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 March 4, 2020 |
Exhibit No. | Description |
99.1 |
Spark Energy, Inc. | ||
By: | /s/ James G. Jones II | |
Name: | James G Jones II | |
Title: | Chief Financial Officer |
• | Recorded $25.7 million in Adjusted EBITDA, $64.3 million in Retail Gross Margin, and $0.7 million in Net Loss for the fourth quarter 2019 |
• | Recorded $92.4 million in Adjusted EBITDA, $220.7 million in Retail Gross Margin, and $14.2 million in Net Income for the year ended 2019 |
• | Total RCE count of 672,000 as of December 31, 2019 |
• | Average monthly attrition of 5.0% for the year ended December 31, 2019 |
• | Settled several significant legacy litigation items |
• | Sold our Japanese joint venture for a pre-tax gain of $4.9 million, not included in Adjusted EBITDA |
• | Total liquidity of $138.7 million |
• | Approximately 70% of all new sales in 2019 were fully renewable electricity or carbon neutral natural gas |
December 31, | |||
($ in thousands) | 2019 | ||
Cash and cash equivalents | $ | 56,664 | |
Senior Credit Facility Availability (1) | 57,068 | ||
Subordinated Debt Facility Availability (2) | 25,000 | ||
Total Liquidity | $ | 138,732 |
• | 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 and actual attrition rates; |
• | accuracy of billing systems; |
• | ability to successfully identify, complete, and efficiently integrate acquisitions into our operations; |
• | significant changes in, or new changes by, the ISOs in the regions 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. |
December 31, 2019 | December 31, 2018 | ||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 56,664 | $ | 41,002 | |||||
Restricted cash | 1,004 | 8,636 | |||||||
Accounts receivable, net of allowance for doubtful accounts of $4,797 and $3,353 as of December 31, 2019 and 2018, respectively | 113,635 | 150,866 | |||||||
Accounts receivable—affiliates | 2,032 | 2,558 | |||||||
Inventory | 2,954 | 3,878 | |||||||
Fair value of derivative assets | 464 | 7,289 | |||||||
Customer acquisition costs, net | 8,649 | 14,431 | |||||||
Customer relationships, net | 13,607 | 16,630 | |||||||
Deposits | 6,806 | 9,226 | |||||||
Renewable energy credit asset | 24,204 | 25,717 | |||||||
Other current assets | 6,109 | 11,747 | |||||||
Total current assets | 236,128 | 291,980 | |||||||
Property and equipment, net | 3,267 | 4,366 | |||||||
Fair value of derivative assets | 106 | 3,276 | |||||||
Customer acquisition costs, net | 9,845 | 3,893 | |||||||
Customer relationships, net | 17,767 | 26,429 | |||||||
Deferred tax assets | 29,865 | 27,321 | |||||||
Goodwill | 120,343 | 120,343 | |||||||
Other assets | 5,647 | 11,130 | |||||||
Total Assets | $ | 422,968 | $ | 488,738 | |||||
Liabilities, Series A Preferred Stock and Stockholders' Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 48,245 | $ | 68,790 | |||||
Accounts payable—affiliates | 1,009 | 2,464 | |||||||
Accrued liabilities | 37,941 | 10,845 | |||||||
Renewable energy credit liability | 33,120 | 42,805 | |||||||
Fair value of derivative liabilities | 19,943 | 6,478 | |||||||
Current payable pursuant to tax receivable agreement—affiliates | — | 1,658 | |||||||
Current contingent consideration for acquisitions | — | 1,328 | |||||||
Current portion of note payable | — | 6,936 | |||||||
Other current liabilities | 1,697 | 647 | |||||||
Total current liabilities | 141,955 | 141,951 | |||||||
Long-term liabilities: | |||||||||
Fair value of derivative liabilities | 495 | 106 | |||||||
Payable pursuant to tax receivable agreement—affiliates | — | 25,917 | |||||||
