UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
FOR THE QUARTERLY PERIOD ENDED
or
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
|
|
|
|
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification Number) |
|
|
|
|
|
|
|
|
|
(Address of principal executive offices) |
|
(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b)-2 of the Exchange Act:
| Title of each Class | Trading Symbol | Name of exchange of which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
☐ |
|
☒ |
|
Non-accelerated filer |
☐ |
Smaller reporting company |
|
|
Emerging growth company |
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes
As of May 8, 2024, the registrant had the following shares outstanding:
|
Class A common stock, $0.01 par value: |
|
|
Class B common stock, $0.01 par value: |
|
GENIE ENERGY LTD.
TABLE OF CONTENTS
| i |
GENIE ENERGY LTD.
(in thousands, except per share amounts)
|
|
March 31, |
|
|
December 31, |
| ||
|
|
(Unaudited) |
|
|
(Note 1) |
| ||
|
Assets |
|
|
|
|
| ||
|
Current assets: |
|
|
|
|
| ||
|
Cash and cash equivalents |
$ |
|
|
|
$ |
|
|
| Restricted cash—short-term | |||||||
| Marketable equity securities | |
||||||
|
Trade accounts receivable, net of allowance for doubtful accounts of $ |
|
|
|
|
|
|
|
|
Inventory |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
|
|
|
|
|
|
|
Other current assets |
|
|
|
|
|
|
|
| Current assets of discontinued operations | |||||||
|
Total current assets |
|
|
|
|
|
|
|
| Restricted cash—long-term |
|||||||
| Property and equipment, net | |||||||
|
Goodwill |
|
|
|
|
|
|
|
|
Other intangibles, net |
|
|
|
|
|
|
|
|
Deferred income tax assets, net |
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
| Noncurrent assets of discontinued operations | |||||||
|
Total assets |
$ |
|
|
|
$ |
|
|
|
Liabilities and equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Trade accounts payable |
|
|
|
|
|
|
|
|
Accrued expenses |
|
|
|
|
|
|
|
|
Income taxes payable |
|
|
|
|
|
|
|
|
Due to IDT Corporation, net |
|
|
|
|
|
|
|
|
Other current liabilities |
|
|
|
|
|
|
|
| Current liabilities of discontinued operations | |||||||
|
Total current liabilities |
|
|
|
|
|
|
|
| Noncurrent captive insurance liability | |
||||||
|
Other liabilities |
|
|
|
|
|
|
|
| Noncurrent liabilities of discontinued operations | |||||||
|
Total liabilities |
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Genie Energy Ltd. stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, $ |
|
|
|
|
|
|
|
| Series 2012-A, designated shares— |
|||||||
| Class A common stock, $ |
|||||||
| Class B common stock, $ |
|||||||
|
Additional paid-in capital |
|
|
|
|
|
|
|
| Treasury stock, at cost, consisting of |
( |
) | ( |
) | |||
| Accumulated other comprehensive income | ( |
) | |||||
|
Retained earnings |
|
|
|
|
|
||
|
Total Genie Energy Ltd. stockholders’ equity |
|
|
|
|
|
|
|
|
Noncontrolling interests |
|
( |
) |
|
|
( |
) |
|
Total equity |
|
|
|
|
|
|
|
|
Total liabilities and equity |
$ |
|
|
|
$ |
|
|
See accompanying notes to consolidated financial statements.
| 1 |
GENIE ENERGY LTD.
|
|
Three Months Ended March 31, |
||||||
|
|
2024 | 2023 | |||||
|
|
(in thousands, except per share data) |
||||||
|
Revenues: |
|||||||
|
Electricity |
$ | $ | |||||
|
Natural gas |
|||||||
|
Other |
|||||||
|
Total revenues |
|||||||
|
Cost of revenues |
|||||||
|
Gross profit |
|||||||
|
Operating expenses: |
|||||||
|
Selling, general and administrative (i) |
|||||||
| Provision for captive insurance liability | |||||||
|
Income from operations |
|||||||
|
Interest income |
|||||||
|
Interest expense |
( |
) | ( |
) | |||
| Gain (loss) on marketable equity securities and investments | ( |
) | |||||
|
Other income, net |
|||||||
|
Income before income taxes |
|||||||
|
Provision for income taxes |
( |
) | ( |
) | |||
|
Net income from continuing operations |
|||||||
| (Loss) income from discontinued operations, net of taxes | ( |
) | |||||
| Net income | |||||||
|
Net income (loss) attributable to noncontrolling interests, net |
( |
) | |||||
|
Net income attributable to Genie Energy Ltd. |
|||||||
|
Dividends on preferred stock |
( |
) | |||||
|
Net income attributable to Genie Energy Ltd. common stockholders |
$ | $ | |||||
|
|
|||||||
| Net income (loss) attributable to Genie Energy Ltd. common stockholders | |||||||
| Continuing operations | $ | $ | |||||
| Discontinued operations | ( |
) | |||||
| Net income attributable to Genie Energy Ltd. common stockholders | $ | $ | |||||
|
Earnings (loss) per share attributable to Genie Energy Ltd. common stockholders: |
|||||||
| Basic: | |||||||
| Continuing operations | $ | $ | |||||
| Discontinued operations | ( |
) | |||||
|
Earnings per share attributable to Genie Energy Ltd. common stockholders |
$ | $ | |||||
| Diluted | |||||||
| Continuing operations | $ | $ | |||||
| Discontinued operations | ( |
) | |||||
|
Earnings per share attributable to Genie Energy Ltd. common stockholders |
$ | $ | |||||
|
Weighted-average number of shares used in calculation of earnings per share: |
|||||||
|
Basic |
|||||||
|
Diluted |
|||||||
|
|
|||||||
|
Dividends declared per common share |
$ | $ | |||||
|
(i) Stock-based compensation included in selling, general and administrative expenses |
$ | $ | |||||
See accompanying notes to consolidated financial statements.
| 2 |
GENIE ENERGY LTD.
(Unaudited)
|
|
Three Months Ended March 31, | ||||||
| 2024 |
2023 |
||||||
|
|
(in thousands) | ||||||
|
Net income |
$ | $ | |||||
|
Other comprehensive loss: |
|||||||
|
Foreign currency translation adjustments |
( |
) | ( |
) | |||
|
Comprehensive income |
|||||||
|
Comprehensive loss attributable to noncontrolling interests |
( |
) | |||||
|
Comprehensive income attributable to Genie Energy Ltd. |
$ | $ | |||||
See accompanying notes to consolidated financial statements.
| 3 |
GENIE ENERGY LTD.
Genie Energy Ltd. Stockholders
|
|
|
Preferred |
|
Class A |
|
Class B |
|
Additional |
|
|
|
Accumulated Other |
|
|
|
Non |
|
|
| |||||||||||||||||
|
|
|
Stock |
|
Common Stock |
|
Common Stock |
|
Paid-In |
|
Treasury |
|
Comprehensive |
|
Retained |
|
controlling |
|
Total |
| |||||||||||||||||
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Stock |
|
Income |
|
Earnings |
|
Interests |
|
Equity |
| |||||||||||
| BALANCE AT JANUARY 1, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||
| Dividends on common stock ($ |
— | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Restricted Class B common stock purchased from employees | — | — | — | — | — | — | — | ( |
) | — | — | — | ( |
) | ||||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Purchase of equity of subsidiary | — | — | — | — | — | — | ( |
) | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||
| Repurchase of Class B common stock from stock repurchase program | — | — | — | — | — | — | — | ( |
) | — | — | — | ( |
) | ||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||
| Net income (loss) for three months ended March 31, 2024 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||
| 4 |
GENIE ENERGY LTD.
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except dividend per share) — (Continued)
Genie Energy Ltd. Stockholders
|
|
|
Preferred |
|
Class A |
|
Class B |
|
Additional |
|
|
|
Accumulated Other |
|
|
|
Non |
|
|
| |||||||||||||||||
|
|
|
Stock |
|
Common Stock |
|
Common Stock |
|
Paid-In |
|
Treasury |
|
Comprehensive |
|
Retained |
|
controlling |
|
Total |
| |||||||||||||||||
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Stock |
|
Income |
|
Earnings |
|
Interests |
|
Equity |
| |||||||||||
| BALANCE AT JANUARY 1, 2023 | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||
| Dividends on preferred stock ($ |
— | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
| Dividends on common stock ($ |
— |
— | — | — | — | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Restricted Class B common stock purchased from employees | — | — | — | — | — | — | — | ( |
) | — | — | — | ( |
) | ||||||||||||||||||||||
| Redemption of preferred stock | ( |
) | ( |
) | — | — | — | — | — | — | — | — | — | ( |
) | |||||||||||||||||||||
| Other comprehensive (loss) income | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||
| Net loss for three months ended March 31, 2023 | — | — | — | — | — | — | — | — | — | ( |
) | |||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2023 | $ | $ |
$ | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||
GENIE ENERGY LTD.
|
|
|
Three Months Ended |
| |||||
|
|
|
2024 |
|
|
2023 |
| ||
|
|
|
(in thousands) |
| |||||
|
Operating activities |
|
|
|
|
|
| ||
|
Net income |
|
$ |
|
|
$ |
|
||
| Net (loss) income from discontinued operations, net of tax | ( |
) | ||||||
| Net income from continuing operations | ||||||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
| Provision for captive insurance liability | ||||||||
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts receivable |
|
|
|
|
|
|
|
|
| Inventory valuation allowance | ||||||||
| Unrealized gain on marketable equity securities and investments and others, net | ( |
) | ( |
) | ||||
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Trade accounts receivable |
|
|
|
|
|
( |
) | |
|
Inventory |
|
|
( |
) |
|
|
( |
) |
|
Prepaid expenses |
|
|
|
|
|
( |
) | |
|
Other current assets and other assets |
|
|
|
|
|
|
||
|
Trade accounts payable, accrued expenses and other liabilities |
|
|
( |
) |
|
|
( |
) |
|
Due to IDT Corporation, net |
|
|
( |
) |
|
|
( |
) |
|
Income taxes payable |
|
|
|
|
|
|
||
| Net cash provided by operating activities of continuing operations | ||||||||
| Net cash provided by operating activities of discontinued operations | ||||||||
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
|
Investing activities |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
| Purchase of solar system facility | ( |
) | ||||||
| Purchases of marketable equity securities and other investments | ( |
) | ( |
) | ||||
| Purchase of equity of subsidiary | ( |
) | ||||||
| Proceeds from the sale of marketable equity securities and other investments | ||||||||
| Proceeds from settlement of equity method investment | ||||||||
|
Repayment of notes receivable |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
Financing activities |
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
( |
) |
|
|
( |
) |
| Repurchases of Class B common stock | ( |
) | ||||||
|
Repurchases of Class B common stock from employees |
|
|
( |
) |
|
|
( |
) |
| Redemption of preferred stock | ( |
) | ||||||
|
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
|
|
|
|
|
( |
) | |
|
Net (decrease) increase in cash, cash equivalents, and restricted cash |
|
|
( |
) |
|
|
|
|
|
Cash, cash equivalents, and restricted cash (including cash held at discontinued operations) at beginning of period |
|
|
|
|
|
|
|
|
| Cash, cash equivalents and restricted cash (including cash held at discontinued operations) at end of the period | ||||||||
| Less: Cash held at of discontinued operations at end of period | ||||||||
|
Cash, cash equivalents, and restricted cash (excluding cash held at discontinued operations) at end of period |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to consolidated financial statements.
| 6 |
Note 1—Basis of Presentation and Business Changes and Development
The accompanying unaudited consolidated financial statements of Genie Energy Ltd. and its subsidiaries (the “Company” or “Genie”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The balance sheet at December 31, 2023 has been derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (the “SEC”).
