Delaware | 001-36559 | 46-5453215 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
• | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
• | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
• | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
• | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description |
99.1 | Press Release of Spark Energy, Inc. dated May 9, 2018 |
Exhibit No. | Description |
99.1 |
Spark Energy, Inc. | ||
By: | /s/ Gil Melman | |
Name: | Gil Melman | |
Title: | Vice President, General Counsel and Corporate Secretary |
• | Achieved $15.9 million in Adjusted EBITDA, $45.7 million in Retail Gross Margin, and a $(41.8) million Net Loss for the first quarter |
• | Total RCE count increased 1% to a record 1,055,000 as of March 31, 2018 |
• | Average monthly attrition of 4.2% for the first quarter |
• | Closed on two acquisitions, adding approximately 80,000 RCEs |
• | Continue to simplify, streamline, and optimize the organization |
• | Expanded the senior credit facility to $200.0 million in commitments |
• | Issued two million shares of Series A Preferred Stock for net proceeds of approximately $48.9 million |
($ in thousands) | March 31, 2018 | ||
Cash and cash equivalents | $ | 21,065 | |
Senior Credit Facility Availability (1) | 43,811 | ||
Subordinated Debt Availability (2) | 25,000 | ||
Total Liquidity | $ | 89,876 |
• | changes in commodity prices and the sufficiency of risk management and hedging policies; |
• | extreme and unpredictable weather conditions, and the impact of hurricanes and other natural disasters; |
• | federal, state and local regulation, including the industry's ability to address or adapt to potentially restrictive new regulations that may be enacted by the New York Public Service Commission; |
• | our ability to borrow funds and access credit markets and restrictions in our debt agreements and collateral requirements; |
• | credit risk with respect to suppliers and customers; |
• | changes in costs to acquire customers and actual customer attrition rates; |
• | accuracy of billing systems; |
• | whether our majority stockholder or its affiliates offer us acquisition opportunities on terms that are commercially acceptable to us; |
• | ability to successfully identify and complete, and efficiently integrate acquisitions into our operations; |
• | competition; and |
• | the “Risk Factors” in our latest Annual Report on Form 10-K, and in our quarterly reports, other public filings and press releases. |
March 31, 2018 | December 31, 2017 | |||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 21,065 | $ | 29,419 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $4.4 million and $4.0 million as of March 31, 2018 and December 31, 2017, respectively | 152,454 | 158,814 | ||||||||
Accounts receivable—affiliates | 3,063 | 3,661 | ||||||||
Inventory | 400 | 4,470 | ||||||||
Fair value of derivative assets | 7,965 | 31,191 | ||||||||
Customer acquisition costs, net | 20,181 | 22,123 | ||||||||
Customer relationships, net | 20,878 | 18,653 | ||||||||
Prepaid assets | 3,809 | 1,028 | ||||||||
Deposits | 28,763 | 7,701 | ||||||||
Other current assets | 23,254 | 19,678 | ||||||||
Total current assets | 281,832 | 296,738 | ||||||||
Property and equipment, net | 7,699 | 8,275 | ||||||||
Fair value of derivative assets | 262 | 3,309 | ||||||||
Customer acquisition costs, net | 6,698 | 6,949 | ||||||||
Customer relationships, net | 35,074 | 34,839 | ||||||||
Deferred tax assets | 30,734 | 24,185 | ||||||||
Goodwill | 120,154 | 120,154 | ||||||||
Other assets | 11,452 | 11,500 | ||||||||
Total assets | $ | 493,905 | $ | 505,949 | ||||||
