Spark Energy, Inc. Announces Amendment and Extension of Credit Facilities; Names James G. Jones II as New Chief Financial Officer

HOUSTON, TX / ACCESSWIRE / June 13, 2019 / Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ: SPKE), today announced an amendment and extension (the “Amendment”) of its senior secured credit facility (the “Facility”). The Facility, which was set to mature in May 2020, now has a maturity date of May 21, 2021.

Additionally, the Company announced the extension of its $25 million subordinated debt facility with its majority shareholder. The subordinated facility, which was set to mature in July 2020, now has a maturity date of December 31, 2021.

“These facilities have enhanced flexibility that supports Spark’s continued growth,” said Nathan Kroeker, Spark’s President and Chief Executive Officer. “We thank each of our lenders for renewing their commitments and continuing their support of our business.”

Spark also announced the appointment of James G. Jones II as Chief Financial Officer of the Company, following Mr. Jones’ resignation from Spark’s Board. In his new role as CFO, Mr. Jones will oversee Spark’s accounting, tax, SEC reporting, treasury, financial planning and analysis, and investor relations functions. He will also assume the role of Spark’s Chief Risk Officer.

“I would like to welcome Jim to the Spark management team. I have worked with Jim and he has been involved with Spark for nine years dating back to his days as a partner at EY, and has served on Spark’s Board and chaired the Audit Committee and Special Committee since our IPO in 2014. Given his financial background and management expertise, we are confident we have a strong leader to guide our finance organization through our next phase of growth.”

“We want to thank Rabobank for their leadership in helping us close the Amendment and continue our journey in providing value to our shareholders,” said Jim Jones, Spark’s new Chief Financial Officer. “Mr. Maxwell has reconfirmed his commitment to Spark by extending his subordinated debt facility. Spark is well positioned with ample liquidity to continue to streamline the business and pursue opportunities in the marketplace.”

About Spark Energy, Inc.

Spark Energy, Inc. is an independent retail energy services company founded in 1999 that provides residential and commercial customers in competitive markets across the United States with an alternative choice for their natural gas and electricity. Headquartered in Houston, Texas, Spark currently operates in 19 states and serves 94 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

We use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should note that new materials, including press releases, updated investor presentations, and financial and other filings with the Securities and Exchange Commission are posted on the Spark Energy Investor Relations website at ir.sparkenergy.com. Investors are urged to monitor our website regularly for information and updates about the Company.

Cautionary Note Regarding Forward Looking Statements

This release contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. These forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) can be identified by the use of forward-looking terminology including “may,” “should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “plan,” “intend,” “project,” or other similar words. Forward-looking statements appear in this press release and include statements about our repurchase program. The forward-looking statements in this press release are subject to risks and uncertainties. Important factors that could cause actual results to materially differ from those projected in the forward-looking statements include, but are not limited to the “Risk Factors” in our latest Annual Report on Form 10-K for the year ended December 31, 2018, in our Quarterly Reports on Form 10-Q, and other public filings and press releases.

You should review the risk factors and other factors noted throughout this press release. All forward-looking statements speak only as of the date of this press release. Unless required by law, we disclaim any obligation to publicly update or revise these statements whether as a result of new information, future events or otherwise. It is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Contact: Spark Energy, Inc.

Investors:
Christian Hettick, 832-200-3727

Media:
Kira Jordan, 832-255-7302

SOURCE: Spark Energy, Inc.

View source version on accesswire.com:
https://www.accesswire.com/548602/Spark-Energy-Inc-Announces-Amendment-and-Extension-of-Credit-Facilities-Names-James-G-Jones-II-as-New-Chief-Financial-Officer

Spark Energy, Inc. Commences Preferred Stock Share Repurchase Program

HOUSTON, TX / ACCESSWIRE / May 22, 2019 / Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ: SPKE), today announced the commencement of a repurchase program (the “Repurchase Program”) of its 8.75% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share (the “Preferred Stock”). The Company may make purchases of Preferred Stock under the Repurchase Program, if any, from the commencement of the program on May 20, 2019 through May 20, 2020, and there is no dollar limit on the amount of Preferred Stock that may be purchased. The Company may make purchases, from time to time, at prevailing prices in open market transactions or in negotiated purchases, subject to market conditions, share prices and other considerations. The Repurchase Program does not obligate the Company to make any repurchases and may be suspended for periods or discontinued at any time. The Company intends to fund the Repurchase Program through available cash balances as well as future operating cash flows.

“We achieved a strong first quarter to start 2019 and believe this is a good opportunity, given the current trading price of the Preferred Stock being under par value,” said Nathan Kroeker, Spark’s President and Chief Executive Officer. “We have strengthening liquidity and this program will allow us to retire Preferred Stock that has a significantly higher cost of capital than other sources available to us.”

About Spark Energy, Inc.

Spark Energy, Inc. is an independent retail energy services company founded in 1999 that provides residential and commercial customers in competitive markets across the United States with an alternative choice for their natural gas and electricity. Headquartered in Houston, Texas, Spark currently operates in 19 states and serves 94 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

We use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should note that new materials, including press releases, updated investor presentations, and financial and other filings with the Securities and Exchange Commission are posted on the Spark Energy Investor Relations website at ir.sparkenergy.com. Investors are urged to monitor our website regularly for information and updates about the Company.

Cautionary Note Regarding Forward Looking Statements

This release contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. These forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) can be identified by the use of forward-looking terminology including “may,” “should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “plan,” “intend,” “project,” or other similar words. Forward-looking statements appear in this press release and include statements about our repurchase program. The forward-looking statements in this press release are subject to risks and uncertainties. Important factors that could cause actual results to materially differ from those projected in the forward-looking statements include, but are not limited to the “Risk Factors” in our latest Annual Report on Form 10-K for the year ended December 31, 2018, in our Quarterly Reports on Form 10-Q, and other public filings and press releases.

You should review the risk factors and other factors noted throughout this press release. All forward-looking statements speak only as of the date of this press release. Unless required by law, we disclaim any obligation to publicly update or revise these statements whether as a result of new information, future events or otherwise. It is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Contact: Spark Energy, Inc.

Investors:
Christian Hettick, 832-200-3727

Media:
Kira Jordan, 832-255-7302

SOURCE: Spark Energy, Inc.

View source version on accesswire.com:
https://www.accesswire.com/546228/Spark-Energy-Inc-Commences-Preferred-Stock-Share-Repurchase-Program

Spark Energy, Inc. Reports First Quarter 2019 Financial Results

Successful Winter Hedging Strategy; Strong Quarter Over Quarter Performance

HOUSTON, TX / ACCESSWIRE / May 6, 2019 / Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ: SPKE), an independent retail energy services company, today reported financial results for the quarter ended March 31, 2019.

           Key Highlights

  • Achieved $25.1 million in Adjusted EBITDA, $56.6 million in Retail Gross Margin, and a $2.7 million in Net Income for the first quarter
  • Total RCE count of 865,000 as of March 31, 2019
  • Continued optimization of large C&I portfolio, resulting in average monthly attrition of 5.4%
  • Winter hedging strategy performed extremely well
  • Successful ramp-up of organic customer acquisition

“We had a strong first quarter, with improved margins that were protected from extreme weather by our winter hedging strategy,” said Nathan Kroeker, Spark Energy’s President and Chief Executive Officer. “We integrated the Starion acquisition and are nearing completion of our brand and platform consolidation efforts.

“The significant year-over-year increase in unit margins from last winter to this winter was the result of a deliberate strategy that we implemented after last year’s bomb cyclone to strengthen our hedging strategy, reduce our exposure to larger commercial customers, and refocus on higher-margin customers. We also achieved year-over-year improvements in G&A, and we expect to continue to see improvement each quarter for the rest of 2019.”

Summary First Quarter 2019 Financial Results

For the quarter ended March 31, 2019, Spark reported Adjusted EBITDA of $25.1 million compared to Adjusted EBITDA of $15.9 million for the quarter ended March 31, 2018. This increase of $9.2 million was driven by higher Retail Gross Margin.