The Company owns
GRE owns and operates retail energy providers (“REPs”), including IDT Energy (“IDT Energy”), Residents Energy (“Residents Energy”), Town Square Energy and Town Square Energy East (collectively, "TSE"), Southern Federal Power ("Southern Federal") and Mirabito Natural Gas (“Mirabito”). The majority of GRE's REP customers are located in the Eastern and Midwestern United States and Texas. Mirabito supplies natural gas to commercial customers in Florida.
Genie Renewables consists of a
Genie Solar owns Sunlight Energy, a solar energy developer and operator and a
One-Time Tax Credit
In the first quarter of 2024, the Company received $
Discontinued Operations in Finland and Sweden
Prior to the third quarter of 2022, the Company had a third segment, Genie Retail Energy International, or GRE International, which supplied electricity to residential and small business customers in Scandinavia. However, as a result of volatility in the energy market in Europe, in the third quarter of 2022, the Company decided to discontinue the operations of Lumo Energia Oyj ("Lumo Finland") and Lumo Energi AB ("Lumo Sweden").
The Company determined that the discontinued operations of Lumo Finland and Lumo Sweden represented a strategic shift that would have a major effect on the Company's operations and financial statements. The Company accounts for these businesses as discontinued operations and accordingly, presents the results of operations and related cash flows as discontinued operations. The results of operations and related cash flows are presented as discontinued operations for all periods. Any remaining assets and liabilities of the discontinued operations are presented separately and reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 2024 and December 31, 2023. Lumo Finland and Lumo Sweden are continuing to liquidate their remaining receivables and settle any remaining liabilities.
In November 2022, Lumo Finland declared bankruptcy and the administration of Lumo Finland was transferred to an administrator (the "Lumo Administrators"). All assets and liabilities of Lumo Finland remain with Lumo Finland, in which Genie retains its equity ownership interest, however, the management and control of Lumo Finland were transferred to the Lumo Administrators. Since the Company lost control of the management of Lumo Finland in favor of the Lumo Administrators, the accounts of Lumo Finland were deconsolidated effective November 9, 2022.
| 7 |
Following the discontinuance of operations of Lumo Finland and Lumo Sweden, GRE International ceased to be a segment and the remaining assets and liabilities and results of continuing operations of GRE International were combined with corporate.
Discontinued Operations in the United Kingdom
In October 2021, as part of the orderly exit process from the U. K. market, Orbit Energy Limited ("Orbit"), a REP owed by the Company that used to operate in United Kingdom, and Shell U.K. Limited ("Shell") agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell.
Following the termination of the contract with Shell, Orbit filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered the current customers to be transferred to “supplier of last resort” and transferred the administration of Orbit to an administrator (the" Orbit Administrators") effective December 1, 2021.
The Company determined that the discontinued operations of Orbit represented a strategic shift that would have a major effect on the Company's operations and financial statements. Since the appointment of the Orbit Administrators, the Company has accounted for these businesses as discontinued operations and accordingly, has presented the results of operations and related cash flows as discontinued operations. Since the Company lost control of the management of Orbit in favor of the Orbit Administrators, the accounts of Orbit were deconsolidated effective December 1, 2021.
On November 21, 2023, the Court issued an order to cease the administration and revert the control of Orbit from the Orbit Administrators to the Company effective November 28, 2023. Following the Company regaining control of the management of Orbit, the accounts of Orbit are consolidated effective November 28, 2023.
Seasonality and Weather; Climate Change and Volatility in Pricing
The weather and the seasons, among other things, affect GRE’s revenues. Weather conditions have a significant impact on the demand for natural gas used for heating and electricity used for heating and cooling. Typically, colder winters increase demand for natural gas and electricity, and hotter summers increase demand for electricity. Milder winters or summers have the opposite effect. Unseasonable temperatures in other periods may also impact demand levels. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately
In addition to the direct physical impact that climate change may have on the Company's business, financial condition and results of operations because of the effect on pricing, demand for our offerings and/or the energy supply markets, we may also be adversely impacted by other environmental factors, including: (i) technological advances designed to promote energy efficiency and limit environmental impact; (ii) increased competition from alternative energy sources; (iii) regulatory responses aimed at decreasing greenhouse gas emissions; and (iv) litigation or regulatory actions that address the environmental impact of our energy products and services.
| 8 |
Note 2—Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet and the corresponding amounts reported in the consolidated statements of cash flows:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
| |||
| (in thousands) | ||||||||
|
Cash and cash equivalents |
$ |
|
|
|
$ |
|
| |
|
Restricted cash—short-term |
|
|
|
|
|
|
| |
| Restricted cash—long-term | ||||||||
|
Total cash, cash equivalents, and restricted cash |
$ |
|
|
|
$ |
|
| |
Restricted cash—short-term includes amounts set aside in accordance with GRE's Amended and Restated Preferred Supplier Agreement with BP Energy Company (“BP”) (see Note 18) and Credit Agreement with JPMorgan Chase (see Note 19).
Restricted cash—long-term consists of cash of a wholly-owned captive insurance subsidiary (the
"Captive"), which is restricted for use to secure the noncurrent
portion of the insured liability program (see Note 18).
At March 31, 2024 and December 31, 2023, the restricted cash—short-term $
Included in the cash and cash equivalents as of March 31, 2024 and December 31, 2023 is cash received from Lumo Sweden (see Note 5).
Note 3—Inventories
Inventories consisted of the following:
|
|
March 31, 2024 |
December 31, 2023 |
| |||||
| (in thousands) | ||||||||
|
Natural gas |
$ |
|
$ |
|
| |||
|
Renewable credits |
|
|
|
|
||||
|
Solar panels, net of a valuation allowance of $ |
|
|
||||||
|
Totals |
$ |
|
$ |
|
||||
In the three months ended March 31, 2024, the Company recorded an inventory valuation allowance of $
Note 4—Revenue Recognition
Revenue from the single performance obligation to deliver a unit of electricity and/or natural gas is recognized as the customer simultaneously receives and consumes the benefit. Variable quantities in requirements contracts are considered to be options for additional goods and services because the customer has a current contractual right to choose the amount of additional distinct goods to purchase. GRE records unbilled revenues for the estimated amount customers will be billed for services rendered from the time meters were last read to the end of the respective accounting period. The unbilled revenue is estimated each month based on available per day usage data, the number of unbilled days in the period and historical trends.
Incumbent utility companies in most of the service territories in which GRE's REPs operate offer purchase of receivables, or POR, and GRE’s REPs participate in POR programs for a majority of their receivables. The Company estimates variable consideration related to its rebate programs using the expected value method and a portfolio approach. The Company’s estimates related to rebate programs are based on the terms of the rebate program, the customer’s historical electricity and natural gas consumption, the customer’s rate plan, and a churn factor. Taxes that are imposed on the Company’s sales and collected from customers are excluded from the transaction price.
| 9 |
Revenue from sales of solar panels are recognized at a point in time following the transfer of control of the solar panels to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For sales contracts that contain multiple performance obligations, such as the shipment or delivery of solar modules, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer, in satisfaction of the corresponding performance obligations. Revenues from sales of solar panels are included in other revenues in the consolidated statements of operations.
Genie Solar enters into contracts to identify, develop, and in some cases operate solar generation sites to provide solar electricity to its customers. Obligations under solar project contracts consist of a series of tasks and components and accordingly are accounted for as multiple performance obligations. Because the Company’s performance creates and enhances assets that are controlled by and specific to customers, the Company recognizes construction services revenue over time. Revenue for these performance obligations is recognized using the input method based on the cost incurred as a percentage of total estimated contract costs. Due to the significance of the costs associated with solar panels to the total project, our judgment on when such costs should be included in the measure of progress has a material impact on revenue recognition. Contract costs include all direct material and labor costs related to contract performance. Revenues from sales of solar panels and solar panel projects are included under the Other Revenues in the consolidated statements of operations.
Energy generation revenue is earned from both the sale of electricity generated from solar projects and the sale of renewable energy credits which are included in the Other Revenues in the consolidated statement of operations.
Revenue from energy generation is recognized when the Company satisfies the performance obligation, which occurs at the time of the delivery of electricity at the contractual rates.
The Company applies for and receives Solar Renewable Energy Credits ("SRECs") in certain jurisdictions for power generated by solar energy systems it owns. There are no direct costs allocated to SRECs upon generation. The Company typically sells SRECs to different customers from those purchasing the energy. The sale of each SREC is a distinct performance obligation satisfied at a point in time and that the performance obligation related to each SREC is satisfied when each SREC is delivered to the customer.
Revenues from commissions from selling third-party products to customers, entry and other fees from the energy brokerage are recognized at the time the performance obligation is met. The Company's contacts with customers for commission revenue contain a single performance obligation and are satisfied at a point in time.
The Company recognizes the incremental costs of obtaining a contract with a customer as an asset if it expects the benefit of those costs to be longer than one year. The Company determined that certain sales commissions to acquire customers meet the requirements to be capitalized. For GRE, the Company applies a practical expedient to expense costs as incurred for sales commissions to acquire customers as the period would have been one year or less.
Disaggregated Revenues
The following table shows the Company’s revenues disaggregated by pricing plans offered to customers:
|
|
Electricity |
Natural Gas |
Other |
Total |
||||||||||||
|
(in thousands) |
||||||||||||||||
|
Three Months Ended March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Variable rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Variable rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Fixed and variable rate revenues are from GRE. Other revenues are revenues from Genie Renewables which includes revenues from solar panels, solar projects and energy generation by Genie Solar, commissions from marketing energy solutions by CityCom Solar and Diversegy.
| 10 |
The following table shows the Company’s revenues disaggregated by non-commercial and commercial channels:
|
|
Electricity |
|
|
Natural Gas |
|
|
Other |
|
|
Total |
| |||||
| (in thousands) | ||||||||||||||||
|
Three Months Ended March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Commercial Channel |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Commercial Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Commercial Channel |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Commercial Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Contract liabilities
Certain revenue generating contracts at Renewables include provisions that require advance payment from customers. These advance payments are recognized as revenue as the Company satisfies the performance obligations to the other party. A portion of the transaction price allocated to the performance obligations to be satisfied in future periods is recognized as a contract liability. Contract liabilities are included in other current liabilities account in the consolidated balance sheet.
The table below reconciles the change in the carrying amount of contract liabilities:
| Three Months Ended March 31, | ||||||||
|
|
2024 |
2023 |
| |||||
| (in thousands) | ||||||||
|
Contract liability, beginning |
$ |
|
$ |
|
| |||
| Recognition of revenue included in the beginning of the year contract liability | ( |
) | ( |
) | ||||
| Additions during the period, net of revenue recognized during the period | ||||||||
| Contract liability, end | $ | $ | ||||||
Allowance for doubtful accounts
The change in the allowance for doubtful accounts was as follows:
| Three Months Ended March 31, | ||||||||
|
|
2024 |
2023 |
| |||||
| (in thousands) | ||||||||
|
Allowance for doubtful accounts, beginning |
$ |
|
$ |
|
| |||
| Additions charged (reversals credited) to expense | ||||||||
| Other additions (deductions) | ( |
) | ( |
) | ||||
| Allowance for doubtful accounts, end | $ | $ | ||||||
Note 5—Acquisitions and Discontinued Operations
Acquisition of Solar System Facilities
On November 3, 2023, the Company acquired
The acquisition has been accounted for as asset acquisition and the Company recorded $
On November 3, 2023, the Company also signed an agreement to purchase from the sellers another special purpose entity that owned and operated a solar system facility in Indiana, for $
The acquired assets are allocated to the Renewables segment.