Liabilities, Series A Preferred Stock and Stockholders' Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 61,687 | $ | 77,510 | ||||||
Accounts payable—affiliates | 4,050 | 4,622 | ||||||||
Accrued liabilities | 41,512 | 33,679 | ||||||||
Fair value of derivative liabilities | 12,347 | 1,637 | ||||||||
Current portion of Senior Credit Facility | — | 7,500 | ||||||||
Current payable pursuant to tax receivable agreement—affiliates | 5,937 | 5,937 | ||||||||
Current contingent consideration for acquisitions | 3,043 | 4,024 | ||||||||
Other current liabilities | 2,484 | 2,675 | ||||||||
Current portion of note payable | 11,332 | 13,443 | ||||||||
Total current liabilities | 142,392 | 151,027 | ||||||||
Long-term liabilities: | ||||||||||
Fair value of derivative liabilities | 11,038 | 492 | ||||||||
Payable pursuant to tax receivable agreement—affiliates | 26,355 | 26,355 | ||||||||
Long-term portion of Senior Credit Facility | 106,500 | 117,750 | ||||||||
Contingent consideration for acquisitions | — | 626 | ||||||||
Other long-term liabilities | — | 172 | ||||||||
Long-term portion of note payable | 5,900 | 7,051 | ||||||||
Total liabilities | $ | 292,185 | $ | 303,473 | ||||||
Commitments and contingencies (Note 13) | ||||||||||
Series A Preferred Stock, par value $0.01 per share, 20,000,000 shares authorized, 3,707,256 shares issued and outstanding at March 31, 2018 and 1,704,339 shares issued and outstanding at December 31, 2017 | 90,758 | 41,173 | ||||||||
Stockholders' equity: | ||||||||||
Common Stock (1) : | ||||||||||
Class A common stock, par value $0.01 per share, 120,000,000 shares authorized, 13,237,981 issued, and 13,138,535 outstanding at March 31, 2018 and 13,235,082 issued and 13,135,636 outstanding at December 31, 2017 | 132 | 132 | ||||||||
Class B common stock, par value $0.01 per share, 60,000,000 shares authorized, 21,485,126 issued and outstanding at March 31, 2018 and December 31, 2017 | 216 | 216 | ||||||||
Additional paid-in capital | 27,717 | 26,914 | ||||||||
Accumulated other comprehensive loss | (43 | ) | (11 | ) | ||||||
Retained earnings | (5,726 | ) | 11,008 | |||||||
Treasury stock, at cost, 99,446 shares at March 31, 2018 and December 31, 2017 | (2,011 | ) | (2,011 | ) | ||||||
Total stockholders' equity | 20,285 | 36,248 | ||||||||
Non-controlling interest in Spark HoldCo, LLC | 90,677 | 125,055 | ||||||||
Total equity | 110,962 | 161,303 | ||||||||
Total liabilities, Series A Preferred Stock and stockholders' equity | $ | 493,905 | $ | 505,949 |
Three Months Ended March 31, | |||||||||||
2018 | 2017 (1) | ||||||||||
Revenues: | |||||||||||
Retail revenues | $ | 284,001 | $ | 196,500 | |||||||
Net asset optimization revenues/(expense) (2) | 2,687 | (193 | ) | ||||||||
Total Revenues | 286,688 | 196,307 | |||||||||
Operating Expenses: | |||||||||||
Retail cost of revenues | 289,876 | 145,761 | |||||||||
General and administrative (3) | 30,047 | 24,493 | |||||||||
Depreciation and amortization | 13,019 | 9,270 | |||||||||
Total Operating Expenses | 332,942 | 179,524 | |||||||||
Operating (loss) income | (46,254 | ) | 16,783 | ||||||||
Other (expense)/income: | |||||||||||
Interest expense | (2,245 | ) | (3,445 | ) | |||||||
Interest and other income | 201 | 199 | |||||||||
Total other expenses | (2,044 | ) | (3,246 | ) | |||||||
(Loss) Income before income tax (benefit) expense | (48,298 | ) | 13,537 | ||||||||
Income tax (benefit)/expense | (6,467 | ) | 2,405 | ||||||||
Net (loss) income | (41,831 | ) | $ | 11,132 | |||||||
Less: Net (loss) income attributable to non-controlling interests | (29,505 | ) | 8,862 | ||||||||
