Form 10-Q Genie Energy Ltd. For: Jun 30
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
FOR THE QUARTERLY PERIOD ENDED
or
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b)-2 of the Exchange Act:
| Title of each Class | Trading Symbol | Name of exchange of which registered |
| Series 2012-A Preferred stock, par value $0.01 per share | GNE-PRA | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes
As of August 5, 2022, the registrant had the following shares outstanding:
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Class A common stock, $0.01 par value: |
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Class B common stock, $0.01 par value: |
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GENIE ENERGY LTD.
| i |
GENIE ENERGY LTD.
(in thousands, except per share amounts)
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June 30, |
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December 31, |
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(Unaudited) |
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(Note 1) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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| Restricted cash—short-term | |||||||
| Marketable equity securities | |
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Trade accounts receivable, net of allowance for doubtful accounts of $ |
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Inventory |
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Prepaid expenses |
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Other current assets |
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| Current assets of discontinued operations | |||||||
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Other intangibles, net |
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Deferred income tax assets, net |
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Other assets |
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Total assets |
$ |
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$ |
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Liabilities and equity |
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Current liabilities: |
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Trade accounts payable |
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Accrued expenses |
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Income taxes payable |
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Due to IDT Corporation, net |
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Other current liabilities |
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| Current liabilities of discontinued operations | |||||||
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Total current liabilities |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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Equity: |
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Genie Energy Ltd. stockholders’ equity: |
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Preferred stock, $ |
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| Series 2012-A, designated shares— |
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| Class A common stock, $ |
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| Class B common stock, $ |
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Additional paid-in capital |
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| Treasury stock, at cost, consisting of |
( |
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| Accumulated other comprehensive income | |||||||
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Retained earnings (accumulated deficit) |
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( |
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Total Genie Energy Ltd. stockholders’ equity |
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Noncontrolling interests |
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( |
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Total equity |
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Total liabilities and equity |
$ |
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$ |
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See accompanying notes to consolidated financial statements.
| 1 |
GENIE ENERGY LTD.
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2022 | 2021 | 2022 |
2021 |
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(in thousands, except per share data) |
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Revenues: |
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Electricity |
$ | $ | $ |
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$ | ||||||||||
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Natural gas |
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Other |
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Total revenues |
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Cost of revenues |
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Gross profit |
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Operating expenses and losses: |
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Selling, general and administrative (i) |
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Income (loss) from operations |
( |
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Interest income |
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Interest expense |
( |
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| Unrealized (loss) gain on marketable equity securities and investments | ( |
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| Gain on sale of subsidiary | |||||||||||||||
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Other (loss) income, net |
( |
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Income before income taxes |
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Provision for income taxes |
( |
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Net income from continuing operations |
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| Loss from discontinued operations, net of taxes | ( |
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| Net income | |||||||||||||||
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Net income (loss) attributable to noncontrolling interests |
( |
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Net income attributable to Genie Energy Ltd. |
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Dividends on preferred stock |
( |
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Net income attributable to Genie Energy Ltd. common stockholders |
$ | $ | $ | $ | |||||||||||
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| Amounts attributable to Genie Energy Ltd. common stockholders | |||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | |||||||||||
| Loss from discontinued operations | ( |
) | ( |
) | |||||||||||
| Net income attributable to Genie Energy Ltd. common stockholders | $ | $ | $ | ||||||||||||
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Earnings per share attributable to Genie Energy Ltd. common stockholders: |
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| Basic: | |||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | |||||||||||
| Loss from discontinued operations | ( |
) | ( |
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Net income attributable to Genie Energy Ltd. common stockholders |
$ | $ | $ | $ | |||||||||||
| Diluted | |||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | |||||||||||
| Loss from discontinued operations | ( |
) | ( |
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Net income attributable to Genie Energy Ltd. common stockholders |
$ | $ | $ | $ | |||||||||||
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Weighted-average number of shares used in calculation of earnings per share: |
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Basic |
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Diluted |
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Dividends declared per common share |
$ | $ | $ | $ | |||||||||||
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(i) Stock-based compensation included in selling, general and administrative expenses |
$ | $ | $ | $ | |||||||||||
See accompanying notes to consolidated financial statements.
| 2 |
GENIE ENERGY LTD.
(Unaudited)
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Three Months Ended June 30, |
Six Months Ended |
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2022 |
2021 |
2022 |
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2021 |
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(in thousands) |
(in thousands) |
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Net income |
$ | $ | $ |
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$ |
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Other comprehensive loss: |
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Foreign currency translation adjustments |
( |
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Comprehensive income |
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Comprehensive gain attributable to noncontrolling interests |
( |
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Comprehensive income attributable to Genie Energy Ltd. |
$ | $ | $ |
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$ |
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See accompanying notes to consolidated financial statements.
| 3 |
GENIE ENERGY LTD.
Genie Energy Ltd. Stockholders
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Preferred |
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Class A |
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Class B |
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Additional |
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Accumulated Other |
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Stock |
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Common Stock |
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Common Stock |
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Paid-In |
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Treasury |
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Comprehensive |
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Accumulated |
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Noncontrolling |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Stock |
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Income |
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Deficit |
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Interests |
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Equity |
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| BALANCE AT JANUARY 1, 2022 | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||
| Dividends on preferred stock ($ |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Dividends on common stock ($ |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Restricted Class B common stock purchased from employees | — | — | — | ( |
) | ( |
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| Other comprehensive income (loss) | — | — | — | ( |
) | |||||||||||||||||||||||||||||||
| Net income (loss) for three months ended March 31, 2022 | — | — | — | ( |
) | |||||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2022 | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||
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Preferred |
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Class A |
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Class B |
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Additional |
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Accumulated Other |
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Stock |
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Common Stock |
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Common Stock |
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Paid-In |
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Treasury |
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Comprehensive |
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Accumulated |
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Noncontrolling |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Stock |
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Income |
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Deficit |
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Interests |
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Equity |
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| BALANCE AT MARCH 31, 2022 | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||
| Dividends on preferred stock ($ |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Dividends on common stock ($ |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Restricted Class B common stock purchased from employees | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
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Exercise of Class B common stock warrants
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( |
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Redemption of Preferred Stock |
( |
) | ( |
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) | ||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Net income (loss) for three months ended June 30, 2022 | — | — | — | |||||||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2022 | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||
| 4 |
GENIE ENERGY LTD.
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except dividend per share) — (Continued)
Genie Energy Ltd. Stockholders
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Preferred |
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Class A |
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Class B |
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Additional |
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Accumulated Other |
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Stock |
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Common Stock |
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Common Stock |
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Paid-In |
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Treasury |
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Comprehensive |
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Accumulated |
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Noncontrolling |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Stock |
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Income |
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Deficit |
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Interests |
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Equity |
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| BALANCE AT JANUARY 1, 2021 | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||
| Dividends on preferred stock ($ |
— | — | — | ( |
) | ( |
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| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Issuance of Class B common stock to Howard Jonas |
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| Other comprehensive (loss) income | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Net loss for three months ended March 31, 2021 | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2021 | $ | $ |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||
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Preferred |
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Class A |
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Class B |
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Additional |
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Accumulated Other |
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Stock |
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Common Stock |
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Common Stock |
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Paid-In |
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Treasury |
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Comprehensive |
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Accumulated |
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Noncontrolling |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Stock |
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Income |
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Deficit |
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Interests |
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Equity |
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| BALANCE AT MARCH 31, 2021 | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||
| Dividends on preferred stock ($ |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||||||||||
| Repurchase of Class B common stock from stock purchase program |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Sale of subsidiary | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Other comprehensive (loss) income | — | — | — | |||||||||||||||||||||||||||||||||
| Net loss for three months ended June 30, 2021 | — | — | — | ( |
) | |||||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2021 | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||
| 5 |
GENIE ENERGY LTD.
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Six Months Ended |
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2022 |
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2021 |
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(in thousands) |
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Operating activities |
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Net income |
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$ |
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$ |
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| Net loss from discontinued operations, net of tax | ( |
) | ||||||
| Net income from continuing operations | ||||||||
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Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Deferred income taxes |
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Provision for doubtful accounts receivable |
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| Unrealized loss (gain) marketable equity securities and investment | ( |
) | ||||||
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Stock-based compensation |
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Equity in the net loss (income) in equity method investees |
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( |
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| Gain on sale of subsidiaries |
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( |
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Change in assets and liabilities: |
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Trade accounts receivable |
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( |
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Inventory |
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Prepaid expenses |
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( |
) |
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( |
) |
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Other current assets and other assets |
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( |
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( |
) |
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Trade accounts payable, accrued expenses and other current liabilities |
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( |
) |
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( |
) |
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Due to IDT Corporation |
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( |
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Income taxes payable |
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| Net cash provided by (used in) operating activities of continuing operations | ( |
) | ||||||
| Net cash used in discontinued operations | ( |
) | ||||||
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Net cash provided by (used in) operating activities |
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( |
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Investing activities |
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Capital expenditures |
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( |
) |
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( |
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| Proceeds from the sale of subsidiary, net of cash disposed | ||||||||
| Investment in notes receivables with related party | ( |
) | ||||||
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Purchase of marketable equity securities and other investment |
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( |
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( |
) |
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Repayment of notes receivable |
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| Net cash (used in) provided by investing activities of continuing operations | ( |
) | ||||||
| Net cash used in investing activities of discontinued operations | ( |
) | ||||||
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Net cash (used in) provided by investing activities |
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( |
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Financing activities |
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Dividends paid |
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( |
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( |
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Repurchases of Class B common stock from employees |
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( |
) |
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| Repurchase of Class B common stock | ( |
) | ( |
) | ||||
| Redemption of preferred stock | ( |
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Net cash used in by financing activities |
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( |
) |
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( |
) |
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Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
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( |
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( |
) |
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Net decrease in cash, cash equivalents, and restricted cash |
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( |
) |
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( |
) |
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Cash, cash equivalents, and restricted cash (including discontinued operations) at beginning of period |
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| Cash, cash equivalents and restricted cash (including discontinued operations) at end of the period | ||||||||
| Less: Cash of discontinued operations at end of period | ||||||||
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Cash, cash equivalents, and restricted cash (excluding discontinued operations) at end of period |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
| 6 |
Note 1—Basis of Presentation and Business Changes and Development
The accompanying unaudited consolidated financial statements of Genie Energy Ltd. and its subsidiaries (the “Company” or “Genie”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The balance sheet at December 31, 2021 has been derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission (the “SEC”).
The Company owns
GRE owns and operates retail energy providers (“REPs”), including IDT Energy, Inc. (“IDT Energy”), Residents Energy, Inc. (“Residents Energy”), Town Square Energy, LLC and Town Square Energy East, LLC (collectively, "TSE"), Southern Federal Power LLC ("Southern Federal") and Mirabito Natural Gas, LLC (“Mirabito”). GRE's REP businesses resell electricity and natural gas to residential and small business customers primarily in the Eastern and Midwestern United States and Texas.
GRE International holds the Company's
Genie Renewables consists of Genie Solar Energy ("Genie Solar"), a rooftop solar system sales and general contracting company, a
Discontinued Operations in United Kingdom
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 market. In October 2021, as part of the orderly exit process from the United Kingdom market, Orbit and Shell U.K. Limited ("Shell") agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell.
Following the termination of the contract with Shell, Orbit filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered the current customers to be transferred to “supplier of last resort” and transferred the administration of Orbit to Administrators effective December 1, 2021. All of the customers of Orbit were transferred to a third-party supplier effective December 1, 2021 as ordered by the Court. All assets and liabilities of Orbit, including cash and receivables remain with Orbit, in which Genie retains
| 7 |
The Company determined that the discontinued operations in the United Kingdom represented a strategic shift that will have a major effect on the Company's operations and financial statements. Since the appointment of the Administrators, the Company has accounted for these businesses as discontinued operations and accordingly, has presented the results of operations and related cash flows as discontinued operations. The results of operations and related cash flows are presented as discontinued operations for all periods presented. Any remaining assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of June 30, 2022 and December 31, 2021. Since the Company lost control of the management of Orbit in favor of the Administrators, the accounts of Orbit were deconsolidated effective December 1, 2021 and the Company estimated the remaining liability related to its ownership of Orbit.