Lumo Finland and Lumo Sweden Operations
As a result of the sustained volatility of the energy market in Europe, in the third quarter of 2022, the Company decided to discontinue the operations of Lumo Finland and Lumo Sweden. From July 13, 2022 to July 19, 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Sweden. The sale price has been fixed and is expected to continue to be
The Company determined that the discontinued operations of Lumo Finland and Lumo Sweden represented a strategic shift that would have a major effect on the Company's operations and financial statements and accordingly, the results of operations and related cash flows are presented as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations are presented separately and reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 2024 and December 31, 2023. Lumo Sweden is continuing to liquidate their remaining receivables and settle any remaining liabilities.
In November 2022, Lumo Finland declared bankruptcy and the administration of Lumo Finland was transferred to an administrator (the "Lumo Administrators"). All assets and liabilities of Lumo Finland remain with Lumo Finland, in which Genie retains its equity ownership interest, however, the management and control of Lumo Finland were transferred to the Lumo Administrators. Since the Company lost control of the management of Lumo Finland in favor of the Lumo Administrators, the accounts of Lumo Finland were deconsolidated effect November 9, 2022.
| 12 |
The following table represents summarized balance sheet information of assets and liabilities of the discontinued operations of Lumo Sweden:
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|||
| (in thousands) | ||||||||
|
Assets |
|
|
|
|
|
| ||
|
Cash |
|
$ |
|
|
|
$ |
|
|
|
Receivables from the settlement of derivative contract—current |
|
|
|
|
|
|
|
|
|
Current assets of discontinued operations |
|
$ |
|
|
|
$ |
|
|
| Receivables from the settlement of derivative contract—noncurrent | $ | $ | ||||||
| Other noncurrent assets | ||||||||
| Noncurrent assets of discontinued operations | $ | $ | ||||||
|
Liabilities |
|
|
|
|
|
|
|
|
| Income taxes payable | ||||||||
|
Accounts payable and other current liabilities |
|
|
|
|
|
|||
|
Current liabilities of discontinued operations |
|
$ |
|
|
|
$ |
|
|
| Deferred tax liabilities | ||||||||
| Noncurrent liabilities of discontinued operations | $ | $ | ||||||
The summary of the results of operations of the discontinued operations of Lumo Finland and Lumo Sweden were as follows:
|
|
Three Months Ended March 31, | ||||||
|
|
2024 | 2023 | |||||
|
|
(in thousands) | ||||||
|
|
|||||||
|
Income from operations |
$ | $ | |||||
|
Other income, net |
|||||||
|
Income before income taxes |
|||||||
|
Provision for income taxes |
( |
) | ( |
) | |||
|
Net (loss) income from discontinued operations, net of taxes |
$ | ( |
) | $ | |||
| Income before income taxes attributable to Genie Energy Ltd. | $ | $ | |||||
The following table presents a summary of cash flows of the discontinued operations of Lumo Finland and Lumo Sweden:
|
|
Three Months Ended March 31, |
||||||||||||||
|
|
2024 | 2023 | |||||||||||||
|
|
(in thousands) | ||||||||||||||
|
|
|||||||||||||||
|
Net (loss) income |
$ | ( |
) | $ | |||||||||||
|
Non-cash items |
|||||||||||||||
|
Changes in assets and liabilities |
|||||||||||||||
|
Cash flows provided by operating activities of discontinued operations |
$ | $ | |||||||||||||
| 13 |
Prior to being treated as discontinued operations or consolidated, the assets and liabilities of Lumo Finland and Lumo Sweden were included in GRE International segment.
On November 8, 2023, the Lumo Administrators, acting on behalf of the Bankruptcy Estate, filed a claim in the District Court of Helsinki against Genie Nordic, a wholly owned subsidiary of the Company and the parent company of Lumo Finland, its directors, officers and affiliates, in which it alleges that the gain from the sale of swap instruments owned by Lumo Sweden amounting to €
Genie was also notified that the Lumo Administrators filed a claim against one of Lumo Finland’s suppliers, seeking to recover payments made by Lumo Finland amounting to €
U.K. Operations
In the third quarter of 2021, the natural gas and energy market in the United Kingdom deteriorated which prompted the Company to start the process of orderly withdrawal from the United Kingdom. In October 2021, as part of the orderly exit process, Orbit and Shell agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell.
Following the termination of the contract with Shell, Orbit filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered the current customers to be transferred to “supplier of last resort” and transfer the administration of Orbit to Orbit Administrators effective December 1, 2021, which transfer was effective December 1, 2021. All assets and liabilities of Orbit, including cash and receivables remained with Orbit and the management and control of which was transferred to Orbit Administrators. As a result of loss of control, the Company deconsolidated Orbit effective December 1, 2021 and estimated the remaining liability related to its ownership of Orbit.
The Company determined that the discontinued operations of Orbit represented a strategic shift that would have a major effect on the Company's operations and financial statements and accordingly, the results of operations and related cash flows are presented as discontinued operations effective December 1, 2021.
On November 21, 2023, the Court issued an order to cease the administration and revert the control of Orbit from the Orbit Administrators to the Company effective November 28, 2023. Following the Company regaining control of the management of Orbit, the accounts of Orbit were reconsolidated effective November 28, 2023. In 2023, the Orbit Administrators paid the Company a return of its interest in Orbit of £
Upon reconsolidation of the accounts of Orbit, the Company recorded cash and accrued expenses of $
There were
Prior to being treated as discontinued operations and deconsolidation, the assets and liabilities of Orbit were included in the Company's former GRE International segment.
| 14 |
Note 6—Fair Value Measurements
The following table presents the balance of assets and liabilities measured at fair value on a recurring basis:
|
|
|
Level 1 (1) |
|
|
Level 2 (2) |
|
|
Level 3 (3) |
|
|
Total |
| ||||
|
|
|
(in thousands) |
| |||||||||||||
|
March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Marketable equity securities | $ | $ | $ | $ | ||||||||||||
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Marketable equity securities | $ | $ | $ | $ | ||||||||||||
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) –
(2) –
(3) –
The Company’s derivative contracts consist of natural gas and electricity put and call options and swaps. The underlying asset in the Company’s put and call options is a forward contract. The Company’s swaps are agreements whereby a floating (or market or spot) price is exchanged for a fixed price over a specified period.
The Company did not have any transfers of assets or liabilities between Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the three months ended March 31, 2024 or 2023.
| 15 |
Fair Value of Other Financial Instruments
The estimated fair value of the Company’s other financial instruments was determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting this data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
Restricted cash—short-term, trade receivables, due to IDT Corporation, other current assets and other current liabilities. At March 31, 2024 and December 31, 2023, the carrying amounts of these assets and liabilities approximated fair value. The fair value estimate for restricted cash—short-term was classified as Level 1. The carrying value of other current assets, due to IDT Corporation, and other current liabilities approximated fair value.
Other assets. At March 31, 2024 and December 31, 2023, other assets included notes receivable. At March 31, 2024, the carrying amount of the notes receivable approximated fair value. The fair values were estimated based on the Company’s assumptions, and were classified as Level 3 of the fair value hierarchy.
The primary non-recurring fair value estimates typically are in the context of goodwill impairment testing, which involves Level 3 inputs, and asset impairments (Note 9) which utilize Level 3 inputs.
Concentration of Credit Risks
The Company holds cash, cash equivalents, and restricted cash at several major financial institutions, which may exceed Federal Deposit Insurance Corporation insured limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings of those institutions. While the Company may be exposed to credit losses due to the nonperformance of the holders of its deposits, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition.
The following table summarizes the percentage of consolidated trade receivable by customers that equal or exceed
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
| ||
|
Customer A |
|
|
|
% |
|
|
|
% |
na—less than
The following table summarizes the percentage of revenues by customers that equal or exceed
| Three Months Ended March 31, | ||||||||
| 2024 |
2023 |
|||||||
|
Customer A |
% | % | ||||||
na—less than
Note 7—Derivative Instruments
The primary risk managed by the Company using derivative instruments is commodity price risk, which is accounted for in accordance with Accounting Standards Codification 815 — Derivatives and Hedging. Natural gas and electricity put and call options and swaps are entered into as hedges against unfavorable fluctuations in market prices of natural gas and electricity. The Company does not apply hedge accounting to these options or swaps, therefore the changes in fair value are recorded in earnings. By using derivative instruments to mitigate exposures to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company minimizes the credit or repayment risk in derivative instruments by entering into transactions with high-quality counterparties. At March 31, 2024, GRE’s swaps and options were traded on the Intercontinental Exchange.