For the quarter ended March 31, 2019, Spark reported Retail Gross Margin of $56.6 million compared to Retail Gross Margin of $45.7 million for the quarter ended March 31, 2018. This increase of $10.9 million was primarily attributable to increased electricity and gas unit margins, partially offset by decreased electricity and natural gas volumes.

Net income for the quarter ended March 31, 2019, was $2.7 million compared to net loss of $41.8 million for the quarter ended March 31, 2018. The increase in performance compared to the prior year was primarily the result of decreased retail cost of revenues.

Liquidity and Capital Resources

($ in thousands)
March 31, 2019
Cash and cash equivalents
$ 32,436
Senior Credit Facility Availability (1)
25,305
Subordinated Debt Availability (2)
25,000
Total Liquidity
$ 82,741

 

(1) Reflects amount of Letters of Credit that could be issued based on existing covenants as of March 31, 2019.
(2) The availability of the Subordinated Facility is dependent on our Founder’s willingness and ability to lend.

 

Dividend

On April 18, 2019, Spark’s Board of Directors declared quarterly dividends of $0.18125 per share of Class A common stock payable on June 14th, 2019, to holders of record on May 31, 2019, and $0.546875 per share of Series A Preferred Stock payable on July 15, 2019 to holders of record on July 1, 2019.

Business Outlook

Kroeker concluded, “We are seeing the benefits of our brand and system consolidations and improved customer mix. We are also ramping up our organic customer acquisition channels, while remaining disciplined on a cost per RCE basis. We expect to deliver strong Adjusted EBITDA for the balance of 2019 and for that trend to continue into 2020.”

Conference Call and Webcast

Spark will host a conference call to discuss first quarter 2019 results on Tuesday, May 7, 2019, at 10:00 AM Central Time (11:00 AM Eastern).

A live webcast of the conference call can be accessed from the Events & Presentations page of the Spark Energy Investor Relations website at http://ir.sparkenergy.com/events-and-presentations. An archived replay of the webcast will be available for twelve months following the live presentation.

About Spark Energy, Inc.

Spark Energy, Inc. is an independent retail energy services company founded in 1999 that provides residential and commercial customers in competitive markets across the United States with an alternative choice for their natural gas and electricity. Headquartered in Houston, Texas, Spark currently operates in 19 states and serves 94 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

We use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should note that new materials, including press releases, updated investor presentations, and financial and other filings with the Securities and Exchange Commission are posted on the Spark Energy Investor Relations website at ir.sparkenergy.com. Investors are urged to monitor our website regularly for information and updates about the Company.

Cautionary Note Regarding Forward Looking Statements

This earnings release contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. These forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the ”Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the ”Exchange Act”) can be identified by the use of forward-looking terminology including ”may,” ”should,” ”likely,””will,” ”believe,” ”expect,” ”anticipate,” ”estimate,” ”continue,” ”plan,” ”intend,” ”project,” or other similar words. All statements, other than statements of historical fact included in this earnings release, regarding strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, objectives and beliefs of management are forward-looking statements. Forward-looking statements appear in a number of places in this earnings release and may include statements about business strategy and prospects for growth, customer acquisition costs, ability to pay cash dividends, cash flow generation and liquidity, availability of terms of capital, competition and government regulation and general economic conditions. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove correct.

The forward-looking statements in this earnings release are subject to risks and uncertainties. Important factors that could cause actual results to materially differ from those projected in the forward-looking statements include, but are not limited to:

  • changes in commodity prices;
  • the sufficiency of risk management and hedging policies and practices;
  • the impact of extreme and unpredictable weather conditions, including hurricanes and other natural disasters;
  • federal, state and local regulation, including the industry’s ability to address or adapt to potentially restrictive new regulations that may be enacted by public utility commissions;
  • our ability to borrow funds and access credit markets;
  • restrictions in our debt agreements and collateral requirements;
  • credit risk with respect to suppliers and customers;
  • changes in costs to acquire customers as well as actual attrition rates;
  • accuracy of billing systems;
  • our ability to successfully identify, complete, and efficiently integrate acquisitions into our operations;
  • significant changes in, or new charges by, the ISOs in the regions in which we operate;
  • competition; and
  • the ”Risk Factors” in our latest Annual Report on Form 10-K for the year ended December 31, 2018, in our Quarterly Reports on Form 10-Q, and other public filings and press releases.

You should review the risk factors and other factors noted throughout or incorporated by reference in this earnings release that could cause our actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements speak only as of the date of this earnings release. Unless required by law, we disclaim any obligation to publicly update or revise these statements whether as a result of new information, future events or otherwise. It is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2019 AND DECEMBER 31, 2018
(in thousands, except share counts)
(unaudited)
March 31,
2019
December 31, 2018
Assets
Current assets:
Cash and cash equivalents
$ 32,436 $ 41,002
Restricted cash
2,767 8,636
Accounts receivable, net of allowance for doubtful accounts of $3,323 at March 31, 2019 and $3,353 at December 31, 2018
130,887 150,866
Accounts receivable-affiliates
2,631 2,558
Inventory
235 3,878
Fair value of derivative assets
2,203 7,289
Customer acquisition costs, net
14,455 14,431
Customer relationships, net
16,565 16,630
Deposits
8,043 9,226
Renewable energy credit asset
34,417 25,717
Other current assets
11,031 11,747
Total current assets
255,670 291,980
Property and equipment, net
3,871 4,366
Fair value of derivative assets
146 3,276
Customer acquisition costs, net
4,736 3,893
Customer relationships, net
27,319 26,429
Deferred tax assets
27,261 27,321
Goodwill
120,343 120,343
Other assets
9,517 11,130
Total assets
$ 448,863 $ 488,738
Liabilities, Series A Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable
$ 54,515 $ 69,631
Accounts payable-affiliates
2,447 2,464
Accrued liabilities
7,336 10,004
Renewable energy credit liability
50,370 42,805
Fair value of derivative liabilities
5,518 6,478
Current payable pursuant to tax receivable agreement-affiliates
1,658 1,658
Current contingent consideration for acquisitions
1,328 1,328
Current portion of Note Payable
5,900 6,936
Other current liabilities
1,037 647
Total current liabilities
130,109 141,951
Long-term liabilities:
Fair value of derivative liabilities
5,284 106
Payable pursuant to tax receivable agreement-affiliates
25,917 25,917
Long-term portion of Senior Credit Facility
110,500 129,500
Subordinated debt-affiliate
10,000
Other long-term liabilities
545 212
Total liabilities
272,355 307,686
Commitments and contingencies (Note 13)
Series A Preferred Stock, par value $0.01 per share, 20,000,000 shares authorized, 3,707,256 shares issued and outstanding at March 31, 2019 and at December 31, 2018
90,758 90,758
Stockholders’ equity:
Common Stock:
Class A common stock, par value $0.01 per share, 120,000,000 shares authorized, 14,241,318 issued, and 14,141,872 outstanding at March 31, 2019 and 14,178,284 issued and 14,078,838 outstanding at December 31, 2018
142 142
Class B common stock, par value $0.01 per share, 60,000,000 shares authorized, 20,800,000 issued and outstanding at March 31, 2019 and December 31, 2018
209 209
Additional paid-in capital
45,769 46,157
Accumulated other comprehensive (loss) income
(12 ) 2
Retained earnings
62 1,307
Treasury stock, at cost, 99,446 shares at March 31, 2019 and December 31, 2018
(2,011 ) (2,011 )
Total stockholders’ equity
44,159 45,806
Non-controlling interest in Spark HoldCo, LLC
41,591 44,488
Total equity
85,750 90,294
Total liabilities, Series A Preferred Stock and Stockholders’ equity
$ 448,863 $ 488,738

 