Long-term portion of Senior Credit Facility | 123,000 | 129,500 | |||||||
Subordinated debt—affiliate | — | 10,000 | |||||||
Other long-term liabilities | 217 | 212 | |||||||
Total liabilities | 265,667 | 307,686 | |||||||
Commitments and contingencies (Note 14) | |||||||||
Series A Preferred Stock, par value $0.01 per share, 20,000,000 shares authorized, 3,707,256 shares issued and 3,677,318 shares outstanding at December 31, 2019 and 3,707,256 shares issued and outstanding at December 31, 2018 | 90,015 | 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 December 31, 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 December 31, 2019 and 20,800,000 issued and outstanding at December 31, 2018 | 209 | 209 | |||||||
Additional paid-in capital | 51,842 | 46,157 | |||||||
Accumulated other comprehensive (loss)/income | (40 | ) | 2 | ||||||
Retained earnings | 1,074 | 1,307 | |||||||
Treasury stock, at cost, 99,446 shares at December 31, 2019 and December 31, 2018 | (2,011 | ) | (2,011 | ) | |||||
Total stockholders' equity | 51,219 | 45,806 | |||||||
Non-controlling interest in Spark HoldCo, LLC | 16,067 | 44,488 | |||||||
Total equity | 67,286 | 90,294 | |||||||
Total Liabilities, Series A Preferred Stock and stockholders' equity | $ | 422,968 | $ | 488,738 |
Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2017 | ||||||||||||
Revenues: | ||||||||||||||
Retail revenues | $ | 810,954 | $ | 1,001,417 | $ | 798,772 | ||||||||
Net asset optimization revenues (expense) | 2,771 | 4,511 | (717 | ) | ||||||||||
Total revenues | 813,725 | 1,005,928 | 798,055 | |||||||||||
Operating expenses: | ||||||||||||||
Retail cost of revenues | 615,225 | 845,493 | 552,167 | |||||||||||
General and administrative | 133,534 | 111,431 | 101,127 | |||||||||||
Depreciation and amortization | 40,987 | 52,658 | 42,341 | |||||||||||
Total operating expenses | 789,746 | 1,009,582 | 695,635 | |||||||||||
Operating income (loss) | 23,979 | (3,654 | ) | 102,420 | ||||||||||
Other (expense)/income: | ||||||||||||||
Interest expense | (8,621 | ) | (9,410 | ) | (11,134 | ) | ||||||||
Change in tax receivable agreement liability | — | — | 22,267 | |||||||||||
Gain on disposal of eRex | 4,862 | — | — | |||||||||||
Total other income/(expense) | 1,250 | 749 | 256 | |||||||||||
Total other (expense)/income | (2,509 | ) | (8,661 | ) | 11,389 | |||||||||
Income (loss) before income tax expense | 21,470 | (12,315 | ) | 113,809 | ||||||||||
Income tax expense | 7,257 | 2,077 | 38,765 | |||||||||||
Net income (loss) | $ | 14,213 | $ | (14,392 | ) | $ | 75,044 | |||||||
Less: Net income (loss) attributable to non-controlling interest | 5,763 | (13,206 | ) | 55,799 | ||||||||||
Net income (loss) attributable to Spark Energy, Inc. stockholders | $ | 8,450 | $ | (1,186 | ) | $ | 19,245 | |||||||
Less: Dividend on Series A preferred stock | 8,091 | 8,109 | 3,038 | |||||||||||
Net income (loss) attributable to stockholders of Class A common stock | $ | 359 | $ | (9,295 | ) | $ | 16,207 | |||||||
Other comprehensive (loss) income, net of tax: | ||||||||||||||
Currency translation (loss) gain | (102 | ) | 31 | (59 | ) | |||||||||
Other comprehensive (loss) income | (102 | ) | 31 | (59 | ) | |||||||||
Comprehensive income (loss) | $ | 14,111 | $ | (14,361 | ) | $ | 74,985 | |||||||
Less: Comprehensive income (loss) attributable to non-controlling interest | 5,703 | (13,188 | ) | 55,762 | ||||||||||
Comprehensive income (loss) attributable to Spark Energy, Inc. stockholders | $ | 8,408 | $ | (1,173 | ) | $ | 19,223 | |||||||
Net income (loss) attributable to Spark Energy, Inc. per share of Class A common stock | ||||||||||||||