Energy Price Volatility in Texas and Japan
In January 2021, weather volatility and the lack of adequate gas reserves significantly increased the price of energy at Japan Electric Power Exchange ("JEPX") for an extended period of time. The spike in demand associated with this situation, exposed Genie Japan to unexpected cost increases. Genie Japan incurred approximately $
In February of 2021, the State of Texas experienced unprecedented cold weather and snow, with was named Winter Storm Uri. With the grid overtaxed due to demand and weather-related reduced supply and rolling blackouts being enforced, by order of the Electricity Reliability Council of Texas ("ERCOT"), real-time commodity prices during the crisis escalated significantly. Although GRE's commitment for their customers in Texas was hedged for foreseen winter weather conditions, the market conditions exposed the Company to significant unexpected cost increases. GRE recognized approximately $
In June 2021, the state legislature of the State of Texas passed House Bill 4492 (“HB 4492”) which includes certain provisions for financing certain costs associated with electric markets caused by Winter Storm Uri. Pursuant to HB 4492, two categories of charges associated with Winter Storm Uri are to be securitized and the proceeds of the securitization will be provided to the load serving entities who originally incurred the charges. Under HB 4492, the Company is entitled to recover a portion of the costs incurred from the effect of Winter Storm Uri with a calculated range of $
In September 2021, the Public Utility Commission of Texas ("PUC") approved the Debt Obligation Order to grant ERCOT's application for a debt financing mechanism to pay for certain costs associated with Winter Storm Uri. Under the Debt Obligation Order, the amount that the Company is entitled to recover increased to approximately $
Seasonality and Weather
The weather and the seasons, among other things, affect GRE’s revenues. Weather conditions have a significant impact on the demand for natural gas used for heating and electricity used for heating and cooling. Typically, colder winters increase demand for natural gas and electricity, and hotter summers increase demand for electricity. Milder winters or summers have the opposite effect. Unseasonable temperatures in other periods may also impact demand levels. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately
| 8 |
Note 2—Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet and the corresponding amounts reported in the consolidated statements of cash flows:
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
| (in thousands) | ||||||||
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Restricted cash—short-term |
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents, and restricted cash |
|
$ |
|
|
|
$ |
|
|
Restricted cash—short-term includes amounts set aside in accordance with the Amended and Restated Preferred Supplier Agreement with BP Energy Company (“BP”) (see Note 18) and Credit Agreement with JPMorgan Chase (see Note 19).
Included in the cash and cash equivalents as of December 31, 2021 is cash received from Orbit Energy (see Note 5).
Note 3—Inventories
Inventories consisted of the following:
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
| (in thousands) | ||||||||
|
Natural gas |
|
$ |
|
|
|
$ |
|
|
|
Renewable credits |
|
|
|
|
|
|
||
|
Solar Panels: |
|
|
|
|
|
|||
|
Finished goods |
|
|
||||||
|
Totals |
|
$ |
|
|
|
$ |
|
|
Note 4—Revenue Recognition
Revenue from the single performance obligation to deliver a unit of electricity and/or natural gas is recognized as the customer simultaneously receives and consumes the benefit. Variable quantities in requirements contracts are considered to be options for additional goods and services because the customer has a current contractual right to choose the amount of additional distinct goods to purchase. GRE and Genie Japan (prior to its sale in May 2021) record unbilled revenues for the estimated amount customers will be billed for services rendered from the time meters were last read to the end of the respective accounting period. The unbilled revenue is estimated each month based on available per day usage data, the number of unbilled days in the period and historical trends.
Incumbent utility companies in most of the service territories in which GRE's REPs operate offer purchase of receivable, or POR programs, and GRE’s REPs participate in POR programs for a majority of their receivables. The Company estimates variable consideration related to its rebate programs using the expected value method and a portfolio approach. The Company’s estimates related to rebate programs are based on the terms of the rebate program, the customer’s historical electricity and natural gas consumption, the customer’s rate plan, and a churn factor. Taxes that are imposed on the Company’s sales and collected from customers are excluded from the transaction price.
| 9 |
Revenue from sales of solar panels are recognized at a point in time following the transfer of control of the solar panels to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For sales contracts that contain multiple performance obligations, such as the shipment or delivery of solar modules, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer, in satisfaction of the corresponding performance obligations. Revenues from sale of solar panels are included in other revenues in the consolidated statements of operations.
The Company recognizes the incremental costs of obtaining a contract with a customer as an asset if it expects the benefit of those costs to be longer than one year. The Company determined that certain sales commissions to acquire customers meet the requirements to be capitalized. For GRE, the Company applies a practical expedient to expense costs as incurred for sales commissions to acquire customers as the period would have been one year or less. Incremental customer acquisition cost of certain GRE International entities are capitalized and amortized over the range of between and months. These costs and the related amortization are recorded within sales and marketing expenses. Total capitalized customer acquisition costs to obtain customer contracts were $
Disaggregated Revenues
The following table shows the Company’s revenues disaggregated by pricing plans offered to customers:
|
|
|
Electricity |
|
|
Natural Gas |
|
|
Other |
|
|
Total |
|
||||
|
(in thousands) |
||||||||||||||||
|
Three Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Variable rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Variable rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
| Six Months Ended June 30, 2022 | ||||||||||||||||
| Fixed rate | $ | $ | $ | $ | ||||||||||||
| Variable rate |
||||||||||||||||
| Other | ||||||||||||||||
| Total | $ |
$ | $ | $ | ||||||||||||
| Six Months Ended June 30, 2021 | ||||||||||||||||
| Fixed rate | $ | $ | $ | $ | ||||||||||||
| Variable rate |
||||||||||||||||
| Other | ||||||||||||||||
| Total | $ |
$ | $ | $ | ||||||||||||
| 10 |
The following table shows the Company’s revenues disaggregated by non-commercial and commercial channels:
|
|
|
Electricity |
|
|
Natural Gas |
|
|
Other |
|
|
Total |
|
||||
| (in thousands) | ||||||||||||||||
|
Three Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Commercial Channel |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Commercial Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Commercial Channel |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Commercial Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
| Six Months Ended June 30, 2022 | ||||||||||||||||
| Non-Commercial Channel | $ | $ | $ | $ | ||||||||||||
| Commercial Channel |
||||||||||||||||
| Other |
||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Six Months Ended June 30, 2021 | ||||||||||||||||
| Non-Commercial Channel | $ | $ | $ | $ | ||||||||||||
| Commercial Channel |
||||||||||||||||
| Other | ||||||||||||||||
| Total |
$ | $ | $ | $ | ||||||||||||
Note 5—Discontinued Operations and Divestiture
United Kingdom Operations
On July 17, 2017, the Company’s subsidiary, Genie Energy UK Ltd. (“GEUK”), entered into a definitive agreement with Energy Global Investments Pty Ltd (“EGC”) to launch Shoreditch Energy Limited (“Shoreditch”), a joint venture to offer electricity and natural gas service to residential and small business customers in the U.K., under the trade name Orbit Energy. Prior to October 8, 2020, the Company owned
On October 8, 2020, the Company entered into an agreement (the “Purchase Agreement”) with EGC under which GEUK purchased EGC’s remaining interest in Shoreditch. Following the transaction, Shoreditch became a wholly-owned subsidiary of GEUK.
In the third quarter of 2021, the natural gas and energy market in the U.K. deteriorated which prompted the Company to start the process of orderly withdrawal from the U.K. market. In October 2021, as part of the orderly exit process, Orbit and Shell U.K. Limited agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell.
Following the termination of the contract with Shell, Orbit filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered the current customers to be transferred to “supplier of last resort” and transfer the administration of Orbit to Administrators effective December 1, 2021. All of the customers of Orbit were transferred to a third-party supplier effective December 1, 2021 as ordered by the Court. All assets and liabilities of the Orbit, including cash and receivables remain with Orbit and the management and control of which was transferred to Administrators. The Company expects that the administration of Orbit will be completed in 2022.
| 11 |
The Company determined that exiting operations in the United Kingdom represented a strategic shift that will have a major effect on the Company's operations and financial statements and accordingly, the results of operations and related cash flows are presented as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of June 30, 2022 and December 31, 2021.
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 summary of results of operations of the discontinued operations were as follows:
| Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | |||||||
| (in thousands) | ||||||||
|
Total revenues |
$ |
|
$ |
|
|
|||
|
Cost of revenues |
|
|
||||||
|
Gross profit |
|
|
||||||
| Selling, general and administrative expenses | ||||||||
| Net loss before taxes | ( |
) | ( |
) | ||||
| Provision for income taxes |
|
|||||||
|
Loss from discontinued operations, net of taxes |
$ | ( |
) |
|
$ |
( |
) | |
The carrying value of the Company's interest in Orbit was net investments of $
| 12 |
The following table presents a summary of cash flows of the discontinued operations for the six months ended June 30, 2021:
|
Net loss |
|
$ |
( |
) |
|
Non-cash items |
|
|
||
| Changes in assets and liabilities |
( |
) | ||
|
Cash flows used in operating activities of discontinued operations |
|
$ |
( |
) |
The assets and liabilities of Orbit were included in the GRE International segment.
Divestiture of Genie Japan
In March 2021, the Company initiated a plan to sell certain assets and liabilities of Genie Japan. In the first quarter of 2021, certain assets and liabilities of Genie Japan were reclassified as assets and liabilities held for sale and reported at lower of fair value less cost to sell and net book value.
On April 26, 2021, the Company entered into an Equity Purchase Agreement ("Purchase Agreement") with Hanhwa Q Cells Japan Co., Ltd. ("Hanhwa"), pursuant to which, the Company agreed to sell its interest in Genie Japan for ¥
The carrying values of assets and liabilities divested at May 11, 2021 which were previously classified as held for sale included the following:
|
(in thousands) |
|
|
|
|
|
Cash |
$ |
|
||
|
Trade accounts receivable |
|
|
|
|
|
Prepaid and other current assets |
|
|
|
|
|
Intangible (license) |
||||
| Other noncurrent assets | ||||
|
Accounts payables |
|
|
( |
) |
|
Accrued expenses and other current liabilities |
|
|
( |
) |
| Loan payable | ( |
) | ||
|
Cumulative translation adjustment |
|
|
( |
) |
|
Noncontrolling interest |
|
|||
| Net assets |
|
$ |
|
|
The assets and liabilities of Genie Japan were included in GRE International segment.
| 13 |
Note 6—Fair Value Measurements
The following table presents the balance of assets and liabilities measured at fair value on a recurring basis:
|
|
|
Level 1 (1) |
|
|
Level 2 (2) |
|
|
Level 3 (3) |
|
|
Total |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
| Marketable equity securities | $ | $ | $ | $ | ||||||||||||
|
Derivative contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Marketable equity securities | $ | $ | $ | $ | ||||||||||||
|
Derivative contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) –
(2) –
(3) –
The Company’s derivative contracts consist of natural gas and electricity put and call options and swaps. The underlying asset in the Company’s put and call options is a forward contract. The Company’s swaps are agreements whereby a floating (or market or spot) price is exchanged for a fixed price over a specified period.
The Company did not have any transfers of assets or liabilities between Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the six months ended June 30, 2022 and 2021.
| 14 |
Fair Value of Other Financial Instruments
The estimated fair value of the Company’s other financial instruments was determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting this data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
Restricted cash—short-term, trade receivables, due to IDT Corporation, other current assets and other current liabilities. At June 30, 2022 and December 31, 2021, the carrying amounts of these assets and liabilities approximated fair value. The fair value estimate for restricted cash—short-term was classified as Level 1. The carrying value of other current assets, due to IDT Corporation, and other current liabilities approximated fair value.
Other assets. At June 30, 2022 and December 31, 2021, other assets included notes receivable. At June 30, 2022, the carrying amount of the note receivable and loans payable approximated fair value. The fair values were estimated based on the Company’s assumptions, and were classified as Level 3 of the fair value hierarchy.
The primary non-recurring fair value estimates typically are in the context of goodwill impairment testing, which involves Level 3 inputs, and asset impairments (Note 9) which utilize Level 3 inputs.
Concentration of Credit Risks
The Company holds cash, cash equivalents, and restricted cash at several major financial institutions, which may exceed Federal Deposit Insurance Corporation insured limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings of those institutions. While the Company may be exposed to credit losses due to the nonperformance of the holders of its deposits, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition.
The following table summarizes the percentage of consolidated trade receivable by customers that equal or exceed
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
Customer A |
|
|
|
% |
|
|
|
|
na-less than
The following table summarizes the percentage of revenues by customers that equal or exceed
| Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
| 2022 |
2021 |
2022 | 2021 | |||||||||||||
|
Customer B |
% |
|
|
|
|
|||||||||||
| Customer A | ||||||||||||||||
na-less than
| 15 |
Note 7—Derivative Instruments
The primary risk managed by the Company using derivative instruments is commodity price risk, which is accounted for in accordance with Accounting Standards Codification 815 — Derivatives and Hedging. Natural gas and electricity put and call options and swaps are entered into as hedges against unfavorable fluctuations in market prices of natural gas and electricity. The Company does not apply hedge accounting to these options or swaps, therefore the changes in fair value are recorded in earnings. By using derivative instruments to mitigate exposures to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company minimizes the credit or repayment risk in derivative instruments by entering into transactions with high-quality counterparties. At June 30, 2022, GRE’s swaps and options were traded on the Intercontinental Exchange. GRE International's swaps and options were traded through counterparties.
