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 November 1, 2018 |
Spark Energy, Inc. | ||
By: | /s/ Gil Melman | |
Name: | Gil Melman | |
Title: | Vice President, General Counsel and Corporate Secretary |
Exhibit No. | Description |
99.1 |
• | Achieved $18.6 million in Adjusted EBITDA, $45.8 million in Retail Gross Margin, and a $18.8 million in Net Income for the third quarter |
• | Expects to exceed upper end of cost reduction guidance range by 10 to 20 percent |
• | Total RCE count of 979,000 as of September 30, 2018 |
• | Acquired 60,000 residential RCEs subsequent to the close of fiscal third quarter 2018 |
($ in thousands) | September 30, 2018 | ||
Cash and cash equivalents | $ | 42,796 | |
Senior Credit Facility Availability (1) | 19,281 | ||
Subordinated Debt Availability (2) | 15,000 | ||
Total Liquidity | $ | 77,077 |
• | 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; |
• | significant changes in, or new charges by, the ISOs in the regions in which we operate; |
• | 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. |
September 30, 2018 | December 31, 2017 | ||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 42,796 | $ | 29,419 | |||||
Accounts receivable, net of allowance for doubtful accounts of $4,324 at September 30 and $4,023 at December 31 | 134,183 | 158,814 | |||||||
Accounts receivable—affiliates | 3,807 | 3,661 | |||||||
Inventory | 4,077 | 4,470 | |||||||
Fair value of derivative assets | 23,427 | 31,191 | |||||||
Customer acquisition costs, net | 15,600 | 22,123 | |||||||
Customer relationships, net | 18,360 | 18,653 | |||||||
Deposits | 12,631 | 7,701 | |||||||
Other current assets | 31,074 | 20,706 | |||||||
Total current assets | 285,955 | 296,738 | |||||||
Property and equipment, net | 5,383 | 8,275 | |||||||
Fair value of derivative assets | 1,873 | 3,309 | |||||||
Customer acquisition costs, net | 3,466 | 6,949 | |||||||
Customer relationships, net | 28,247 | 34,839 | |||||||
Deferred tax assets | 24,935 | 24,185 | |||||||
Goodwill | 120,343 | 120,154 | |||||||
Other assets | 11,075 | 11,500 | |||||||
Total assets | $ | 481,277 | $ | 505,949 | |||||
Liabilities, Series A Preferred Stock and Stockholders' Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 55,496 | $ | 77,510 | |||||
Accounts payable—affiliates | 2,836 | 4,622 | |||||||
Accrued liabilities | 45,518 | 33,679 | |||||||
Fair value of derivative liabilities | 269 | 1,637 | |||||||
Current portion of Senior Credit Facility | — | 7,500 | |||||||
Current payable pursuant to tax receivable agreement—affiliates | 2,508 | 5,937 | |||||||
Current contingent consideration for acquisitions | 2,980 | 4,024 | |||||||
Other current liabilities | 856 | 2,675 | |||||||
Current portion of note payable | 10,535 | 13,443 | |||||||
Total current liabilities | 120,998 | 151,027 | |||||||
Long-term liabilities: | |||||||||
Fair value of derivative liabilities | 489 | 492 | |||||||
Payable pursuant to tax receivable agreement—affiliates | 26,067 | 26,355 | |||||||
Long-term portion of Senior Credit Facility | 112,000 | 117,750 | |||||||
Subordinated debt—affiliate | 10,000 | — | |||||||
Long-term portion of note payable | — | 7,051 | |||||||
Contingent consideration for acquisitions | — | 626 | |||||||
Other long-term liabilities | — | 172 | |||||||
Total liabilities | 269,554 | 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 September 30 and 1,704,339 shares issued and outstanding at December 31 | 90,758 | 41,173 | |||||||
Stockholders' equity: | |||||||||
Common Stock: | |||||||||
