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)) |
Title of each class | Trading Symbols(s) | Name of exchange on which registered | |||
Class A common stock, par value $0.01 per share | SPKE | The NASDAQ Global Select Market | |||
8.75% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share | SPKEP | The NASDAQ Global Select Market |
Exhibit No. | Description |
99.1 | Press Release of Spark Energy, Inc. dated August 7, 2019 |
Exhibit No. | Description |
99.1 |
Spark Energy, Inc. | ||
By: | /s/ James G. Jones II | |
Name: | James G Jones II | |
Title: | Chief Financial Officer |
• | Achieved $13.6 million in Adjusted EBITDA, $41.7 million in Retail Gross Margin, and $25.5 million in Net Loss for the second quarter |
• | Total RCE count of 818,000 as of June 30, 2019 |
• | Average monthly attrition of 3.8%, a 30% improvement from the first quarter |
• | Settled several significant legacy litigation items |
• | Amended and extended Senior Credit Facility and Subordinated Debt Facility; current liquidity of $108 million |
• | Terminated Tax Receivable Agreement ("TRA"), which will result in an increase in stockholders equity and a reduction in future cash payments |
($ in thousands) | June 30, 2019 | ||
Cash and cash equivalents | $ | 27,579 | |
Senior Credit Facility Availability (1) | 55,488 | ||
Subordinated Debt Facility Availability (2) | 25,000 | ||
Total Liquidity | $ | 108,067 |
• | changes in commodity prices; |
• | the sufficiency of risk management and hedging policies and practices; |
• | the impact of extreme and unpredictable weather conditions, including 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 public utility commissions; |
• | our ability to borrow funds and access credit markets; |
• | restrictions in our debt agreements and collateral requirements; |
• | credit risk with respect to suppliers and customers; |
• | changes in costs to acquire customers as well as actual attrition rates; |
• | accuracy of billing systems; |
• | our ability to successfully identify, 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 for the year ended December 31, 2018, in our Quarterly Reports on Form 10-Q, and other public filings and press releases. |
June 30, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 27,579 | $ | 41,002 | ||||
Restricted cash | 1,001 | 8,636 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $3,720 at June 30, 2019 and $3,353 at December 31, 2018 | 103,680 | 150,866 | ||||||
Accounts receivable—affiliates | 3,882 | 2,558 | ||||||
Inventory | 2,020 | 3,878 | ||||||
Fair value of derivative assets | 52 | 7,289 | ||||||
Customer acquisition costs, net | 13,004 | 14,431 | ||||||
Customer relationships, net | 15,467 | 16,630 | ||||||
Deposits | 9,331 | 9,226 | ||||||
Renewable energy credit asset | 11,664 | 25,717 | ||||||
Other current assets | 14,810 | 11,747 | ||||||
Total current assets | 202,490 | 291,980 | ||||||
Property and equipment, net | 3,575 | 4,366 | ||||||
Fair value of derivative assets | — | 3,276 | ||||||
Customer acquisition costs, net | 4,856 | 3,893 | ||||||
Customer relationships, net | 23,810 | 26,429 | ||||||
Deferred tax assets | 31,847 | 27,321 | ||||||
Goodwill | 120,343 | 120,343 | ||||||
Other assets | 10,163 | 11,130 | ||||||
Total assets | $ | 397,084 | $ | 488,738 | ||||
Liabilities, Series A Preferred Stock and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 48,985 | $ | 68,790 | ||||
Accounts payable—affiliates | 2,475 | 2,464 | ||||||
