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 November 5, 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 $28.1 million in Adjusted EBITDA, $58.2 million in Retail Gross Margin, and $37.7 million in Net Income for the third quarter |
• | Total RCE count of 772,000 as of September 30, 2019 |
• | Average monthly attrition of 4.0% |
• | ERCOT summer insurance hedging strategy performed very well |
($ in thousands) | September 30, 2019 | ||
Cash and cash equivalents | $ | 42,580 | |
Senior Credit Facility Availability (1) | 63,113 | ||
Subordinated Debt Facility Availability (2) | 14,496 | ||
Total Liquidity | $ | 120,189 |
• | 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. |
September 30, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 42,580 | $ | 41,002 | ||||
Restricted cash | 1,002 | 8,636 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $2,995 at September 30, 2019 and $3,353 at December 31, 2018 | 101,672 | 150,866 | ||||||
Accounts receivable—affiliates | 1,419 | 2,558 | ||||||
Inventory | 3,580 | 3,878 | ||||||
Fair value of derivative assets | 1,143 | 7,289 | ||||||
Customer acquisition costs, net | 8,389 | 14,431 | ||||||
Customer relationships, net | 14,623 | 16,630 | ||||||
Deposits | 6,723 | 9,226 | ||||||
Renewable energy credit asset | 16,414 | 25,717 | ||||||
Other current assets | 14,296 | 11,747 | ||||||
Total current assets | 211,841 | 291,980 | ||||||
Property and equipment, net | 3,255 | 4,366 | ||||||
Fair value of derivative assets | 94 | 3,276 | ||||||
Customer acquisition costs, net | 9,328 | 3,893 | ||||||
Customer relationships, net | 20,715 | 26,429 | ||||||
Deferred tax assets | 23,130 | 27,321 | ||||||
Goodwill | 120,343 | 120,343 | ||||||
Other assets | 9,696 | 11,130 | ||||||
Total assets | $ | 398,402 | $ | 488,738 | ||||
Liabilities, Series A Preferred Stock and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 45,708 | $ | 68,790 | ||||
Accounts payable—affiliates | 351 | 2,464 | ||||||
Accrued liabilities | 23,755 | 10,845 | ||||||
Renewable energy credit liability | 30,638 | 42,805 | ||||||
Fair value of derivative liabilities | 4,460 | 6,478 | ||||||
Current payable pursuant to tax receivable agreement—affiliates | — | 1,658 | ||||||
Current contingent consideration for acquisitions | 1,328 | 1,328 | ||||||
Current portion of Note Payable | — | 6,936 | ||||||
Other current liabilities | 1,862 | 647 | ||||||
Total current liabilities | 108,102 | 141,951 | ||||||
Long-term liabilities: | ||||||||
Fair value of derivative liabilities | 1,830 | 106 | ||||||
Payable pursuant to tax receivable agreement—affiliates | — | 25,917 | ||||||
Long-term portion of Senior Credit Facility | 109,000 | 129,500 | ||||||
Subordinated debt—affiliate | 10,504 | 10,000 | ||||||
Other long-term liabilities | 190 | 212 | ||||||
Total liabilities | 229,626 | 307,686 | ||||||
Commitments and contingencies | ||||||||
Series A Preferred Stock, par value $0.01 per share, 20,000,000 shares authorized, 3,702,756 issued and outstanding at September 30, 2019 and 3,707,256 issued and outstanding at December 31, 2018 | 90,646 | 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 September 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 September 30, 2019 and December 31, 2018 | 209 | 209 | ||||||
Additional paid-in capital | 53,750 | 46,157 | ||||||
Accumulated other comprehensive (loss) income | (57 | ) | 2 | |||||
Retained earnings | 3,849 | 1,307 | ||||||
Treasury stock, at cost, 99,446 shares at September 30, 2019 and December 31, 2018 | (2,011 | ) | (2,011 | ) | ||||
Total stockholders' equity | 55,885 | 45,806 | ||||||
Non-controlling interest in Spark HoldCo, LLC | 22,245 | 44,488 | ||||||
Total equity | 78,130 | 90,294 | ||||||