Basic | $ | 0.03 | $ | (0.69 | ) | $ | 1.23 | |||||||
Diluted | $ | 0.02 | $ | (0.69 | ) | $ | 1.21 | |||||||
Weighted average shares of Class A common stock outstanding | ||||||||||||||
Basic | 14,286 | 13,390 | 13,143 | |||||||||||
Diluted | 14,568 | 13,390 | 13,346 |
Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2017 | ||||||||||||
Cash flows from operating activities: | ||||||||||||||
Net income (loss) | $ | 14,213 | $ | (14,392 | ) | $ | 75,044 | |||||||
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: | ||||||||||||||
Depreciation and amortization expense | 41,002 | 51,436 | 42,666 | |||||||||||
Deferred income taxes | (6,929 | ) | (2,328 | ) | 29,821 | |||||||||
Change in TRA liability | — | — | (22,267 | ) | ||||||||||
Stock based compensation | 5,487 | 5,879 | 5,058 | |||||||||||
Amortization of deferred financing costs | 1,275 | 1,291 | 1,035 | |||||||||||
Change in fair value of earnout liabilities | (1,328 | ) | (1,715 | ) | (7,898 | ) | ||||||||
Accretion on fair value of earnout liabilities | — | — | 4,108 | |||||||||||
Excess tax expense (benefit) related to restricted stock vesting | 50 | (101 | ) | 179 | ||||||||||
Bad debt expense | 13,532 | 10,135 | 6,550 | |||||||||||
Loss (gain) on derivatives, net | 67,749 | 18,170 | (5,008 | ) | ||||||||||
Current period cash settlements on derivatives, net | (41,919 | ) | 11,038 | (19,598 | ) | |||||||||
Accretion of discount to convertible subordinated notes to affiliate | — | — | 1,004 | |||||||||||
Earnout payments | — | — | (1,781 | ) | ||||||||||
Gain on disposal of eRex | (4,862 | ) | — | — | ||||||||||
Other | (776 | ) | (882 | ) | (5 | ) | ||||||||
Changes in assets and liabilities: | ||||||||||||||
Decrease (increase) in accounts receivable | 23,699 | 2,692 | (32,361 | ) | ||||||||||
Decrease (increase) in accounts receivable—affiliates | 526 | 859 | (1,459 | ) | ||||||||||
Decrease (increase) in inventory | 924 | 674 | (718 | ) | ||||||||||
Increase in customer acquisition costs | (18,685 | ) | (13,673 | ) | (25,874 | ) | ||||||||
Decrease (increase) in prepaid and other current assets | 9,250 | (14,033 | ) | 1,915 | ||||||||||
Decrease (increase) in other assets | 55 | (335 | ) | (465 | ) | |||||||||
(Decrease) increase in accounts payable and accrued liabilities | (8,620 | ) | 10,301 | 14,831 | ||||||||||
(Decrease) increase in accounts payable—affiliates | (1,455 | ) | (2,158 | ) | 51 | |||||||||
Decrease in other current liabilities | (1,459 | ) | (3,050 | ) | (1,210 | ) | ||||||||
Increase (decrease) in other non-current liabilities | 6 | 41 | (1,487 | ) | ||||||||||
Decrease in intangible assets—customer acquisitions | — | (86 | ) | — | ||||||||||
Net cash provided by operating activities | 91,735 | 59,763 | 62,131 | |||||||||||
Cash flows from investing activities: | ||||||||||||||
Purchases of property and equipment | (1,120 | ) | (1,429 | ) | (1,704 | ) | ||||||||
Cash paid for acquisitions | — | (17,552 | ) | (75,854 | ) | |||||||||
Acquisition of Starion Customers | (5,913 | ) | — | — | ||||||||||
Disposal of eRex investment | 8,431 | — | — | |||||||||||
Net cash provided by (used in) investing activities | 1,398 | (18,981 | ) | (77,558 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||
Proceeds from (buyback) issuance of Series A Preferred Stock, net of issuance costs paid | (743 | ) | 48,490 | 40,241 | ||||||||||
Payment to affiliates for acquisition of customer book | (10 | ) | (7,129 | ) | — | |||||||||
Borrowings on notes payable | 356,000 | 417,300 | 206,400 | |||||||||||
Payments on notes payable | (362,500 | ) | (403,050 | ) | (152,939 | ) | ||||||||