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(in thousands)
(unaudited)
Three Months Ended March 31,
2019
2018
Revenues:
Retail revenues
$ 240,154 $ 284,001
Net asset optimization revenues
2,552 2,687
Total Revenues
242,706 286,688
Operating Expenses:
Retail cost of revenues
195,255 289,876
General and administrative
29,476 30,047
Depreciation and amortization
12,155 13,019
Total Operating Expenses
236,886 332,942
Operating income (loss)
5,820 (46,254 )
Other (expense)/income:
Interest expense
(2,223 ) (2,245 )
Interest and other income
189 201
Total other expenses
(2,034 ) (2,044 )
Income (loss) before income tax expense (benefit)
3,786 (48,298 )
Income tax expense (benefit)
1,041 (6,467 )
Net income (loss)
$ 2,745 $ (41,831 )
Less: Net income (loss) attributable to non-controlling interests
1,963 (30,726 )
Net income (loss) attributable to Spark Energy, Inc. stockholders
$ 782 $ (11,105 )
Less: Dividend on Series A Preferred Stock
2,027 2,027
Net loss attributable to stockholders of Class A common stock
$ (1,245 ) $ (13,132 )
Other comprehensive income (loss), net of tax:
Currency translation loss
$ (35 ) $ (83 )
Other comprehensive loss
(35 ) (83 )
Comprehensive income (loss)
$ 2,710 $ (41,914 )
Less: Comprehensive income (loss) attributable to non-controlling interests
1,943 (30,777 )
Comprehensive income (loss) attributable to Spark Energy, Inc. stockholders
$ 767 $ (11,137 )
Net loss attributable to Spark Energy, Inc. per share of Class A common stock
Basic
$ (0.09 ) $ (1.00 )
Diluted
$ (0.09 ) $ (1.04 )
Weighted average shares of Class A common stock outstanding
Basic
14,135 13,136
Diluted
14,135 34,621

 

 

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

 

 

Three Months Ended March 31,
2019
2018
Cash flows from operating activities:
Net income (loss)
$ 2,745 $ (41,831 )
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization expense
12,159 11,632
Deferred income taxes
59 (6,549 )
Stock based compensation
1,172 1,131
Amortization of deferred financing costs
268 295
Bad debt expense
3,849 2,423
Loss on derivatives, net
19,541 36,542
Current period cash settlements on derivatives, net
(7,106 ) 16,442
Other
(137 ) (248 )
Changes in assets and liabilities:
Decrease in accounts receivable
16,129 9,737
(Increase) decrease in accounts receivable-affiliates
(73 ) 354
Decrease in inventory
3,643 4,070
Increase in customer acquisition costs
(5,789 ) (4,274 )
Increase in prepaid and other current assets
(5,692 ) (22,719 )
Increase in other assets
(102 ) (58 )
Decrease in accounts payable and accrued liabilities
(11,322 ) (9,091 )
Decrease in accounts payable-affiliates
(18 ) (572 )
Increase (decrease) in other current liabilities
390 (6,653 )
Increase (decrease) in other non-current liabilities
333 (171 )
Net cash provided by (used in) operating activities
30,049 (9,540 )
Cash flows from investing activities:
Purchases of property and equipment
(254 ) (754 )
Acquisition of Starion customers
(5,869 )
Acquisition of HIKO
(15,041 )
Net cash used in investing activities
(6,123 ) (15,795 )
Cash flows from financing activities:
Proceeds from issuance of Series A Preferred Stock, net of issuance costs paid
48,490
Borrowings on notes payable
64,500 83,800
Payments on notes payable
(93,500 ) (102,550 )
Payment of the Major Energy Companies Earnout
(1,607 )
Payments on the Verde promissory note
(1,036 ) (3,261 )
Proceeds from disgorgement of stockholders short-swing profits
46 244
Payment of dividends to Class A common stockholders
(2,564 ) (2,381 )
Payment of distributions to non-controlling unitholders
(3,770 ) (4,822 )
Payment of Dividends to Preferred Stock
(2,027 ) (932 )
Payment to affiliates for acquisition of customer book
(10 )
Net cash (used in) provided by financing activities
(38,361 ) 16,981
Decrease in Cash and cash equivalents
(14,435 ) (8,354 )
Cash and cash equivalents and Restricted cash-beginning of period
49,638 29,419
Cash and cash equivalents and Restricted cash-end of period
$ 35,203 $ 21,065
Supplemental Disclosure of Cash Flow Information:
Non-cash items:
Property and equipment purchase accrual
$ 2 $ 180
Cash paid (received) during the period for:
Interest
$ 2,099 $ 1,854
Taxes
$ (3,147 ) $ 1,268

 

 

SPARK ENERGY, INC.
OPERATING SEGMENT RESULTS
FOR THE THREE MONTHS ENDED March 31, 2019 AND 2018
Three Months Ended
March 31,
2019
2018
(in thousands, except volume and per unit operating data)
Retail Electricity Segment
Total Revenues
$ 182,092 $ 220,899
Retail Cost of Revenues
165,888 249,547
Less: Net losses on non-trading derivatives, net of cash settlements
(13,769 ) (48,367 )
Retail Gross Margin (1) – Electricity
$ 29,973 $ 19,719
Volumes – Electricity (MWhs)
1,728,083 2,252,024
Retail Gross Margin (2) – Electricity per MWh
$ 17.35 $ 8.76
Retail Natural Gas Segment
Total Revenues
58,062 63,102
Retail Cost of Revenues
29,367 40,329
Less: Net gains (losses) on non-trading derivatives, net of cash settlements
2,091 (3,227 )
Retail Gross Margin (1) – Gas
$ 26,604 $ 26,000
Volumes – Gas (MMBtus)
6,951,610 7,677,082
Retail Gross Margin (2) – Gas per MMBtu
$ 3.83 $ 3.39

(1) Reflects the Retail Gross Margin attributable to our Retail Natural Gas Segment or Retail Electricity Segment, as applicable. Retail Gross Margin is a non-GAAP financial measure. See ”Non-GAAP Performance Measures” in our Form 10-Q for a reconciliation of Adjusted EBITDA and Retail Gross Margin to their most directly comparable financial measures presented in accordance with GAAP.

(2) Reflects the Retail Gross Margin for the Retail Natural Gas Segment or Retail Electricity Segment, as applicable, divided by the total volumes in MMBtu or MWh, respectively.

Reconciliation of GAAP to Non-GAAP Measures

Adjusted EBITDA

We define ”Adjusted EBITDA” as EBITDA less (i) customer acquisition costs incurred in the current period, (ii) net gain (loss) on derivative instruments, and (iii) net current period cash settlements on derivative instruments, plus (iv) non-cash compensation expense, and (v) other non-cash and non-recurring operating items. EBITDA is defined as net income (loss) before provision for income taxes, interest expense and depreciation and amortization. We deduct all current period customer acquisition costs (representing spending for organic customer acquisitions) in the Adjusted EBITDA calculation because such costs reflect a cash outlay in the period in which they are incurred, even though we capitalize such costs and amortize them over two years. We do not deduct the cost of customer acquisitions through acquisitions of business or portfolios of customers in calculated Adjusted EBITDA. We deduct our net gains (losses) on derivative instruments, excluding current period cash settlements, from the Adjusted EBITDA calculation in order to remove the non-cash impact of net gains and losses on derivative instruments. We also deduct non-cash compensation expense as a result of restricted stock units that are issued under our long-term incentive plan. Finally, we also adjust from time to time other non-cash or unusual and/or infrequent charges due to either their non-cash nature or their infrequency.

We believe that the presentation of Adjusted EBITDA provides information useful to investors in assessing our liquidity and financial condition and results of operations and that Adjusted EBITDA is also useful to investors as a financial indicator of our ability to incur and service debt, pay dividends and fund capital expenditures. Adjusted EBITDA is a supplemental financial measure that management and external users of our condensed consolidated financial statements, such as industry analysts, investors, commercial banks and rating agencies, use to assess the following:

  • our operating performance as compared to other publicly traded companies in the retail energy industry, without regard to financing methods, capital structure or historical cost basis;
  • the ability of our assets to generate earnings sufficient to support our proposed cash dividends; and
  • our ability to fund capital expenditures (including customer acquisition costs) and incur and service debt.