The summarized volume of GRE’s outstanding contracts and options at June 30, 2022 was as follows (MWh – Megawatt hour and Dth – Decatherm):
|
Settlement Dates |
|
Volume |
|
|||||
|
|
|
Electricity (in MWH) |
|
|
Gas (in Dth) |
|
||
| Third quarter 2022 | ||||||||
| Fourth quarter 2022 | ||||||||
| First quarter 2023 | ||||||||
| Second quarter 2023 | ||||||||
| Third quarter 2023 | ||||||||
| Fourth quarter 2023 | ||||||||
| First quarter 2024 | ||||||||
| Second quarter 2024 | ||||||||
| Third quarter of 2024 | ||||||||
| Fourth quarter of 2024 | ||||||||
| First quarter of 2025 | ||||||||
| Second quarter of 2025 | ||||||||
| Third quarter of 2025 | ||||||||
| Fourth quarter of 2025 | ||||||||
The fair value of outstanding derivative instruments recorded in the accompanying consolidated balance sheets were as follows:
|
Asset Derivatives |
|
Balance Sheet Location |
|
June 30, |
|
|
December 31, |
|
||
|
|
|
|
|
(in thousands) |
|
|||||
|
Derivatives not designated or not qualifying as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
| Energy contracts and options1 | Other current assets | $ | $ | |||||||
| Energy contracts and options | Other assets | |||||||||
|
Total derivatives not designated or not qualifying as hedging instruments — Assets |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives |
|
Balance Sheet Location |
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
|
|
|
(in thousands) |
|
|||||
|
Derivatives not designated or not qualifying as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
| Energy contracts and options1 | Other current liabilities | $ | $ | |||||||
| Energy contracts and options | Other liabilities | |||||||||
|
Total derivatives not designated or not qualifying as hedging instruments — Liabilities |
|
|
$ |
|
|
|
$ |
|
|
|
(1)
| 16 |
The effects of derivative instruments on the consolidated statements of operations was as follows:
|
|
Amount of Gain Recognized on Derivatives |
||||||||||||||||
|
Derivatives not designated or not qualifying as |
|
Location of Gain Recognized |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
|
hedging instruments |
|
on Derivatives |
2022 | 2021 | 2022 |
|
2021 | ||||||||||
|
|
|
|
(in thousands) |
(in thousands) |
|||||||||||||
|
Energy contracts and options |
|
Cost of revenues |
$ | $ | $ | $ | |||||||||||
Note 8—Other Current Assets and Other Assets
Other current assets consisted of the following:
|
June 30, 2022 |
|
December 31, 2021 |
|
|||||
|
(in thousands) |
||||||||
|
Fair value of derivative contracts—current |
|
$ |
|
|
|
$ |
|
|
|
Receivables from the settlement of derivative contracts |
|
|
|
|
|
|
|
|
|
Other current assets |
|
|
|
|
|
|
|
|
|
Total other current assets |
|
$ |
|
|
|
$ |
|
|
Other assets consisted of the following:
|
June 30, 2022 |
|
December 31, 2021 |
|
|||||
|
(in thousands) |
||||||||
|
Fair value of derivative contracts—noncurrent |
|
$ |
|
|
|
$ |
|
|
|
Security deposits |
|
|
|
|
|
|
|
|
| Right-of-use assets, net of amortization | ||||||||
|
Other assets |
|
|
|
|
|
|
|
|
|
Total other assets |
|
$ |
|
|
|
$ |
|
|
Note 9—Goodwill and Other Intangible Assets
The table below reconciles the change in the carrying amount of goodwill for the period from January 1, 2022 to June 30, 2022:
|
|
|
GRE |
GRE International |
Genie Renewables |
Total |
|||||||||||
| (in thousands) | ||||||||||||||||
|
Balance at January 1, 2022 |
|
$ |
|
$ |
|
$ |
$ |
|
||||||||
| Cumulative translation adjustment | ( |
) | ( |
) | ||||||||||||
|
Balance at June 30, 2022 |
|
$ |
|
$ |
|
$ |
$ |
|
||||||||
| 17 |
The table below presents information on the Company’s other intangible assets:
|
|
|
Weighted Average Amortization Period |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net |
|
||||
| (in thousands) | ||||||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Patents and trademarks |
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Customer relationships |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Licenses |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
Total |
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademark |
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Customer relationships |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Licenses |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total |
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Amortization expense of intangible assets (including minimal amounts reported in cost of revenues) was $
Note 10—Accrued Expenses and Other Liabilities
Accrued expenses consisted of the following:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
|||
|
(in thousands) |
||||||||
|
Renewable energy |
|
$ |
|
|
|
$ |
|
|
|
Liability to customers related to promotions and retention incentives |
|
|
|
|
|
|
|
|
| Payroll and employee benefit | ||||||||
|
Other accrued expenses |
|
|
|
|
|
|
|
|
|
Total accrued expenses |
|
$ |
|
|
|
$ |
|
|
Other liabilities consisted of the following:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
|||
|
(in thousands) |
||||||||
|
Deferred tax liabilities |
|
$ |
|
|
$ |
|
||
|
Fair value of derivative contracts—noncurrent |
|
|
|
|
|
|
||
|
Other noncurrent liabilities |
|
|
|
|
|
|
||
|
Total other liabilities |
|
$ |
|
|
$ |
|
|
|
| 18 |
Note 11—Leases
|
|
|
June 30, 2022 |
|
December 31, 2021 |
|||
| (in thousands) | |||||||
|
ROU Assets |
$ |
|
$ | ||||
|
Current portion of operating lease liabilities |
|
||||||
| Noncurrent portion of operating lease liabilities |
|
||||||
|
Total |
|
$ |
|
|
$ | ||
| Six Months Ended June 30, | |||||||
| 2022 | 2021 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities: | (in thousands) | ||||||
|
Operating cash flows from operating activities
|
$ | $ | |||||
| ROU assets obtained in the exchange for lease liabilities | |||||||
| Operating leases | $ | $ | |||||
| (in thousands) | ||||
|
Remainder of 2022 |
|
$ |
|
|
|
2023 |
|
|||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
|
Total future lease payments |
|
|||
|
Less imputed interest |
( |
) | ||
|
Total operating lease liabilities |
|
$ |
|
|
| 19 |
Note 12—Equity
Dividend Payments
The following table summarizes the quarterly dividends paid by the Company during the six months ended June 30, 2022 (in thousands, except per share amounts):
|
Declaration Date |
|
Dividend Per Share |
|
|
Aggregate Dividend Amount |
|
|
Record Date |
|
Payment Date |
||
|
|
|
|
|
|
|
|
||||||
|
Series 2012-A Preferred Stock ("Preferred Stock") |
||||||||||||
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
| Class A Common Stock and Class B Common Stock |
||||||||||||
| $ | $ | |||||||||||
In March 2021, in light of the losses incurred from the effects of events in Texas and Japan discussed above, the Company suspended the payment of quarterly dividends on its common stock. However, in February 2022, the Company reinstated the quarterly dividends on our Class A and Class B common stock.
On December 31, 2021, the Company accrued Additional Dividends of $
In second quarter of 2022, the Company accrued Additional Dividends of $
On July 14, 2022, the Company’s Board of Directors declared a quarterly Base Dividend of $
On August 3, 2022, the Company’s Board of Directors declared a quarterly dividend of $
The Delaware General Corporation Law allows companies to declare dividends out of “Surplus,” which is calculated by deducting the par value of the company’s stock from the difference between total assets and total liabilities. The Company has elected to record dividends declared against accumulated deficit.
Stock Repurchases
On March 11, 2013, the Board of Directors of the Company approved a program for the repurchase of up to an aggregate of
As of June 30, 2022 and December 31, 2021, there were
On March 21, 2020, the Board of Directors of the Company approved a program to redeem up to $
| 20 |
On February 7, 2022, the Board of Directors of the Company authorized a program to redeem up to $
Warrants to Purchase Class B Common Stock
On June 8, 2018, the Company sold to Howard S. Jonas, the Chairman of the Company’s Board of Directors and then the holder of the controlling portion of the Company's common stock, shares of the Company’s Class B common stock and warrants to purchase an additional
In May 2022, a holder of common stock warrants exercised
As of June 30, 2022, there were outstanding
Purchase of Equity of Subsidiaries
In September 2021, the Company purchased from Howard S. Jonas, the Chairman of the Board of Directors of the Company, Michael Stein, the Chief Executive Officer of the Company, Avi Goldin, the Chief Financial Officer of the Company, certain employees and consultant an aggregate of
In October 2021, the Company purchased from Wes Perry, the Chairman of the Audit Committee of the Company's Board of Directors, a
Stock-Based Compensation
The Company’s 2011 Stock Option and Incentive Plan (as amended, the "2011 Plan") is intended to provide incentives to executives, employees, directors and consultants of the Company. Incentives available under the Plan include stock options, stock appreciation rights, limited rights, deferred stock units, and restricted stock. The 2011 Plan expired in 2021 and no new grants are to be issued thereunder, however, outstanding grants are not impacted by the expiration of the plan.
On March 8, 2021, the Board of Directors adopted the Company 2021 Stock Option and Incentive Plan (the "2021 Plan"), subject to the approval of the Company's stockholders. In May 2021, the 2021 Plan became effective and replaced the 2011 Plan. Similar to the 2011 Plan, the 2021 Plan provides incentives to executives, employees, directors and consultants of the Company. Incentives available under the 2021 Plan include stock options, stock appreciation rights, limited stock appreciation rights, deferred stock units, and restricted stock. The Plan is administered by the Compensation Committee of the Company’s Board of Directors. The maximum number of shares reserved for the grant of awards under the 2021 Plan is
In February 2022, the Company granted certain employees and members of its Board of Directors an aggregate of
As of June 30, 2022, there were approximately $
| 21 |
Note 13—Variable Interest Entity
Citizens Choice Energy, LLC (“CCE”), is a REP that resells electricity and natural gas to residential and small business customers in the State of New York. The Company does not own any interest in CCE. Since 2011, the Company has provided CCE with substantially all of the cash required to fund its operations. The Company determined that it has the power to direct the activities of CCE that most significantly impact its economic performance and it has the obligation to absorb losses of CCE that could potentially be significant to CCE on a stand-alone basis. The Company therefore determined that it is the primary beneficiary of CCE, and as a result, the Company consolidates CCE within its GRE segment. The net income or loss incurred by CCE was attributed to noncontrolling interests in the accompanying consolidated statements of operations.
The Company has an option to purchase
Net loss related to CCE and aggregate net funding provided by the Company were as follows:
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|
|||||||||||||||
|
2022 |
2021 |
2022 |
2021 |
||||||||||||||
|
(in thousands) |
(in thousands) |
||||||||||||||||
|
Net income (loss) |
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||||
|
Aggregate funding paid to (provided by) the Company, net |
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||||
Summarized combined balance sheet amounts related to CCE was as follows:
|
|
|
June 30, |
|
|
December 31, 2021 |
|
||
| (in thousands) | ||||||||
|
Assets |
|
|
|
|
|
|
||
|
Cash, cash equivalents and restricted cash |
|
$ |
|
|
|
$ |
|
|
|
Trade accounts receivable |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
Liabilities and noncontrolling interests |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
|
|
|
$ |
|
|
|
Due to IDT Energy |
|
|
|
|
|
|
|
|
|
Noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
|
Total liabilities and noncontrolling interests |
|
$ |
|
|
|
$ |
|
|
The assets of CCE may only be used to settle obligations of CCE, and may not be used for other consolidated entities. The liabilities of CCE are non-recourse to the general credit of the Company’s other consolidated entities.
| 22 |
Note 14—Income Taxes
The following table provides a summary of Company's effective tax rate:
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|
|||||||||
|
|
2022 |
2021 |
2022 |
2021 |
|
|||||||
|
Reported tax rate |
|
% |
|
% |
|
% |
|
% |
||||
The reported tax rate for the three months ended June 30, 2022 was
Note 15— Earnings Per Share
Basic earnings per share is computed by dividing net income or loss attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increases is anti-dilutive.
The weighted-average number of shares used in the calculation of basic and diluted earnings per share attributable to the Company’s common stockholders consists of the following:
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||
|
2022 |
2021 |
2022 |
2021 |
|||||||||||
|
(in thousands) |
(in thousands) |
|||||||||||||
| Basic weighted-average number of shares |
|
|
|
|
||||||||||
| Effect of dilutive securities: |
||||||||||||||
|
Stock options and warrants |
|
|
|
|
||||||||||
|
Non-vested restricted Class B common stock |
|
|
|
|
||||||||||
| Diluted weighted-average number of shares |
|
|
|
|
||||||||||
The following shares were excluded from the diluted earnings per share computations:
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||
|
2022 |
2021 |
2022 |
2021 |
|||||||||||
|
(in thousands) |
(in thousands) |
|||||||||||||
| Shares underlying options and warrants |
|
|
|
|
||||||||||
|
Non-vested deferred stock units |
|
|
|
|
||||||||||
Stock options were excluded from the diluted earnings per share computation in the three and six months ended June 30, 2022 and 2021 because the exercise prices of the stock options were greater than the average market prices of the Company's stock during the period.
Non-vested deferred stock units were excluded from the basic and diluted weighted average shares outstanding calculation because the market condition for vesting of those deferred stock units were not met as of June 30, 2022 and 2021.
| 23 |
Note 16—Related Party Transactions
On December 7, 2020, the Company invested $
The Company was formerly a subsidiary of IDT Corporation (“IDT”). On October 28, 2011, the Company was spun-off by IDT. The Company entered into various agreements with IDT prior to the spin-off including an agreement for certain services to be performed by the Company and IDT. The Company also provides specified administrative services to certain of IDT’s foreign subsidiaries. Howard Jonas is the Chairman of the Board of IDT.
The Company leases office space and parking in New Jersey from Rafael. The leases expire in April 2025.