Total liabilities, Series A Preferred Stock and Stockholders' equity | $ | 398,402 | $ | 488,738 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Retail revenues | $ | 207,341 | $ | 258,127 | $ | 625,300 | $ | 773,616 | |||||||
Net asset optimization (expense) revenues | (254 | ) | 348 | 2,242 | 3,798 | ||||||||||
Total Revenues | 207,087 | 258,475 | 627,542 | 777,414 | |||||||||||
Operating Expenses: | |||||||||||||||
Retail cost of revenues | 123,867 | 193,409 | 477,881 | 645,954 | |||||||||||
General and administrative | 27,629 | 25,695 | 94,352 | 83,522 | |||||||||||
Depreciation and amortization | 9,496 | 13,917 | 31,963 | 39,797 | |||||||||||
Total Operating Expenses | 160,992 | 233,021 | 604,196 | 769,273 | |||||||||||
Operating income | 46,095 | 25,454 | 23,346 | 8,141 | |||||||||||
Other (expense)/income: | |||||||||||||||
Interest expense | (2,174 | ) | (2,762 | ) | (6,392 | ) | (7,323 | ) | |||||||
Interest and other income | 322 | (47 | ) | 1,005 | 707 | ||||||||||
Total other expenses | (1,852 | ) | (2,809 | ) | (5,387 | ) | (6,616 | ) | |||||||
Income before income tax expense | 44,243 | 22,645 | 17,959 | 1,525 | |||||||||||
Income tax expense | 6,567 | 3,818 | 3,022 | 602 | |||||||||||
Net income | $ | 37,676 | $ | 18,827 | $ | 14,937 | $ | 923 | |||||||
Less: Net income (loss) attributable to non-controlling interests | 22,142 | 12,060 | 5,736 | (3,524 | ) | ||||||||||
Net income attributable to Spark Energy, Inc. stockholders | $ | 15,534 | $ | 6,767 | $ | 9,201 | $ | 4,447 | |||||||
Less: Dividend on Series A Preferred Stock | 2,026 | 2,027 | 6,080 | 6,081 | |||||||||||
Net income (loss) attributable to stockholders of Class A common stock | $ | 13,508 | $ | 4,740 | $ | 3,121 | $ | (1,634 | ) | ||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Currency translation (loss) gain | $ | (45 | ) | $ | 47 | $ | (143 | ) | $ | (11 | ) | ||||
Other comprehensive (loss) income | (45 | ) | 47 | (143 | ) | (11 | ) | ||||||||
Comprehensive income | $ | 37,631 | $ | 18,874 | $ | 14,794 | $ | 912 | |||||||
Less: Comprehensive income (loss) attributable to non-controlling interests | 22,116 | 12,089 | 5,652 | (3,531 | ) | ||||||||||
Comprehensive income attributable to Spark Energy, Inc. stockholders | $ | 15,515 | $ | 6,785 | $ | 9,142 | $ | 4,443 | |||||||
Net income (loss) attributable to Spark Energy, Inc. per share of Class A common stock | |||||||||||||||
Basic | $ | 0.94 | $ | 0.35 | $ | 0.22 | $ | (0.12 | ) | ||||||
Diluted | $ | 0.93 | $ | 0.35 | $ | 0.22 | $ | (0.12 | ) | ||||||
Weighted average shares of Class A common stock outstanding | |||||||||||||||
Basic | 14,380 | 13,394 | 14,254 | 13,254 | |||||||||||
Diluted | 14,514 | 13,394 | 14,429 | 13,254 | |||||||||||
Nine Months Ended September 30, | |||||||||
2019 | 2018 | ||||||||
Cash flows from operating activities: | |||||||||
Net income | $ | 14,937 | $ | 923 | |||||
Adjustments to reconcile net loss to net cash flows provided by operating activities: | |||||||||
Depreciation and amortization expense | 31,965 | 38,538 | |||||||
Deferred income taxes | 34 | (749 | ) | ||||||
Change in TRA liability | — | 79 | |||||||
Stock based compensation | 4,053 | 3,707 | |||||||
Amortization of deferred financing costs | 1,002 | 1,243 | |||||||
Excess tax benefit related to restricted stock vesting | — | (101 | ) | ||||||
Change in Fair Value of Earnout liabilities | — | (63 | ) | ||||||
Bad debt expense | 9,185 | 8,480 | |||||||
Loss on derivatives, net | 42,690 | 1,371 | |||||||
Current period cash settlements on derivatives, net | (32,593 | ) | 6,189 | ||||||
Other | (608 | ) | (489 | ) | |||||
Changes in assets and liabilities: | |||||||||
Decrease in accounts receivable | 40,008 | 21,029 | |||||||
Decrease (increase) in accounts receivable—affiliates | 1,139 | (390 | ) | ||||||