Retail Gross Margin

We define retail gross margin as operating income (loss) plus (i) depreciation and amortization expenses and (ii) general and administrative expenses, less (i) net asset optimization revenues, (ii) net gains (losses) on non-trading derivative instruments, and (iii) net current period cash settlements on non-trading derivative instruments. Retail gross margin is included as a supplemental disclosure because it is a primary performance measure used by our management to determine the performance of our retail natural gas and electricity segments. As an indicator of our retail energy business’ operating performance, retail gross margin should not be considered an alternative to, or more meaningful than, operating income (loss), its most directly comparable financial measure calculated and presented in accordance with GAAP.

We believe retail gross margin provides information useful to investors as an indicator of our retail energy business’s operating performance.

The GAAP measures most directly comparable to Adjusted EBITDA are net income (loss) and net cash provided by operating activities. The GAAP measure most directly comparable to Retail Gross Margin is operating income (loss). Our non-GAAP financial measures of Adjusted EBITDA and Retail Gross Margin should not be considered as alternatives to net income (loss), net cash provided by operating activities, or operating income (loss). Adjusted EBITDA and Retail Gross Margin are not presentations made in accordance with GAAP and have important limitations as analytical tools. You should not consider Adjusted EBITDA or Retail Gross Margin in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA and Retail Gross Margin exclude some, but not all, items that affect net income (loss) and net cash provided by operating activities, and are defined differently by different companies in our industry, our definition of Adjusted EBITDA and Retail Gross Margin may not be comparable to similarly titled measures of other companies.

Management compensates for the limitations of Adjusted EBITDA and Retail Gross Margin as analytical tools by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these data points into management’s decision-making process.

The following tables present a reconciliation of Adjusted EBITDA to net income (loss) and net cash provided by operating activities for each of the periods indicated.

APPENDIX TABLES A-1 AND A-2
ADJUSTED EBITDA RECONCILIATIONS
(in thousands)
(unaudited)
Three Months Ended March 31,
(in thousands)
2019
2018
Reconciliation of Adjusted EBITDA to Net Income (loss):
Net income (loss)
$ 2,745 $ (41,831 )
Depreciation and amortization
12,155 13,019
Interest expense
2,223 2,245
Income tax expense (benefit)
1,041 (6,467 )
EBITDA
18,164 (33,034 )
Less:
Net, losses on derivative instruments
(19,541 ) (36,542 )
Net, Cash settlements on derivative instruments
8,025 (15,537 )
Customer acquisition costs
5,789 4,274
Plus:
Non-cash compensation expense
1,172 1,131
Adjusted EBITDA
$ 25,063 $ 15,902

 

 

Three Months Ended March 31,
(in thousands)
2019
2018
Reconciliation of Adjusted EBITDA to net cash provided by operating activities:
Net cash provided by (used in) operating activities
$ 30,049 $ (9,540 )
Amortization of deferred financing costs
(268 ) (295 )
Bad debt expense
(3,849 ) (2,423 )
Interest expense
2,223 2,245
Income tax expense (benefit)
1,041 (6,467 )
Changes in operating working capital
Accounts receivable, prepaids, current assets
(10,364 ) 12,628
Inventory
(3,643 ) (4,070 )
Accounts payable and accrued liabilities
10,950 16,316
Other
(1,076 ) 7,508
Adjusted EBITDA
$ 25,063 $ 15,902
Cash Flow Data:
Cash flows provided by (used in) operating activities
$ 30,049 $ (9,540 )
Cash flows used in investing activities
$ (6,123 ) $ (15,795 )
Cash flows (used in) provided by financing activities
$ (38,361 ) $ 16,981

The following table presents a reconciliation of Retail Gross Margin to operating income (loss) for each of the periods indicated.

APPENDIX TABLE A-3
RETAIL GROSS MARGIN RECONCILIATION
(in thousands)
(unaudited)
Three Months Ended March 31,
(in thousands)
2019
2018
Reconciliation of Retail Gross Margin to Operating Income (loss):
Operating income (loss)
$ 5,820 $ (46,254 )
Plus:
Depreciation and amortization
12,155 13,019
General and administrative expense
29,476 30,047
Less:
Net asset optimization revenues
2,552 2,687
Net, losses on non-trading derivative instruments
(19,803 ) (36,712 )
Net, Cash settlements on non-trading derivative instruments
8,125 (14,882 )
Retail Gross Margin
$ 56,577 $ 45,719
Retail Gross Margin – Retail Electricity Segment
$ 29,973 $ 19,719
Retail Gross Margin – Retail Natural Gas Segment
$ 26,604 $ 26,000

 

CONTACT:

Spark Energy, Inc.

Investors:
Christian Hettick, 832-200-3727

Media:
Kira Jordan, 832-255-7302

SOURCE: Spark Energy, Inc.

Spark Energy, Inc. Announces Dividend on Common and Preferred Stock

First Quarter 2019 Financial Results to be presented on Tuesday, May 7, 2019

HOUSTON, TX / ACCESSWIRE / April 18, 2019 / Spark Energy, Inc. (‘Spark’ or the ‘Company’) (NASDAQ: SPKE), an independent retail energy services company, announced today that its Board of Directors has declared a quarterly cash dividend for the first quarter of 2019 in the amount of $0.18125 per share on its Class A Common Stock. This amount represents an annualized dividend of $0.725 per share. The first quarter dividend will be paid on June 14, 2019 to holders of record of Spark’s Class A Common Stock on May 31, 2019.

Additionally, in accordance with the terms of the 8.75% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock (“Series A Preferred Stock”) of the Company, the Board of Directors has declared a quarterly cash dividend in the amount of $0.546875 per share on the Series A Preferred Stock. This amount represents an annualized dividend of $2.1875 per share. The dividend will be paid on July 15, 2019 to holders of record of Spark’s Series A Preferred Stock on July 1, 2019.

Conference Call and Webcast

The Company has also announced today that it plans to present its first quarter 2019 financial results in a conference call and webcast on Tuesday, May 7, 2019 at 10:00 AM Central (11:00 AM Eastern).

A live webcast of the conference call can be accessed from the Events & Presentations page of the Spark Energy Investor Relations website at ir.sparkenergy.com/events-and-presentations. An archived replay of the webcast will be available for twelve months following the live presentation.

About Spark Energy, Inc.

Spark Energy, Inc. is an established and growing independent retail energy services company founded in 1999 that provides residential and commercial customers in competitive markets across the United States with an alternative choice for their natural gas and electricity. Headquartered in Houston, Texas, Spark currently operates in 19 states and serves 94 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

We use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should note that new materials, including press releases, updated investor presentations, and financial and other filings with the Securities and Exchange Commission are posted on the Spark Energy Investor Relations website at ir.sparkenergy.com. Investors are urged to monitor our website regularly for information and updates about the Company.

Contact:

Spark Energy, Inc.

Investors:
Christian Hettick, 832-200-3727

Media:
Kira Jordan, 832-255-7302

SOURCE: Spark Energy, Inc.

Spark Energy, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results

HOUSTON, March 04, 2019 (GLOBE NEWSWIRE) — Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ: SPKE), an independent retail energy services company, today reported financial results for the year ended December 31, 2018.

Key Business Highlights

  • Recorded $20.1 million in Adjusted EBITDA, $50.2 million in Retail Gross Margin, and $15.3 million in Net Loss for the fourth quarter 2018
  • Recorded $70.7 million in Adjusted EBITDA, $185.1 million in Retail Gross Margin, and $14.4 million in Net Loss for the year ended 2018
  • Total RCE count of 908,000 as of December 31, 2018
  • Average monthly attrition of 4.7% for the year ended December 31, 2018
  • Closed three acquisitions in 2018
  • Brand consolidation and other synergies on track for $22 million in run-rate G&A savings
  • Increased commitments on the senior credit facility to $217.5 million

“We have significantly improved the health and stability of the business in 2018, strengthened our balance sheet, and positioned Spark to grow in 2019 and beyond,” said Nathan Kroeker, Spark Energy’s President and Chief Executive Officer. “Despite a challenging first quarter, we achieved our key objectives for the year, which included reducing our exposure to extreme weather risk, simplifying our brands and operating footprint, refocusing on growing our mass market business, and delivering on significant G&A savings across the organization. We also executed three tuck-in acquisitions that required minimal integration and had an immediate positive impact to our Adjusted EBITDA.