Class A common stock, par value $0.01 per share, 120,000,000 shares authorized, 13,493,158 issued, and 13,393,712 outstanding at September 30 and 13,235,082 issued and 13,135,636 outstanding at December 31 | 135 | 132 | |||||||
Class B common stock, par value $0.01 per share, 60,000,000 shares authorized, 21,485,126 issued and outstanding at September 30 and December 31 | 216 | 216 | |||||||
Additional paid-in capital | 25,387 | 26,914 | |||||||
Accumulated other comprehensive loss | (15 | ) | (11 | ) | |||||
Retained earnings | 2,885 | 11,008 | |||||||
Treasury stock, at cost, 99,446 shares at September 30 and December 31 | (2,011 | ) | (2,011 | ) | |||||
Total stockholders' equity | 26,597 | 36,248 | |||||||
Non-controlling interest in Spark HoldCo, LLC | 94,368 | 125,055 | |||||||
Total equity | 120,965 | 161,303 | |||||||
Total liabilities, Series A Preferred Stock and stockholders' equity | $ | 481,277 | $ | 505,949 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Retail revenues | $ | 258,127 | $ | 215,856 | $ | 773,616 | $ | 563,960 | |||||||
Net asset optimization revenues/(expense) | 348 | (320 | ) | 3,798 | (681 | ) | |||||||||
Total Revenues | 258,475 | 215,536 | 777,414 | 563,279 | |||||||||||
Operating Expenses: | |||||||||||||||
Retail cost of revenues | 193,409 | 160,373 | 645,954 | 420,771 | |||||||||||
General and administrative | 25,695 | 25,566 | 83,522 | 69,405 | |||||||||||
Depreciation and amortization | 13,917 | 11,509 | 39,797 | 30,435 | |||||||||||
Total Operating Expenses | 233,021 | 197,448 | 769,273 | 520,611 | |||||||||||
Operating income | 25,454 | 18,088 | 8,141 | 42,668 | |||||||||||
Other (expense)/income: | |||||||||||||||
Interest expense | (2,762 | ) | (2,863 | ) | (7,323 | ) | (8,760 | ) | |||||||
Interest and other income (loss) | (47 | ) | 168 | 707 | 102 | ||||||||||
Total other expenses | (2,809 | ) | (2,695 | ) | (6,616 | ) | (8,658 | ) | |||||||
Income before income tax expense | 22,645 | 15,393 | 1,525 | 34,010 | |||||||||||
Income tax expense | 3,818 | 2,451 | 602 | 5,265 | |||||||||||
Net income | $ | 18,827 | $ | 12,942 | $ | 923 | $ | 28,745 | |||||||
Less: Net income attributable to non-controlling interests | 13,218 | 10,595 | 140 | 23,049 | |||||||||||
Net income attributable to Spark Energy, Inc. stockholders | $ | 5,609 | $ | 2,347 | $ | 783 | $ | 5,696 | |||||||
Less: Dividend on Series A preferred stock | 2,027 | 932 | 6,081 | 2,106 | |||||||||||
Net income (loss) attributable to stockholders of Class A common stock | $ | 3,582 | $ | 1,415 | $ | (5,298 | ) | $ | 3,590 | ||||||
Other comprehensive income, net of tax: | |||||||||||||||
Currency translation gain (loss) | $ | 47 | $ | (13 | ) | $ | (11 | ) | $ | (88 | ) | ||||
Other comprehensive income (loss) | 47 | (13 | ) | (11 | ) | (88 | ) | ||||||||
Comprehensive income | $ | 18,874 | $ | 12,929 | $ | 912 | $ | 28,657 | |||||||
Less: Comprehensive income attributable to non-controlling interests | 13,247 | 10,587 | 133 | 22,994 | |||||||||||
Comprehensive income attributable to Spark Energy, Inc. stockholders | $ | 5,627 | $ | 2,342 | $ | 779 | $ | 5,663 |
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 | — | — | — | — | — | — | — | 3,596 | — | 3,596 | — | 3,596 | ||||||||||||||||||||||||||||||||
Restricted stock unit vesting | 258 | — | — | 3 | — | — | — | (715 | ) | — | (712 | ) | — | (712 | ) | |||||||||||||||||||||||||||||
Consolidated net income | — | — | — | — | — | — | — | — | 783 | 783 | 140 | 923 | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustment for equity method investee | — | — | — | — | — | — | (4 | ) | — | — | (4 | ) | (7 | ) | (11 | ) | ||||||||||||||||||||||||||||