Earnout Payments | — | (1,607 | ) | (18,418 | ) | |||||||||
Net paydown on subordinated debt facility | (10,000 | ) | — | — | ||||||||||
Payments on the Verde promissory note | (2,036 | ) | (13,422 | ) | — | |||||||||
Restricted stock vesting | (1,348 | ) | (2,895 | ) | (3,091 | ) | ||||||||
Proceeds from disgorgement of stockholders short-swing profits | 55 | 244 | 1,129 | |||||||||||
Payment of Tax Receivable Agreement Liability | (11,239 | ) | (6,219 | ) | — | |||||||||
Payment of dividends to Class A common stockholders | (10,382 | ) | (9,783 | ) | (9,519 | ) | ||||||||
Payment of distributions to non-controlling unitholders | (34,794 | ) | (35,478 | ) | (33,800 | ) | ||||||||
Payment of Preferred Stock dividends | (8,106 | ) | (7,014 | ) | (2,106 | ) | ||||||||
Purchase of Treasury Stock | — | — | (2,011 | ) |
Net cash (used in) provided by financing activities | (85,103 | ) | (20,563 | ) | 25,886 | |||||||||
Increase in Cash and cash equivalents and Restricted Cash | 8,030 | 20,219 | 10,459 | |||||||||||
Cash and cash equivalents and Restricted cash—beginning of period | 49,638 | 29,419 | 18,960 | |||||||||||
Cash and cash equivalents and Restricted cash—end of period | $ | 57,668 | $ | 49,638 | $ | 29,419 | ||||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||||
Non-cash items: | ||||||||||||||
Property and equipment purchase accrual | $ | 92 | $ | (123 | ) | $ | 91 | |||||||
Holdback for Verde Note—Indemnified Matters | $ | 4,900 | $ | — | $ | — | ||||||||
Write-off of tax benefit related to tax receivable agreement liability—affiliates | $ | 4,384 | $ | — | $ | — | ||||||||
Gain on settlement of tax receivable agreement liability—affiliates | $ | 16,336 | $ | — | $ | — | ||||||||
Net contribution by NG&E in excess of cash | $ | — | $ | — | $ | 274 | ||||||||
Installment consideration incurred in connection with the Verde Companies acquisition and Verde Earnout Termination Note | $ | — | $ | — | $ | 19,994 | ||||||||
Tax benefit from tax receivable agreement | $ | — | $ | (1,508 | ) | $ | (1,802 | ) | ||||||
Liability due to tax receivable agreement | $ | — | $ | 1,642 | $ | 4,674 | ||||||||
Cash paid during the period for: | ||||||||||||||
Interest | $ | 6,634 | $ | 7,883 | $ | 5,715 | ||||||||
Taxes | $ | 7,516 | $ | 8,561 | $ | 11,205 |
Year Ended December 31, | |||||||||||
2019 | 2018 | 2017 | |||||||||
(in thousands, except volume and per unit operating data) | |||||||||||
Retail Electricity Segment | |||||||||||
Total Revenues | $ | 688,451 | $ | 863,451 | $ | 657,566 | |||||
Retail Cost of Revenues | 552,250 | 762,771 | 477,012 | ||||||||
Less: Net (Losses) Gains on non-trading derivatives, net of cash settlements | (24,339 | ) | (23,988 | ) | 22,086 | ||||||
Retail Gross Margin (1) —Electricity | $ | 160,540 | $ | 124,668 | $ | 158,468 | |||||
Volumes—Electricity (MWhs) | 6,416,568 | 8,630,653 | 6,755,663 | ||||||||
Retail Gross Margin (2) —Electricity per MWh | $ | 25.02 | $ | 14.44 | $ | 23.46 | |||||
Retail Natural Gas Segment | |||||||||||
Total Revenues | $ | 122,503 | $ | 137,966 | $ | 141,206 | |||||
Retail Cost of Revenues | 62,975 | 82,722 | 75,155 | ||||||||
Less: Net (Losses) Gains on non-trading derivatives, net of cash settlements | (672 | ) | (5,197 | ) | 10 | ||||||
Retail Gross Margin (1) —Gas | $ | 60,200 | $ | 60,441 | $ | 66,041 | |||||
Volumes—Gas (MMBtus) | 14,543,563 | 16,778,393 | 18,203,684 | ||||||||
Retail Gross Margin (2) —Gas per MMBtu | $ | 4.14 | $ | 3.60 | $ | 3.63 |
• | 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 |
Year Ended December 31, | Quarter Ended December 31, | |||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Reconciliation of Adjusted EBITDA to Net Income (Loss): | ||||||||||||||||