“Looking ahead, 2019 is already off to a good start. Our hedging strategy performed very well through the first half of the winter. We continue to shed larger, lower margin C&I customers, while the last of the full year hedges we put on during 2018’s Bomb Cyclone rolled off in December. As a result, we expect our electricity unit margins to increase steadily over the next couple of years. We continue to focus on our mass market book while realizing the remaining cost savings we first targeted in 2017.

“We recently upsized our credit facility to $217.5 million, which gives us the flexibility to continue to be opportunistic on the M&A front. When you combine this with our disciplined approach to unit margin improvement and anticipated cost savings, we have a lot to look forward to.”

Summary Fourth Quarter 2018 Financial Results

For the quarter ended December 31, 2018, Spark reported Adjusted EBITDA of $20.1 million compared to Adjusted EBITDA of $28.9 million for the quarter ended December 31, 2017. The decrease was primarily due to lower Retail Gross Margin partially offset by decreased spending on G&A and Customer Acquisition Costs.

For the quarter ended December 31, 2018, Spark reported Retail Gross Margin of $50.2 million compared to Retail Gross Margin of $66.2 million for the quarter ended December 31, 2017. The decrease was due to lower electricity unit margins and lower natural gas volumes.

Net loss for the quarter ended December 31, 2018, was $15.3 million compared to net income of $46.3 million for the quarter ended December 31, 2017, primarily due to a decrease in the non-cash mark-to-market position of our hedging book, the decrease in Retail Gross Margin detailed above, and the inclusion in 2017 of a reduction in our Tax Receivable Agreement (TRA) liability, offset by lower income tax expense in 2018 due to the Tax Law change.

Summary Full Year 2018 Financial Results

For the year ended December 31, 2018, Spark reported Adjusted EBITDA of $70.7 million compared to Adjusted EBITDA of $102.9 million for the year ended December 31, 2017. The decrease was primarily due to lower Retail Gross Margin due to full year financial impacts of the extreme weather events of the first quarter of 2018, as well as increased G&A, partially offset by a reduction in Customer Acquisition Costs.

For the year ended December 31, 2018, Spark reported Retail Gross Margin of $185.1 million compared to Retail Gross Margin of $224.5 million for the year ended December 31, 2017. The decrease was primarily due to lower electricity unit margins caused by the increase in retail costs of goods sold from full year impacts of the extreme weather experienced in the first quarter of 2018 and other factors, along with a reduction in natural gas volumes, partially offset by an increase in electric volumes.

Net loss for the year ended December 31, 2018, was $14.4 million compared to net income of $75.0 million for the year ended December 31, 2017, primarily due to a decrease in a non-cash mark-to-market position of our hedging book, the decrease in Retail Gross Margin detailed above, and the inclusion in 2017 of a reduction in our TRA liability, offset by lower income tax expense in 2018 due to the Tax Law change.

Liquidity and Capital Resources

($ in thousands) December 31, 2018
Cash and cash equivalents $ 41,002
Senior Credit Facility Availability 4,360
Subordinated Debt Availability (1) $ 15,000
Total Liquidity $ 60,362

(1)   The availability of the Subordinated Debt Facility is dependent on our Founder’s financial position and ability to lend.

On January 28, 2019 the Company and Co-Borrowers exercised the accordion feature of the Company’s Senior Credit Facility, bringing total commitments under the Senior Credit Facility to $217.5 million.

Dividend

Spark’s Board of Directors declared quarterly dividends of $0.18125 per share of Class A common stock payable on March 15, 2019, and $0.546875 per share of Series A Preferred Stock payable on April 15, 2019.

Conference Call and Webcast

Spark will host a conference call to discuss fourth quarter and full year 2018 results on Monday, March 4, 2019, at 9:00 AM Central Time (10:00 AM Eastern).

A live webcast of the conference call can be accessed from the Events & Presentations page of the Spark Energy Investor Relations website at https://ir.sparkenergy.com/events-and-presentations. An archived replay of the webcast will be available for twelve months following the live presentation.

About Spark Energy, Inc.

Spark Energy, Inc. is an established and growing independent retail energy services company founded in 1999 that provides residential and commercial customers in competitive markets across the United States with an alternative choice for their natural gas and electricity. Headquartered in Houston, Texas, Spark currently operates in 19 states and serves 94 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

We use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should note that new materials, including press releases, updated investor presentations, and financial and other filings with the Securities and Exchange Commission are posted on the Spark Energy Investor Relations website at ir.sparkenergy.com. Investors are urged to monitor our website regularly for information and updates about the Company.

Cautionary Note Regarding Forward Looking Statements

This earnings release contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. These forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) can be identified by the use of forward-looking terminology including “may,” “should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “plan,” “intend,” “projects,” or other similar words. All statements, other than statements of historical fact included in this earnings release, regarding strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, objectives and beliefs of management are forward-looking statements. Forward-looking statements appear in a number of places in this earnings release and may include statements about business strategy and prospects for growth, customer acquisition costs, ability to pay cash dividends, cash flow generation and liquidity, availability of terms of capital, competition and government regulation and general economic conditions. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove correct.

The forward-looking statements in this earnings release and the related earnings call are subject to risks and uncertainties. Important factors that could cause actual results to materially differ from those projected in the forward-looking statements include, but are not limited to:

  • changes in commodity prices
  • the sufficiency of risk management and hedging policies and practices;
  • the impact of extreme and unpredictable weather conditions, including hurricanes and other natural disasters;
  • federal, state and local regulation, including the industry’s ability to address or adapt to potentially restrictive new regulations that may be enacted by public utility commissions;
  • our ability to borrow funds and access credit markets;
  • restrictions in our debt agreements and collateral requirements;
  • credit risk with respect to suppliers and customers;
  • changes in costs to acquire customers and actual attrition rates;
  • accuracy of billing systems;
  • ability to successfully identify, complete, and efficiently integrate acquisitions into our operations;
  • significant changes in, or new changes by, the ISOs in the regions we operate;
  • competition; and
  • the “Risk Factors” in our latest Annual Report on Form 10-K, and in our quarterly reports, other public filings and press releases.

All forward-looking statements speak only as of the date of this earnings release. Unless required by law, we disclaim any obligation to publicly update or revise these statements whether as a result of new information, future events or otherwise. It is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

further discussion.

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 AS OF DECEMBER 31, 2018 AND DECEMBER 31, 2017
(in thousands)
(unaudited)