Distributions paid to non-controlling unit holders | — | — | — | — | — | — | — | — | — | — | (23,701 | ) | (23,701 | ) | ||||||||||||||||||||||||||||||
Dividends paid to Class A common stockholders | — | — | — | — | — | — | — | (2,381 | ) | (4,852 | ) | (7,233 | ) | — | (7,233 | ) | ||||||||||||||||||||||||||||
Dividends to Preferred Stock | — | — | — | — | — | — | — | (2,027 | ) | (4,054 | ) | (6,081 | ) | — | (6,081 | ) | ||||||||||||||||||||||||||||
Acquisition of Customers from Affiliate | — | — | — | — | — | — | — | — | — | (7,119 | ) | (7,119 | ) | |||||||||||||||||||||||||||||||
Balance at September 30, 2018 | 13,493 | 21,485 | (99 | ) | $ | 135 | $ | 216 | $ | (2,011 | ) | $ | (15 | ) | $ | 25,387 | $ | 2,885 | $ | 26,597 | $ | 94,368 | $ | 120,965 |
Nine Months Ended September 30, | |||||||||
2018 | 2017 | ||||||||
Cash flows from operating activities: | |||||||||
Net income | $ | 923 | $ | 28,745 | |||||
Adjustments to reconcile net income to net cash flows provided by operating activities: | |||||||||
Depreciation and amortization expense | 38,538 | 30,584 | |||||||
Deferred income taxes | (749 | ) | 681 | ||||||
Change in TRA liability | 79 | — | |||||||
Stock based compensation | 3,707 | 4,023 | |||||||
Amortization of deferred financing costs | 1,243 | 750 | |||||||
Excess tax benefit related to restricted stock vesting | (101 | ) | 179 | ||||||
Change in Fair Value of Earnout liabilities | (63 | ) | (9,423 | ) | |||||
Accretion on fair value of Earnout liabilities | — | 3,787 | |||||||
Bad debt expense | 8,480 | 3,436 | |||||||
Loss on derivatives, net | 1,371 | 34,225 | |||||||
Current period cash settlements on derivatives, net | 6,189 | (20,816 | ) | ||||||
Accretion of discount to convertible subordinated notes to affiliate | — | 1,004 | |||||||
Payment of the Major Energy Companies Earnout | — | (1,104 | ) | ||||||
Payment of the Provider Companies Earnout | — | (677 | ) | ||||||
Other | (489 | ) | 123 | ||||||
Changes in assets and liabilities: | |||||||||
Decrease in accounts receivable | 21,029 | 18,056 | |||||||
Increase in accounts receivable—affiliates | (390 | ) | (2,508 | ) | |||||
Decrease (increase) in inventory | 475 | (1,936 | ) | ||||||
Increase in customer acquisition costs | (8,949 | ) | (18,642 | ) | |||||
(Increase) decrease in prepaid and other current assets | (10,999 | ) | 1,536 | ||||||
Increase in intangible assets—customer acquisitions | (86 | ) | (32 | ) | |||||
Decrease (increase) in other assets | 92 | (664 | ) | ||||||
Decrease in accounts payable and accrued liabilities | (11,062 | ) | (9,301 | ) | |||||
(Decrease) increase in accounts payable—affiliates | (1,786 | ) | 1,165 | ||||||
(Decrease) increase in other current liabilities | (5,140 | ) | 22 | ||||||
Decrease in other non-current liabilities | (459 | ) | (1,170 | ) | |||||
Net cash provided by operating activities | 41,853 | 62,043 | |||||||
Cash flows from investing activities: | |||||||||
Purchases of property and equipment | (1,097 | ) | (1,438 | ) | |||||
Acquisitions of Perigee and other customers | — | (11,464 | ) | ||||||
Acquisition of the Verde Companies | — | (65,785 | ) | ||||||
Verde working capital settlement | 470 | — | |||||||
Acquisition of HIKO | (14,290 | ) | — | ||||||
Acquisition of Customers from Affiliate | (8,776 | ) | — | ||||||
Net cash used in investing activities | (23,693 | ) | (78,687 | ) | |||||
Cash flows from financing activities: | |||||||||
Proceeds from issuance of Series A Preferred Stock, net of issuance costs paid | 48,490 | 40,312 | |||||||
