SPKE - Earnings call transcript Q4 2018

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Operator

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

Christian Hettick

which based located contain Spark management Robert to that call via can With our urge section assumptions to being Harbor statements except This as quarter CFO, at law. reasonable review obligation on website in release, CEO, forward-looking is broadcast we that Investor discussion be offuture are sparkenergy.com. be today's Nathan factors SEC as of result results required a Safe by you and our risk which today earnings our Welcome as believe no note, Actual webcast fourth our also to Lane. date. filings. Energy's from statements Please as update XXXX may us the of may Relations the undertake is events, in well statement earnings the everyone these call. this in today's differ Kroeker; as materially.We to We

addition, GAAP will non-GAAP financial measures. In to and refer both we

CEO. over our Nathan information that, reconciliations directly most I'll the release. please measures the today's GAAP financial measures, turn call For to comparable refer our With and Kroeker, to non-GAAP regarding earnings to

Nathan Kroeker

Last details Thank more summarize on you I'm CFO, our then was and everybody before and here year earnings full results, transformational provide going today's financials our close call. and welcome to to year quarter at our Q&A. with fourth Rob will Spark. we Lane,

growth business our and profitable in down brands, up sheet shoring on more have driving and We beyond. and made the positioning our progress acquisitions, XXXX consolidating platforms integrating our tremendous costs, balance for

organization. our off. refocusing business hedges elevated the finally last prices savings January our footprint, to significant on reducing key and the extreme addition, put rolled across of on our had weather risk, In our simplifying we brand operating delivering achieved for dramatically G&A including the and objectives year year have all full We at mass-market

three an tuck-in executed through fully and already had EBITDA. also acquisitions integrated impact positive adjusted We immediate are that our

we EBITDA of margins take all dive years. exposure We've our they our hedged significantly result take adjusted weather associated But unit portfolio events. the and expect over these increased and to reduce accomplishments the As for these moment what increase deeper a collateral a a moves, future. physical portion with mean into the next order to two in to to of

from risk stable In added and we protection We using physical and earnings as more addition, these New winter length believe protections. been and far extreme a call profile outweigh summer reduced of have benefits options England of weather. the ERCOT insurance the cost

While I'll no may I'm cold Bomb we that some you effects say winter, very another this to will first start XXXX's our be a that expect we quarter winter's that of very good proud and from Cyclone had we this heard have to extreme suffered year.

to consolidation our simplifying office committed through we and brands, footprint which also streamlining We and systems of done our locations. billing have the

$XX reductions over XX% consolidated of system instances; savings our four brands billing associated achieving locations, our are to-date. We us have began million the half all the by we've have of also with in G&A X that year already and that office resulted best are We along end the reduced business into locations in has with way X forward. by going on We've to aligning around brands XXXX. done number headcount eliminated redundant our of this and targeted X XX we our

free significant to for turn that, adjusted believe over to will our review. internal cash we business call I'll EBITDA with our growth return shareholders. realize are Rob flow As initiatives into streamline we synergies and to the help and and solidly to the in XXXX, move place, his us And financial in

Robert Lane

$XX.X year was was the The primary million, EBITDA to Bomb to compared for adjusted gross achieved Cyclone margin $XXX.X margins, $XX.X both to believed we $XXX.X $XX.X cost quarter, our saving we liquidity million. end to million EBITDA that retail customers A G&A this company's year's fourth decreased contributing was aggressively for New C&I quarter $XX.X adjusted Thanks increased should remedied. that power reverse trend we been expect full to of roll-off costs decrease an margin the the percentage and last margin compared compared are Retail unit factors that unit at lower a retail to saw million $XXX.X XXXX, quarterly gross the quarter million, attributable, million. we In year margins in decrease the significant morning. XXXX. primarily electric and million with fourth we capacity $XX.X the to position have included Good expect last beginning Full larger in million at year-over-year Nathan. non-renewing, to compared while initiatives, you, was of a of in in due The to we England year. that of decrease gross this May. Thank continue XXXX year.