December 31, 2018 December 31, 2017
Assets
Current assets:
Cash and cash equivalents $ 41,002 $ 29,419
Restricted cash 8,636
Accounts receivable, net of allowance for doubtful accounts of $3,353 and $4,023 as of December 31, 2018 and 2017, respectively 150,866 158,814
Accounts receivable—affiliates 2,558 3,661
Inventory 3,878 4,470
Fair value of derivative assets 7,289 31,191
Customer acquisition costs, net 14,431 22,123
Customer relationships, net 16,630 18,653
Deposits 9,226 7,701
Renewable energy credit asset 25,717 12,839
Other current assets 11,747 20,706
Total current assets 291,980 296,738
Property and equipment, net 4,366 8,275
Fair value of derivative assets 3,276 3,309
Customer acquisition costs, net 3,893 6,949
Customer relationships, net 26,429 34,839
Deferred tax assets (1) 27,321 21,977
Goodwill 120,343 120,154
Other assets 11,130 11,500
Total Assets (1) $ 488,738 $ 503,741
Liabilities, Series A Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable $ 69,631 $ 77,510
Accounts payable—affiliates 2,464 4,622
Accrued liabilities 10,004 33,679
Renewable energy credit liability 42,805 23,477
Fair value of derivative liabilities 6,478 1,637
Current portion of Senior Credit Facility 7,500
Current payable pursuant to tax receivable agreement—affiliates 1,658 5,937
Current contingent consideration for acquisitions 1,328 4,024
Current portion of note payable 6,936 13,443
Other current liabilities 647 2,675
Total current liabilities 141,951 151,027
Long-term liabilities:
Fair value of derivative liabilities 106 492
Payable pursuant to tax receivable agreement—affiliates 25,917 26,355
Long-term portion of Senior Credit Facility 129,500 117,750
Subordinated debt—affiliate 10,000
Note payable 7,051
Contingent consideration for acquisitions 626
Other long-term liabilities 212 172
Total liabilities 307,686 303,473
Commitments and contingencies
Series A Preferred Stock, par value $0.01 per share, 20,000,000 shares authorized, 3,707,256 shares issued and outstanding at December 31, 2018 and 1,704,339 shares issued and outstanding at December 31, 2017 90,758 41,173
Stockholders’ equity:
Common Stock :
Class A common stock, par value $0.01 per share, 120,000,000 shares authorized, 14,178,284 issued and 14,078,838 outstanding at December 31, 2018 and 13,235,082 issued and 13,135,636 outstanding at December 31, 2017 142 132
Class B common stock, par value $0.01 per share, 60,000,000 shares authorized, 20,800,000 issued and outstanding at December 31, 2018 and 21,485,126 issued and outstanding at December 31, 2017 209 216
Additional paid-in capital (1) 46,157 47,811
Accumulated other comprehensive (loss)/income 2 (11 )
Retained (deficit) earnings (1) 1,307 11,399
Treasury stock, at cost, 99,446 shares at December 31, 2018 and December 31, 2017 (2,011 ) (2,011 )
Total stockholders’ equity (1) 45,806 57,536
Non-controlling interest in Spark HoldCo, LLC (1) 44,488 101,559
Total equity 90,294 159,095
  Total Liabilities, Series A Preferred Stock and stockholders’ equity $ 488,738 $ 503,741
  1. 2017 amounts have been adjusted to reflect certain immaterial prior period adjustments related to the allocation of income and recorded book equity balances between non-controlling interests and Spark Energy, Inc. stockholders. Please see our Form 10-K for our audited financial statements and Notes thereto which include a discussion of these immaterial adjustments.

SPARK ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 and 2016
(in thousands)
(unaudited)

Year Ended December 31,
2018 2017 2016
Revenues:
Retail revenues $ 1,001,417 $ 798,772 $ 547,283
Net asset optimization revenues (expense) 4,511 (717 ) (586 )
Total revenues 1,005,928 798,055 546,697
Operating expenses:
Retail cost of revenues 845,493 552,167 344,944
General and administrative 111,431 101,127 84,964
Depreciation and amortization 52,658 42,341 32,788
Total operating expenses 1,009,582 695,635 462,696
Operating (loss) income (3,654 ) 102,420 84,001
Other (expense)/income:
Interest expense (9,410 ) (11,134 ) (8,859 )
Change in tax receivable agreement liability 22,267
Interest and other income 749 256 957
Total other expenses (8,661 ) 11,389 (7,902 )
(Loss) income before income tax expense (12,315 ) 113,809 76,099
Income tax expense (1) 2,077 38,765 10,426
Net (loss) income(1) (14,392 ) 75,044 65,673
Less: Net (loss) income attributable to non-controlling interest (1) (13,206 ) 55,799 51,229
Net (loss) income attributable to Spark Energy, Inc. stockholders (1) $ (1,186 ) $ 19,245 $ 14,444
Less: Dividend on Series A preferred stock 8,109 3,038
Net (loss) income attributable to stockholders of Class A common stock (9,295 ) 16,207 14,444
Other comprehensive (loss) income, net of tax:
Currency translation (loss) gain 31 (59 ) 41
Other comprehensive (loss) income 31 (59 ) 41
Comprehensive (loss) income (14,361 ) 74,985 65,714
Less: Comprehensive (loss) income attributable to non-controlling interest (1) (13,188 ) 55,762 51,259
Comprehensive (loss) income attributable to Spark Energy, Inc. stockholders (1) (1,173 ) 19,223 14,455
  1. 2017 amounts have been adjusted to reflect certain immaterial prior period adjustments related to the allocation of income and recorded book equity balances between non-controlling interests and Spark Energy, Inc. stockholders. Please see our Form 10-K for our audited financial statements and Notes thereto which include a discussion of these immaterial adjustments.

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 20182017 AND 2016

(in thousands)
(unaudited)

Year Ended December 31,
2018 2017 2016
Cash flows from operating activities:
Net (loss) income (1) $ (14,392 ) $ 75,044 $ 65,673
Adjustments to reconcile net (loss) income to net cash flows provided by operating activities:
Depreciation and amortization expense 51,436 42,666 48,526
Deferred income taxes (1) (3,970 ) 29,821 3,382
Change in TRA liability 1,433 (22,267 )
Stock based compensation 5,879 5,058 5,242
Amortization of deferred financing costs 1,291 1,035 668
Change in fair value of Earnout liabilities (1,715 ) (7,898 ) (140 )
Accretion on fair value of Earnout liabilities 4,108 5,060
Excess tax benefit related to restricted stock vesting (101 ) 179
Bad debt expense 10,135 6,550 1,261
Loss (gain) on derivatives, net 18,170 (5,008 ) (22,407 )
Current period cash settlements on derivatives, net 11,038 (19,598 ) (24,427 )
Accretion of discount to convertible subordinated notes to affiliate 1,004 150
Earnout Payments (1,781 ) (843 )
Other (673 ) (5 ) (715 )
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 2,692 (32,361 ) (12,088 )
Decrease (increase) in accounts receivable—affiliates 859 (1,459 ) (118 )
Decrease (increase) in inventory 674 (718 ) 542
Increase in customer acquisition costs (13,673 ) (25,874 ) (21,907 )
(Increase) decrease in prepaid and other current assets (14,033 ) 1,915 71
(Increase) decrease in other assets (335 ) (465 ) 1,321
Increase in accounts payable and accrued liabilities 10,301 14,831 14,831
(Decrease) increase in accounts payable—affiliates (2,158 ) 51 458
(Decrease) increase in other current liabilities (3,050 ) (1,210 ) 2,364
Increase (decrease) in other non-current liabilities 42 (1,487 ) 46
Decrease in intangible assets—customer acquisitions (2,161 )
Net cash provided by operating activities 57,689 62,131 66,950
Cash flows from investing activities:
Purchases of property and equipment (1,429 ) (1,704 ) (2,258 )
Cash paid for acquisitions (22,607 ) (75,854 ) (30,129 )
Contribution to equity method investment (1,102 )
Net cash used in investing activities (24,036 ) (77,558 ) (33,489 )
Cash flows from financing activities:
Proceeds from issuance of Series A Preferred Stock, net of issuance costs paid 48,490 40,241
Payment to affiliates for acquisition of customer book (7,129 )
Borrowings on notes payable 432,300 206,400 79,048
Payments on notes payable (418,050 ) (152,939 ) (66,652 )
Earnout Payments (1,607 ) (18,418 ) (2,012 )
Payments on the Verde promissory note (13,422 )
Restricted stock vesting (2,893 ) (3,091 ) (1,183 )
Proceeds from issuance of Class B common stock 13,995
Proceeds from disgorgement of stockholders short-swing profits 244 1,129 941
Excess tax benefit related to restricted stock vesting 185
Payment of Tax Receivable Agreement Liability (6,219 )
Payment of dividends to Class A common shareholders (9,784 ) (9,519 ) (8,367 )
Payment of distributions to non-controlling unitholders (35,479 ) (33,800 ) (34,930 )
Payment of dividends to Preferred Stock (7,014 ) (2,106 ) ���
Purchase of Treasury Stock (2,011 )
Net cash (used in) provided by financing activities (13,434 ) 25,886 (18,975 )
Increase in Cash and cash equivalents and Restricted Cash 20,219 10,459 14,486
Cash and cash equivalents and Restricted cash—beginning of period 29,419 18,960 4,474
Cash and cash equivalents and Restricted cash—end of period $ 49,638 $ 29,419 $ 18,960
  1. 2017 amounts have been adjusted to reflect certain immaterial prior period adjustments related to the allocation of income and recorded book equity balances between non-controlling interests and Spark Energy, Inc. stockholders. Please see our Form 10-K for our audited financial statements and Notes thereto which include a discussion of these immaterial adjustments.