Borrowings on notes payable | 277,800 | 139,400 | |||||||
Payments on notes payable | (281,050 | ) | (119,664 | ) | |||||
Payment of the Major Energy Companies Earnout | (1,607 | ) | (6,299 | ) | |||||
Payment of the Provider Companies Earnout and installment consideration | — | (7,061 | ) | ||||||
Payments on the Verde promissory note | (6,573 | ) | (2,149 | ) | |||||
Proceeds from disgorgement of stockholders short-swing profits | 244 | 872 | |||||||
Restricted stock vesting | (2,589 | ) | (2,009 | ) | |||||
Payment of Tax Receivable Agreement liability | (3,577 | ) | — |
Payment of dividends to Class A common stockholders | (7,233 | ) | (7,137 | ) | |||||
Payment of distributions to non-controlling unitholders | (23,701 | ) | (24,270 | ) | |||||
Payment of Dividends to Preferred Stock | (4,987 | ) | (1,174 | ) | |||||
Purchase of Treasury Stock | — | (1,888 | ) | ||||||
Net cash (used in) provided by financing activities | (4,783 | ) | 8,933 | ||||||
Increase (decrease) in Cash and cash equivalents | 13,377 | (7,711 | ) | ||||||
Cash and cash equivalents—beginning of period | 29,419 | 18,960 | |||||||
Cash and cash equivalents—end of period | $ | 42,796 | $ | 11,249 | |||||
Supplemental Disclosure of Cash Flow Information: | |||||||||
Non-cash items: | |||||||||
Contingent consideration—earnout obligations incurred in connection with the Verde Companies acquisition | $ | — | $ | 5,400 | |||||
Net contribution by NG&E in excess of cash | $ | — | $ | 1,019 | |||||
Installment consideration incurred in connection with the Verde Companies acquisition | $ | — | $ | 17,851 | |||||
Property and equipment purchase accrual | $ | (123 | ) | $ | 41 | ||||
Cash paid during the period for: | |||||||||
Interest | $ | 5,955 | $ | 4,113 | |||||
Taxes | $ | 7,461 | $ | 7,769 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands, except volume and per unit operating data) | |||||||||||||||
Retail Electricity Segment | |||||||||||||||
Total Revenues | $ | 246,182 | $ | 202,259 | 676,528 | $ | 467,861 | ||||||||
Retail Cost of Revenues | 186,449 | 153,594 | 587,949 | 364,518 | |||||||||||
Less: Net gains (losses) on non-trading derivatives, net of cash settlements | 19,481 | 4,170 | (4,034 | ) | (12,786 | ) | |||||||||
Retail Gross Margin (1) — Electricity | $ | 40,252 | $ | 44,495 | $ | 92,613 | $ | 116,129 | |||||||
Volumes — Electricity (MWhs) | 2,432,314 | 2,063,894 | 6,784,345 | 4,828,629 | |||||||||||
Retail Gross Margin (2) — Electricity per MWh | $ | 16.55 | $ | 21.56 | $ | 13.65 | $ | 24.05 | |||||||
Retail Natural Gas Segment | |||||||||||||||
Total Revenues | $ | 12,293 | $ | 13,277 | $ | 100,886 | $ | 95,418 | |||||||
Retail Cost of Revenues | 6,960 | 6,779 | 58,005 | 56,253 | |||||||||||
Less: Net Asset Optimization Revenues (Expenses) | 348 | (320 | ) | 3,798 | (681 | ) | |||||||||
Less: Net gains (losses) on non-trading derivatives, net of cash settlements | (558 | ) | 743 | (3,243 | ) | (2,344 | ) | ||||||||
Retail Gross Margin (1) — Gas | $ | 5,543 | $ | 6,075 | $ | 42,326 | $ | 42,190 | |||||||
Volumes — Gas (MMBtus) | 1,395,377 | 1,706,132 | 11,913,180 | 12,554,497 | |||||||||||
Retail Gross Margin (2) — Gas per MMBtu | $ | 3.97 | $ | 3.56 | $ | 3.55 | $ | 3.36 |
(1) | Reflects the Retail Gross Margin attributable to our Retail Natural Gas Segment or Retail Electricity Segment, as applicable. Retail Gross Margin is a non-GAAP financial measure. See “Other Performance Measures” in our Form 10-Q for a reconciliation of Adjusted EBITDA and Retail Gross Margin to their most directly comparable financial measures presented in accordance with GAAP. |