Our to to-date. $XX.X dropping by this $XX.X have we $XX quarter largely from operating expenses million; synergies of million is rate fourth the improved achieved over year-over-year, run million due XX% to

on in an expenses We year-over-year improvement of have realized normalized our G&A a nearly basis. XX%

$XX by partially a end XXXX continued in CAC non-renewing our RCEs our see some over as result fully well reducing we our proactively acquisitions. We rate three as of with G&A XXX,XXX run XXXX. as year profitable of the C&I realize less normalized customers, offset the of our ended savings by spend, We expect of million improvement G&A to the as

income and loss to reduction our to on outliabilities million million accretion expense expense from $X.X by year non-cash Income Meanwhile, Interest taxable due million was acquisition monthly hedging $XX.X million and prior $X.X year. the gross our of X.X%. driven earn compared primarily we -- portfolio. average decreased because in to customer margin less $XX.X year attrition $XX.X million, spend costs million on to tax XXXX fell the for on million $X.X customer For the our [indiscernible]. lower from in a a $XX.X

loss of diluted income million negatively by a share share fully $XX million affected by income for of diluted was loss loss $XX.X $XX.X while for mark-to-market for of net a fully $X.XX or Our the million $XX.X XXXX was XXXX. affected million to compared gain. mark-to-market and per was year positively $X.XX XXXX net

XX, we to As done receive non-cash experienced it the of curve does we reminded mark-to-market we on elevated in a cash the contracts. as loss fixed our XXXX, curve not that since commodity expect investors when falls, have past, is December actual the ultimately the change price

quarterly fourth and Class share April and we paid per the cash on senior liquidity paid we December be of of facility end. dividend stock year and of commitments million. share common increased had million total Series XX, we XX to we the at which by on $XX credit On have dividend On million our our January stockto on our A of announced XX stock debt XX and and of $XXX.X per respectively. million $X.XXXXX $XX $XXX to sheet, balance our on at March January full our brings liquidity preferred Looking stock Since XX $X.XXXXX preferred our end $XX our lender respectively. million, A year, net common formal total our the

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

Nathan Kroeker

and everyone they've proud of our in course We're the the margins of very returning Rob. business improve see over here to XXXX structure put last excited benefits at of we our continue our cost Thanks, Spark rationalizing year. to about normal work levels. for the to I'm as the

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

Operator

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

Carter Driscoll

significant value first on, have scenes a XXXX-XXXX; in you what done right said, lot expectations can is and much you -- bit talk depth some the margin growth in EBITDA attrition, takes? talked adjusted with you You terms the a a that So as increases, question, just for things price talking -- already puts improved lot in is little outlook you've behind preparing you about factors to expansion of more the and need place. growth, of of work to versus of like occur that your for which in about customer guys metric about

this a of Thank cost So other adjusted but You've EBITDA position trying particularly yourselves side, drive to sense to growth? be obviously year? the where on what's articulated done to you. left that aspects get that will

Robert Lane

'XX. hedges I guess, being I all will at and put had one business we've would rolled say, I the would you've a last done modeling of the margins end all that. a it always first prices that things, of of things understanding through so biggest thing out two 'XX probably year of elevated in two point expand for and is, very equal, thanks have of 'XX, this job going so the off the on forward; good -- good

book mix just $XX margins in the in our we today to to projecting of at megawatt that unit continue margins The later all hedges in existing second of us and portfolio of we're investor off, our will negative off continue so of shrink. has to C&I I C&I evolution contracts A thing order the back natural unit you'll C&I hour. the to the that was lot to the nothing XXXX. that [ph] are portfolio highlight falls our would for is, we by is, falling those zero as renewal, get which these pricing non-renewing in that appropriately pricing change the of we aggressively portion slightly see on unit load net $XX so If margins change or a see the to or middle anticipate going you What happen. with strategy, is increase margins, data that,

Carter Driscoll

don't So benign environment, that [ph] prices either, it's that's a increase need pricing I'm the to free relatively function? assuming you realize to and --

Robert Lane

sell The but changes doesn't we our retail target shift or we our on new pricing with upfront our return changes specific the strategy. margin underlying there investment. curve obviously when is commodity so in change, specific in Yes, unit a fundamental contracts no strategy

Carter Driscoll

significant context that year of talk increased weather And about XXXX just it to the is did been -- in you doesn't some just But place quantify that roll-off. of had -- correct? have hedge put then, hedges, just EBITDA, taken you and within adjusted of terms for in those reminds so expectations part full the in growth already that the account again, into is

Robert Lane

Yes.

million something New in baked and putting for England, place of fully couple portfolio. in a place similar 'XX; 'XX, spent In We is you -- dollars all doing we putting of 'XX our that of 'XX some into some for of the summer projections. go-forward all put for already of $X ERCOT. anticipate that's million in insurance November spend summer winter we So insurance

Carter Driscoll

C&I year. side, a let's relatively to XX% book or natural talking could have electricity, in mean bit gas So a margins the natural apply the to mean, flattish the rough back and of I see if attrition that of I keep going to at XX-XX just were calculation, because growth of a to those in EBITDA you're unit the least -- this book; Is my you -- you're envelope unreasonable assume? I roll-off

Robert Lane

I Like business to at storm had January that unreasonable all. the not we it's No, in back said, numbers to that historical of think 'XX. we this prior reverts [Crosstalk].