SPARK ENERGY, INC.
OPERATING SEGMENT RESULTS
FOR THE YEARS ENDED December 31, 2018, 2017 and 2016
(in thousands, except per unit operating data)
(unaudited)

Year Ended December 31,
2018 2017 2016
(in thousands, except volume and per unit operating data)
Retail Electricity Segment
Total Revenues $ 863,451 $ 657,566 $ 417,229
Retail Cost of Revenues 762,771 477,012 286,795
Less: Net (Losses) Gains on non-trading derivatives, net of cash settlements (23,988 ) 22,086 12,298
Retail Gross Margin —Electricity $ 124,668 $ 158,468 $ 118,136
Volumes—Electricity (MWhs) 8,630,653 6,755,663 4,170,593
Retail Gross Margin —Electricity per MWh $ 14.44 $ 23.46 $ 28.33
Retail Natural Gas Segment
Total Revenues $ 137,966 $ 141,206 $ 130,054
Retail Cost of Revenues 82,722 75,155 58,149
Less: Net (Losses) Gains on non-trading derivatives, net of cash settlements (5,197 ) 10 7,672
Retail Gross Margin —Gas $ 60,441 $ 66,041 $ 64,233
Volumes—Gas (MMBtus) 16,778,393 18,203,684 16,819,713
Retail Gross Margin —Gas per MMBtu $ 3.60 $ 3.63 $ 3.82

Reconciliation of GAAP to Non-GAAP Measures

Adjusted EBITDA

We define “Adjusted EBITDA” as EBITDA less (i) customer acquisition costs incurred in the current period, (ii) net gain (loss) on derivative instruments, and (iii) net current period cash settlements on derivative instruments, plus (iv) non-cash compensation expense, and (v) other non-cash and non-recurring operating items. EBITDA is defined as net income (loss) before provision for income taxes, interest expense and depreciation and amortization. We deduct all current period customer acquisition costs (representing spending for organic customer acquisitions) in the Adjusted EBITDA calculation because such costs reflect a cash outlay in the period in which they are incurred, even though we capitalize such costs and amortize them over two years in accordance with our accounting policies. The deduction of current period customer acquisition costs is consistent with how we manage our business, but the comparability of Adjusted EBITDA between periods may be affected by varying levels of customer acquisition costs. For example, our Adjusted EBITDA is lower in years of customer growth reflecting larger customer acquisition spending. We do not deduct the cost of customer acquisitions through acquisitions of business or portfolios of customers in calculated Adjusted EBITDA. We deduct our net gains (losses) on derivative instruments, excluding current period cash settlements, from the Adjusted EBITDA calculation in order to remove the non-cash impact of net gains and losses on derivative instruments. We also deduct non-cash compensation expense as a result of restricted stock units that are issued under our long-term incentive plan.

We believe that the presentation of Adjusted EBITDA provides information useful to investors in assessing our liquidity and financial condition and results of operations and that Adjusted EBITDA is also useful to investors as a financial indicator of our ability to incur and service debt, pay dividends and fund capital expenditures. Adjusted EBITDA is a supplemental financial measure that management and external users of our condensed consolidated financial statements, such as industry analysts, investors, commercial banks and rating agencies, use to assess the following:

  • our operating performance as compared to other publicly traded companies in the retail energy industry, without regard to financing methods, capital structure or historical cost basis;
  • the ability of our assets to generate earnings sufficient to support our proposed cash dividends; and
  • our ability to fund capital expenditures (including customer acquisition costs) and incur and service debt.

Retail Gross Margin

We define retail gross margin as operating income (loss) plus (i) depreciation and amortization expenses and (ii) general and administrative expenses, less (i) net asset optimization revenues, (ii) net gains (losses) on non-trading derivative instruments, and (iii) net current period cash settlements on non-trading derivative instruments. Retail gross margin is included as a supplemental disclosure because it is a primary performance measure used by our management to determine the performance of our retail natural gas and electricity business by removing the impacts of our asset optimization activities and net non-cash income (loss) impact of our economic hedging activities. As an indicator of our retail energy business’ operating performance, retail gross margin should not be considered an alternative to, or more meaningful than, operating income (loss), its most directly comparable financial measure calculated and presented in accordance with GAAP.

We believe retail gross margin provides information useful to investors as an indicator of our retail energy business’s operating performance.

The GAAP measures most directly comparable to Adjusted EBITDA are net income (loss) and net cash provided by operating activities. The GAAP measure most directly comparable to Retail Gross Margin is operating income (loss). Our non-GAAP financial measures of Adjusted EBITDA and Retail Gross Margin should not be considered as alternatives to net income (loss), net cash provided by operating activities, or operating income (loss). Adjusted EBITDA and Retail Gross Margin are not presentations made in accordance with GAAP and have important limitations as analytical tools. You should not consider Adjusted EBITDA or Retail Gross Margin in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA and Retail Gross Margin exclude some, but not all, items that affect net income (loss) and net cash provided by operating activities, and are defined differently by different companies in our industry, our definition of Adjusted EBITDA and Retail Gross Margin may not be comparable to similarly titled measures of other companies.

Management compensates for the limitations of Adjusted EBITDA and Retail Gross Margin as analytical tools by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these data points into management’s decision-making process.

The following tables present a reconciliation of Adjusted EBITDA to net income (loss) and net cash provided by operating activities for each of the periods indicated.

APPENDIX TABLES A-1 AND A-2
ADJUSTED EBITDA RECONCILIATIONS
(in thousands)
(unaudited)

Year Ended December 31, Quarter Ended December 31,
(in thousands) 2018 2017 2018 2017
Reconciliation of Adjusted EBITDA to Net (Loss) Income:
Net (loss) income(1) $ (14,392 ) $ 75,044 $ (15,315 ) $ 46,299
Depreciation and amortization 52,658 42,341 12,861 11,906
Interest expense 9,410 11,134 2,087 2,374
Income tax expense(1) 2,077 38,765 1,475 33,500
EBITDA 49,753 167,284 1,108 94,079
Less:
Net, (Losses) gains on derivative instruments (18,170 ) 5,008 (16,799 ) 39,233
Net, Cash settlements on derivative instruments (10,587 ) 16,309 (4,764 ) (2,499 )
Customer acquisition costs 13,673 25,874 4,724 7,232
Plus:
Non-cash compensation expense 5,879 5,058 2,172 1,035
Change in Tax Receivable Agreement liability (2) (22,267 ) (22,267 )
Adjusted EBITDA $ 70,716 $ 102,884 $ 20,119 $ 28,881
  1. 2017 amounts have been adjusted to reflect certain immaterial prior period adjustments related to the allocation of income and recorded book equity balances between non-controlling interests and Spark Energy, Inc. stockholders. Please see our Form 10-K for our audited financial statements and Notes thereto which include a discussion of these immaterial adjustments.
  2. Represents the change in the value of the Tax Receivable Agreement liability due to U.S. Tax Reform.
Year Ended December 31, Quarter Ended December 31,
(in thousands) 2018 2017 2018 2017
Reconciliation of Adjusted EBITDA to net cash provided by operating activities:
Net cash provided by operating activities $ 57,689 $ 62,131 $ 15,836 $ 1,869
Amortization of deferred financing costs (1,291 ) (1,035 ) (48 ) (285 )
Bad debt expense (10,135 ) (6,550 ) (1,655 ) (3,114 )
Interest expense 9,410 11,134 2,087 2,374
Income tax expense (1) 2,077 38,765 1,475 33,500
Change in Tax Receivable Agreement liability (2) (22,267 ) (22,267 )
Accounts receivable, prepaids, current assets 10,482 31,905 20,122 48,989
Inventory (674 ) 718 (199 ) (1,218 )
Accounts payable and accrued liabilities (5,093 ) (13,672 ) (23,081 ) (21,786 )
Other 8,251 1,755 5,582 (9,181 )
Adjusted EBITDA $ 70,716 $ 102,884 $ 20,119 $ 28,881
Cash Flow Data:
Cash flows provided by operating activities $ 57,689 $ 62,131 $ 15,836 $ 1,869
Cash flows used in investing activities $ (24,036 ) $ (77,558 ) $ (343 ) $ (19,070 )
Cash flows (used in) provided by financing activities $ (13,434 ) $ 25,886 $ (8,651 ) $ 35,371
  1. 2017 amounts have been adjusted to reflect certain immaterial prior period adjustments related to the allocation of income and recorded book equity balances between non-controlling interests and Spark Energy, Inc. stockholders. Please see our Form 10-K for our audited financial statements and Notes thereto which include a discussion of these immaterial adjustments.
  2. Represents the change in the value of the Tax Receivable Agreement liability due to U.S. Tax Reform.