Net income (loss) | $ | 14,213 | $ | (14,392 | ) | $ | (724 | ) | $ | (15,315 | ) | |||||
Depreciation and amortization | 40,987 | 52,658 | 9,024 | 12,861 | ||||||||||||
Interest expense | 8,621 | 9,410 | 2,229 | 2,087 | ||||||||||||
Income tax expense | 7,257 | 2,077 | 4,235 | 1,475 | ||||||||||||
EBITDA | 71,078 | 49,753 | 14,764 | 1,108 | ||||||||||||
Less: | ||||||||||||||||
Net, (Losses) gains on derivative instruments | (67,749 | ) | (18,170 | ) | (25,059 | ) | (16,799 | ) | ||||||||
Net, Cash settlements on derivative instruments | 42,820 | (10,587 | ) | 9,305 | (4,764 | ) | ||||||||||
Customer acquisition costs | 18,685 | 13,673 | 5,077 | 4,724 | ||||||||||||
Plus: | ||||||||||||||||
Non-cash compensation expense | 5,487 | 5,879 | 1,433 | 2,172 | ||||||||||||
Non-recurring legal and regulatory settlements | 14,457 | — | 3,650 | — | ||||||||||||
Gain on disposal of eRex | (4,862 | ) | — | (4,862 | ) | — | ||||||||||
Adjusted EBITDA | $ | 92,404 | $ | 70,716 | $ | 25,662 | $ | 20,119 |
Year Ended December 31, | Quarter Ended December 31, | |||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||
Reconciliation of Adjusted EBITDA to net cash provided by operating activities: | ||||||||||||||
Net cash provided by operating activities | $ | 91,735 | $ | 59,763 | $ | 14,650 | $ | 17,910 | ||||||
Amortization of deferred financing costs | (1,275 | ) | (1,291 | ) | (273 | ) | (48 | ) | ||||||
Bad debt expense | (13,532 | ) | (10,135 | ) | (4,347 | ) | (1,655 | ) | ||||||
Interest expense | 8,621 | 9,410 | 2,229 | 2,087 | ||||||||||
Income tax expense | 7,257 | 2,077 | 4,235 | 1,475 | ||||||||||
Changes in operating working capital | ||||||||||||||
Accounts receivable, prepaids, current assets | (33,475 | ) | 10,482 | 16,883 | 20,122 | |||||||||
Inventory | (924 | ) | (674 | ) | (626 | ) | (199 | ) | ||||||
Accounts payable and accrued liabilities | 11,534 | (5,093 | ) | (18,675 | ) | (23,081 | ) | |||||||
Other | 22,463 | 6,177 | 11,586 | 3,508 | ||||||||||
Adjusted EBITDA | $ | 92,404 | $ | 70,716 | $ | 25,662 | $ | 20,119 | ||||||
Cash Flow Data: | ||||||||||||||
Cash flows provided by operating activities | $ | 91,735 | $ | 59,763 | $ | 14,650 | $ | 17,910 | ||||||
Cash flows provided by (used in) investing activities | $ | 1,398 | $ | (18,981 | ) | $ | 7,888 | $ | 4,712 | |||||
Cash flows (used in) provided by financing activities | $ | (85,103 | ) | $ | (20,563 | ) | $ | (8,452 | ) | $ | (15,780 | ) |
Year Ended December 31, | Quarter Ended December 31, | |||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||
Reconciliation of Retail Gross Margin to Operating Income (Loss): | ||||||||||||||
Operating income (loss) | $ | 23,979 | $ | (3,654 | ) | $ | 633 | $ | (11,795 | ) | ||||
Plus: | ||||||||||||||
Depreciation and amortization | 40,987 | 52,658 | 9,024 | 12,861 | ||||||||||
General and administrative expense | 133,534 | 111,431 | 39,182 | 27,909 | ||||||||||
Less: | ||||||||||||||
Net asset optimization revenue (expense) | 2,771 | 4,511 | 529 | 713 | ||||||||||
(Losses) gains on non-trading derivative instruments | (67,955 | ) | (19,571 | ) | (25,214 | ) | (17,348 | ) | ||||||
Cash settlements on non-trading derivative instruments | 42,944 | (9,614 | ) | 9,267 | (4,560 | ) | ||||||||
Retail Gross Margin | $ | 220,740 | $ | 185,109 | $ | 64,257 | $ | 50,170 | ||||||
Retail Gross Margin - Retail Electricity Segment | $ | 160,540 | $ | 124,668 | $ | 43,810 | $ | 32,055 | ||||||
Retail Gross Margin - Retail Natural Gas Segment | $ | 60,200 | $ | 60,441 | $ | 20,447 | $ | 18,115 |