Net (loss) income attributable to Spark Energy, Inc. stockholders | $ | (12,326 | ) | $ | 2,270 | ||||||
Less: Dividend on Series A preferred stock | 2,027 | 183 | |||||||||
Net (loss) income attributable to stockholders of Class A common stock | $ | (14,353 | ) | $ | 2,087 | ||||||
Other comprehensive loss, net of tax: | |||||||||||
Currency translation loss | $ | (83 | ) | $ | (49 | ) | |||||
Other comprehensive loss | (83 | ) | (49 | ) | |||||||
Comprehensive (loss) income | $ | (41,914 | ) | $ | 11,083 | ||||||
Less: Comprehensive (loss) income attributable to non-controlling interests | (29,556 | ) | 8,831 | ||||||||
Comprehensive (loss) income attributable to Spark Energy, Inc. stockholders | $ | (12,358 | ) | $ | 2,252 |
(1) | Financial information has been recast to include results attributable to the acquisition of Perigee Energy, LLC by an affiliate on February 3, 2017. See Notes 2 and 4, "Basis of Presentation and Summary of Significant Accounting Policies" and "Acquisitions," respectively, for further discussion. |
(2) | Net asset optimization revenues (expenses) includes asset optimization revenues—affiliates of $648 and $0 for the three months ended March 31, 2018 and 2017, respectively, and asset optimization revenues—affiliates cost of revenues of $12 and $0 for the three months ended March 31, 2018 and 2017, respectively. |
(3) | General and administrative expense includes general and administrative expense—affiliates of $6,400 and $7,300 for the three months ended March 31, 2018 and 2017, respectively. |
Issued Shares of Class A Common Stock | Issued Shares of Class B Common Stock | Treasury Stock | Class A Common Stock | Class B Common Stock | Treasury Stock | Accumulated Other Comprehensive Loss | Additional Paid-in Capital | Retained Earnings (Deficit) | Total Stockholders' Equity | Non-controlling Interest | Total Equity | |||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2017 | 13,235 | 21,485 | (99 | ) | $ | 132 | $ | 216 | $ | (2,011 | ) | $ | (11 | ) | $ | 26,914 | $ | 11,008 | $ | 36,248 | $ | 125,055 | $ | 161,303 | ||||||||||||||||||||||||||||
Stock based compensation | — | — | — | — | — | — | — | 817 | — | 817 | — | 817 | ||||||||||||||||||||||||||||||||||||||||
Restricted stock unit vesting | 3 | — | — | — | — | — | — | (14 | ) | — | (14 | ) | — | (14 | ) | |||||||||||||||||||||||||||||||||||||
Consolidated net loss | — | — | — | — | — | — | — | — | (12,326 | ) | (12,326 | ) | (29,505 | ) | (41,831 | ) | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment for equity method investee | — | — | — | — | — | — | (32 | ) | — | — | (32 | ) | (51 | ) | (83 | ) | ||||||||||||||||||||||||||||||||||||
Distributions paid to non-controlling unit holders | — | — | — | — | — | — | — | — | — | — | (4,822 | ) | (4,822 | ) | ||||||||||||||||||||||||||||||||||||||
Dividends paid to Class A common stockholders | — | — | — | — | — | — | — | — | (2,381 | ) | (2,381 | ) | — | (2,381 | ) | |||||||||||||||||||||||||||||||||||||
Dividends to Preferred Stock | — | — | — | — | — | — | — | — | (2,027 | ) | (2,027 | ) | — | (2,027 | ) | |||||||||||||||||||||||||||||||||||||
Balance at March 31, 2018 | 13,238 | 21,485 | (99 | ) | $ | 132 | $ | 216 | $ | (2,011 | ) | $ | (43 | ) | $ | 27,717 | $ | (5,726 | ) | $ | 20,285 | $ | 90,677 | $ | 110,962 |
Three Months Ended March 31, | |||||||||
2018 | 2017 (1) | ||||||||
Cash flows from operating activities: | |||||||||
Net (loss) income | $ | (41,831 | ) | $ | 11,132 | ||||
Adjustments to reconcile net income to net cash flows provided by operating activities: | |||||||||
Depreciation and amortization expense | 11,632 | 8,204 | |||||||