Decrease in inventory | 298 | 475 | |||||||
Increase in customer acquisition costs | (13,608 | ) | (8,949 | ) | |||||
Decrease (increase) in prepaid and other current assets | 9,211 | (10,999 | ) | ||||||
Increase in intangible assets—customer acquisitions | — | (86 | ) | ||||||
(Increase) decrease in other assets | (394 | ) | 92 | ||||||
Decrease in accounts payable and accrued liabilities | (27,721 | ) | (11,062 | ) | |||||
Decrease in accounts payable—affiliates | (2,114 | ) | (1,786 | ) | |||||
Increase (decrease) in other current liabilities | (374 | ) | (5,140 | ) | |||||
Decrease in other non-current liabilities | (25 | ) | (459 | ) | |||||
Net cash provided by operating activities | 77,085 | 41,853 | |||||||
Cash flows from investing activities: | |||||||||
Purchases of property and equipment | (577 | ) | (1,097 | ) | |||||
Verde working capital settlement | — | 470 | |||||||
Acquisition of Starion customers | (5,913 | ) | — | ||||||
Acquisition of HIKO | — | (14,290 | ) | ||||||
Acquisition of Customers from Affiliate | — | (8,776 | ) | ||||||
Net cash used in investing activities | (6,490 | ) | (23,693 | ) | |||||
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 | 224,500 | 277,800 | |||||||
Payments on notes payable | (245,000 | ) | (281,050 | ) | |||||
Net borrowings on subordinated debt facility | 504 | — | |||||||
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 | (11,239 | ) | (3,577 | ) | |||||
Payment of dividends to Class A common stockholders | (7,776 | ) | (7,233 | ) | |||||
Payment of distributions to non-controlling unitholders | (28,108 | ) | (23,701 | ) | |||||
Payment of Preferred Stock dividends | (6,082 | ) | (4,987 | ) | |||||
Payment to affiliates for acquisition of customer book | (10 | ) | — | ||||||
Net cash used in financing activities | (76,651 | ) | (4,783 | ) |
(Decrease) increase in Cash, cash equivalents and Restricted cash | (6,056 | ) | 13,377 | ||||||
Cash, cash equivalents and Restricted cash—beginning of period | 49,638 | 29,419 | |||||||
Cash, cash equivalents and Restricted cash—end of period | $ | 43,582 | $ | 42,796 | |||||
Supplemental Disclosure of Cash Flow Information: | |||||||||
Non-cash items: | |||||||||
Property and equipment purchase accrual | $ | 89 | $ | (123 | ) | ||||
Holdback for Verde Note—Indemnified Matters | $ | 4,900 | $ | — | |||||
Write-off of tax benefit related to tax receivable agreement liability — affiliates | $ | 4,157 | $ | — | |||||
Gain on settlement of tax receivable agreement liability—affiliates | $ | (16,336 | ) | $ | — | ||||
Cash paid during the period for: | |||||||||
Interest | $ | 5,245 | $ | 5,955 | |||||
Taxes | $ | 5,097 | $ | 7,461 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Retail Electricity Segment | |||||||||||||||
Total Revenues | $ | 197,010 | $ | 246,182 | $ | 539,878 | $ | 676,528 | |||||||
Retail Cost of Revenues | 119,100 | 186,449 | 433,175 | 587,949 | |||||||||||
Less: Net gain (loss) on non-trading derivatives, net of cash settlements | 24,767 | 19,481 | (10,027 | ) | (4,034 | ) | |||||||||
Retail Gross Margin (1) — Electricity | $ | 53,143 | $ | 40,252 | $ | 116,730 | $ | 92,613 | |||||||
Volumes — Electricity (MWhs) | 1,808,276 | 2,432,314 | 5,052,498 | 6,784,345 | |||||||||||
Retail Gross Margin (2) — Electricity per MWh | $ | 29.39 | $ | 16.55 | $ | 23.10 | $ | 13.65 | |||||||
Retail Natural Gas Segment | |||||||||||||||
Total Revenues | 10,331 | 11,945 | 85,422 | 97,088 | |||||||||||
Retail Cost of Revenues | 4,767 | 6,960 | 44,706 | 58,005 | |||||||||||
Less: Net gain (loss) on non-trading derivatives, net of cash settlements | 525 | (558 | ) | 963 | (3,243 | ) | |||||||||
Retail Gross Margin (1) — Gas | $ | 5,039 | $ | 5,543 | $ | 39,753 | $ | 42,326 | |||||||