The charges for services provided by IDT to the Company, and rent charged by Rafael, net of the charges for the services provided by the Company to IDT, are included in “Selling, general and administrative” expense in the consolidated statements of operations.
|
Three Months Ended |
Six Months Ended June 30, |
||||||||||||||
|
|
2022 |
2021 |
2022 |
2021 |
|||||||||||
|
|
(in thousands) |
(in thousands) |
|||||||||||||
|
Amount IDT charged the Company |
$ |
|
$ |
|
$ |
|
$ |
|
|||||||
|
Amount the Company charged IDT |
$ |
|
$ |
|
$ |
|
$ |
|
|||||||
|
Amount Rafael charged the Company |
$ |
|
$ |
|
$ |
|
$ |
|
|||||||
The following table presents the balance of receivables and payables to IDT and Rafael:
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
|
(in thousands) |
|
|||||
|
Due to IDT |
|
$ |
|
|
|
$ |
|
|
|
Due from IDT |
|
$ |
|
|
|
$ |
|
|
|
Due to Rafael |
|
$ |
|
|
|
$ |
|
|
On August 31, 2018, the Company extended a loan to a former employee for $
The Company obtains insurance policies from several insurance brokers, one of which is IGM Brokerage Corp. (“IGM”). IGM is owned by the mother of Howard S. Jonas and Joyce Mason, who is a Director and Corporate Secretary of the Company. Jonathan Mason, husband of Joyce Mason and brother-in-law of Howard S. Jonas, provides insurance brokerage services via IGM. Based on information the Company received from IGM, the Company believes that IGM received commissions and fees from payments made by the Company (including payments from third party brokers). The Company paid IGM a total of $
| 24 |
In September and October of 2021, the Company purchased from certain related parties interests in GRE International and GEIC (see Note 12 — Equity).
On February 21, 2022, the Company entered into a Loan and Security Agreement to extend up to
Investments in Atid 613
In September 2018, the Company divested a majority interest in Atid Drilling Ltd. in exchange for a
The Company also entered into a Shareholder Agreement with Atid 613's other shareholders to govern certain issues regarding management of the new company. Under the Shareholder Agreement, among other things, a Company subsidiary agreed to make available to Atid 613 working capital financing up to $
On August 12, 2019, the Company, together with the other shareholders of Atid 613 signed a Funding Agreement to provide aggregate loans to Atid 613 in an amount of up to NIS
| 25 |
The Company has
The Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision-maker.
The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its business segments based primarily on income (loss) from operations. There are no significant asymmetrical allocations to segments.
Operating results for the business segments of the Company were as follows:
|
(in thousands) |
|
GRE |
GRE International |
|
|
Genie Renewables |
|
|
Corporate |
|
|
Total |
|
|||||||
| Three Months Ended June 30, 2022 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Income (loss) from operations | ( |
) | ( |
) | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Provision for (benefit from) income taxes | ( |
) | ||||||||||||||||||
| Three Months Ended June 30, 2021 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Income (loss) from operations | ( |
) | ||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Provision for (benefit from) income taxes | ( |
|||||||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Income (loss) from operations | ( |
) | ( |
) | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Stock-based compensation |
|
|||||||||||||||||||
| Provision for (benefit from) income taxes |
|
( |
) | |||||||||||||||||
| Six Months Ended June 30, 2021 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Income (loss) from operations | ( |
) | ( |
) | ( |
) | ||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Provision for (benefit from) income taxes |
Total assets for the business segments of the Company were as follows:
|
(in thousands) |
|
GRE |
GRE International |
|
|
Genie Renewables |
|
|
Corporate |
|
|
Total |
|
|||||||
|
Total assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
June 30, 2022 |
|
$ |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|||
| December 31, 2021 | ||||||||||||||||||||
| 26 |
Note 18—Commitments and Contingencies
Legal Proceedings
The Company may from time to time be subject to legal proceedings that arise in the ordinary course of business. Although there can be no assurance in this regard, the Company does not expect any of those legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows or financial condition.
Refer to Note 5—Discontinued Operations and Divestiture, for discussion related to the administration of Orbit.
Agency and Regulatory Proceedings
From time to time, the Company receives inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes, and the Company responds to those inquiries or requests. The Company cannot predict whether any of those matters will lead to claims or enforcement actions or whether the Company and the regulatory parties will enter into settlements before a formal claim is made.
State of Connecticut Public Utilities Regulatory Authority
Town Square
On September 19, 2018, the State of Connecticut Public Utilities Regulatory Authority (“PURA”) commenced an investigation into Town Square following customer complaints of allegedly misleading and deceptive sales practices on the part of Town Square. The Connecticut Office of Consumer Counsel subsequently joined in the investigation. On June 17, 2020, PURA notified Town Square that it was advancing its investigation by assigning Prosecutorial staff for the purpose of investigating Town Square’s compliance with licensed electric supplier billing, marketing, and licensing requirements, and, if appropriate, facilitating settlement discussions among the parties.
Although Town Square denies any basis for those complaints and any wrongdoing on its part, in July 2021, the parties settled the dispute. Pursuant to the terms of the settlement agreement, Town Square paid $
Residents Energy
In August 2020, Residents Energy began marketing retail energy services to Connecticut. For the year ended December 31, 2021, Residents Energy's gross revenues from sales in Connecticut was $
In June 2022, the parties settled the dispute. Pursuant to the terms of the settlement agreement, Residents Energy paid $
Other Reviews or Investigations
From time to time regulators may initiate reviews, compliance checks or issue subpoenas for information as means to evaluate the Company and its subsidiaries’ compliance with applicable laws, rules, regulations and practices.
On October 25, 2019, the Office of the Attorney General of the State of Illinois ("IL AG") notified Residents Energy (by way of subpoena) that it is conducting an investigation to assess compliance with the Illinois Consumer Fraud and Deceptive Business Practices Act. The notice was issued in the form of a subpoena in the course of the foregoing. The Company, which has responded as required, has challenged the merits of the subpoena and investigation. Residents Energy denies any wrongdoing on its part. As of June 30, 2022,
| 27 |
In response to certain customers complaints, the State of Maine Public Utility Commission ("MPUC") has opened a review of the door to door marketing practices of Town Square. In connection with the review, the MPUC has requested information from Town Square demonstrating compliance in the form of an order to show cause as to why its marketing practices are in compliance and it should be permitted to continue licensed operations in Maine. In August 2021, the parties settled the dispute without any obligation for payment by Town Square. In connection with the settlement, Town Square has agreed to voluntarily refrain from door-to-door marketing activities in Maine through June 30, 2023, and to voluntarily refrain from outbound telemarketing to obtain new residential customers for a period of six months, along with certain compliance procedures. For the three and six months ended June 30, 2022, Town Square’s gross revenues from sales in Maine was $
Other Commitments
Purchase Commitments
The Company had future purchase commitments of $
|
(in thousands) |
|
|
|
|
|
Remainder of 2022 |
|
$ |
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
| 2025 | ||||
| 2026 | ||||
|
Thereafter |
|
|
|
|
|
Total payments |
|
$ |
|
|
In the three months ended June 30, 2022, the Company purchased $
Renewable Energy Credits
GRE must obtain a certain percentage or amount of its power supply from renewable energy sources in order to meet the requirements of renewable portfolio standards in the states in which it operates. This requirement may be met by obtaining renewable energy credits that provide evidence that electricity has been generated by a qualifying renewable facility or resource. At June 30, 2022, GRE had commitments to purchase renewable energy credits of $
Performance Bonds and Unused Letters of Credit
GRE has performance bonds issued through a third party for certain utility companies and for the benefit of various states in order to comply with the states’ financial requirements for REPs. At June 30, 2022, GRE had aggregate performance bonds of $
BP Energy Company Preferred Supplier Agreement
Certain of GRE’s REPs are party to an Amended and Restated Preferred Supplier Agreement with BP, which is to be in effect through November 30, 2023. Under the agreement, the REPs purchase electricity and natural gas at market rate plus a fee. The obligations to BP are secured by a first security interest in deposits or receivables from utilities in connection with their purchase of the REPs’ customer’s receivables, and in any cash deposits or letters of credit posted in connection with any collateral accounts with BP. The ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. At June 30, 2022, the Company was in compliance with such covenants. At June 30, 2022, restricted cash—short-term of $
| 28 |
Note 19—Debt
Loan with Tokyo Star Bank
On May 13, 2020,
Credit Agreement with JP Morgan Chase Bank
On December 13, 2018,
Note 20—Recently Issued Accounting Standards
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except the losses will be recognized as allowances instead of reductions in the amortized cost of the securities. In addition, an entity will have to disclose significantly more information about allowances, credit quality indicators and past due securities. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. The Company will adopt the new standard on January 1, 2023. The Company is currently evaluating the requirements of this guidance and has not yet determined the impact of its adoption on the Company's consolidated financial statements.
| 29 |
Note 21—Subsequent Events
Lumo Finland and Lumo Sweden
In July 2022, the Company initiated a plan to dispose of certain assets and liabilities of Lumo Finland and Lumo Sweden. From July 13, 2022 to July 19, 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Finland and Lumo Sweden for a gross aggregate amount of €
In July 2022, Lumo Sweden entered into a transaction to transfer, effective August 5, 2022, its customers to a third party for nominal consideration. The Company is exploring alternatives for ongoing servicing of the customers of Lumo Finland.
The aggregate net assets of Lumo Finland and Lumo Sweden was $
The Company anticipates that the assets and liabilities of Lumo Finland and Lumo Sweden that are expected to be sold or disposed will be reclassified as assets and liabilities held for sale. A potential disposal would represent a strategic shift that would have a major effect on the Company’s operations and financial statements and would be accounted for as a discontinued operation upon completion of disposal in 2022. Upon completion of the disposal of the assets and liabilities of Lumo Finland and Lumo Sweden, the remaining assets and liabilities of GRE International would be combined with the corporate segment.
Redemption of Preferred Stock
In July 2022, the Company elected to exercise its right to redeem
| 30 |
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, 2021, 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, 2021. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our Annual Report on Form 10-K for the year ended December 31, 2021.
Overview
We are comprised of Genie Retail Energy ("GRE"), Genie Retail Energy International ("GRE International") 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 REP businesses resell electricity and natural gas primarily to residential and small business customers, with the majority of the customers in the Eastern and Midwestern United States and Texas.
GRE International holds the Company's interest in REPs that serve retail customers in Scandinavia. It holds 91.6% controlling interest in Lumo Energia Oyj ("Lumo Finland"), a REP serving residential customers in Finland and 97.7% interest in Lumo Energi AB ("Lumo Sweden"). GREI previously held 98.8% in Genie Japan that was sold in May 2021. GRE International also holds a 100% ownership of Orbit Energy, a REP operating in the U.K., which was discontinued in November 2021 as discussed below.
Genie Renewables holds Genie Solar Energy, a rooftop solar system sales and general contracting company, a 93.5% interest in CityCom Solar, a marketer of community solar energy solutions, Diversegy LLC ("Diversegy"), an energy broker for commercial, and a 60.0% controlling interest in Prism Solar, a solar solutions company that is engaged in U.S. manufacturing of solar panels, solar installation design and solar energy project management.
As part of our ongoing business development efforts, we seek out new opportunities, which may include complementary operations or businesses that reflect horizontal or vertical expansion from our current operations. Some of these potential opportunities are considered briefly and others are examined in further depth. In particular, we seek out acquisitions to expand the geographic scope and size of our REP businesses.
| 31 |
Discontinued Operations in United Kingdom
In 2021, the natural gas and energy market in the United Kingdom deteriorated which prompted us to suspend the spin-off and start the process of orderly withdrawal from the United Kingdom market. In October 2021, as part of the orderly exit process from the United Kingdom market, Orbit and Shell U.K. Limited ("Shell") agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell. A portion of the net cash proceeds was transferred to us (see Note 5, Discontinued Operations and Divestiture, to our financial statements included elsewhere in this Quarterly Report on Form 10-Q).
Following the termination of the contract with Shell, we filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent based on the Insolvency Act of 1986, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered that Orbit's current customers be transferred to a “supplier of last resort” and transferred the administration of Orbit to Administrators effective December 1, 2021. All of the customers of Orbit were transferred to a third-party supplier effective December 1, 2021 as ordered by the Court. All assets and liabilities of Orbit, including cash and receivables remain with Orbit, the management and control of which was transferred to Administrators.
We determined that exiting the United Kingdom represented a strategic shift that would have a major effect on our operations and accordingly, presented the results of operations and related cash flows as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of June 30, 2022 and December 31, 2021.
Lumo Finland and Lumo Sweden
In July 2022, we initiated a plan to dispose of certain assets and liabilities of Lumo Finland and Lumo Sweden. From July 13, 2022 to July 19, 2022, we entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Finland and Lumo Sweden for a gross aggregate amount of €41.1 million (equivalent to approximately $41.4 million) before fees and other costs. The sale price is expected to be settled monthly based on monthly commodity volume specified in the instruments from September 2022 to March 2025. The net book value of the instrument sold was €35.8 million (equivalent to $35.8 million) as of June 30, 2022.
In July 2022, Lumo Sweden entered into a transaction to transfer effective August 5, 2022, its customers to a third party for nominal consideration. We are exploring alternatives for ongoing servicing of the customers of Lumo Finland.