Deferred income taxes | (6,549 | ) | (87 | ) | |||||
Stock based compensation | 1,131 | 1,367 | |||||||
Amortization of deferred financing costs | 295 | 248 | |||||||
Change in Fair Value of Earnout liabilities | — | 711 | |||||||
Accretion on fair value of Earnout liabilities | — | 1,226 | |||||||
Bad debt expense | 2,423 | 356 | |||||||
Loss on derivatives, net | 36,542 | 21,796 | |||||||
Current period cash settlements on derivatives, net | 16,442 | (6,178 | ) | ||||||
Accretion of discount to convertible subordinated notes to affiliate | — | 1,004 | |||||||
Payment of the Major Energy Companies Earnout | — | (1,104 | ) | ||||||
Other | (248 | ) | 6 | ||||||
Changes in assets and liabilities: | |||||||||
Decrease in accounts receivable | 9,737 | 3,738 | |||||||
Decrease (Increase) in accounts receivable—affiliates | 354 | (55 | ) | ||||||
Decrease in inventory | 4,070 | 3,322 | |||||||
Increase in customer acquisition costs | (4,274 | ) | (7,690 | ) | |||||
Increase in prepaid and other current assets | (22,719 | ) | (1,302 | ) | |||||
Increase in other assets | (58 | ) | — | ||||||
Decrease in accounts payable and accrued liabilities | (9,091 | ) | (8,979 | ) | |||||
Decrease in accounts payable—affiliates | (572 | ) | (1,684 | ) | |||||
Decrease in other current liabilities | (6,653 | ) | (2,413 | ) | |||||
Decrease in other non-current liabilities | (171 | ) | (324 | ) | |||||
Net cash (used in) provided by operating activities | (9,540 | ) | 23,294 | ||||||
Cash flows from investing activities: | |||||||||
Purchases of property and equipment | (754 | ) | (112 | ) | |||||
Acquisition of HIKO Energy | (15,041 | ) | — | ||||||
Net cash used in investing activities | (15,795 | ) | (112 | ) | |||||
Cash flows from financing activities: | |||||||||
Proceeds from issuance of Series A Preferred Stock, net of issuance costs paid | 48,490 | 38,607 | |||||||
Borrowings on notes payable | 83,800 | 5,625 | |||||||
Payments on notes payable | (102,550 | ) | (46,993 | ) | |||||
Payment of the Major Energy Companies Earnout | (1,607 | ) | (6,299 | ) | |||||
Payment of the Provider Companies Earnout and installment consideration | — | (2,097 | ) | ||||||
Payments on the Verde promissory note | (3,261 | ) | — | ||||||
Proceeds from disgorgement of stockholders short-swing profits | 244 | 666 | |||||||
Payment of dividends to Class A common stockholders | (2,381 | ) | (2,355 | ) | |||||
Payment of distributions to non-controlling unitholders | (4,822 | ) | (4,347 | ) | |||||
Payment of Dividends to Preferred Stock | (932 | ) | — | ||||||
Net cash provided by (used in) financing activities | 16,981 | (17,193 | ) | ||||||
(Decrease) increase in Cash and cash equivalents | (8,354 | ) | 5,989 | ||||||
Cash and cash equivalents—beginning of period | 29,419 | 18,960 | |||||||
Cash and cash equivalents—end of period | $ | 21,065 | $ | 24,949 | |||||
Supplemental Disclosure of Cash Flow Information: | |||||||||
Non-cash items: | |||||||||
Property and equipment purchase accrual | $ | 180 | $ | 76 | |||||
Cash paid during the period for: | |||||||||
Interest | $ | 1,854 | $ | 888 | |||||
Taxes | $ | 1,268 | $ | 118 |
Three Months Ended March 31, | |||||||
2018 | 2017 (1) | ||||||
(in thousands, except volume and per unit operating data) | |||||||
Retail Electricity Segment | |||||||
Total Revenues | 220,899 | 133,694 | |||||
Retail Cost of Revenues | 249,547 | 108,844 | |||||
Less: Net Losses on non-trading derivatives, net of cash settlements | (48,367 | ) | (11,921 | ) | |||
Retail Gross Margin — Electricity | 19,719 | 36,771 | |||||