Accrued liabilities | 23,165 | 10,845 | ||||||
Renewable energy credit liability | 25,384 | 42,805 | ||||||
Fair value of derivative liabilities | 25,848 | 6,478 | ||||||
Current payable pursuant to tax receivable agreement—affiliates | 11,239 | 1,658 | ||||||
Current contingent consideration for acquisitions | 1,328 | 1,328 | ||||||
Current portion of Note Payable | — | 6,936 | ||||||
Other current liabilities | 1,132 | 647 | ||||||
Total current liabilities | 139,556 | 141,951 | ||||||
Long-term liabilities: | ||||||||
Fair value of derivative liabilities | 4,578 | 106 | ||||||
Payable pursuant to tax receivable agreement—affiliates | 16,336 | 25,917 | ||||||
Long-term portion of Senior Credit Facility | 94,000 | 129,500 | ||||||
Subordinated debt—affiliate | — | 10,000 | ||||||
Other long-term liabilities | 260 | 212 | ||||||
Total liabilities | 254,730 | 307,686 | ||||||
Commitments and contingencies (Note 13) | ||||||||
Series A Preferred Stock, par value $0.01 per share, 20,000,000 shares authorized, 3,707,256 issued and 3,702,756 outstanding at June 30, 2019 and 3,707,256 issued and outstanding at December 31, 2018 | 90,649 | 90,758 | ||||||
Stockholders' equity: | ||||||||
Common Stock: | ||||||||
Class A common stock, par value $0.01 per share, 120,000,000 shares authorized, 14,478,999 issued, and 14,379,553 outstanding at June 30, 2019 and 14,178,284 issued and 14,078,838 outstanding at December 31, 2018 | 145 | 142 | ||||||
Class B common stock, par value $0.01 per share, 60,000,000 shares authorized, 20,800,000 issued and outstanding at June 30, 2019 and December 31, 2018 | 209 | 209 | ||||||
Additional paid-in capital | 42,329 | 46,157 | ||||||
Accumulated other comprehensive (loss) income | (38 | ) | 2 | |||||
Retained (deficit) earnings | (7,053 | ) | 1,307 | |||||
Treasury stock, at cost, 99,446 shares at June 30, 2019 and December 31, 2018 | (2,011 | ) | (2,011 | ) | ||||
Total stockholders' equity | 33,581 | 45,806 | ||||||
Non-controlling interest in Spark HoldCo, LLC | 18,124 | 44,488 | ||||||
Total equity | 51,705 | 90,294 | ||||||
Total liabilities, Series A Preferred Stock and Stockholders' equity | $ | 397,084 | $ | 488,738 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Retail revenues | $ | 177,805 | $ | 231,488 | $ | 417,959 | $ | 515,489 | |||||||
Net asset optimization (expense) revenues | (56 | ) | 763 | 2,496 | 3,450 | ||||||||||
Total Revenues | 177,749 | 232,251 | 420,455 | 518,939 | |||||||||||
Operating Expenses: | |||||||||||||||
Retail cost of revenues | 158,759 | 162,669 | 354,014 | 452,545 | |||||||||||
General and administrative | 37,247 | 27,780 | 66,723 | 57,827 | |||||||||||
Depreciation and amortization | 10,312 | 12,861 | 22,467 | 25,880 | |||||||||||
Total Operating Expenses | 206,318 | 203,310 | 443,204 | 536,252 | |||||||||||
Operating (loss) income | (28,569 | ) | 28,941 | (22,749 | ) | (17,313 | ) | ||||||||
Other (expense)/income: | |||||||||||||||
Interest expense | (1,995 | ) | (2,316 | ) | (4,218 | ) | (4,561 | ) | |||||||
Interest and other income | 494 | 553 | 683 | 754 | |||||||||||
Total other expenses | (1,501 | ) | (1,763 | ) | (3,535 | ) | (3,807 | ) | |||||||
(Loss) income before income tax (benefit) expense | (30,070 | ) | 27,178 | (26,284 | ) | (21,120 | ) | ||||||||
Income tax (benefit) expense | (4,586 | ) | 3,251 | (3,545 | ) | (3,216 | ) | ||||||||
Net (loss) income | $ | (25,484 | ) | $ | 23,927 | $ | (22,739 | ) | $ | (17,904 | ) | ||||