The summarized volume of GRE’s outstanding contracts and options at March 31, 2024 was as follows (MWh – Megawatt hour and Dth – Decatherm):
|
Settlement Dates |
|
Volume |
| |||||
|
|
|
Electricity (in MWH) |
|
|
Gas (in Dth) |
| ||
| Second quarter 2024 | ||||||||
| Third quarter of 2024 | ||||||||
| Fourth quarter of 2024 | ||||||||
| First quarter of 2025 | ||||||||
| Second quarter of 2025 | ||||||||
| Third quarter of 2025 | ||||||||
| Fourth quarter of 2025 | ||||||||
| First quarter of 2026 | ||||||||
| Second quarter of 2026 | ||||||||
| Third quarter of 2026 | ||||||||
The fair value of outstanding derivative instruments recorded in the accompanying consolidated balance sheets were as follows:
|
Asset Derivatives |
|
Balance Sheet Location |
|
March 31, |
|
|
December 31, |
| ||
|
|
|
|
|
(in thousands) |
| |||||
|
Derivatives not designated or not qualifying as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
| Energy contracts and options1 | Other current assets | $ | $ | |||||||
| Energy contracts and options | Other assets | |||||||||
|
Total derivatives not designated or not qualifying as hedging instruments — Assets |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives |
|
Balance Sheet Location |
|
March 31, 2024 |
|
|
December 31, 2023 |
| ||
|
|
|
|
|
(in thousands) |
| |||||
|
Derivatives not designated or not qualifying as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
| Energy contracts and options1 | Other current liabilities | $ | $ | |||||||
| Energy contracts and options | Other liabilities | |||||||||
|
Total derivatives not designated or not qualifying as hedging instruments — Liabilities |
|
|
$ |
|
|
|
$ |
|
| |
(1)
| 17 |
The effects of derivative instruments on the consolidated statements of operations was as follows:
|
|
Amount of Loss Recognized on Derivatives | ||||||||||
|
Derivatives not designated or not qualifying as |
|
Location of Gain Recognized |
Three Months Ended March 31, | ||||||||
|
hedging instruments |
|
on Derivatives |
2024 | 2023 | |||||||
|
|
|
|
(in thousands) | ||||||||
|
Energy contracts and options |
|
Cost of revenues |
$ | $ | |||||||
Other assets consisted of the following:
| March 31, 2024 |
|
December 31, 2023 |
| |||||
|
(in thousands) |
||||||||
|
Security deposit |
|
$ |
|
|
|
$ |
|
|
|
Right-of-use assets, net of amortization |
|
|
|
|
|
|
|
|
| Fair value of derivative contracts—noncurrent | ||||||||
|
Other assets |
|
|
|
|
|
|
|
|
|
Total other assets |
|
$ |
|
|
|
$ |
|
|
Note 9—Goodwill and Other Intangible Assets
The table below reconciles the change in the carrying amount of goodwill for the period from January 1, 2024 to March 31, 2024:
|
|
|
GRE |
Genie Renewables |
Total |
||||||||
| (in thousands) | ||||||||||||
|
Balance at January 1, 2024 |
|
$ |
|
$ |
$ |
|
||||||
| Additions/deductions during the period | ||||||||||||
|
Balance at March 31, 2024 |
|
$ |
|
$ |
$ |
|
||||||
| 18 |
The table below presents information on the Company’s other intangible assets:
|
|
|
Weighted Average Amortization Period |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net |
| ||||
| (in thousands) | ||||||||||||||||
|
March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Patents and trademarks |
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
| |
|
Customer relationships |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Licenses |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
| |
|
Total |
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
| |
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patent and trademark |
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Customer relationships |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Licenses |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total |
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
| |
Amortization expense of intangible assets was $
Note 10—Accrued Expenses and Other Current Liabilities
Accrued expenses consisted of the following:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
| |||
|
(in thousands) |
||||||||
|
Renewable energy |
|
$ |
|
|
|
$ |
|
|
|
Liability to customers related to promotions and retention incentives |
|
|
|
|
|
|
|
|
| Payroll and employee benefit | ||||||||
|
Other accrued expenses |
|
|
|
|
|
|
|
|
|
Total accrued expenses |
|
$ |
|
$ |
|
| ||
Other current liabilities consisted of the following:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
| |||
|
(in thousands) |
||||||||
|
Contract liabilities |
|
$ |
|
|
|
$ |
|
|
| Current hedge liabilities | ||||||||
| Current lease liabilities | ||||||||
| Current captive insurance liability | ||||||||
|
Others |
|
|
|
|
|
|
|
|
|
Total other current liabilities |
|
$ |
|
$ |
|
| ||
| 19 |
|
|
|
March 31, 2024 |
|
December 31, 2023 |
|||
| (in thousands) | |||||||
|
ROU Assets |
$ |
|
$ | ||||
|
Current portion of operating lease liabilities |
|
||||||
| Noncurrent portion of operating lease liabilities |
|
||||||
|
Total |
|
$ |
|
|
$ | ||
| Three Months Ended March 31, | |||||||
| 2024 | 2023 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities: | (in thousands) | ||||||
|
Operating cash flows from operating activities |
$ | $ | |||||
| ROU assets obtained in the exchange for lease liabilities | |||||||
| Operating leases | $ | $ | |||||
| (in thousands) | ||||
|
Remainder of 2024 |
|
$ |
|
|
|
2025 |
|
|||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
|
Total future lease payments |
|
|||
|
Less imputed interest |
|
|||
|
Total operating lease liabilities |
|
$ |
|
|
| 20 |
Note 12—Equity
Dividend Payments
The following table summarizes the quarterly dividends declared by the Company on its Class A and Class B common stock during the three months ended March 31, 2024 (in thousands, except per share amounts):
|
Declaration Date |
|
Dividend Per Share |
|
|
Aggregate Dividend Amount |
|
|
Record Date |
|
Payment Date | ||
|
|
|
|
|
|
|
| ||||||
| $ | $ | |||||||||||
On May 2, 2024, the Company’s Board of Directors declared a quarterly dividend of $
Stock Repurchases and Redemption; Treasury Shares
On March 11, 2013, the Board of Directors of the Company approved a program for the repurchase of up to an aggregate of
As of March 31, 2024 and December 31, 2023, there were
On February 7, 2022, the Board of Directors of the Company authorized a program to redeem, beginning, in the second quarter of 2033, up to $
| 21 |
Exercise of Stock Options
In February 2024, Howard S.
Jonas exercised options to purchase
In May 2023, Howard S.
Jonas exercised options to purchase
At March 31, 2024, There were
Warrants to Purchase Class B Common Stock
On June 8, 2018, the Company sold to Howard S. Jonas, the Chairman of the Company’s Board of Directors and then the holder of the controlling portion of the Company's common stock, shares of the Company’s Class B common stock and warrants to purchase an additional
As of March 31, 2024, there were
Purchase of Equity of Subsidiaries
In February 2024, the Company purchased from a certain investor a
Stock-Based Compensation
On March 8, 2021, the Board of Directors adopted the Company's 2021 Stock Option and Incentive Plan (the "2021 Plan"), subject to the approval of the Company's stockholders. In May 2021, the 2021 Plan became effective and replaced the Company's 2011 Stock Option and Incentive Plan. The 2021 Plan provides incentives to executives, employees, directors and consultants of the Company. Incentives available under the 2021 Plan provide for grants of stock options, stock appreciation rights, limited stock appreciation rights, deferred stock units, and restricted stock. The Plan is administered by the Compensation Committee of the Company’s Board of Directors. The maximum number of shares reserved for the grant of awards under the 2021 Plan upon adoption was
In February 2022, the Company granted certain employees and members of its Board of Directors an aggregate of
As of March 31, 2024, there were approximately $
Note 13—Variable Interest Entity
Citizens Choice Energy, LLC (“CCE”) is a REP that resells electricity and natural gas to residential and small business customers in the State of New York. The Company does not own any interest in CCE. Since 2011, the Company has provided CCE with substantially all of the cash required to fund its operations. The Company determined that it has the power to direct the activities of CCE that most significantly impact its economic performance and it has the obligation to absorb losses of CCE that could potentially be significant to CCE on a stand-alone basis. The Company therefore determined that it is the primary beneficiary of CCE, and as a result, the Company consolidates CCE within its GRE segment. The net income or loss incurred by CCE was attributed to noncontrolling interests in the accompanying consolidated statements of operations.
Net loss related to CCE and aggregate net funding provided by the Company were as follows:
|
Three Months Ended March 31, |
||||||||
|
2024 |
2023 |
|||||||
|
(in thousands) |
||||||||
|
Net loss |
$ |
|
$ |
|
||||
|
Aggregate funding (provided by) paid to the Company, net |
$ |
|
$ |
|
||||
Summarized combined balance sheet amounts related to CCE was as follows:
|
|
|
March 31, |
|
|
December 31, 2023 |
| ||
| (in thousands) | ||||||||
|
Assets |
|
|
|
|
|
| ||
|
Cash, cash equivalents and restricted cash |
|
$ |
|
|
|
$ |
|
|
|
Trade accounts receivable |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
Liabilities and noncontrolling interests |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
|
|
|
$ |
|
|
|
Due to IDT Energy |
|
|
|
|
|
|
|
|
|
Noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
|
Total liabilities and noncontrolling interests |
|
$ |
|
|
|
$ |
|
|
The assets of CCE may only be used to settle obligations of CCE, and may not be used for other consolidated entities. The liabilities of CCE are non-recourse to the general credit of the Company’s other consolidated entities.
| 23 |
Note 14—Income Taxes
The following table provides a summary of Company's effective tax rate:
|
|
Three Months Ended March 31, |
|||||
|
|
2024 |
2023 |
||||
|
Reported tax rate |
|
% |
|
% | ||
The reported tax rates for the three months ended March 31, 2024 decreased compared to the same period in 2023. The decreases are mainly from the change in the mix of tax rates in the jurisdictions where the Company earned taxable income.
Note 15—Earnings Per Share
Basic earnings per share is computed by dividing net income or loss attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increases is anti-dilutive.
The weighted-average number of shares used in the calculation of basic and diluted earnings per share attributable to the Company’s common stockholders consists of the following:
|
|
Three Months Ended March 31, |
||||||
|
2024 |
2023 |
||||||
|
(in thousands) |
|||||||
| Basic weighted-average number of shares |
|
|
|||||
| Effect of dilutive securities: |
|||||||
|
Non-vested restricted Class B common stock |
|
|
|||||
|
Stock options and warrants |
|
|
|||||
| Unissued vested deferred stock units | |||||||
| Diluted weighted-average number of shares |
|
|
|||||
Unissued vested deferred stock units in three months ended March 31, 2023 pertain to the weighted average of restricted shares of the company's Class B common stock that the Company expected, at that time, to issue related to satisfaction of 2022 market conditions (see Note 12 — Equity) to the vesting of certain then outstanding deferred stock units.
There were
Note 16—Related Party Transactions
On November
2, 2023, the Company made a charitable donation to Genie Energy
Charitable Foundation ("Genie Foundation") by issuing
On December 7, 2020, the Company invested $
The Company was formerly a subsidiary of IDT Corporation (“IDT”). On October 28, 2011, the Company was spun-off by IDT. The Company entered into various agreements with IDT prior to the spin-off including an agreement for certain services to be performed by the Company and IDT. The Company also provides specified administrative services to certain of IDT’s foreign subsidiaries. Howard Jonas is the Chairman of the Board of IDT.
The charges for services provided by IDT to the Company, net of the charges for the services provided by the Company to IDT, are included in “Selling, general and administrative” expense in the consolidated statements of operations.
|
Three Months Ended |
|||||||
|
|
2024 |
2023 |
|||||
|
|
(in thousands) |
||||||
|
Amount IDT charged the Company |
$ |
|
$ |
|
|||
|
Amount the Company charged IDT |
$ |
|
$ |
|
|||
The following table presents the balance of receivables and payables to IDT:
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
| ||
|
|
|
(in thousands) |
| |||||
|
Due to IDT |
|
$ |
|
|
|
$ |
|
|
|
Due from IDT |
|
$ |
|
|
|
$ |
|
|
The Company obtains insurance policies from several insurance brokers, one of which is IGM Brokerage Corp. (“IGM”). IGM is owned by the mother of Howard S. Jonas and Joyce Mason, who is a Director and Corporate Secretary of the Company. Jonathan Mason, husband of Joyce Mason and brother-in-law of Howard S. Jonas, provides insurance brokerage services via IGM. Based on information the Company received from IGM, the Company believes that IGM received commissions and fees from payments made by the Company (including payments from third party brokers). The Company paid IGM a total of $
Investments in Atid 613
In September 2018, the Company divested a majority interest in Atid Drilling Ltd. in exchange for a
| 25 |
The Company has
The Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision-maker.
The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its business segments based primarily on income (loss) from operations. There are no significant asymmetrical allocations to segments.
Operating results for the business segments of the Company were as follows:
|
(in thousands) |
|
GRE |
Genie Renewables |
|
|
Corporate |
|
|
Total |
| |||||
| Three Months Ended March 31, 2024 | |||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||
| Income (loss) from operations | ( |
) | ( |
) | |||||||||||
| Depreciation and amortization | |||||||||||||||
| Stock-based compensation | |||||||||||||||
| Provision for doubtful accounts receivables | |||||||||||||||
| Provision for (benefit from) income taxes | ( |
) | ( |
) | |||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||
| Income (loss) from operations | ( |
) | ( |
) | |||||||||||
| Depreciation and amortization | |||||||||||||||
| Stock-based compensation |
|
||||||||||||||
| Provision for (benefit from) income taxes | ( |
) | ( |
) | |||||||||||
| Provision for doubtful accounts receivables | |||||||||||||||
Total assets for the business segments of the Company were as follows
|
(in thousands) |
|
GRE |
Genie Renewables |
|
|
Corporate |
|
|
Total |
| ||||||
|
Total assets: |
|
|
|
|
|
|
|
|
|
| ||||||
|
March 31, 2024 |
|
$ |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
| ||
| December 31, 2023 | ||||||||||||||||
The total assets of corporate segment includes total assets of discontinued operations of Lumo Finland and Lumo Sweden with aggregate net book value of $
| 26 |
Note 18 — Commitments and Contingencies
Legal Proceedings
On September 29, 2023, the Attorney General of the State of Illinois filed a complaint against Residents Energy in the Circuit Court of Cook County, Illinois, Chancery Division. The Complaint alleges several counts of violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq., and the Illinois Telephone Solicitations Act, 815 ILCS 413/1 et seq., in connection with Residents Energy’s marketing practices, and seeks monetary damages to redress any resulting losses alleged to have been incurred by customers, civil penalties for certain alleged violations in the amount of $
The Company may from time to time be subject to legal proceedings that arise in the ordinary course of business. Although there can be no assurance in this regard, the Company does not expect any of those legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows or financial condition.