Volumes — Electricity (MWhs) | 2,252,024 | 1,385,114 | |||||
Retail Gross Margin — Electricity per MWh | 8.76 | 26.55 | |||||
Retail Natural Gas Segment | |||||||
Total Revenues | $ | 65,789 | $ | 62,613 | |||
Retail Cost of Revenues | 40,329 | 36,917 | |||||
Less: Net Asset Optimization Revenues (Expenses) | 2,687 | (193 | ) | ||||
Less: Net Losses on non-trading derivatives, net of cash settlements | (3,227 | ) | (1,940 | ) | |||
Retail Gross Margin — Gas | $ | 26,000 | $ | 27,829 | |||
Volumes — Gas (MMBtus) | 7,677,082 | 8,219,279 | |||||
Retail Gross Margin — Gas per MMBtu | $ | 3.39 | $ | 3.39 |
• | our operating performance as compared to other publicly traded companies in the retail energy industry, without regard to financing methods, capital structure or historical cost basis; |
• | the ability of our assets to generate earnings sufficient to support our proposed cash dividends; and |
• | our ability to fund capital expenditures (including customer acquisition costs) and incur and service debt. |
Three Months Ended March 31, | |||||||||||
(in thousands) | 2018 | 2017 (1) | |||||||||
Reconciliation of Adjusted EBITDA to Net Income: | |||||||||||
Net (loss) income | $ | (41,831 | ) | $ | 11,132 | ||||||
Depreciation and amortization | 13,019 | 9,270 | |||||||||
Interest expense | 2,245 | 3,445 | |||||||||
Income tax (benefit) expense | (6,467 | ) | 2,405 | ||||||||
EBITDA | (33,034 | ) | 26,252 | ||||||||
Less: | |||||||||||
Net, losses on derivative instruments | (36,542 | ) | (21,796 | ) | |||||||
Net, Cash settlements on derivative instruments | (15,537 | ) | 7,355 | ||||||||
Customer acquisition costs | 4,274 | 7,690 | |||||||||
Plus: | |||||||||||
Non-cash compensation expense | 1,131 | 1,367 | |||||||||
Adjusted EBITDA | $ | 15,902 | $ | 34,370 |
Three Months Ended March 31, | |||||||
(in thousands) | 2018 | 2017 (1) | |||||
Reconciliation of Adjusted EBITDA to net cash provided by operating activities: | |||||||
Net cash (used in) provided by operating activities | $ | (9,540 | ) | $ | 23,294 | ||
Amortization of deferred financing costs | (295 | ) | (248 | ) | |||
Allowance for doubtful accounts and bad debt expense | (2,423 | ) | (356 | ) | |||
Interest expense | 2,245 | 3,445 | |||||
Income tax (benefit) expense | (6,467 | ) | 2,405 | ||||
Changes in operating working capital | |||||||
Accounts receivable, prepaids, current assets | 12,628 | (2,381 | ) | ||||
Inventory | (4,070 | ) | (3,322 | ) | |||
Accounts payable and accrued liabilities | 16,316 | 13,076 | |||||
Other | 7,508 | (1,543 | ) | ||||
Adjusted EBITDA | $ | 15,902 | $ | 34,370 | |||
Cash Flow Data: | |||||||
Cash flows (used in) provided by operating activities | $ | (9,540 | ) | $ | 23,294 | ||
Cash flows used in investing activities | (15,795 | ) | (112 | ) | |||
Cash flows provided by (used in) financing activities | 16,981 | (17,193 | ) |
Three Months Ended March 31, | |||||||
(in thousands) | 2018 | 2017 (1) | |||||
Reconciliation of Retail Gross Margin to Operating Income: | |||||||
Operating (loss) income | $ | (46,254 | ) | $ | 16,783 | ||
Depreciation and amortization | 13,019 | 9,270 | |||||
General and administrative | 30,047 | 24,493 | |||||
Less: | |||||||
Net asset optimization revenues (expenses) | 2,687 | (193 | ) | ||||
Net, Losses on non-trading derivative instruments | (36,712 | ) | (21,376 | ) | |||
Net, Cash settlements on non-trading derivative instruments | (14,882 | ) | 7,515 | ||||
Retail Gross Margin | $ | 45,719 | $ | 64,600 | |||
Retail Gross Margin - Retail Electricity Segment | $ | 19,719 | $ | 36,771 | |||
Retail Gross Margin - Retail Natural Gas Segment | $ | 26,000 | $ | 27,829 |