Volumes — Gas (MMBtus) | 1,119,126 | 1,395,377 | 10,127,857 | 11,913,180 | |||||||||||
Retail Gross Margin (2) — Gas per MMBtu | $ | 4.50 | $ | 3.97 | $ | 3.93 | $ | 3.55 |
(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 September 30, | Nine Months Ended September 30, | |||||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
Reconciliation of Adjusted EBITDA to Net income: | ||||||||||||||||||
Net income | $ | 37,676 | $ | 18,827 | $ | 14,937 | $ | 923 | ||||||||||
Depreciation and amortization | 9,496 | 13,917 | 31,963 | 39,797 | ||||||||||||||
Interest expense | 2,174 | 2,762 | 6,392 | 7,323 | ||||||||||||||
Income tax expense | 6,567 | 3,818 | 3,022 | 602 | ||||||||||||||
EBITDA | 55,913 | 39,324 | 56,314 | 48,645 | ||||||||||||||
Less: | ||||||||||||||||||
Net, gain (loss) on derivative instruments | 12,307 | 18,117 | (42,690 | ) | (1,371 | ) | ||||||||||||
Net cash settlements on derivative instruments | 12,721 | 922 | 33,515 | (5,823 | ) | |||||||||||||
Customer acquisition costs | 4,423 | 2,695 | 13,608 | 8,949 | ||||||||||||||
Plus: | ||||||||||||||||||
Non-cash compensation expense | 1,622 | 1,021 | 4,054 | 3,707 | ||||||||||||||
Non-recurring legal and regulatory settlements | — | — | 10,807 | — | ||||||||||||||
Adjusted EBITDA | $ | 28,084 | $ | 18,611 | $ | 66,742 | $ | 50,597 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Reconciliation of Adjusted EBITDA to net cash provided by operating activities: | |||||||||||||||
Net cash provided by operating activities | $ | 26,056 | $ | 5,443 | $ | 77,085 | $ | 41,853 | |||||||
Amortization of deferred financing costs | (497 | ) | (631 | ) | (1,002 | ) | (1,243 | ) | |||||||
Bad debt expense | (3,170 | ) | (2,755 | ) | (9,185 | ) | (8,480 | ) | |||||||
Interest expense | 2,174 | 2,762 | 6,392 | 7,323 | |||||||||||
Income tax expense | 6,567 | 3,818 | 3,022 | 602 | |||||||||||
Changes in operating working capital | |||||||||||||||
Accounts receivable, prepaids, current assets | 1,034 | 16,248 | (50,358 | ) | (9,640 | ) | |||||||||
Inventory | 1,560 | 2,218 | (298 | ) | (475 | ) | |||||||||
Accounts payable and accrued liabilities | (963 | ) | (5,946 | ) | 30,209 | 17,988 | |||||||||
Other | (4,677 | ) | (2,546 | ) | 10,877 | 2,669 | |||||||||
Adjusted EBITDA | $ | 28,084 | $ | 18,611 | $ | 66,742 | $ | 50,597 | |||||||
Cash Flow Data: | |||||||||||||||
Cash flows provided by operating activities | $ | 26,056 | $ | 5,443 | $ | 77,085 | $ | 41,853 | |||||||
Cash flows (used in) provided by investing activities | $ | (117 | ) | $ | 307 | $ | (6,490 | ) | $ | (23,693 | ) | ||||
Cash flows (used in) provided by financing activities | $ | (10,937 | ) | $ | 1,344 | $ | (76,651 | ) | $ | (4,783 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Reconciliation of Retail Gross Margin to Operating income: | |||||||||||||||
Operating income | $ | 46,095 | $ | 25,454 | $ | 23,346 | $ | 8,141 | |||||||
Plus: | |||||||||||||||
Depreciation and amortization | 9,496 | 13,917 | 31,963 | 39,797 | |||||||||||
General and administrative expense | 27,629 | 25,695 | 94,352 | 83,522 | |||||||||||
Less: | |||||||||||||||
Net asset optimization (expenses) revenues | (254 | ) | 348 | 2,242 | 3,798 | ||||||||||
Net, gain (loss) on non-trading derivative instruments | 12,528 | 17,888 | (42,741 | ) | (2,223 | ) | |||||||||
Net, cash settlements on non-trading derivative instruments | 12,764 | 1,035 | 33,677 | (5,054 | ) | ||||||||||
Retail Gross Margin | $ | 58,182 | $ | 45,795 | $ | 156,483 | $ | 134,939 | |||||||
Retail Gross Margin - Retail Electricity Segment | $ | 53,143 | $ | 40,252 | $ | 116,730 | $ | 92,613 | |||||||
Retail Gross Margin - Retail Natural Gas Segment | $ | 5,039 | $ | 5,543 | $ | 39,753 | $ | 42,326 |