The aggregate net assets of Lumo Finland and Lumo Sweden were $39.8 million as of June 30, 2022, including the $35.8 million in net book value of derivative contracts disclosed above. The aggregate revenue of Lumo Finland and Lumo Sweden was $8.1 million and $20.7 million in the three and six months ended June 30, 2022, respectively and $6.3 million and $17.5 million in the three and six months ended June 30, 2021, respectively. The assets, liabilities and results of operations of Lumo Finland and Lumo Sweden are included in GRE International segment.
We anticipate that the assets and liabilities of Lumo Finland and Lumo Sweden that are expected to be sold or disposed will be reclassified as assets and liabilities held for sale. A potential disposal would represent a strategic shift that would have a major effect on our operations and financial statements and would be accounted for as a discontinued operation upon completion of disposal in 2022. Upon completion of the disposal of the assets and liabilities of Lumo Finland and Lumo Sweden, the remaining assets and liabilities of GRE International would be combined with the corporate segment.
Coronavirus Disease (COVID 19)
Starting in the first quarter 2020, the world and the United States experienced the unprecedented impacts of the coronavirus disease 2019 (COVID-19) pandemic.
For the year ended December 31, 2021, the impacts of COVID-19 are evident in several key aspects of our business operations and the corresponding financial impact has been mixed. Our consolidated income from operations for the three and six months ended June 30, 2022 increased by $43.9 million and $73.8 million compared to the same periods in 2021.
Our customer base is predominantly residential, so we benefited from the increased demand for electricity when customers are working from their homes. On the other hand, like other retail energy providers, we suspended our face-to-face customer acquisition programs in March 2020 as public health measures were implemented to combat COVID-19, resulting in a decrease in gross meter acquisitions and a decrease in U.S. domestic meters served. The reduction in gross meter acquisitions decreased our customer acquisition expense in the year ended December 31, 2021 and 2020 compared to the period before the pandemic.
We did not experience any significant changes in our workforce composition and were able to implement our business continuity plans with no significant impact to our ability to maintain our operations. We continue to maintain strong physical and cybersecurity measures in order to both serve our operational needs with a remote workforce and to ensure that we continue to provide services to our customers. We face challenges due to the need to operate with a remote workforce and are continuing to address those challenges so as to minimize the impact on our ability to operate.
Beginning in 2021, public health restrictions were eased in most of our markets which has allowed us to resume face-to-face sales and marketing. We believe that the impact of public health restrictions on our meter acquisition efforts has dissipated, however, any reversal of the easing of restrictions would impact that situation.
There are many uncertainties regarding the impacts of the COVID-19 pandemic, and we are closely monitoring those impacts of on all aspects of its business, including how it will impact our customers, employees, suppliers, vendors, and business partners. We are currently unable to predict the impact that COVID-19 will have on our financial position and operating results due to the complexities of the impacts and numerous uncertainties that are beyond the Company's control. We expect to continue to assess the evolving impact of COVID-19 on our business and assets and intend to make adjustments accordingly.
| 33 |
Genie Retail Energy
GRE operates REPs that resell electricity and/or natural gas to residential and small business customers in Connecticut, Delaware, Georgia, Illinois, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Florida, Texas, Rhode Island, and Washington, D.C. GRE’s revenues represented approximately 84.2% and 84.7% of our consolidated revenues in the three and six months ended June 30, 2022, respectively and 87.7% and 85.7% of our consolidated revenues in the three and six months ended June 30, 2021, respectively.
Seasonality and Weather; Climate Change
The weather and the seasons, among other things, affect GRE’s REPs' revenues. Weather conditions have a significant impact on the demand for natural gas used for heating and electricity used for heating and cooling. Typically, colder winters increase demand for natural gas and electricity, and hotter summers increase demand for electricity. Milder winters and/or summers have the opposite effects. Unseasonable temperatures in other periods may also impact demand levels. Potential changes in global climate may produce, among other possible conditions, unusual variations in temperature and weather patterns, resulting in unusual weather conditions, more intense, frequent and extreme weather events and other natural disasters. Some climatologists believe that these extreme weather events will become more common and more extreme which will have a greater impact on our operations. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately 44.5% and 47.9% of GRE’s natural gas revenues for the relevant years were generated in the first quarter of 2021 and 2020, respectively, when demand for heating was highest. Although the demand for electricity is not as seasonal as natural gas (due, in part, to usage of electricity for both heating and cooling), approximately 30.8% and 31.8% of GRE’s electricity revenues for 2021 and 2020, respectively, were generated in the third quarters of those years. GRE's REP's revenues and operating income are subject to material seasonal variations, and the interim financial results are not necessarily indicative of the estimated financial results for the full year.
In addition to the direct physical impact that climate change may have on our business, financial condition and results of operations because of the effect on pricing, demand for our offerings and/or the energy supple markets, we may also be adversely impacted by other environmental factors, including: (i) technological advances designed to promote energy efficiency and limit environmental impact; (ii) increased competition from alternative energy sources; (iii) regulatory responses aimed at decreasing greenhouse gas emissions; and (iv) litigation or regulatory actions that address the environmental impact of our energy products and services.
Winter Storm in Texas
In February of 2021, the State of Texas experienced unprecedented cold weather and snow, which was named Winter Storm Uri. With the grid overtaxed due to demand and weather-related reduced supply and rolling blackouts being enforced, by order of the Electricity Reliability Council of Texas ("ERCOT"), real-time commodity prices during the crisis escalated significantly. Although GRE's commitment for their customers in Texas was hedged for foreseen winter weather conditions, the market conditions exposed the Company to significant unexpected cost increases. In the year ended December 31, 2021, GRE recognized approximately $13.0 million in additional costs related to the situation, which were included in the cost of revenue in the consolidated statements of operation.
In June 2021, the state legislature of the State of Texas passed House Bill 4492 (“HB 4492”) which includes certain provisions for financing certain costs associated with electric markets caused by Winter Storm Uri. Pursuant to HB 4492, two categories of charges associated with Winter Storm Uri are to be securitized and the proceeds of the securitization will be provided to the load serving entities who originally incurred the charges. Under HB 4492, the Company is entitled to recover a portion of the costs incurred from the effect of Winter Storm Uri with a calculated range of $1.5 million to $2.6 million. In the second quarter of 2021, the Company recorded a reduction in cost of revenues of $1.5 million.
| 34 |
In September 2021, the Public Utility Commission of Texas ("PUC") approved the Debt Obligation Order to grant ERCOT's application for a debt financing mechanism to pay for certain costs associated with Winter Storm Uri. Under the Debt Obligation Order, the amount that the Company is entitled to recover increased to approximately $3.4 million. In the third quarter of 2021, the Company recorded an additional reduction in the cost of revenues of $1.9 million for an aggregate amount of $3.4 million for the year ended December 31, 2021. In June 2022, the Company received a $3.5 million refund related to the cost of Winter Storm Uri.
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 six months ended June 30, 2022 the associated cost was approximately 1.0% and 1.1% of GRE's revenue, respectively and approximately 1.0% for the three and six months ended June 30, 2021. At June 30, 2022, 85.0% of GRE’s net accounts receivables were under a POR program. Certain of the utility companies represent significant portions of our consolidated revenues and consolidated gross trade accounts receivable balance during certain periods, and such concentrations increase our risk associated with nonpayment by those utility companies.
The following table summarizes the percentage of consolidated trade receivable by customers that equal or exceed 10.0% of consolidated net trade receivables at June 30, 2022 and December 31, 2021 (no other single customer accounted for 10.0% or greater of our consolidated net trade receivable as of June 30, 2022 or December 31, 2021.
| June 30, 2022 | December 31, 2021 | |||||||
|
Customer A |
|
12.5 |
% |
|
|
na | ||
na-less than 10.0% of consolidated revenue in the period
The following table summarizes the percentage of revenues by customers that equal or exceed 10.0% of consolidated revenues for the three and six months ended June 30, 2022 and 2021 (no other single customer accounted for 10.0% or greater of our consolidated revenues for the three and six months ended June 30, 2022 or 2021):
| Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
| 2022 |
2021 |
2022 | 2021 | |||||||||||||
|
Customer B |
na | 13.6 | % |
na |
|
|
|
na | ||||||||
| Customer A | na | 10.2 | na | na | ||||||||||||
na-less than 10.0% of consolidated revenue in the period
Legal Proceedings
Although GRE endeavors to maintain best sales and marketing practices, such practices have been the subject of certain class action lawsuits.
See Note 18, Commitments and Contingencies, in this Quarterly Report on Form 10-Q, which is incorporated by reference.
| 35 |
Agency and Regulatory Proceedings
From time to time, the Company responds to inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes. The Company cannot predict whether any of those matters will lead to claims or enforcement actions or whether the Company and the regulatory parties will enter into settlements before a formal claim is made. See Notes 18, Commitments and Contingencies, in this Quarterly Report on Form 10-Q, which is incorporated by reference, for further detail on agency and regulatory proceedings.
State of Connecticut Public Utilities Regulatory Authority
Town Square
On September 19, 2018, the State of Connecticut Public Utilities Regulatory Authority (“PURA”) commenced an investigation into Town Square following customer complaints of allegedly misleading and deceptive sales practices on the part of Town Square. The Connecticut Office of Consumer Counsel joined in the investigation. On June 17, 2020, the PURA notified Town Square that it was advancing it’s investigation by assigning Prosecutorial ("PRO") staff for the purpose of investigating Town Square’s compliance with licensed electric supplier billing, marketing, and licensing requirements, and, if appropriate, facilitating settlement discussions among the parties.
Although Town Square denies any basis for those complaints and any wrongdoing on its part, in May 2021, the parties reached a settlement in principle, subject to finalization of a definitive settlement agreement, pursuant to which Town Square paid $0.4 million. Town Square has also volunteered to refrain, from door-to-door marketing activities in Connecticut for a period of 15 months.
As of June 30, 2022, Town Square’s Connecticut customer base represented 6.9% of GRE’s total meters served and 7.8% of the total RCEs of GRE’s customer base. For three and six months ended June 30, 2022 and 2021, Town Square’s gross revenues from sales in Connecticut were $4.4 million and $8.1 million, respectively.
An RCE represents a natural gas customer with annual consumption of 100 mmbtu or an electricity customer with annual consumption of 10 MWh. Because different customers have different rates of energy consumption, RCEs are an industry standard metric for evaluating the consumption profile of a given retail customer base.
| 36 |
Residents Energy
In August of 2020, Residents Energy began marketing retail energy services in Connecticut. For the year ended December 31, 2021 Residents Energy's gross revenues from sales in Connecticut was $0.2 million. During the fourth quarter of 2020, the enforcement division of PURA contacted Residents Energy concerning customer complaints received in connection with alleged door-to-door marketing activities in violation of various rules and regulations. On March 12, 2021, the enforcement division filed a motion against Resident Energy with the adjudicating body of PURA, seeking the assessment of $1.5 million in penalties, along with a suspension of license for eighteen months, auditing of marketing practices upon reinstatement and an invitation for settlement discussions.
In May 2021, the parties reached a settlement, pursuant to which Residents will pay $0.3 million. Residents Energy has also volunteered to withdraw from the market in Connecticut for a period of 36 months.
Critical Accounting Policies
Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our significant accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting policies are those that require the application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies include those related to revenue recognition, allowance for doubtful accounts, acquisitions, goodwill, and income taxes. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For additional discussion of our critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021.
Recently Issued Accounting Standards
Information regarding new accounting pronouncements is included in Note 20—Recently Issued Accounting Standards, to the current period’s consolidated financial statements.
Results of Operations
We evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, the income and expense line items below income (loss) from operations are only included in our discussion of the consolidated results of operations.
| 37 |
Three and Six Months Ended June 30, 2022 and Compared to Three and Six Months Ended June 30, 2021
Genie Retail Energy Segment
|
|
Three months ended June 30, |
Change |
Six months ended |
Change |
||||||||||||||||||||||||||||||
|
(amounts in thousands) |
2022 |
2021 |
$ |
% |
2022 |
2021 |
$ |
% |
||||||||||||||||||||||||||
|
Revenues: |
||||||||||||||||||||||||||||||||||
|
Electricity |
$ |
53,063 |
$ |
61,895 |
$ |
(8,832 |
) |
(14.3 |
) |
% |
$ |
112,443 |
$ |
135,282 |
$ |
(22,839 |
) |
(16.9 |
) |
% |
||||||||||||||
|
Natural gas |
10,098 |
5,082 |
5,016 |
98.7 |
34,601 |
22,362 |
12,239 |
54.7 |
||||||||||||||||||||||||||
|
Total revenues |
63,161 |
66,977 |
(3,816 |
) |
(5.7 |
) |
147,044 |
157,644 |
(10,600 |
) |
(6.7 |
) | ||||||||||||||||||||||
|
Cost of revenues |
34,159 |
48,657 |
(14,498 |
) |
(29.8 |
) |
71,459 |
124,358 |
(52,899 |
) |
(42.5 |
) | ||||||||||||||||||||||
|
Gross profit |
29,002 |
18,320 |
10,682 |
58.3 |
75,585 |
33,286 |
42,299 |
127.1 |
||||||||||||||||||||||||||
|
Selling, general and administrative expenses |
14,589 |
12,811 |
1,778 |
13.9 |
30,996 |
26,574 |
4,422 |
16.6 |
||||||||||||||||||||||||||
|
Income from operations |
$ |
14,413 |
$ |
5,509 |
$ |
8,904 |
(161.6 |
) |
% |
$ |
44,589 |
$ |
6,712 |
$ |
37,877 |
564.3 |
% |
|||||||||||||||||
Revenues. Electricity revenues decreased by 14.3% in the three months ended June 30, 2022 compared to the same period in 2021. The decrease was due to a decline in electricity consumption partially offset by an increase in the average price per kilowatt hour charged to customers in the three months ended June 30, 2022 compared to the same period in 2021. Electricity consumption by GRE’s REPs' customers decreased by 33.6% in the three months ended June 30, 2022, compared to the same period in 2021. The decrease in electricity consumption reflected a 0.8% decrease in average consumption per meter and a 33.1% decrease in the average number of meters served. The reduction in meters served was driven, in part, by our decision to pause certain customer acquisitions efforts and allow certain lower margin customers, including those acquired through municipal aggregation deals to move to other suppliers. The average rate per kilowatt hour sold increased 29.1% in the three months ended June 30, 2022 compared to the same period in 2021. The increase is due to the increase in the average wholesale price of electricity in the three months ended June 30, 2022 compared to the same period in 2021.