(2) | Reflects the Retail Gross Margin for the Retail Natural Gas Segment or Retail Electricity Segment, as applicable, divided by the total volumes in MMBtu or MWh, respectively. |
• | 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 September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Reconciliation of Adjusted EBITDA to Net Income: | |||||||||||||||
Net income | $ | 18,827 | $ | 12,942 | $ | 923 | $ | 28,745 | |||||||
Depreciation and amortization | 13,917 | 11,509 | 39,797 | 30,435 | |||||||||||
Interest expense | 2,762 | 2,863 | 7,323 | 8,760 | |||||||||||
Income tax expense | 3,818 | 2,451 | 602 | 5,265 | |||||||||||
EBITDA | 39,324 | 29,765 | 48,645 | 73,205 | |||||||||||
Less: | |||||||||||||||
Net, Gain (losses) on derivative instruments | 18,117 | (2,752 | ) | (1,371 | ) | (34,225 | ) | ||||||||
Net, Cash settlements on derivative instruments | 922 | 7,457 | (5,823 | ) | 18,808 | ||||||||||
Customer acquisition costs | 2,695 | 6,568 | 8,949 | 18,642 | |||||||||||
Plus: | |||||||||||||||
Non-cash compensation expense | 1,021 | 1,118 | 3,707 | 4,023 | |||||||||||
Adjusted EBITDA | $ | 18,611 | $ | 19,610 | $ | 50,597 | $ | 74,003 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Reconciliation of Adjusted EBITDA to net cash provided by operating activities: | |||||||||||||||
Net cash provided by operating activities | $ | 5,443 | $ | 16,418 | $ | 41,853 | $ | 62,043 | |||||||
Amortization of deferred financing costs | (631 | ) | (219 | ) | (1,243 | ) | (750 | ) | |||||||
Allowance for doubtful accounts and bad debt expense | (2,755 | ) | (2,517 | ) | (8,480 | ) | (3,436 | ) | |||||||
Interest expense | 2,762 | 2,863 | 7,323 | 8,760 | |||||||||||
Income tax expense | 3,818 | 2,451 | 602 | 5,265 | |||||||||||
Changes in operating working capital | |||||||||||||||
Accounts receivable, prepaids, current assets | 16,248 | 4,457 | (9,640 | ) | (17,084 | ) | |||||||||
Inventory | 2,218 | 2,246 | (475 | ) | 1,936 | ||||||||||
Accounts payable and accrued liabilities | (5,946 | ) | (12,857 | ) | 17,988 | 8,114 | |||||||||
Other | (2,546 | ) | 6,768 | 2,669 | 9,155 | ||||||||||
Adjusted EBITDA | $ | 18,611 | $ | 19,610 | $ | 50,597 | $ | 74,003 | |||||||
Cash Flow Data: | |||||||||||||||
Cash flows provided by operating activities | $ | 5,443 | $ | 16,418 | $ | 41,853 | $ | 62,043 | |||||||
Cash flows provided by (used in) investing activities | $ | 307 | $ | (3,178 | ) | $ | (23,693 | ) | $ | (78,687 | ) | ||||
Cash flows provided by (used in) financing activities | $ | 1,344 | $ | (16,036 | ) | $ | (4,783 | ) | $ | 8,933 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Reconciliation of Retail Gross Margin to Operating Income: | |||||||||||||||
Operating income | $ | 25,454 | $ | 18,088 | $ | 8,141 | $ | 42,668 | |||||||
Depreciation and amortization | 13,917 | 11,509 | 39,797 | 30,435 | |||||||||||
General and administrative | 25,695 | 25,566 | 83,522 | 69,405 | |||||||||||
Less: | |||||||||||||||
Net asset optimization revenues (expenses) | 348 | (320 | ) | 3,798 | (681 | ) | |||||||||
Net, gains (losses) on non-trading derivative instruments | 17,888 | (2,568 | ) | (2,223 | ) | (34,146 | ) | ||||||||
Net, Cash settlements on non-trading derivative instruments | 1,035 | 7,481 | (5,054 | ) | 19,016 | ||||||||||
Retail Gross Margin | $ | 45,795 | $ | 50,570 | $ | 134,939 | $ | 158,319 | |||||||
Retail Gross Margin - Retail Electricity Segment | $ | 40,252 | $ | 44,495 | $ | 92,613 | $ | 116,129 | |||||||
Retail Gross Margin - Retail Natural Gas Segment | $ | 5,543 | $ | 6,075 | $ | 42,326 | $ | 42,190 |