Refer to Note 5—Acquisitions and Discontinued Operations, for discussion related to the administration of Lumo Finland.
Agency and Regulatory Proceedings
From time to time, the Company receives inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes, and the Company responds to those inquiries or requests. The Company cannot predict whether any of those matters will lead to claims or enforcement actions or whether the Company and the regulatory parties will enter into settlements before a formal claim is made.
Other Commitments
Purchase Commitments
The Company had future purchase commitments of $
|
(in thousands) |
|
|
| |
|
Remainder of 2024 |
|
$ |
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
| 2027 | ||||
|
Thereafter |
|
|
|
|
|
Total payments |
|
$ |
|
|
In the three months ended March 31, 2024, the Company purchased $
Renewable Energy Credits
GRE must obtain a certain percentage or amount of its power supply from renewable energy sources in order to meet the requirements of renewable portfolio standards in the states in which it operates. This requirement may be met by obtaining renewable energy credits that provide evidence that electricity has been generated by a qualifying renewable facility or resource. At March 31, 2024, GRE had commitments to purchase renewable energy credits of $
Captive Insurance Subsidiary
In December 2023, the Company established the Captive insurance company with the primary purpose of enhancing the Company's risk financing strategies. The Captive insures the Company against certain risks unique to the operations of the Company and its subsidiaries for which insurance may not be currently available or economically feasible in today's insurance marketplace. The covered risks are both current and related to historical business activities.
The Company, with input from external experts, estimated the expected ultimate cost of: 1) claims defense cost, settlements and penalties resulting from insured risk, and 2) stranded risk which includes economic losses due to regulatory restrictions or unanticipated reduction of demand, as well as the level cost associated with contesting such restrictions. The amount of the expected loss liability for each risk is based on an analysis performed by a third-party actuary which assumed historical patterns. The key assumptions used in developing these estimates are subject to variability.
In December
2023, the Company paid a $
The table below reconciles the change in the current and noncurrent captive insurance liabilities for three months ended March 31, 2024 (in thousands):
|
Current and noncurrent captive insurance liabilities, beginning |
$ |
|
| |
| Changes for the provision of prior year claims | ( |
) | ||
| Changes for the provision for current year claims | ||||
| Payment of claims | ||||
| Current and noncurrent captive insurance liabilities, end | $ |
The captive insurance liability outstanding at March 31, 2024 is expected to be paid as follows (in thousands).
|
2024 |
|
$ |
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
2028 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total payments |
|
$ |
|
Performance Bonds and Unused Letters of Credit
GRE has performance bonds issued through a third party for certain utility companies and for the benefit of various states in order to comply with the states’ financial requirements for REPs. At March 31, 2024, GRE had aggregate performance bonds of $
BP Energy Company Preferred Supplier Agreement
Certain of GRE’s REPs are party to an Amended and Restated Preferred Supplier Agreement with BP, which is to be in effect through November 30, 2026. Under the agreement, the REPs purchase electricity and natural gas at market rate plus a fee. The obligations to BP are secured by a first security interest in deposits or receivables from utilities in connection with their purchase of the REPs’ customer’s receivables, and in any cash deposits or letters of credit posted in connection with any collateral accounts with BP. The ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. At March 31, 2024, the Company was in compliance with such covenants. At March 31, 2024, restricted cash—short-term of $
| 28 |
Note 19—Debt
On December 13, 2018, the Company entered into a Credit Agreement with JPMorgan Chase Bank (the “Credit Agreement”). On February 14, 2024, the Company entered into the fourth amendment of the existing Credit Agreement to extend the maturity date to December 31, 2024. The aggregate principal amount was reduced to $
Note 20—Recently Issued Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 will require public entities to disclose on an annual basis a tabular reconciliation using both percentages and amounts, broken out into specific categories with certain reconciling items at or above 5% of the statutory (i.e. expected) tax further broken out by nature and/or jurisdiction. The new provisions require all entities to disclose on an annual basis the amount of income taxes paid (net of refunds received), disaggregated between federal (national), state/local and foreign, and amounts paid to an individual jurisdiction when 5% or more of the total income taxes paid. The new provisions are required to be applied on a prospective basis; retrospective application is permitted. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. Although the new standard only requires additional disclosures, the Company is in the process of determining the impact of this guidance to its income tax disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 amends Accounting Standards Codification 280, Segment Reporting (“ASC 280”) to require public entities to disclose significant segment expenses and other segment items that are regularly provided to the chief operating decision maker (“CODM”) and included in each reported measure of a reportable segment’s profit or loss, on an annual and interim basis, and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The new provisions permit entities to report multiple measures of a reportable segment’s profit or loss if the CODM uses those measures to allocate resources and assess performance. The new standard is required to be applied retrospectively to all periods presented in the financial statements, unless impracticable. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is also permitted. Although the new standards only require additional disclosures, the Company is in the process of determining the impact of this guidance to its segment disclosures.
| 29 |
The following information should be read in conjunction with the accompanying consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (or SEC).
As used below, unless the context otherwise requires, the terms “the Company,” “Genie,” “we,” “us,” and “our” refer to Genie Energy Ltd., a Delaware corporation, and its subsidiaries, collectively.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends,” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those discussed below under Part II, Item IA and under Item 1A to Part I “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our Annual Report on Form 10-K for the year ended December 31, 2023.
Overview
We are comprised of Genie Retail Energy ("GRE") and Genie Renewables.
GRE owns and operates retail energy providers ("REPs"), including IDT Energy, Residents Energy, Town Square Energy ("TSE"), Southern Federal and Mirabito Natural Gas. GRE's REPs' businesses resell electricity and natural gas primarily to residential and small business customers, with the majority of the customers in the Eastern and Midwestern United States and Texas.
Genie Renewables holds our 95.5% interest in Genie Solar, an integrated solar energy company, our 92.8% interest in CityCom Solar, a marketer of community solar and other sales solutions and our 96.0% interest in Diversegy, an energy broker.
Genie Solar holds our interest in Sunlight Energy, a solar energy developer and operator and our 60.0% interest in Prism Solar Technology ("Prism") which designs and manufactures specialized solar panels.
As part of our ongoing business development efforts, we seek out new opportunities, which may include complementary operations or businesses that reflect horizontal or vertical expansion from our current operations. Some of these potential opportunities are considered briefly and others are examined in further depth. In particular, we seek out acquisitions to expand the geographic scope and size of our REP businesses.
| 30 |
Discontinued Operations in Finland and Sweden
As a result of volatility in the energy market in Europe, in the third quarter of 2022, we decided to discontinue the operations of Lumo Energia Oyj ("Lumo Finland") and Lumo Energi AB ("Lumo Sweden"). In July 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Sweden. The sale price is to be settled monthly based on the monthly commodity volume specified in the instruments from September 2022 to March 2025. The Company also entered into a series of transactions to transfer the customers of Lumo Finland and Lumo Sweden to other suppliers.
We determined that the discontinued operations of Lumo Finland and Lumo Sweden represented a strategic shift that would have a major effect on our operations and financial statements. We account for these businesses as discontinued operations and accordingly, present the results of operations and related cash flows as discontinued operations for all periods presented. Any remaining assets and liabilities of the discontinued operations are presented separately and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 2024 and December 31, 2023. Lumo Finland and Lumo Sweden are continuing to liquidate their remaining receivables and settle any remaining liabilities.
On November 7, 2022,
Lumo Finland filed a petition for bankruptcy, which was approved by
the Helsinki District Court on November 9, 2022. The administration of
Lumo Finland was transferred to an administrator (the "Lumo Administrators").
All assets and liabilities of Lumo Finland remain with Lumo Finland,
in which we retain our equity ownership interest, however, the management and control
of Lumo Finland were transferred to the Lumo Administrators. Since
the Company lost control of the management of Lumo Finland in favor of the
Lumo Administrators, the accounts of Lumo Finland were
deconsolidated effective November 9, 2022.
Net loss from discontinued operations of Lumo Finland and Lumo Sweden, net of taxes was $0.3 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.
Following the discontinuance of operations of Lumo Finland and Lumo Sweden, GRE International ceased to be a segment and the remaining assets and liabilities and results of continuing operations of GRE International were combined with corporate.
On November 8, 2023, the Lumo Administrators, acting on behalf of the Bankruptcy Estate, filed a claim in the District Court of Helsinki against Genie Nordic, its directors, officers and affiliates, in which it alleges that the gain from the sale of swap instruments owned by Lumo Sweden amounting to €35.2 million (equivalent to $38.0 million as of March 31, 2024) belongs to the Bankruptcy Estate. We believe that the Lumo Administrators' position is without merit, and we intend to vigorously defend our position against the Administrators' claims.
We are also notified that
the Lumo Administrators filed a claim against one of Lumo Finland’s suppliers,
seeking to recover payments made by Lumo Finland amounting to €4.2 million
(equivalent to $4.5 million as of March 31, 2024) prior to the bankruptcy. Related to such payment, the Lumo Administrators have filed a recovery claim jointly against us and the
supplier for €1.6 million (equivalent to $1.7 million as of March 31, 2024) alleging that a portion of the payment to Lumo Finland effectively reduced our liability under the terms of a
previously supplied parental guarantee (this €1.6 is included within and not additive to the €4.2 million). The Lumo Administrators allege that the
payments represented preferential payments and therefore belong to the
bankruptcy estate which are recoverable under the laws of Finland. We intend to challenge the Lumo Administrators' claims. Nevertheless, should the Lumo Administrators succeed in clawing back the funds from the supplier, it is possible that the supplier will seek to recover its losses against us, under terms of the parental guarantee. At this time there is insufficient basis to assess an amount of any probable loss
Discontinued Operations in the United Kingdom
On November 29, 2021 Orbit Energy Limited ("Orbit"), which operated in United Kingdom was declared and its customers were transferred to a “supplier of last resort.” Effective December 1, 2021, the administration of Orbit was transferred to a third party Administrators (the "Orbit Administrators"). The accounts of Orbit were deconsolidated from those of the Company effective December 1, 2021.
We determined that the discontinued operations of Orbit represented a strategic shift that would have a major effect on our operations and the financial statements. Since the appointment of the Orbit Administrators, we accounted their businesses as discontinued operations and accordingly, have presented the results of operations and related cash flows as discontinued operations. Any remaining assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of December 31, 2022. Since the Company lost control of the management of Orbit in favor of the Orbit Administrators, the accounts of Orbit were deconsolidated effective December 1, 2021.
On November 28, 2023,
the administration of Orbit ceased and the control of Orbit reverted back to
the Company from the Orbit Administrators. The accounts of Orbit
were reconsolidated with those of the Company effective November 28,
2023.
There were no income or loss from discontinued operations recognized in the three months ended March 31, 2024. In the three months ended March 31, 2023, the Company recognized income from discontinued operation, net of taxes of $2.9 million mainly from the increase in the estimated value of our investments in Orbit due to a change in estimated net assets of Orbit after the Orbit Administrators settle the liabilities.