Electricity revenues decreased by 16.9% in the six months ended June 30, 2022 compared to the same period in 2021. The decrease was due to a decline in electricity consumption partially offset by an increase in the average price charged per kilowatt hour charged to customers in the six months ended June 30, 2022 compared to the same period in 2021. Electricity consumption by GRE’s REPs' customers decreased by 35.3% in the six months ended June 30, 2022, compared to the same period in 2021. The decrease in electricity consumption reflected a 3.1% decrease in average consumption per meter and a 33.2% decrease in the average number of meters served. As discussed above, the reduction in meters served was driven, in part, by the decision to pause certain customer acquisitions efforts and allow certain lower margin customers to move to other suppliers. The average rate per kilowatt hour sold increased 28.4% in the six months ended June 30, 2022 compared to the same period in 2021. The increase is due to the increase in the wholesale price of electricity in the six months ended June 30, 2022 compared to the same period in 2021.
GRE’s natural gas revenues increased by 98.7% in the three months ended June 30, 2022 compared to the same period in 2021. The increase in natural gas revenues in the three months ended June 30, 2022 compared to the same period in 2021 was a result of increases in natural gas consumption and in average revenue per therm sold. Natural gas consumption by GRE’s REPs’ customers increased by 57.8% in the three months ended June 30, 2022 compared to the same period in 2021, reflecting a 48.6% increase in average consumption per meter and a 6.2% increase in average meters served in the three months ended June 30, 2022 compared to the same period in 2021. The increase in average consumption per meter in the three months ended June 30, 2022 compared to the same period in 2021 was a result of entering new, natural gas-only markets during the last four quarters and enrolling relatively high average consumption natural gas meters. The average revenue per therm sold increased by 25.9% in the three months ended June 30, 2022, compared to the same period in 2021.
GRE’s natural gas revenues increased by 54.7% in the six months ended June 30, 2022 compared to the same period in 2021. The increase in natural gas revenues in the six months ended June 30, 2022 compared to the same period in 2021 was a result of increases in natural gas consumption partially offset by a decrease in average revenue per therm sold. Natural gas consumption by GRE’s REPs’ customers increased by 29.1% in the six months ended June 30, 2022 compared to the same period in 2021, reflecting a 21.9% increase in average consumption per meter and a 5.9% increase in average meters served in the six months ended June 30, 2022 compared to the same period in 2021. The average revenue per therm sold increased by 19.9% in the six months ended June 30, 2022, compared to the same period in 2021.
| 38 |
The customer base for GRE’s REPs as measured by meters served consisted of the following:
|
(in thousands) |
|
June 30, 2022 |
March 31, 2022 |
|
|
December 31, 2021 |
|
|
September 30, 2021 |
|
|
June 30, 2021 |
|
||||||
|
Meters at end of quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Electricity customers |
|
203 |
|
209 |
|
|
|
210 |
|
|
|
289 |
|
|
|
292 |
|
||
|
Natural gas customers |
|
77 |
|
77 |
|
|
|
75 |
|
|
|
72 |
|
|
|
69 |
|
||
|
Total meters |
|
280 |
|
286 |
|
|
|
285 |
|
|
|
361 |
|
|
|
361 |
|
||
Gross meter acquisitions in the three months ended June 30, 2022, were 34,000 compared to 35,000 for the same period in 2021. Gross meter acquisitions in the six months ended June 30, 2022, were 79,000 compared to 97,000 for the same period in 2021. The decrease in the gross meter acquisitions for the three and six months ended June 30, 2022 compared to the same period in 2021 was due to a “strategic pause” on certain customer acquisition channels to protect margins due to unfavorable market conditions that started in the fourth quarter 2021.
Meters served slightly decreased by 6,000 meters or 2.1% from March 31, 2022 to June 30, 2022. Meters served slightly decreased by 5,000 meters or 1.8% from December 31, 2021 to June 30, 2022. The decreases in the number of meters served at June 30, 2022 compared to March 31, 2022 and December 31, 2021 were due to a decrease in average churn during the period and the "strategic pause" on certain customer acquisition channels discussed above. GRE's REPs also returned some customers to their underlying utility in certain markets in the fourth quarter of 2021 to minimize the impact of expected higher prices on our margins. In the three months ended June 30, 2022, average monthly churn increased to 4.4% compared to 3.8% for same period in 2021. In the six months ended June 30, 2022, the average monthly churn slightly increased to 4.5% compared to 4.3% for same period in 2021.
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) |
|
June 30, 2022 |
March 31, 2022 |
|
|
December 31, 2021 |
|
|
September 30, 2021 |
|
|
June 30, 2021 |
|
||||||
|
RCEs at end of quarter: |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Electricity customers |
|
185 |
|
182 |
|
|
|
189 |
|
|
|
276 |
|
|
|
272 |
|
||
|
Natural gas customers |
|
77 |
|
78 |
|
|
|
71 |
|
|
|
60 |
|
|
|
58 |
|
||
|
Total RCEs |
|
262 |
|
260 |
|
|
|
260 |
|
|
|
336 |
|
|
|
330 |
|
||
| 39 |
RCEs decreased 20.6% at June 30, 2022 compared to June 30, 2021. The decreases are primarily due to the "strategic pause" on customer acquisitions and transfer of some customers to their underlying utilities as discussed above. RCEs slightly increased by 0.8% at June 30, 2022 compared to December 31, 2021.
Cost of Revenues and Gross Margin Percentage. GRE’s cost of revenues and gross margin percentage were as follows:
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change |
||||||||||||||||||||||||||||||
| (amounts in thousands) | 2022 | 2021 | $ | % | 2022 | 2021 | $ |
% |
|||||||||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||||||||||||
| Electricity | $ | 24,526 | $ | 45,883 | $ | (21,357 | ) | (46.5 | )% | $ | 49,723 | $ | 112,344 | $ | (62,621 | ) |
(55.7 | )% | |||||||||||||||
| Natural gas | 9,633 | 2,774 | 6,859 | 247.3 | 21,736 | 12,014 | 9,722 | 80.9 | |||||||||||||||||||||||||
| Total cost of revenues | $ | 34,159 | $ | 48,657 | $ | (14,498 | ) | (29.8 | )% | $ | 71,459 | $ | 124,358 | $ | (52,899 | ) | (42.5 | )% | |||||||||||||||
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||
| (amounts in thousands) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||
| Gross margin percentage: | |||||||||||||||||||||
| Electricity | 53.8 | % | 25.9 | % | 27.9 | % | 55.8 |
% | 17.0 | % | 38.8 |
% | |||||||||
| Natural gas | 4.6 | 45.4 | (40.8 | ) | 37.2 | 46.3 | (9.1 |
) | |||||||||||||
| Total gross margin percentage | 45.9 | % | 27.4 | % | 18.6 | % | 51.4 | % | 21.1 |
% | 30.3 |
% | |||||||||
Cost of revenues for electricity decreased in the three months ended June 30, 2022 compared to the same period in 2021 primarily because of decreases in electricity consumption by GRE’s REPs’ customers and the average unit cost of electricity. The average unit cost of electricity decreased 19.7% in the three months ended June 30, 2022 compared to the same period in 2021. A significant portion of the decrease in the average cost of electricity resulted from the favorable results of hedging activities for the three months ended June 30, 2022 compared to the same period in 2021. We recognized gains from derivative instruments of $22.2 million in the three months ended June 30, 2022 compared to $0.2 million recognized in the same period of 2021. Gross margin on electricity sales increased in the three months ended June 30, 2022 compared to the same period in 2021 because the average rate charged to customers increased while the average unit cost of electricity decreased.
Cost of revenues for electricity decreased in the six months ended June 30, 2022 compared to the same period in 2021 primarily because of decreases in electricity consumption by GRE’s REPs’ customers and the average unit cost of electricity. The average unit cost of electricity decreased 31.7% in the six months ended June 30, 2022 compared to the same period in 2021. A significant portion of the decrease in the average cost of electricity resulted from the favorable results of hedging activities for the six months ended June 30, 2022 compared to the same period in 2021 and the incremental cost incurred in the six months ended June 30, 2021 as an effect of a major winter storm in Texas as discussed above. We recognized gains from derivative instruments of $53.2 million in the six months ended June 30, 2022 compared to $3.2 million recognized in the same period of 2021. Gross margin on electricity sales increased in the six months ended June 30, 2022 compared to the same period in 2021 because the average rate charged to customers increased while the average unit cost of electricity decreased.
Cost of revenues for natural gas increased in the three months ended June 30, 2022 compared to the same period in 2021 primarily because of increases in natural gas consumption by GRE's REPs' customers and in average unit cost of natural gas. The average unit cost of natural gas increased 120.1% in the three months ended June 30, 2022 compared to the same period in 2021. Gross margin on natural gas sales decreased in the three months ended June 30, 2022 compared to the same period in 2021 because the average rate charged to customers increased less than the increase in the average unit cost of natural gas.
Cost of revenues for natural gas increased in the six months ended June 30, 2022 compared to the same period in 2021 primarily because of increases in natural gas consumption by GRE's REPs' customers and in average unit cost of natural gas. The average unit cost of natural gas increased 40.2% in the six months ended June 30, 2022 compared to the same period in 2021. Gross margin on natural gas sales decreased in the six months ended June 30, 2022 compared to the same period in 2021 because the average rate charged to customers increased less than the increase in the average unit cost of natural gas.
| 40 |
Selling, General and Administrative. The increase in selling, general and administrative expense in the three months ended June 30, 2022 compared to the same period in 2021 was primarily due to increases in marketing and customer acquisition costs and employee-related costs partially offset by a decrease in legal settlement costs. Employee-related expenses increased by $0.7 million in the three months ended June 30, 2022 compared to the same period in 2021 primarily due to an increase in accrued bonuses as a result of improved results of operations during the period. Marketing and customer acquisition expenses increased by $1.1 million in the three months ended June 30, 2022 compared to the same period in 2021 as a result of expansion of marketing activities to offset the effect of COVID-19 related to public health restrictions to traditional customer acquisition methods. As a percentage of GRE’s total revenues, selling, general and administrative expense increased from 19.1% in the three months ended June 30, 2021 to 23.1% in the three months ended June 30, 2022.
The increase in selling, general and administrative expense in the six months ended June 30, 2022 compared to the same period in 2021 was primarily due to increases in marketing and customer acquisition costs and employee-related costs partially offset by a decrease in legal settlement costs. Employee-related expenses increased by $1.8 million in the six months ended June 30, 2022 compared to the same period in 2021 primarily due to an increase in accrued bonuses as a result of improved results of operations during the period. Marketing and customer acquisition expenses increased by $3.1 million in the six months ended June 30, 2022 compared to the same period in 2021 as a result of expansion of marketing activities to offset the effect of COVID-19 related to public health restrictions to traditional customer acquisition methods. As a percentage of GRE’s total revenues, selling, general and administrative expense increased from 16.9% in the six months ended June 30, 2021 to 21.1%% in the six months ended June 30, 2022.
GRE International Segment
GRE International holds our stakes in REPs outside of North America. These businesses currently include our controlling stakes in Lumo Finland and Lumo Sweden and included Genie Japan prior to its sale in May 2021. GRE International also holds our stake in Orbit, which discontinued operations at the end of November 2021.
In January 2021, weather volatility and the lack of adequate gas reserves drove the prices on the Japan Electric Power Exchange to $2,390 per megawatt hour for an extended period of time. Although our supply commitment for our customers in Japan was hedged reasonably for expected winter weather conditions, the extreme price spike exposed us to further unexpected cost increases. The impact on our 2021 consolidated result of operations was approximately $2.5 million.