Carter Driscoll

was similar at number this acquisitions of tuck-in grow in taken you so trying can traditional one to or Yes, and XX still KLIA some I'm book on and last out what this in there to a in range business of your the once was assuming sense trailing mean, an I you're competitors you small you're of talk you're that being M&A be with X.Xx in there looking comment a what to just your think Do reasonable -- you of kind [ph] I'm your EBITDA worth reasonable could your multiple I multiple get understood. and/or few the of months could have you of you to on is thought double-digit? a seeing? has Within that terms taking weeks out that opportunities ago; target an Xx the year? demonstrate been RCEs context, you M&A additional you a whether about estimate? of kind could mind -- context looking of year? opportunities strategy obviously,

Robert Lane

I it's Yes, think north maybe definitely of Xx. Xx,

acquisition anybody in attractive previous bit is is room our believe consolidation as in industry. this says space. for the every think platform I still else's as there the We

doing deals includes everywhere, two both we're years. for profitability very business sustainable I KLIA's acquisitions. well trading return our organic think we've a the I and tuck-in good and we've tuck-in goal mean, [ph] at got growth, change a do platform our Tuck-in's kind as growth, So multi-year is like doesn't as last specifically, been three strategy on here. of that all; focused one or to to or five

to at So of it generate all our grow continuing in doesn't really and terms shareholder change value. strategy

Carter Driscoll

upon assuming mean, before need players Are I comment you imagine that interest getting bit maybe in what that think would you you consider point yours to specifically? that seeing demonstrate on you some organization would And/or some do in lot it the would that were sense after the you or on sides or would -- it think interest the you occurred, investor a I obviously of at a even depend got growth of the you make itself; something price? all range; could potentially

Nathan Kroeker

our do but see I'm not to business comment going continue say we going further interest of lot that. in to any to on a

Carter Driscoll

just cause little last to achieved you you achieve million? of qualify to consolidation you -- you of in it bit I highlighted remaining systems? -- for need [ph] the that that Is just there of XX%? maybe then, didn't in brand $XX And of still haven't had is cited of mean can try. you to you had kind I that reach all terms remaining can question left to-date that me; quantify -- anything what do, right, quantify target that have to the terms All Is

Robert Lane

all No, stuff we've finishing the just it's started. that

billing still just that have associated started. bit several systems everything to more eliminate, have finish with a that, I there is we of So cost indirect to little we

more is it's steep we'll work So change it's in really well no hard and assumptions There several of there. in be that. -- hand, months

Carter Driscoll

of And into composition effect of maybe range? we've maybe added are margin on much looking natural unit But your electricity amount that which bigger there get so customer targets on obviously back for it can performance to fair is talk has and financial type you about your one a a And the historical expect timeframe me; a because of last your gas what a side, perspective? contracts about talked base. similar on the at you've the

Robert Lane

we've fluctuated been expanding $X Yes. for bit, attractive now more unit that really much, some of we're $X in to them $X.X historically. we done we'll high contracts dekatherm We're a continuing. that years, see hasn't the be selling But several on Maybe forward. $X's gas a Gas have dekatherm. the the little mid-to-high we've $X what to margins in a than going

Carter Driscoll

territories go of acquisition along Just or either more. maybe new at into trying M&A to Any domestically? your with in new I'm betting, expecting sorry, be sense a a one which of still will you're opportunities that of kind any you're territory? tuck-in your get least existing

Nathan Kroeker

realize we all in of to today. really think M&A and market right us be. so is in projecting. for about we And the specific in not that there not we're is in that key the economies order the markets we're got that to scale; consolidation feel need We're we've a footprint growth I

Operator

like to this no Mr. Kroeker. Thank I'd time. Nathan you. turn back at over to further the have questions we And call

Nathan Kroeker

we'll call, you in next Thanks right. today's everybody for talkto and All participating quarter.

Operator

thank a program, you may disconnect. and for This does today's Everyone, day. now you the great gentlemen, participation and conference. Ladies have in conclude

Via Renewables (VIASP) 4 Mar 192018 Q4 Earnings call transcript