Less: Net (loss) income attributable to non-controlling interests | (18,369 | ) | 15,142 | (16,406 | ) | (15,584 | ) | ||||||||
Net (loss) income attributable to Spark Energy, Inc. stockholders | $ | (7,115 | ) | $ | 8,785 | $ | (6,333 | ) | $ | (2,320 | ) | ||||
Less: Dividend on Series A Preferred Stock | 2,027 | 2,027 | 4,054 | 4,054 | |||||||||||
Net (loss) income attributable to stockholders of Class A common stock | $ | (9,142 | ) | $ | 6,758 | $ | (10,387 | ) | $ | (6,374 | ) | ||||
Other comprehensive (loss) income, net of tax: | |||||||||||||||
Currency translation (loss) gain | $ | (63 | ) | $ | 25 | $ | (98 | ) | $ | (58 | ) | ||||
Other comprehensive (loss) income | (63 | ) | 25 | (98 | ) | (58 | ) | ||||||||
Comprehensive (loss) income | $ | (25,547 | ) | $ | 23,952 | $ | (22,837 | ) | $ | (17,962 | ) | ||||
Less: Comprehensive (loss) income attributable to non-controlling interests | (18,407 | ) | 15,157 | (16,464 | ) | (15,620 | ) | ||||||||
Comprehensive (loss) income attributable to Spark Energy, Inc. stockholders | $ | (7,140 | ) | $ | 8,795 | $ | (6,373 | ) | $ | (2,342 | ) | ||||
Net (loss) income attributable to Spark Energy, Inc. per share of Class A common stock | |||||||||||||||
Basic | $ | (0.64 | ) | $ | 0.51 | $ | (0.73 | ) | $ | (0.48 | ) | ||||
Diluted | $ | (0.73 | ) | $ | 0.51 | $ | (0.73 | ) | $ | (0.52 | ) | ||||
Weighted average shares of Class A common stock outstanding | |||||||||||||||
Basic | 14,246 | 13,229 | 14,191 | 13,183 | |||||||||||
Diluted | 35,046 | 13,246 | 34,991 | 34,668 | |||||||||||
Six Months Ended June 30, | |||||||||
2019 | 2018 | ||||||||
Cash flows from operating activities: | |||||||||
Net loss | $ | (22,739 | ) | $ | (17,904 | ) | |||
Adjustments to reconcile net loss to net cash flows provided by operating activities: | |||||||||
Depreciation and amortization expense | 22,480 | 24,639 | |||||||
Deferred income taxes | (4,527 | ) | (3,396 | ) | |||||
Change in TRA liability | — | 79 | |||||||
Stock based compensation | 2,432 | 2,686 | |||||||
Amortization of deferred financing costs | 505 | 612 | |||||||
Excess tax benefit related to restricted stock vesting | — | (101 | ) | ||||||
Change in Fair Value of Earnout liabilities | — | (63 | ) | ||||||
Bad debt expense | 6,015 | 5,725 | |||||||
Loss on derivatives, net | 54,997 | 19,488 | |||||||
Current period cash settlements on derivatives, net | (19,891 | ) | 7,170 | ||||||
Other | (399 | ) | (554 | ) | |||||
Changes in assets and liabilities: | |||||||||
Decrease in accounts receivable | 41,171 | 25,957 | |||||||
Increase in accounts receivable—affiliates | (1,324 | ) | (10 | ) | |||||
Decrease in inventory | 1,858 | 2,693 | |||||||
Increase in customer acquisition costs | (9,185 | ) | (6,254 | ) | |||||
Decrease (increase) in prepaid and other current assets | 11,545 | (59 | ) | ||||||
(Increase) decrease in other assets | (786 | ) | 97 | ||||||
Decrease in accounts payable and accrued liabilities | (30,391 | ) | (20,140 | ) | |||||
Increase (decrease) in accounts payable—affiliates | 11 | (2,249 | ) | ||||||
Decrease in other current liabilities | (792 | ) | (1,545 | ) | |||||
Increase (decrease) in other non-current liabilities | 49 | (461 | ) | ||||||
Net cash provided by operating activities | 51,029 | 36,410 | |||||||
Cash flows from investing activities: | |||||||||
Purchases of property and equipment | (460 | ) | (1,163 | ) | |||||
Acquisition of Starion customers | (5,913 | ) | — | ||||||
Acquisition of HIKO | — | (15,041 | ) | ||||||