Genie Retail Energy
GRE operates REPs that resell electricity and/or natural gas to residential and small business customers in Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Texas, Rhode Island, and Washington, D.C. GRE’s revenues represented approximately 94.0% and 96.3% of our consolidated revenues in the three months ended March 31, 2024 and March 31, 2023, respectively.
Seasonality and Weather; Climate Change and Volatility in Pricing
The weather and the seasons, among other things, affect GRE’s REPs' revenues. Weather conditions have a significant impact on the demand for natural gas used for heating and electricity used for heating and cooling. Typically, colder winters increase demand for natural gas and electricity, and hotter summers increase demand for electricity. Milder winters and/or summers have the opposite effects. Unseasonable temperatures in other periods may also impact demand levels. Potential changes in global climate may produce, among other possible conditions, unusual variations in temperature and weather patterns, resulting in unusual weather conditions, more intense, frequent and extreme weather events and other natural disasters. Some climatologists believe that these extreme weather events will become more common and more extreme, which will have a greater impact on our operations. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately 48.1% and 39.7% of GRE’s natural gas revenues for the relevant years were generated in the first quarter of 2023 and 2022 respectively, when demand for heating was highest. Although the demand for electricity is not as seasonal as natural gas (due, in part, to usage of electricity for both heating and cooling), approximately 32.5% and 30.5% of GRE’s electricity revenues for 2023 and 2022 respectively, were generated in the third quarters of those years. GRE's REP's revenues and operating income are subject to material seasonal variations, and the interim financial results are not necessarily indicative of the estimated financial results for the full year.
In addition to the direct physical impact that climate change may have on our business, financial condition and results of operations because of the effect on pricing, demand for our offerings and/or the energy supply markets, we may also be adversely impacted by other environmental factors, including: (i) technological advances designed to promote energy efficiency and limit environmental impact; (ii) increased competition from alternative energy sources; (iii) regulatory responses aimed at decreasing greenhouse gas emissions; and (iv) litigation or regulatory actions that address the environmental impact of our energy products and services.
| 32 |
Purchase of Receivables and Concentration of Credit Risk
Utility companies offer purchase of receivable, or POR, programs in most of the service territories in which GRE operates. GRE’s REPs reduce their customer credit risk by participating in POR programs for a majority of their receivables. In addition to providing billing and collection services, utility companies purchase those REPs’ receivables and assume all credit risk without recourse to those REPs. GRE’s REPs’ primary credit risk is therefore nonpayment by the utility companies. In the three months ended March 31, 2024 the associated cost was approximately 1.0% of GRE revenue and approximately 0.9% for the three months ended March 31, 2023, respectively. At March 31, 2024, 86.7% of GRE’s net accounts receivable were under a POR program. Certain of the utility companies represent significant portions of our consolidated revenues and consolidated gross trade accounts receivable balance during certain periods, and such concentrations increase our risk associated with nonpayment by those utility companies.
The following table summarizes the percentage of consolidated trade receivables by customers that equal or exceed 10.0% of consolidated net trade receivables at March 31, 2024 and December 31, 2023 (no other single customer accounted for 10.0% or greater of our consolidated net trade receivable as of March 31, 2024 or December 31, 2023).
| March 31, 2024 | December 31, 2023 | |||||||
|
Customer A |
|
19.9 |
% |
|
|
21.4 | % | |
na—less than10.0% of consolidated net trade receivables at the relevant date
The following table summarizes the percentage of revenues by customers that equal or exceed 10.0% of consolidated revenues for the three months ended March 31, 2024 or 2023 (no other single customer accounted for 10.0% or greater of our consolidated revenues for the three months ended March 31, 2024 or 2023):
| Three Months Ended March 31, | ||||||||
| 2024 |
2023 |
|||||||
|
Customer A |
21.8 | % | na | |||||
na—less than 10.0% of consolidated revenue in the period
Legal Proceedings
Although GRE endeavors to maintain best sales and marketing practices, such practices have been the subject of class action lawsuits in the past.
See Note 18, Commitments and Contingencies, in this Quarterly Report on Form 10-Q, which is incorporated by reference.
From time to time, the Company responds to inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes. The Company cannot predict whether any of those matters will lead to claims or enforcement actions or whether the Company and the regulatory parties will enter into settlements before a formal claim is made. See Note 18, Commitments and Contingencies, in the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q, which is incorporated by reference, for further detail on agency and regulatory proceedings.
| 33 |
Critical Accounting Policies
Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our significant accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting policies are those that require the application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies include those related to revenue recognition, allowance for doubtful accounts, acquisitions, goodwill, and income taxes. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For additional discussion of our critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023.
Recently Issued Accounting Standards
Information regarding new accounting pronouncements is included in Note 20—Recently Issued Accounting Standards, to the current period’s consolidated financial statements.
Results of Operations
We evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, the income and expense line items below income (loss) from operations are only included in our discussion of the consolidated results of operations.
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Genie Retail Energy Segment
|
|
Three months ended March 31, |
Change |
||||||||||||||
|
(amounts in thousands) |
2024 |
2023 |
$ |
% |
||||||||||||
|
Revenues: |
||||||||||||||||
|
Electricity |
$ |
89,396 |
$ |
74,487 |
$ |
14,909 |
20.0 |
% | ||||||||
|
Natural gas |
22,398 |
26,925 |
(4,527 |
) |
(16.8 |
) | ||||||||||
| Others | 671 | — | 671 | nm | ||||||||||||
|
Total revenues |
112,465 |
101,412 |
11,053 |
10.9 |
||||||||||||
|
Cost of revenues |
80,270 |
68,874 |
11,396 |
16.5 |
||||||||||||
|
Gross profit |
32,195 |
32,538 |
(343 |
) |
(1.1 |
) | ||||||||||
|
Selling, general and administrative expenses |
17,947 |
16,093 |
1,854 |
11.5 |
||||||||||||
|
Income from operations |
$ |
14,248 |
$ |
16,445 |
$ |
(2,197 |
) |
(13.4 |
) | |||||||
nm—not meaningful
| 34 |
Revenues. Electricity revenues increased by 20.0% in the three months ended March 31, 2024 compared to the same period in 2023. The increase was due to an increase in electricity consumption partially offset by a decrease in the average price per kilowatt hour charged to customers in the three months ended March 31, 2024 compared to the same period in 2023. Electricity consumption by GRE’s REPs' customers increased by 34.0% in the three months ended March 31, 2024, compared to the same period in 2023, reflecting an 18.4% increase in the average number of meters served and a 13.2% increase in average consumption per meter. The increase in meters served was driven by strong customer acquisitions during 2023 that continued into 2024 which had been curtailed during 2023 due to market conditions. The increase in per meter consumption is due to colder weather in the three months ended March 31, 2024 compared to the same period in 2022. The average rate per kilowatt hour sold decreased 10.4% in the three months ended March 31, 2024 compared to the same period in 2023 due to the shift in the mix of customers and products sold during the quarters.
GRE’s natural gas revenues decreased by 16.8% in the three months ended March 31, 2024 compared to the same period in 2023. The decrease was a result of a decrease in average revenue per therm sold partially offset by an increase in natural gas consumption. The average revenue per therm sold decreased by 22.6% in the three months ended March 31, 2024, compared to the same period in 2023. The decrease in revenue per therm was driven by an increase in the portion of the customer base consisting of commercial customers with fixed rates compared to customers with variable rates in the three months ended March 31, 2024 compared to the same period in 2023. Natural gas consumption by GRE’s REPs’ customers increased by 7.5% in the three months ended March 31, 2024 compared to the same period in 2023, reflecting a 6.0% increase in average meters served in the three months ended March 31, 2024 compared to the same period in 2023, partially offset by a 1.4% decrease in average consumption per meter.
Other revenues in the three months ended March 31, 2024 included revenues from the sale of petroleum products in Israel.
The customer base for GRE’s REPs as measured by meters served consisted of the following:
|
(in thousands) |
|
March 31, 2024 |
December 31, 2023 |
|
|
September 30, 2023 |
|
|
June 30, 2023 |
|
|
March 31, 2023 |
| ||||||
|
Meters at end of quarter: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Electricity customers |
|
281 |
|
279 |
|
|
|
304 |
|
|
|
301 |
|
|
|
271 |
| ||
|
Natural gas customers |
|
83 |
|
82 |
|
|
|
81 |
|
|
|
80 |
|
|
|
78 |
| ||
|
Total meters |
|
364 |
|
361 |
|
|
|
385 |
|
|
|
381 |
|
|
|
349 |
| ||
Gross meter acquisitions in the three months ended March 31, 2024, were 70,000 compared to 129,000 for the same period in 2023. In the first quarter of 2023, we resumed customer acquisition activities using a variety of new and existing channels after a "strategic pause" implemented from the fourth quarter of 2021 through 2022.
Meters served increased by 3,000 meters or 0.8% from December 31, 2023 to March 31, 2024. The increase in the number of meters served at March 31, 2024 compared to December 31, 2023 was due to continued acquisition activities in 2024 and 2023 as discussed above.
In the three months ended March 31, 2024, average monthly churn increased to 5.5% compared to 4.4% for same period in 2023.
The average rates of annualized energy consumption, as measured by RCEs, are presented in the chart below. An RCE represents a natural gas customer with annual consumption of 100 mmbtu or an electricity customer with annual consumption of 10 MWh. Because different customers have different rates of energy consumption, RCEs are an industry standard metric for evaluating the consumption profile of a given retail customer base.
|
(in thousands) |
|
March 31, 2024 |
December 31, 2023 |
|
|
September 30, 2023 |
|
|
June 30, 2023 |
|
|
March 31, 2023 |
| ||||||
|
RCEs at end of quarter: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Electricity customers |
|
267 |
|
272 |
|
|
|
298 |
|
|
|
304 |
|
|
|
276 |
| ||
|
Natural gas customers |
|
81 |
|
78 |
|
|
|
77 |
|
|
|
76 |
|
|
|
77 |
| ||
|
Total RCEs |
|
348 |
|
350 |
|
|
|
375 |
|
|
|
380 |
|
|
|
353 |
| ||
RCEs at March 31, 2024 decreased 0.6% compared to December 31, 2023. The increase is due to the resumption of customer acquisition activities as discussed above.
| 35 |
Cost of Revenues and Gross Margin Percentage. GRE’s cost of revenues and gross margin percentage were as follows:
| Three Months Ended March 31, | Change | |||||||||||||||
| (amounts in thousands) | 2024 | 2023 | $ | % | ||||||||||||
| Cost of revenues: | ||||||||||||||||
| Electricity | $ | 65,717 | $ | 45,766 | $ | 19,951 | 43.6 | |||||||||
| Natural gas | 13,888 | 23,108 | (9,220 | ) | (39.9 | ) | ||||||||||
| Others | 665 | — | 665 | nm | ||||||||||||
| Total cost of revenues | $ | 80,270 | $ | 68,874 | $ | 11,396 | 16.5 | |||||||||
nm—not meaningful
| Three months ended March 31, | |||||||||
| (amounts in thousands) | 2024 | 2023 | Change | ||||||
| Gross margin percentage: | |||||||||
| Electricity | 26.5 | % | 38.6 | % | (12.1 | ) | |||
| Natural gas | 38.0 | 14.2 | 23.8 | ||||||
| Others | 0.9 | — | 0.9 | ||||||
| Total gross margin percentage | 28.6 | % | 32.1 | % | (3.5 | ) | |||
Cost of revenues for electricity increased in the three months ended March 31, 2024 compared to the same period in 2023 primarily because of increases in electricity consumption by GRE’s REPs’ customers and the average unit cost of electricity. The average unit cost of electricity increased 7.2% in the three months ended March 31, 2024 compared to the same period in 2023 due to an increase in the average wholesale price of electricity. The gross margin on electricity sales decreased in the three months ended March 31, 2024 compared to the same period in 2023 because the average unit cost of electricity increased while the average rate charged to customers decreased.