On April 26, 2021, we entered into an Equity Purchase Agreement ("Purchase Agreement") with Hanhwa Q Cells Japan Co., Ltd. ("Hanhwa"), pursuant to which, we agreed to sell our interest in Genie Japan for ¥570.0 million (equivalent to approximately $5.3 million at April 26, 2021) subject to certain terms and conditions set forth in the Purchase Agreement. On May 11, 2021, upon the terms and subject to the conditions of Purchase Agreement, we completed the divestiture of Genie Japan for an aggregate cash consideration of ¥570.0 million (equivalent to approximately $5.2 million at May 11, 2021). Hanhwa also assumed the outstanding loans payable of Genie Japan. We paid $0.6 million of commission to certain former employees of Genie Japan and recognized a pre-tax gain of $4.2 million from the divestiture. For the period from January 1, 2021 to May 11, 2021, Genie Japan had revenues and cost of revenues of $3.9 million and $5.9 million, respectively.
|
|
Three Months Ended June 30, | Change | Six Months Ended June 30, |
Change |
||||||||||||||||||||||||||||
| (amounts in thousands) | 2022 | 2021 | $ | % | 2022 |
2021 |
$ |
% |
||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||
| Electricity | $ | 7,769 | $ | 6,786 | $ | 983 | 14.5 | $ | 20,173 | $ | 21,012 |
$ | (839 | ) | (4.0 | )% | ||||||||||||||||
| Others | 317 | 272 | 45 | 16.5 | 516 | 382 |
134 |
35.1 | ||||||||||||||||||||||||
|
Total revenues |
$ | 8,086 | $ | 7,058 | $ | 1,028 | 14.6 | $ | 20,689 | $ | 21,394 |
$ | (705 |
) | (3.3 |
) | ||||||||||||||||
|
Cost of revenue |
(29,568 | ) | 5,092 | (34,660 | ) | nm | (15,400 | ) | 22,858 | (38,258 |
) | (167.4 | ) | |||||||||||||||||||
|
Gross profit (loss) |
37,654 | 1,966 | 35,688 | nm | 36,089 | (1,464 | ) | 37,553 |
nm | |||||||||||||||||||||||
|
Selling, general and administrative expenses |
1,289 | 1,821 | (532 | ) | (29.2 | ) | 2,532 |
3,940 |
(1,408 |
) | (35.7 |
) | ||||||||||||||||||||
|
Income (loss) from operations |
$ | 36,365 | $ | 145 | $ | 36,220 | nm | $ | 33,557 |
$ | (5,404 |
) | $ | 38,961 |
nm | |||||||||||||||||
nm—not meaningful
| 41 |
Meters served by GRE International's REPs slightly increased to 62,000 at June 30, 2022 from 61,000 at March 31, 2022 and decreased from 67,000 at December 31, 2021 primarily due to a “strategic pause” on customer acquisition to protect margins due to unfavorable market conditions that started in the fourth quarter 2021.
RCEs of GRE International at June 30, 2022 is relatively flat at 40,000 compared to March 31, 2022 and December 31, 2021 primarily due to the "strategic pause" as discussed above.
Revenues. GRE International's revenues increased in the three months ended June 30, 2022 compared to the same period in 2021 primarily due to an increase in the average price charged to customers of Lumo Finland and Lumo Sweden partially offset by a decrease in electricity consumption of customers of Lumo Finland and Lumo Sweden and the effect of the sale of Genie Japan in May 2021. The average price charged to customers of Lumo Finland and Lumo Sweden increased by 123.3% for the three months ended June 30, 2022 compared to the same period in 2021. The increase in the average price charged to customers in the three months ended June 30, 2022 compared to the same period in 2021 is due to a significant increase in the price of electricity in the wholesale market. Electricity consumption of customers of Lumo Finland and Lumos Sweden decreased by 26.8% for the three months ended June 30, 2022 compared to the same period in 2021. Revenues from Genie Japan were $0.8 million for the three months ended June 30, 2021.
GRE International's revenues decreased in the six months ended June 30, 2022 compared to the same period in 2021 primarily due to the sale of Genie Japan in May 2021 and a decrease in electricity consumption of customers of Lumo Finland and Lumo Sweden partially offset by the increase in the average price charged to customers of Lumo Finland and Lumo Sweden. Revenues from Genie Japan were $3.9 million for the six months ended June 30, 2021. Electricity consumption of customers of Lumo Finland and Lumos Sweden decreased by 35.2% for the six months ended June 30, 2022 compared to the same period in 2021. The average price charged to customers of Lumo Finland and Lumo Sweden increased by 133.7% for the six months ended June 30, 2022 compared to the same period in 2021. The increase in the average price charged to customers in the six months ended June 30, 2022 compared to the same period in 2021 is due to a significant increase in the price of electricity in the wholesale market.
Cost of Revenues. GRE International's cost of revenue decreased in the three months ended June 30, 2022 compared to the same period primarily due to the significant gain recognized from the settlement and change in fair values of hedge instruments held by Lumo Finland and Lumo Sweden. Gain from settlement and change in fair values of hedges of Lumo Finland and Lumo Sweden increased to $39.2 million for the three months ended June 30, 2022 from $1.5 million for the three months ended June 30, 2021. The gains are primarily due to significant volatility in the wholesale electricity market in the Nordic regions since the third quarter of 2021.
GRE International's cost of revenue decreased in the six months ended June 30, 2022 compared to the same period primarily due to the significant gain recognized from the settlement and change in fair values of hedge instruments held by Lumo Finland and Lumo Sweden and the sale of Genie Japan in May 2021. Gain from settlement and change in fair values of hedges of Lumo Finland and Lumo Sweden increased to $39.4 for the six months ended June 30, 2022 from $1.9 million for the six months ended June 30, 2021. Cost of revenue from Genie Japan was $5.9 million for the six months ended June 30, 2021.
Selling, General and Administrative Expenses. The decreases in selling, general and administrative expenses in the three and six months ended June 30, 2022 compared to the same periods in 2021 was primarily due to the sale of Genie Japan in May 2021 partially offset by an increase in employee-related cost as a result of hiring additional personnel during the period.
Genie Renewables Segment
The Genie Renewables (formerly GES) segment is composed of Genie Solar, CityCom Solar, Diversegy and Prism, in which we hold a 60.0% controlling interest.
|
|
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||
| (amounts in thousands) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | ||||||||||||||||||||||||
|
Revenues |
$ | 3,779 | $ | 2,344 | $ | 1,435 | 61.2 | $ | 5,821 | $ | 4,832 | $ | 989 | 20.5 | % | |||||||||||||||||
|
Cost of revenue |
2,961 | 1,422 | 1,539 | 108.2 | 4,480 | 2,792 | 1,688 | 60.5 | ||||||||||||||||||||||||
|
Gross profit |
818 | 922 | (104 | ) | (11.3 | ) | 1,341 | 2,040 | (699 | ) | (34.3 | ) | ||||||||||||||||||||
| Selling, general and administrative expenses | 1,335 | 588 | 747 | 127.0 | 2,338 | 1,146 | 1,192 | 104.0 | ||||||||||||||||||||||||
|
(Loss) income from operations |
$ | (517 | ) | $ | 334 | $ | 851 | (254.8 | )% | $ | (997 | ) | $ | 894 | $ | 1,891 | (211.5 | )% | ||||||||||||||
| 42 |
Revenue. Genie Renewables' revenues increased in the three and six months ended June 30, 2022 compared to the same periods in 2021. The increases in revenues were the result of increases in the activities of Genie Solar projects and commissions from selling third-party products to customers by CityCom Solar. Revenues from Diversegy include commissions, entry fees and other fees from our energy brokerage and marketing services businesses.
Cost of Revenues. Cost of revenue increased in the three and six months ended June 30, 2022 compared to the same periods in 2021. The increases in cost revenues reflects the increase in revenues of Genie Solar and CityCom Solar.
Selling, General and Administrative. Selling, general and administrative expenses increased in the three and six months ended June 30, 2022 compared to the same period in 2021 primarily due to increases in headcount in Genie Solar and Diversegy and consulting fees at Genie Solar.
Corporate
Corporate does not generate any revenues, nor does it incur any cost of revenues. Corporate costs include unallocated compensation, consulting fees, legal fees, business development expense and other corporate-related general and administrative expense.
| (amounts in thousands) | Three months ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||
| 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | ||||||||||||||||||||||||
| General and administrative expenses and loss from operations | $ | 1,785 | $ | 1,452 | $ | 333 | 22.9 | % | 4,241 | 3,130 | 1,111 | 35.5 | |||||||||||||||||||
Corporate general and administrative expenses increased in the three and six months ended June 30, 2022 compared to the same period in 2021 primarily because of increases in employee related cost and in stock-based compensation expense. As a percentage of our consolidated revenues, Corporate general and administrative expense increased to 2.4% in the three months ended June 30, 2022 from 1.9% in the three months ended June 30, 2021 and decreased to 2.4% in the six months ended June 30, 2022 from 1.7% in the six months ended June 30, 2021.
| 43 |
Consolidated
Selling, general and administrative expenses. Stock-based compensation expense included in consolidated selling, general and administrative expense was $0.7 million and $0.6 million in the three months ended June 30, 2022 and 2021, respectively and $1.6 million and $1.1 million in the six months ended June 30, 2022 and 2021, respectively. At June 30, 2022, aggregate unrecognized compensation cost related to non-vested stock-based compensation was $5.5 million. The unrecognized compensation cost is recognized over the expected service period.
The following is a discussion of our consolidated income and expense line items below income from operations:
|
Three Months ended June 30, |
Change |
Six Months ended June 30, |
Change | |||||||||||||||||||||||||||||
| (amounts in thousands) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | ||||||||||||||||||||||||
| Income from operations | $ | 48,476 | $ | 4,536 | $ | 43,940 | (968.7 | )% | $ | 72,908 | $ | (928 | ) | $ | 73,836 | nm | ||||||||||||||||
| Interest income | 48 | 10 | 38 | 380.0 | 65 | 20 |
45 |
225.0 |
||||||||||||||||||||||||
| Interest expense | (52 | ) | (103 | ) | 51 | (49.5 | ) | (102 | ) | (212 | ) | 110 | (51.9 |
) | ||||||||||||||||||
| Other income (loss), net | (372 | ) | 39 | (411 | ) | nm | (799 | ) | 7,022 | (7,821 | ) | (111.4 | ) | |||||||||||||||||||
| Unrealized gain on marketable equity securities and investments | (146 | ) | 2,915 | (3,061 | ) | nm | (869 |
) | 447 | (1,316 |
) | (294.4 | ) | |||||||||||||||||||
| Gain from sale of subsidiary | — | 4,226 | (4,226 | ) | nm | — | 4,226 | (4,226) | nm |
|||||||||||||||||||||||
| Provision for benefit from income taxes | (10,581 | ) | (3,143 | ) | (7,438 | ) | 236.7 | (17,094 | ) | (3,679 | ) | (13,415 |
) | 364.6 | ||||||||||||||||||
| Net income from continuing operations | 37,373 | 8,480 | 28,893 | 340.7 | 54,109 |
6,896 | 47,213 | 684.6 |
||||||||||||||||||||||||
| Loss from discontinued operations, net of tax | — | (3,195 | ) | 3,195 | nm | — |
(4,305 | ) | 4,305 | (100.0 |
) | |||||||||||||||||||||
| Net income | 37,373 | 5,285 | 32,088 | (607.2 | ) | 54,109 | 2,591 | 51,518 | nm | |||||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests | 2,894 | (82 | ) | 2,976 | nm | 1,741 |
(790 | ) | 2,531 |
(320.4 | ) | |||||||||||||||||||||
| Net income attributable to Genie Energy Ltd. | $ | 34,479 | $ | 5,367 | $ | 29,112 | (542.4 | )% | $ | 52,368 |
$ | 3,381 |
$ | 48,987 |
nm | |||||||||||||||||
nm—not meaningful
| 44 |
Other Income (loss), net. Other income (loss), net in the three and six months ended June 30, 2022 and 2021 consisted primarily foreign currency transactions and equity in net loss in equity method investees.
Provision for Income Taxes. The change in the reported tax rate for the three and six months ended June 30, 2022 compared to the same periods in 2021, are the result of favorable results of operations in the U.S. and GRE International and changes in the mix of jurisdiction in which taxable income was earned which was not offset by income tax benefit in some jurisdictions that had losses due to valuation allowances in those jurisdictions.
Net Income (Loss) Attributable to Noncontrolling Interests. The increase in net income attributable to noncontrolling interests in the three and six months ended June 30, 2022 compared to the same periods in 2021 was primarily due to an increase in the share of noncontrolling interest in the net income of Lumo Sweden and Lumo Finland.
Unrealized (loss) gain on Marketable Equity Securities and Investments. The unrealized (loss) gain on marketable equity securities and investment for the three and six months ended June 30, 2022 pertains to the change in fair value of the Company's investments in common stock of Rafael Holdings, Inc. ("Rafael") which the Company acquired in December 2020.
Loss (Income) from Discontinued Operations, net of tax. Income from discontinued operations, net of tax in the three and six months ended June 30, 2021 is mainly due to losses incurred from the operations of Orbit.
Liquidity and Capital Resources
General
We currently expect that our cash flow from operations and the $61.1 million balance of unrestricted cash and cash equivalents that we held at June 30, 2022 will be sufficient to meet our currently anticipated cash requirements for at least the period from July 1, 2022 to August 8, 2023.
At June 30, 2022, we had working capital (current assets less current liabilities) of $125.8 million.