Acquisition of Customers from Affiliate | — | (7,796 | ) | ||||||
Net cash used in investing activities | (6,373 | ) | (24,000 | ) | |||||
Cash flows from financing activities: | |||||||||
Proceeds from (buyback) issuance of Series A Preferred Stock, net of issuance costs paid | (111 | ) | 48,490 | ||||||
Borrowings on notes payable | 118,500 | 146,800 | |||||||
Payments on notes payable | (164,000 | ) | (160,050 | ) | |||||
Payment of the Major Energy Companies Earnout | — | (1,607 | ) | ||||||
Payments on the Verde promissory note | (2,036 | ) | (6,573 | ) | |||||
Proceeds from disgorgement of stockholders short-swing profits | 55 | 244 | |||||||
Restricted stock vesting | (1,348 | ) | (2,589 | ) | |||||
Payment of Tax Receivable Agreement liability | — | (3,577 | ) | ||||||
Payment of dividends to Class A common stockholders | (5,170 | ) | (4,805 | ) | |||||
Payment of distributions to non-controlling unitholders | (7,540 | ) | (19,501 | ) | |||||
Payment of Preferred Stock dividends | (4,054 | ) | (2,959 | ) | |||||
Payment to affiliates for acquisition of customer book | (10 | ) | — | ||||||
Net cash used in financing activities | (65,714 | ) | (6,127 | ) | |||||
(Decrease) increase in Cash, cash equivalents and Restricted cash | (21,058 | ) | 6,283 | ||||||
Cash, cash equivalents and Restricted cash—beginning of period | 49,638 | 29,419 | |||||||
Cash, cash equivalents and Restricted cash—end of period | $ | 28,580 | $ | 35,702 | |||||
Supplemental Disclosure of Cash Flow Information: |
Non-cash items: | |||||||||
Property and equipment purchase accrual | $ | 4 | $ | (123 | ) | ||||
Holdback for Verde Note—Indemnified Matters | $ | 4,900 | $ | — | |||||
Cash paid during the period for: | |||||||||
Interest | $ | 3,723 | $ | 3,884 | |||||
Taxes | $ | 1,440 | $ | 5,399 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands, except volume and per unit operating data) | |||||||||||||||
Retail Electricity Segment | |||||||||||||||
Total Revenues | $ | 160,776 | $ | 209,447 | $ | 342,868 | $ | 430,346 | |||||||
Retail Cost of Revenues | 148,187 | 151,953 | 314,074 | 401,500 | |||||||||||
Less: Net (loss) gain on non-trading derivatives, net of cash settlements | (21,025 | ) | 24,852 | (34,794 | ) | (23,515 | ) | ||||||||
Retail Gross Margin (1) — Electricity | $ | 33,614 | $ | 32,642 | $ | 63,588 | $ | 52,361 | |||||||
Volumes — Electricity (MWhs) | 1,516,139 | 2,100,007 | 3,244,222 | 4,352,031 | |||||||||||
Retail Gross Margin (2) — Electricity per MWh | $ | 22.17 | $ | 15.54 | $ | 19.60 | $ | 12.03 | |||||||
Retail Natural Gas Segment | |||||||||||||||
Total Revenues | 17,029 | 22,041 | 75,091 | 85,143 | |||||||||||
Retail Cost of Revenues | 10,572 | 10,716 | 39,940 | 51,045 | |||||||||||
Less: Net (loss) gain on non-trading derivatives, net of cash settlements | (1,653 | ) | 542 | 438 | (2,685 | ) | |||||||||
Retail Gross Margin (1) — Gas | $ | 8,110 | $ | 10,783 | $ | 34,713 | $ | 36,783 | |||||||
Volumes — Gas (MMBtus) | 2,057,121 | 2,840,721 | 9,008,731 | 10,517,802 | |||||||||||
Retail Gross Margin (2) — Gas per MMBtu | $ | 3.94 | $ | 3.80 | $ | 3.85 | $ | 3.50 |
(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 “Reconciliation of GAAP to Non-GAAP Measures” section below 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; |
• | our ability to fund capital expenditures (including customer acquisition costs) and incur and service debt; and |
• | our compliance with financial debt covenants. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||||