Cost of revenues for natural gas decreased in the three months ended March 31, 2024 compared to the same period in 2023 primarily because of a decrease in the average unit cost of natural gas partially offset by an increase in the natural gas consumption by GRE's REPs' customers. The average unit cost of natural gas decreased by 44.1% per therm in the three months ended March 31, 2024 compared to the same period in 2023 to a decrease in the wholesale price of natural gas. Gross margin on natural gas sales increased in the three months ended March 31, 2024 compared to the same period in 2023 because the average rate charged to customers decreased less than the decrease in the average unit cost of natural gas.
Selling, General and Administrative. Selling, general and administrative expenses increased by 11.5% in the three months ended March 31, 2024 compared to the same period in 2023 primarily due to increases in marketing and customer acquisition costs, employee-related costs, POR program fees, processing fees and provision of doubtful account. Marketing and customer acquisition expenses increased by $0.6 million in the three months ended March 31, 2024 compared to the same period in 2023 as a result of an increase in the number of meters acquired during 2023 period. Employee-related expenses increased by $0.3.0 million in the three months ended March 31, 2024 compared to the same period in 2023 primarily due to an increase in the number of employees. POR program fees increased by $0.3. million in the three months ended March 31, 2024 compared to the same period in 2023 as a result of changes in rates implemented by several utilities. Processing fees increased by $0.2 million in the three months ended March 31, 2024 compared to the same period in 2023 as a result of a higher level of activities from an increase in the number of meters. Provision for doubtful accounts increased by $0.2 million in the three months ended March 31, 2024 compared to the same period in 2023 as a result of increase in revenues in non-POR territories. As a percentage of GRE’s total revenues, selling, general and administrative expense increased from 15.9% in the three months ended March 31, 2023 to 16.0% in the three months ended March 31, 2024.
| 36 |
Genie Renewables Segment
The Genie Renewables (formerly GES) segment is composed of Genie Solar, CityCom Solar and Diversegy. Genie Solar is an integrated solar energy company that develops, constructs and operates solar energy projects for commercial and industrial customers as well as its own portfolio. CityCom Solar is a marketer of alternative products and services complementary to our energy offerings. Diversegy provides energy brokerage and advisory services to commercial and industrial customers.
|
|
Three Months Ended March 31, | Change | ||||||||||||||
| (amounts in thousands) | 2024 | 2023 | $ | % | ||||||||||||
|
Revenues |
$ | 7,223 | $ | 3,864 | $ | 3,359 | 86.9 | % | ||||||||
|
Cost of revenue |
5,632 | 3,116 | 2,516 | 80.7 | ||||||||||||
|
Gross profit |
1,591 | 748 | 843 | 112.7 | ||||||||||||
| Selling, general and administrative expenses | 2,236 | 1,896 | 340 | 17.9 | ||||||||||||
|
Loss from operations |
$ | (645 | ) | $ | (1,148 | ) | $ | (503 | ) | (43.8 | ) | |||||
Revenue. Genie Renewables' revenues increased in the three months ended March 31, 2024 compared to the same period in 2023. The increases in revenues were the result of increases in revenues from the development of the solar projects for customers from Genie Solar, revenues from Diversegy that includes commissions, entry fees and other fees from our energy brokerage and marketing services businesses, partially offset by decreases in commissions from selling third-party products to customers by CityCom Solar and sale of solar panels by Prism. Genie Solar projects had significant progress in the in the three months ended March 31, 2024 compared to the same period in 2023.
Cost of Revenues. The variations in the cost of revenues for the three months ended March 31, 2024 compared to the same periods in 2023 are consistent with the variations in revenues of Genie Solar, Diversegy, CityCom Solar and Prism. In the first quarter of 2024, we recorded a $0.4 million charge to the cost of revenues of Genie Solar to write down the carrying value of solar panel inventories to the estimated net realizable value.
Selling, General and Administrative. Selling, general and administrative expenses increased in the three months ended March 31, 2024 compared to the same periods in 2023 primarily due to increases in headcount in Genie Solar and Diversegy, consulting fees and warehousing costs at Genie Solar and depreciation from the solar arrays acquired by Genie Solar in the last six months.
Corporate
As discussed above, the remaining accounts of GRE International were transferred to corporate starting in the third quarter of 2022. Entities under corporate do not generate any revenues, nor does it incur any cost of revenues. Corporate costs include unallocated compensation, consulting fees, legal fees, business development expense and other corporate-related general and administrative expenses.
|
|
Three Months Ended March 31, | Change | ||||||||||||||
| (amounts in thousands) | 2024 | 2023 | $ | % | ||||||||||||
| General and administrative expenses | 2,718 | 4,022 | (1,304 | ) | (32.4) | |||||||||||
| Provision for captive insurance liability | 1,036 | — | 1,036 | nm | ||||||||||||
|
General and administrative expenses and loss from operations |
$ | 3,754 | $ | 4,022 | $ | (268 | ) | (6.7 | )% | |||||||
Corporate general and administrative expenses decreased in the three months ended March 31, 2024 compared to the same period in 2023, primarily because of decreases in employee-related cost and professional and consulting fees. As a percentage of our consolidated revenues, Corporate general and administrative decreased to 2.3% in the three months ended March 31, 2024 from 3.8% in the three months ended March 31, 2023.
In December 2023, we established a wholly-owned captive insurance subsidiary (the "Captive") with the primary purpose of enhancing our risk financing strategies. In December 2023, we paid $51.2 million premiums to Captive, which amount is included in restricted cash in our consolidated balance sheet as of December 31, 2023. The Captive must maintain a sufficient level of cash to fund future reserve payment and secure the insurer's liabilities, particularly those related to the insured risks. We also recognized a $1.0 million provision for captive insurance liability for the three months ended March 31, 2024 related to Captive's exposure for the insured risks.
| 37 |
Consolidated
Selling, general and administrative expenses. Stock-based compensation expense included in consolidated selling, general and administrative expenses was $0.9 million in the three months ended March 31, 2024 and 2023. At March 31, 2024, the aggregate unrecognized compensation cost related to non-vested stock-based compensation was $1.7 million. The unrecognized compensation cost is recognized over the expected service period.
The following is a discussion of our consolidated income and expense line items below income from operations:
|
Three Months Ended March 31, |
Change | |||||||||||||||
| (amounts in thousands) | 2024 | 2023 | $ | % | ||||||||||||
| Income from operations | $ | 9,849 | $ | 11,275 | $ | (1,426 | ) | (12.6) | % | |||||||
| Interest income | 1,340 | 974 | 366 | 37.6 | ||||||||||||
| Interest expense | (32 | ) | (19 | ) | 13 | 68.4 | ||||||||||
| Other income, net | 80 | 3,246 | (3,166 | ) | (97.5) | |||||||||||
| Gain (loss) on marketable equity securities and investments | 117 | (71 | ) | 188 | 264.8 | |||||||||||
| Provision for benefit from income taxes | (2,920 | ) | (4,068 | ) | (1,148) | (28.2) | ||||||||||
| Net income from continuing operations | 8,434 | 11,337 | (2,903 | ) | (25.6 | ) | ||||||||||
| (Loss) income from discontinued operations, net of tax | (265 | ) | 3,055 | (3,320 | ) | (108.7 | ) | |||||||||
| Net income | 8,169 | 14,392 | (6,223 | ) | (43.2 | ) | ||||||||||
| Net income (loss) attributable to noncontrolling interests | 46 | (39 | ) | 85 | (217.9 | ) | ||||||||||
| Net income attributable to Genie Energy Ltd. | $ | 8,123 | $ | 14,431 | $ | (6,308 | ) | (43.7) | % | |||||||
| 38 |
Interest income. Interest income increased in the three months ended March 31, 2024, compared to the same period in 2023 primarily due to increase in average cash and cash equivalents and restricted cash during the period.
Other Income, net. Other income, net in the three months ended March 31, 2024 and 2023 consisted primarily of foreign currency transactions and equity in net loss in equity method investees. Other income (loss) income, net, in the three months ended March 31, 2024 consisted primarily of on-time tax credit related to payroll taxes incurred in prior years.
Provision for Income Taxes. The change in the reported tax rate for the three months ended March 31, 2024 compared to the same periods in 2023, is the result of changes in the mix of jurisdictions in which taxable income was earned.
Net Loss Attributable to Noncontrolling Interests. The decreases in net loss attributable to noncontrolling interests in the three months ended March 31, 2024 compared to the same periods in 2023 was primarily due to the share of noncontrolling interest in the operations of Citizens Choice Energy.
Gain (loss) on Marketable Equity Securities and Investments. The gain on marketable equity securities and investment for the three months ended March 31, 2024 pertains to the change in fair value of the Company's investments in common stock of Rafael Holdings, Inc. ("Rafael") which the Company acquired in December 2020 and various investments in equity of several entities.
(Loss) income from Discontinued Operations, net of tax. Loss from discontinued operations, net of tax in the three months ended March 31, 2024 is mainly related to foreign exchange differences in Lumo Sweden during the period. Gain from discontinued operations, net of tax in the three months ended March 31, 2023 is mainly from an increase in the estimated value of our investments in Orbit and foreign exchange differences in Lumo Sweden.
Liquidity and Capital Resources
General
We currently expect that our cash flow from operations and the $106.6 million balance of unrestricted cash and cash equivalents that we held at March 31, 2024 will be sufficient to meet our anticipated cash requirements for at least the period to March 9, 2025.
At March 31, 2024, we had working capital (current assets less current liabilities) of $127.2 million.
|
|
|
Three Months Ended March 31, |
| |||||
|
|
|
2024 |
|
|
2023 |
| ||
|
|
|
(in thousands) |
| |||||
|
Cash flows provided by (used in): |
|
|
|
|
|
| ||
|
Operating activities |
|
$ |
8,718 |
|
$ |
1,520 |
||
|
Investing activities |
|
|
(5,844 |
) |
|
|
(4,162 |
) |
|
Financing activities |
|
|
(7,730 |
) |
|
|
(3,273 |
) |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 74 | (10 | ) | |||||
| Decrease in cash, cash equivalents and restricted cash of continuing operations | (4,782 | ) | (5,925) | |||||
| Cash flows provided by discontinued operations | 4,208 | 9,714 | ||||||
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
$ |
(574 |
) |
|
$ |
3,789 |
|
| 39 |
Operating Activities
Cash, cash equivalents and restricted cash provided by operating activities of continuing operations was $8.7 million in the three months ended March 31, 2024 compared to net cash used in operating activities of continuing operations of $1.5 million in the three months ended March 31, 2023. The decrease is primarily the fluctuation in the results of operations in the three months ended March 31, 2024 compared to the same period in 2023.
Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable. Changes in assets and liabilities decreased cash flows by $8.5 million for the three months ended March 31, 2024, compared to the same period in 2023.
Certain of GRE's REPs are party to an Amended and Restated Preferred Supplier Agreement with BP Energy Company, or BP, which is to be in effect through November 30, 2023. Under the agreement, the REPs purchase electricity and natural gas at market rate plus a fee. The obligations to BP are secured by a first security interest in deposits or receivables from utilities in connection with their purchase of the REP’s customer’s receivables, and in any cash deposits or letters of credit posted in connection with any collateral accounts with BP. The ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. At March 31, 2024, we were in compliance with such covenants. At March 31, 2024, restricted cash—short-term of $0.4 million and trade accounts receivable of $64.2 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $16.0 million at March 31, 2024.
