from similar grow, than down you XQ expectations Are book people's in latter sense smaller to begin inorganically, Are those get the accretive to seem coming 'XX. Can of or impact had of there talk books the they size? types other books of valuation You types other about in I Are pickup, to M&A? again, less were part where of they part 'XX? been first. a the they to in That of of Trying past. 'XX opportunities or should

Nathan Kroeker

our that of different to seen a as of M&A And seeing us deal upwards perspective, We're purchase, most did. see, I the we customers. that book we've months, half kind need last other thoughts. than say, a look of doesn't dozen in we we would all size the at value couple of meaning number bring opportunities, So it the few a lot, from everything a the to similar of

think per-customer customer it and looking acquisition next it's model's blank the mix basis. It's we flow produce going significantly years. of book discounted that. doing the on map us perfect sheet right if in good us, to So in a we're if bought over it a the produce, deal, of could it's On less can markets, value this look as to the base, that model than we several I like got it's for what what discount it's mature is buy telling a and to the particular I us and significant all had telling it the cash a checks we boxes. acquisitions paper just DCF variable out fixed at at for And a

Carter Driscoll

me, the remind just of that rough is split electric/natural book? gas And

Nathan Kroeker

all virtually It's electricity.

Carter Driscoll

All electricity.

in really balance to trying are it side a to gas. to mean, gas to to, book? most acquisitions natural plans I recent you there side that unit do on natural margins better move it that with thoughts plans the decision more direction? Are than conscious get gas? side. of leveraging any electricity of Your Is there to Are more the Okay. the And add natural

Nathan Kroeker

organically, Yes. to that's like lot We larger high lower customer the past, But again. tell I of we're becoming gas will that well actively now. again a marketing XX% will some with that our book of obviously we become the a been see portfolio gas-only our both recent In all in XX%. you and dual-fuel would going it's markets, of in overall forward. of gas utilities as in result portion acquisitions, as the believe as as

Carter Driscoll

the of of past, Is Maybe way a maybe from correct? about the end, is the couple you next you or of the some quantify correctly, if I off, both? clarifications. And any Okay. that rolling the if effects either there till for talked issues by to of so, year. hedges so of year spring heard book magnitude Texas not There's but

Nathan Kroeker

in clarify were all So The me behind 'XX, July, August, did September that's hedges of Texas we let first. us.

a on ended have mirror. hedges in back selling that piece from lot and so Didn't the mitigate hedges some The spikes. to order loss of additional up in basically price where that portfolio piece continued on customer The of from length protect That's our in have here renewing into us at those the of concentration a through to and shift but going England. C&I higher to you're end still those into referencing customers. so the And effect at of to spikes, ends And quarter, all 'XX. taking in all is 'XX of XX those small carries put you're customers less a a December January that's of calendar exposure we're December fourth not in collateral that price lot back bought New the rearview 'XX. carryover mass-market going third the profitable continue see we strip is that we Piece it.

Carter Driscoll

it and but And gas-only That's update plans, some markets, Japanese some you then talked there any a still of success focused right very you is market. is on Is fairly for organic one but are consciously market, after some I market Okay. Excellent. growth, pattern? reinvigorating promising more now. you I if a it's Trying a about fully. glacial-moving have it, in going helpful. opportunity Any had mean, have large forays holding very it you there? the mean, well. be on to internationally to deregulates the realize as I kind see Seems you

Nathan Kroeker

customers I there partner our over over grow there's products. with business in working new XXX,XXX upwards currently just mean, today. of Yes, our forward continues no there. to to now that market right We're market. is We're The challenge develop

supply, in exposed supply bilateral our anything to but to So market. we've agreements, addition got day-ahead we're bilateral the

than that's its market. we some North costs to in focus can of stages. sure before really where double those any on make But different we that So new early pass trying was that through we're and on development not America product down

it, figure market selection out need to get think So forward very and product encouraged I'm we to side. by robust more on we diverse retail but how a I

Carter Driscoll

difference is you magnitude particular of be a a to what just brand has be And a up between you to me trying a talk brand had can acquiring book maybe I back, mean, the versus the about the it of about in willing you if willing you'd brand? you'd brand, one then pay value? X-turn think pay value. X-turn Just last to when going think what book a get buying a versus you if sense think one a or just is, for

Nathan Kroeker

Yes.

we've basis. channels. look pay really the If something on what been When sales we've you we've multiple concentrated deals you kind we bought it a purchase synergies, an And those they've less just definitely at products been done, I of of at look markets than customers new books, DCF at the book or before we multiple Any buying or of historically, buying turns. around customers. that below new justifies think all all new X price. if look I'll I'm a X buy probably turns for don't EBITDA EBITDA and

thinking I'm in of the not same So that way.

Operator

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

Your now open. line is

Mike Gyure

customers, little bit guess, talk spent on bit It more I can customer you your guys you acquisitions can versus a Yes, talk guess, costs, little And quarter? going you looks forward? maybe expectation about, focused acquisition this how I you're much that? developing but like a about

Nathan Kroeker

run early manage mean, in we while did I of into the for challenges on channels We, to order takes to of you dollars that. Yes. in that when back winter, the one and cash time. we back as things period last know, year, was to the that a cut a these through do needed We It up. conserve CAC ramp to

we're the back-end but If that to in the next forward. going you where as up sales and ramping heavily see maintaining quarter, And the over quarter growing million channels we're our channels. mass-market spent third quarter, all up $X.X third expectation of we toward book couple those the point that weighted the to ramp we that organic the was third continue our is quarters of

Mike Gyure

maybe then on And financing liquidity. and

financing your somewhere is book versus And acquisition? saw I XX,XXX with talk you what liquidity guess, of the your think kind expectation feel can the customers kind for I that debt. year? year of your this But you winter, of into I last how about, financing

Nathan Kroeker

said just being a the because in The hedged, doesn't have we're additional last collateral we the to a year We've the balance effects implications we plus insurance this steps we a we physical. So deal. several sheet form terms had steps having of option. any we've then we've did ago book in fully down of shift the We that, we And year. taken much call we financial as of of balanced the taken out portfolio of financial does. saw out-of-the-money preferred on take that raise from primarily year. One, that to physical, have and that just done sheet. for than the additional paid I in But have next didn't our, stronger we've for out that balance debt cash got, to hedges the obviously, earlier the earlier, winter, financial mitigate going

significantly than of year. last I feel we in better it's December were like how So positioned

Mike Gyure

then on And maybe lastly Great. attrition. the

okay the and like it of bit of think a attrition for some to the your that sounds sort attrition some I you you're expectation can increasing as of with talk you But of mass-market little sort rate intentionally the residential forward? going from rate move products. about

Nathan Kroeker

relationships. where customer little between and And our to believe returns Yes, we're if be we number trade-off is fluctuate attrition. low We unit bit. is a pull going maximize attrition higher We the activity, around on comes to on sales that tend slightly of we our number long-term X%. Xs. back a and view activity. is It's more organic continues value lifetime X% to have But the margins view that down when sales long-term in

Operator

gentlemen, session. you. Kroeker remarks. turn back like and closing I Thank concludes the Q&A would call now Ladies today's this to for any Nathan over to

Nathan Kroeker

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

Operator

program, for Ladies and you in all day. a conclude wonderful This may conference. gentlemen, does disconnect. thank and today's have Everyone, you today's participating

Via Renewables (VIASP) 5 Nov 182018 Q3 Earnings call transcript