Reconciliation of Adjusted EBITDA to Net (loss) income: | |||||||||||||||||
Net (loss) income | $ | (25,484 | ) | $ | 23,927 | $ | (22,739 | ) | $ | (17,904 | ) | ||||||
Depreciation and amortization | 10,312 | 12,861 | 22,467 | 25,880 | |||||||||||||
Interest expense | 1,995 | 2,316 | 4,218 | 4,561 | |||||||||||||
Income tax (benefit) expense | (4,586 | ) | 3,251 | (3,545 | ) | (3,216 | ) | ||||||||||
EBITDA | (17,763 | ) | 42,355 | 401 | 9,321 | ||||||||||||
Less: | |||||||||||||||||
Net, (loss) gain on derivative instruments | (35,456 | ) | 17,054 | (54,997 | ) | (19,488 | ) | ||||||||||
Net cash settlements on derivative instruments | 12,769 | 8,792 | 20,794 | (6,745 | ) | ||||||||||||
Customer acquisition costs | 3,396 | 1,980 | 9,185 | 6,254 | |||||||||||||
Plus: | |||||||||||||||||
Non-cash compensation expense | 1,260 | 1,555 | 2,432 | 2,686 | |||||||||||||
Non-recurring legal and regulatory settlements | 10,807 | — | 10,807 | — | |||||||||||||
Adjusted EBITDA | $ | 13,595 | $ | 16,084 | $ | 38,658 | $ | 31,986 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Reconciliation of Adjusted EBITDA to net cash provided by operating activities: | |||||||||||||||
Net cash provided by operating activities | $ | 20,980 | $ | 45,950 | $ | 51,029 | $ | 36,410 | |||||||
Amortization of deferred financing costs | (237 | ) | (317 | ) | (505 | ) | (612 | ) | |||||||
Bad debt expense | (2,166 | ) | (3,302 | ) | (6,015 | ) | (5,725 | ) | |||||||
Interest expense | 1,995 | 2,316 | 4,218 | 4,561 | |||||||||||
Income tax (benefit) expense | (4,586 | ) | 3,251 | (3,545 | ) | (3,216 | ) | ||||||||
Changes in operating working capital | |||||||||||||||
Accounts receivable, prepaids, current assets | (41,028 | ) | (38,516 | ) | (51,392 | ) | (25,888 | ) | |||||||
Inventory | 1,785 | 1,377 | (1,858 | ) | (2,693 | ) | |||||||||
Accounts payable and accrued liabilities | 20,222 | 7,618 | 31,172 | 23,934 | |||||||||||
Other | 16,630 | (2,293 | ) | 15,554 | 5,215 | ||||||||||
Adjusted EBITDA | $ | 13,595 | $ | 16,084 | $ | 38,658 | $ | 31,986 | |||||||
Cash Flow Data: | |||||||||||||||
Cash flows provided by operating activities | $ | 20,980 | $ | 45,950 | $ | 51,029 | $ | 36,410 | |||||||
Cash flows used in investing activities | $ | (250 | ) | $ | (8,205 | ) | $ | (6,373 | ) | $ | (24,000 | ) | |||
Cash flows used in financing activities | $ | (27,353 | ) | $ | (23,108 | ) | (65,714 | ) | $ | (6,127 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Reconciliation of Retail Gross Margin to Operating (loss) income: | |||||||||||||||
Operating (loss) income | $ | (28,569 | ) | $ | 28,941 | $ | (22,749 | ) | $ | (17,313 | ) | ||||
Plus: | |||||||||||||||
Depreciation and amortization | 10,312 | 12,861 | 22,467 | 25,880 | |||||||||||
General and administrative expense | 37,247 | 27,780 | 66,723 | 57,827 | |||||||||||
Less: | |||||||||||||||
Net asset optimization (expenses) revenues | (56 | ) | 763 | 2,496 | 3,450 | ||||||||||
Net, (loss) gain on non-trading derivative instruments | (35,466 | ) | 16,601 | (55,269 | ) | (20,111 | ) | ||||||||
Net, Cash settlements on non-trading derivative instruments | 12,788 | 8,793 | 20,913 | (6,089 | ) | ||||||||||
Retail Gross Margin | $ | 41,724 | $ | 43,425 | $ | 98,301 | $ | 89,144 | |||||||
Retail Gross Margin - Retail Electricity Segment | $ | 33,614 | $ | 32,642 | $ | 63,588 | $ | 52,361 | |||||||
Retail Gross Margin - Retail Natural Gas Segment | $ | 8,110 | $ | 10,783 | $ | 34,713 | $ | 36,783 |