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
|
|
(in thousands) |
|
|||||
|
Cash flows provided by (used in): |
|
|
|
|
|
|
||
|
Operating activities |
|
$ |
27,551 |
|
$ |
(2,048 |
) | |
|
Investing activities |
|
|
(2,229 |
) |
|
|
3,483 |
|
|
Financing activities |
|
|
(11,154 |
) |
|
|
(3,175 |
) |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (120 | ) | (54 | ) | ||||
| Increase in cash, cash equivalents and restricted cash of continuing operations | 14,048 | (1,794 | ) | |||||
| Cash flows used in discontinued operations | (49,446 | ) | (3,824 | ) | ||||
|
Net decrease in cash, cash equivalents and restricted cash |
|
$ |
(35,398 |
) |
|
$ |
(5,618 |
) |
| 45 |
Operating Activities
Cash, cash equivalents and restricted cash provided by operating activities of continuing operations was $27.6 million in the six months ended June 30, 2022 compared to net cash used in operating activities of continuing operations of $2.0 million in the six months ended June 30, 2021. The increase is primarily the result of favorable results of operations in the six months ended June 30, 2022 compared to the same period in 2021.
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 $33.2 million for the six months ended June 30, 2022, compared to the same period in 2021.
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 June 30, 2022, we were in compliance with such covenants. At June 30, 2022, restricted cash—short-term of $0.5 million and trade accounts receivable of $42.1 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $13.2 million at June 30, 2022.
We had purchase commitments of $130.9 million at June 30, 2022, of which $103.7 million was for purchases of electricity.
From time to time, we receive inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes, and we respond to those inquiries or requests. We cannot predict whether any of those matters will lead to claims or enforcement actions.
Investing Activities
Our capital expenditures were minimal in the three months ended June 30, 2022 and 2021. We currently anticipate that our total capital expenditures in the twelve months ending December 31, 2022 will be between $0.5 to $1.0 million.
In December 2020, we invested $5.0 million in Class B common stock of Rafael. Rafael, a publicly-traded company, is also a related party. In connection with the purchase, Rafael issued to us warrants to purchase an additional 43,649 shares of Rafael's Class B common stock with an exercise price of $22.91 per share. The warrants had a term expiring on June 6, 2022. We exercised the warrants in full on March 31, 2021 for a total exercise price of $1.0 million. We do not exercise significant influence over the operating or financial policies of Rafael.
In the first half of 2022, we acquired minimal interests in various ventures for an aggregate amount of investments of $0.8 million.
| 46 |
In the fourth quarter of 2021, Orbit transferred to GEIC a net amount of $49.7 million from the proceeds of the settlement of the contact with Shell which is included in cash and cash equivalents in the consolidated balance sheet as of December 31, 2021. In January 2022, we transferred $21.5 million to the Administrators of Orbit Energy to fund the settlement of the expected remaining liabilities of Orbit of $30.8 million, which were included in the current liabilities of discontinued operations in the consolidated balance sheet as of December 31, 2021. In February 2022, we deposited $28.3 million into an attorney trust account to hold, preserve, and dispense funds to the extent needed in connection with the administration process. On February 24, 2022, the Administrators filed a petition under Chapter 15 of the U.S. Bankruptcy Code with the Bankruptcy Court of the Southern District of New York seeking (i) recognition of the U.K. administration proceeding as a foreign main proceeding and the U.K. Administrators as its foreign representatives, and (ii) entrusting distribution of the funds the Company deposited into its attorney’s trust fund to the U.K. Administrators. In the second quarter of 2022, the Administrators filed an application to transfer the funds back to the Administrators’ control in the U.K. Subject to certain representations and expectations regarding use and application of the funds to efficiently and expeditiously pay off creditors and bring a timely close to the insolvency administration, we decided not to oppose the application, and the Court transferred the $28.3 million to the Administrator. We believe that the funds are more than sufficient to pay any remaining creditors of Orbit (with any surplus, which we expect to be significant, to be returned to us).
Financing Activities
In each of the six months ended June 30, 2022 and 2021, we paid aggregate quarterly Base Dividends of $0.3188 per share, $0.8 million in the aggregate, on our Series 2012-A Preferred Stock, or Preferred Stock. On April 14, 2022, our Board of Directors declared a quarterly Base Dividend of $0.1594 per share of our Preferred Stock. The dividend will be paid on or about May 16, 2022 to stockholders of record as of the close of business on May 6, 2022.
In March 2021, in light of the losses incurred from the effects of the events in Texas and Japan discussed above, the Company suspended the payment of quarterly dividends on its common stock to rebuild cash position.
On February 7, 2022, the Board of Directors reversed its earlier suspension of quarterly dividends and declared a quarterly dividend of $0.075 per share on our Class a common stock and Class B Common Stock. In the six months ended June 30, 2022, we paid an aggregate quarterly dividends of $0.150 per share to stockholders of our Class A common stock and Class B common stock. The Company paid $3.9 million in aggregate dividends on our common stock for the six months ended June 30, 2022. On August 3, 2022, our Board of Directors declared a quarterly dividend of $0.075 per share of our Class A common stock and Class B Common Stock. The dividend will be paid on or about August 26, 2022 to stockholders of record as of the close of business on August 18, 2022.
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 three and six months ended June 30, 2022, the Company acquired 639,393 Class B common stock under the stock purchase program for an aggregate amount of $4.4 million. In the three and six months ended June 30, 2021, the Company acquired 392,932 Class B common stock under the stock purchase program for an aggregate amount of $2.4 million.At June 30, 2022, 4.9 million shares of Class B common stock remained available for repurchase under the stock repurchase program.
On March 21, 2020, our Board of Directors approved a program to redeem up to $4.0 million worth of our Preferred Stock in accordance with the Certificate of Designations for the preferred stock. There were no redemptions under this program in the three and six months ended June 30, 2022 and 2021 and the program terminated.
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. On May 3, 2022, our Board of Directors authorized to redeem $2.0 million of our Preferred Stock during the second quarter of 2022. In the three and six months ended June 30, 2022, the Company redeemed 235,294 Preferred Stock under the stock purchase program for an aggregate amount of $2.0 million. The Company accrued and paid $0.1296 per share on the redeemed Preferred Stock for a minimal aggregate amount
| 47 |
On May 13, 2020, Genie Japan entered into a Loan Agreement with Tokyo Star Bank for a ¥150.0 million (equivalent to $1.4 million) short-term credit facility ("May 2020 Loan") with maturity date of November 13, 2020. On November 13, 2020, Genie Japan and Tokyo Star Bank amended the May 2020 Loan to extend the maturity date to May 13, 2021. Genie Japan provided a letter of credit issued by JPMorgan Chase in the amount of ¥150.0 million (equivalent to $1.4 million) as collateral. The outstanding principal amount incurred interest at 3.0% per annum and was payable monthly. In May 2021, the Company completed the divestiture of Genie Japan including balance of the May 2020 Loan.
On April 4, 2017, GRE, IDT Energy, and other GRE subsidiaries entered into a Credit Agreement with Vantage Commodities Financial Services II, LLC ("Vantage"), for a $20 million revolving loan facility. The borrowers consist of our subsidiaries that operate REP businesses, and those subsidiaries’ obligations are guaranteed by GRE. The borrowers have provided as collateral a security interest in their receivables, bank accounts, customer agreements, certain other material agreements and related commercial and intangible rights. The outstanding principal amount incurred interest at LIBOR plus 4.5% per annum. Interest is payable monthly, and all outstanding principal and any accrued and unpaid interest matured on April 3, 2020. In April 2020, the revolving line of credit expired and we paid outstanding balance of $3.5 million.
On December 13, 2018, we entered into a Credit Agreement with JPMorgan Chase Bank (“Credit Agreement”). On December 23, 2021, the Company entered into the third amendment of its existing Credit Agreement to extend the maturity date of December 31, 2022. The Company continues to have an aggregate principal amount of $5.0 million credit line facility (“Credit Line”). The Company pays a commitment fee of 0.1% per annum on unused portion of the Credit Line as specified in the Credit Agreement. The borrowed amounts will be in the form of letters of credit which will bear interest of 1.0% per annum. The Company will also pay a fee for each letter of credit that is issued equal to the greater of $500 or 1.0% of the original maximum available amount of the letter of credit. We agreed to deposit cash in a money market account at JPMorgan Chase Bank as collateral for the line of credit equal to $5.1 million. As of June 30, 2022, there is no issued letter of credit from the Credit Line. At June 30, 2022, the cash collateral of $5.2 million was included in restricted cash—short-term in the consolidated balance sheet.
In the six months ended June 30, 2022, we paid $0.1 million to repurchase 12,492 shares of our Class B common stock of our Class B common stock tendered by our employee and an officer to satisfy tax withholding obligations in connection with the lapsing of restrictions on awards of restricted stock. There was no repurchase from employees in the six months ended June 30, 2021. Such shares were repurchased by us based on their fair market value on the trading day immediately prior to the vesting date.
Off-Balance Sheet Arrangements
We do not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources, other than the following. GRE has performance bonds issued through a third party for the benefit of certain utility companies and for various states in order to comply with the states’ financial requirements for retail energy providers. At June 30, 2022, the Company had outstanding aggregate performance bonds of $15.5 million and minimal amount of unused letters of credit.
| 48 |
Our primary market risk exposure is the price applicable to our natural gas and electricity purchases and sales. The sales price of our natural gas and electricity is primarily driven by the prevailing market price. Hypothetically, for our GRE segment, if our gross profit per unit in the three months ended June 30, 2022 had remained the same as in the three months ended June 30, 2021, our gross profit from electricity sales would have decreased by $18.0 million and our gross profit from natural gas sales would have increased by $3.2 million in the three months ended June 30, 2022. Hypothetically, for our GRE segment, if our gross profit per unit in the six months ended June 30, 2022 had remained the same as in the six months ended June 30, 2022, our gross profit from electricity sales would have decreased by $48.0 million and our gross profit from natural gas sales would have increased by $0.5 million in the six months ended June 30, 2022.
Hypothetically, for our GRE International segment, if our gross loss per unit in the three months ended June 30, 2022 had remained the same as in the three months ended June 30, 2021, our gross loss from electricity sales would have decreased by $36.3 million in the three months ended June 30, 2022. Hypothetically, for our GRE International segment, if our gross loss per unit in the six months ended June 30, 2022 had remained the same as in the six months ended June 30, 2021, our gross loss from electricity sales would have decreased by $36.5 million in the six months ended June 30, 2022.
The energy markets have historically been very volatile, and we can reasonably expect that electricity and natural gas prices will be subject to fluctuations in the future. In an effort to reduce the effects of the volatility of the price of electricity and natural gas on our operations, we have adopted a policy of hedging electricity and natural gas prices from time to time, at relatively lower volumes, primarily through the use of put and call options and swaps. While the use of these hedging arrangements limits the downside risk of adverse price movements, it also limits future gains from favorable movements. We do not apply hedge accounting to these options or swaps, therefore the mark-to-market change in fair value is recognized in cost of revenue in our consolidated statements of operations. We recognized gains from derivative instruments of $61.8 million and $99.5 million in the three and six months ended June 30, 2022, respectively, and $1.9 million and $4.8 million in the three and six months ended June 30, 2021, respectively. Refer to Note 7 – Derivative Instruments, for details of the hedging activities.
Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2022, due to the material weakness in internal control over financial reporting that was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
Remediation. As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2021, we began implementing a remediation plan to address the material weakness mentioned above. The weakness will not be considered remediated, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed in 2022.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 49 |
Legal proceedings in which we are involved are more fully described in Note 18 to the Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
There are no material changes from the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
The following table provides information with respect to purchases by us of shares of our Class B common stock during the second quarter of 2022:
|
|
|
Total |
|
|
Average |
|
|
Total Number |
|
|
Maximum |
|
||||
|
April 1–30, 2022 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
5,538,366 |
|
|
May 1–31, 2022 |
|
|
639,393 |
|
|
|
6.90 |
|
|
|
639,393 |
|
|
|
4,898,973 |
|
|
June 1–30, 2022 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,898,973 |
|
|
Total |
|
|
639,393 |
|
|
$ |
6.90 |
|
|
|
639,393 |
|
|
|
|
|
|
(1) |
Under our existing stock repurchase program, approved by our Board of Directors on March 11, 2013, we were authorized to repurchase up to an aggregate of 7.0 million shares of our Class B common stock. |
The following table provides information with respect to redemption by us of shares of our Preferred stock during the second quarter of 2022:
|
|
|
Total |
|
|
Average |
|
|
Total Number |
|
|
Maximum |
|
||||
| (in thousands) | ||||||||||||||||
|
April 1–30, 2022 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
2,322,699 |
|
|
May 1–31, 2022 |
|
|
235,294 |
|
|
|
8.50 |
|
|
|
235,294 |
|
|
|
2,087,405 |
|
|
June 1–30, 2022 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,087,405 |
|
|
Total |
|
|
235,294 |
|
|
$ |
8.50 |
|
|
|
235,294 |
|
|
|
|
|
None
Not applicable
None
|
Exhibit |
|
Description |
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
32.1* |
|
|
|
|
|
|
|
32.2* |
|
|
|
|
|
|
|
101.INS* |
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
* |
Filed or furnished herewith. |
| 51 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Genie Energy Ltd. |
|
|
|
|
|
|
August 8, 2022 |
By: |
/s/ Michael M. Stein |
|
|
|
Michael M. Stein |
|
|
|
|
|
August 8, 2022 |
By: |
/s/ Avi Goldin |
|
|
|
Avi Goldin |
| 52 |
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