We had purchase commitments of $130.3 million at March 31, 2024, of which $116.1 million was for purchases of electricity.
As discussed above, in December 2023, we established the Captive insurance subsidiary. At March 31, 2024, the balance of short-term and long-term restricted cash and cash equivalents of the Captive are $6.3 million and $45.5 million, respectively. We also recognized $1.0 million provision for captive insurance liability for the three months ended March 31, 2024, related to Captive's exposure for the insured risks. At March 31, 2024, the current captive insurance liability of $0.6 million is included in other current liabilities in the consolidated balance sheet. The amount of the expected loss liability for each risk is based on an analysis performed by a third-party actuary which assumed historical patterns. The key assumptions used in developing these estimates are subject to variability.
We are a lessee under operating lease agreements primarily for office space in locations where we operate and for our solar development projects with lease periods expiring between 2024 and 2052. Our future lease payments under the operating leases as of March 31, 2024 were $3.9 million.
GRE has performance bonds issued through a third party for the benefit of certain utility companies and for various states in order to comply with the states’ financial requirements for retail energy providers. At December 31, 2023, we had outstanding aggregate performance bonds of $21.5 million and a minimal amount of unused letters of credit.
Investing Activities
Our capital expenditures decreased $1.2 million for the three months ended March 31, 2024 compared to the same period in 2023. The capital expenditures are mainly for the construction of solar projects at Genie Solar. In the third quarter of 2023, we transferred $4.3 million worth of solar panels that are intended to be used in Genie Solar projects from inventories to construction in progress related to solar panels expected to be used in the solar project by Genie Solar. We currently anticipate that our total capital expenditures in the twelve months ending December 31, 2024 will be between $6.0 million to $10.00 million mostly related to the solar projects of Genie Renewables.
On November 3, 2023, we acquired ten special-purpose entities that own and operate solar system facilities in Ohio and Michigan for an aggregate purchase price of $7.5 million. The acquisition has been accounted for as an asset acquisition with a total purchase price of $7.7 million, including $0.2 million of direct transaction cost allocated to solar arrays assets included in the property and equipment account in our consolidated balance sheet.
On November 3, 2023, we also signed an agreement to purchase from the sellers another special purpose entity that owned and operated a solar system facility in Indiana, for $1.3 million, subject to the satisfaction of certain closing conditions. In February 2024, the purchase of the solar system facility in Indiana was completed after the closing conditions were met. The acquisition has been accounted for as asset acquisition and we recorded $1.3 million to solar arrays assets included in the property and equipment account in the consolidated balance sheet.
In February 2024, we purchased from a certain investor 0.5% interest in GEIC by paying $1.2 million.
In the three months ended March 31, 2024 and 2023, we acquired minimal interests in various ventures for an aggregate amount of investments of $2.1 million and $0.2 million, respectively.
In 2020 and 2021, we invested an aggregate of $6.0 million for 261,984 shares of Class B common stock of Rafael Holdings, Inc. ("Rafael"). Rafael, a publicly-traded company and a related party. In the three months ended March 31, 2023, we sold 195,501 shares of our Class B common stock of Rafael for $0.3 million. In the second quarter of 2023, we acquired 150,001 shares of our Class B common stock of Rafael for $0.3 million. We do not exercise significant influence over the operating or financial policies of Rafael. At March 31, 2024, the carrying value of the remaining investments in the Class B common stock of Rafael was $0.4 million.
In the three months ended March 31, 2023, we invested $4.6 million to purchase the common stock of a publicly traded company which we sold for $3.9 million in the second quarter of 2023.
In March 2023, the Company received $0.1 million from Atid 613 Drilling Ltd. ("Atid 613") for the full settlement of its investment in Atid 613. The Company recognized a minimal gain from settlement of investment included in other income (loss), net in its consolidated statements of operations for the three months ended March 31, 2023.
On November 29, 2021, Orbit, which operated in the United Kingdon, was declared insolvent and its customers were transferred to the “supplier of last resort.” Effective December 1, 2021, the administration of Orbit was transferred to Orbit Administrators. The accounts of Orbit were deconsolidated from those of the Company effective December 1, 2021. In 2022, we transferred $49.7 million to the Orbit Administrators as part of the administration process. On November 28, 2023, the administration of Orbit ceased and the control of Orbit reverted back to the Company from the Administrators. The accounts of Orbit were reconsolidated with those of the Company effective November 28, 2023. In 2023, the Orbit Administrators paid us a return of our interest in Orbit of £18.8 million (equivalent to $23.7 million on the dates of transfer).
Financing Activities
In the three months ended March 31, 2024 and 2023, we paid dividends of $0.075 per share to stockholders of our Class A common stock and Class B common stock, or aggregate dividends of $2.1 million and $2.0 million in the three months ended March 31, 2024 and 2023, respectively. On May 2, 2024 our Board of Directors declared a quarterly dividend of $0.075 per share on our Class A common stock and Class B common stock. The dividend will be paid on or about May 31, 2024 to stockholders of record as of the close of business on May 20, 2024.
In the three months ended March 31, 2023, we paid Base Dividends of $0.1594 per share of our 2012-A Preferred Stock or Preferred Stock in an aggregate amount of $0.2 million.
On March 11, 2013, our Board of Directors approved a program for the repurchase of up to an aggregate of 7.0 million shares of our Class B common stock. In the three months ended March 31, 2024, we acquired 250,000 Class B common stock under the stock purchase program for an aggregate amount of $4.1 million. There are no repurchases under this program in the three months ended March 31, 2023. At March 31, 2024, 4.4 million shares of Class B common stock remained available for repurchase under the stock repurchase program.
On February 7, 2022, our Board of Directors authorized a program to redeem up to $1.0 million per quarter of our Preferred Stock at the liquidation preference of $8.50 per share beginning in the second quarter of 2022. In the three months ended March 31, 2023, the Company redeemed 117,647 shares of Preferred Stock under the stock purchase program for an aggregate amount of $1.0 million.
On May 16, 2023, our Board of Directors approved the redemption of all outstanding Preferred Stock on June 16, 2023 (the "Redemption Date") at the liquidation preference of $8.50 per share, together with an amount equal to all dividends accrued and unpaid up to, but not including, the Redemption Date. On the Redemption Date, we completed the redemption of 748,064 shares of Preferred Stock for an aggregate amount of $6.5 million and the related accrued dividends of $0.1349 per share equivalent to $0.1 million. Following the redemption, there are no shares of Preferred Stock outstanding, all rights of Preferred Stockholders have terminated, and the Preferred Stock’s ticker symbol, "GNEPRA", has been retired.
| 41 |
In the three months ended March 31, 2024 and 2023, we paid $2.5 million and $0.2 million, respectively, to repurchase our Class B common stock of our Class B common stock tendered by our employees (including one officer) to satisfy tax withholding obligations in connection with the lapsing of restrictions on awards of restricted stock and exercise of stock options. Such shares were repurchased by us based on their fair market value on the trading day immediately prior to the vesting date.
On December 13, 2018, we entered into a Credit Agreement with JPMorgan Chase Bank (“Credit Agreement”). On February 14, 2024, the Company entered into the third amendment of its existing Credit Agreement to extend the maturity date of December 31, 2024. The aggregate principal amount was reduced to $3.0 million credit line facility (“Credit Line”). The Company pays a commitment fee of 0.1% per annum on the unused portion of the Credit Line as specified in the Credit Agreement. The borrowed amounts will be in the form of letters of credit which will bear interest of 1.0% per annum. The Company will also pay a fee for each letter of credit that is issued equal to the greater of $500 or 1.0% of the original maximum available amount of the letter of credit. We agreed to deposit cash in a money market account at JPMorgan Chase Bank as collateral for the line of credit equal to $3.1 million. As of March 31, 2024, there is no issued letter of credit from the Credit Line. At March 31, 2024, the cash collateral of $3.3 million was included in restricted cash—short-term in the consolidated balance sheet.
Cash flows from discontinued operations
Cash provided by operating activities of discontinued operations was $9.7 million in the three months ended March 31, 2024 compared to $4.2 million in the same period in 2023. The cash provided by operating activities of discontinued operations in the three months ended March 31, 2024 and 2023 pertains to the proceeds from the settlement of hedges of Lumo Sweden.
| 42 |
Our primary market risk exposure is the price applicable to our natural gas and electricity purchases and sales. The sales price of our natural gas and electricity is primarily driven by the prevailing market price. Hypothetically, for our GRE segment, if our gross profit per unit in the three months ended March 31, 2024 had remained the same as in the three months ended March 31, 2023, our gross profit from electricity would have increased by 14.8 million and our gross profit from natural gas would have decreased $4.4 million.
The energy markets have historically been very volatile, and we can reasonably expect that electricity and natural gas prices will be subject to fluctuations in the future. In an effort to reduce the effects of the volatility of the price of electricity and natural gas on our operations, we have adopted a policy of hedging electricity and natural gas prices from time to time, at relatively lower volumes, primarily through the use of put and call options and swaps. While the use of these hedging arrangements limits the downside risk of adverse price movements, it also limits future gains from favorable movements. We do not apply hedge accounting to these options or swaps, therefore the mark-to-market change in fair value is recognized in cost of revenue in our consolidated statements of operations. We recognized losses from derivative instruments of $5.5 million and $11.2 million in the three months ended March 31, 2024 and 2023, respectively, from our derivative instruments. Refer to Note 7 – Derivative Instruments, for details of the hedging activities.
Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2024.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 43 |
Legal proceedings in which we are involved are more fully described in Note 18 to the Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
There are no material changes from the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
The following table provides information with respect to purchases by us of shares of our Class B common stock during the first quarter of 2024:
|
|
|
Total |
|
|
Average |
|
|
Total Number |
|
|
Maximum |
| ||||
|
January 1–31, 2024 |
|
|
15,792 |
|
|
$ |
28.91 |
|
|
|
— |
|
|
|
4,661,417 |
|
|
February 1–28, 2024 |
|
|
109,916 |
(2) |
|
|
18.80 |
|
|
|
— |
|
|
|
4,661,417 |
|
|
March 1–31, 2023 |
|
|
250,000 |
|
|
|
16.40 |
|
|
|
250,000 |
|
|
|
4,411,417 |
|
|
Total |
|
|
375,708 |
|
|
$ |
18.80 |
|
|
|
250,000 |
|
|
|
|
|
|
(1) |
Under our existing stock repurchase program, approved by our Board of Directors on March 11, 2013, we were authorized to repurchase up to an aggregate of 7.0 million shares of our Class B common stock. |
| (2) | Consists of Class B Common stock that was tendered by an officer to satisfy the exercise price of stock options and tax withholding obligations in connection with the exercise of stock options and lapsing of restrictions on awards of restricted stock. Such shares were repurchased by us based on their fair market value on the trading day immediately prior to the vesting date. |
None
Not applicable
|
Exhibit |
|
Description |
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
32.1* |
|
|
|
|
|
|
|
32.2* |
|
|
|
|
|
|
|
101.INS* |
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
* |
Filed or furnished herewith. |
| 45 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Genie Energy Ltd. | |
|
|
|
|
|
May 9, 2024 |
By: |
/s/ Michael M. Stein |
|
|
|
Michael M. Stein |
|
|
|
|
|
May 9, 2024 |
By: |
/s/ Avi Goldin |
|
|
|
Avi Goldin |
| 46 |