The following table presents a reconciliation of Retail Gross Margin to operating income (loss) for each of the periods indicated.

APPENDIX TABLE A-3
RETAIL GROSS MARGIN RECONCILIATION
(in thousands)
(unaudited)

Year Ended December 31, Quarter Ended 31,
(in thousands) 2018 2017 2018 2017
Reconciliation of Retail Gross Margin to Operating Income:
Operating income $ (3,654 ) $ 102,420 $ (11,795 ) $ 59,752
Depreciation and amortization 52,658 42,341 12,861 11,906
General and administrative 111,431 101,127 27,909 31,722
Less:
Net asset optimization (expenses) revenues 4,511 (717 ) 713 (36 )
Net, Losses (gains) on non-trading derivative instruments (19,571 ) 5,588 (17,348 ) 39,734
Net, Cash settlements on non-trading derivative instruments (9,614 ) 16,508 (4,560 ) (2,508 )
Retail Gross Margin $ 185,109 $ 224,509 $ 50,170 $ 66,190
Retail Gross Margin – Retail Electricity Segment $ 124,668 $ 158,468 $ 32,055 $ 42,339
Retail Gross Margin – Retail Natural Gas Segment $ 60,441 66,041 $ 18,115 $ 23,851

Contact: Spark Energy, Inc.

Investors:

Christian Hettick, 832-200-3727

Media:

Kira Jordan, 832-255-7302

Source: Spark Energy, Inc.

Spark Energy, Inc. Announces Time Change for Upcoming Earnings Conference Call

HOUSTON, Feb. 22, 2019 (GLOBE NEWSWIRE) — Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ: SPKE), an independent retail energy services company, today announced that its fourth quarter and full year earnings call will take place at 9:00 AM Central (10:00 AM Eastern) on Monday, March 4, 2019. The call originally had been scheduled for 10:00 AM Central on the same date.

Conference Call and Webcast Details

A live webcast of the conference call can be accessed from the Events and Presentations page of the Spark Energy Investor Relations website at ir.sparkenergy.com/events-and-presentations. An archived replay of the webcast will be available for 12 months following the live presentation. Spark’s earnings release and supplemental materials will be available on the Investor Relations website prior to the call.

About Spark Energy, Inc.

Spark Energy, Inc. is an established and growing independent retail energy services company founded in 1999 that provides residential and commercial customers in competitive markets across the United States with an alternative choice for their natural gas and electricity. Headquartered in Houston, Texas, Spark currently operates in 19 states and serves 94 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

We use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should note that new materials, including press releases, updated investor presentations, and financial and other filings with the Securities and Exchange Commission are posted on the Spark Energy Investor Relations website at ir.sparkenergy.com. Investors are urged to monitor our website regularly for information and updates about the Company.

Contact: Spark Energy, Inc.

Investors:
Christian Hettick, 832-200-3727
Media:
Kira Jordan, 832-255-7302

Source: Spark Energy, Inc.

Spark Energy, Inc. Announces Increase in Credit Commitments

HOUSTON, Jan. 28, 2019 (GLOBE NEWSWIRE) — Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ: SPKE), an independent retail energy services company, today announced the increase of its senior secured borrowing base credit facility (the “Facility”) to $217.5 million in commitments.

“We are proud of the strong liquidity position we have established over the last several quarters,” said Nathan Kroeker, Spark’s President and Chief Executive Officer.  “We have continued to reduce our collateral exposure and improve our balance sheet as we discussed following last year’s Bomb Cyclone. Our balance sheet is in much better shape this winter, and with these added commitments, we are further improving on that position. So far this year, we have been able to take advantage of the colder weather and believe that 2019 is off to a great start.”

“Since we started the Facility in May 2017, our banks have continued to support us through acquisitions, weather events, and our current brand and platform consolidation efforts,” said Robert Lane, Spark’s Vice President and Chief Financial Officer. “We look forward to continuing to deliver strong financial performance both for our banks and our shareholders in 2019 and beyond.”

About Spark Energy, Inc.

Spark Energy, Inc. is an established and growing independent retail energy services company founded in 1999 that provides residential and commercial customers in competitive markets across the United States with an alternative choice for their natural gas and electricity. Headquartered in Houston, Texas, Spark currently operates in 19 states and serves 94 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

We use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should note that new materials, including press releases, updated investor presentations, and financial and other filings with the Securities and Exchange Commission are posted on the Spark Energy Investor Relations website at ir.sparkenergy.com. Investors are urged to monitor our website regularly for information and updates about the Company.

Cautionary Note Regarding Forward Looking Statements

This press release contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. These forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) can be identified by the use of forward-looking terminology including “may,” “should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “plan,” “intend,” “projects,” or other similar words. All statements, other than statements of historical fact included in this press release, regarding strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, objectives and beliefs of management are forward-looking statements. Forward-looking statements appear in a number of places in this press release and may include statements about business strategy and prospects for growth, customer acquisition costs, ability to pay cash dividends, cash flow generation and liquidity, availability of terms of capital, competition and government regulation and general economic conditions. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove correct.

The forward-looking statements in this press release are subject to risks and uncertainties. Important factors that could cause actual results to materially differ from those projected in the forward-looking statements include, but are not limited to:

  • changes in commodity prices and the sufficiency of risk management and hedging policies;
  • extreme and unpredictable weather conditions, and the impact of hurricanes and other natural disasters;
  • federal, state and local regulation, including the industry’s ability to address or adapt to potentially restrictive new regulations that may be enacted by the New York Public Service Commission;
  • our ability to borrow funds and access credit markets and restrictions in our debt agreements and collateral requirements;
  • credit risk with respect to suppliers and customers;
  • changes in costs to acquire customers and actual customer attrition rates;
  • accuracy of billing systems;
  • whether our majority stockholder or its affiliates offer us acquisition opportunities on terms that are commercially acceptable to us;
  • ability to successfully identify and complete, and efficiently integrate acquisitions into our operations;
  • competition; and
  • the “Risk Factors” in our latest Annual Report on Form 10-K, and in our quarterly reports, other public filings and press releases.

You should review the risk factors and other factors noted throughout or incorporated by reference in this press release that could cause our actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements speak only as of the date of this press release. Unless required by law, we disclaim any obligation to publicly update or revise these statements whether as a result of new information, future events or otherwise. It is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Contact: Spark Energy, Inc.

Investors:
Christian Hettick, 832-200-3727
Media:
Kira Jordan, 832-255-7302

Source: Spark Energy, Inc.

Spark Energy, Inc. Announces Dividend on Common and Preferred Stock

HOUSTON, Jan. 17, 2019 (GLOBE NEWSWIRE) — Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ: SPKE), an independent retail energy services company, announced today that its Board of Directors has declared a quarterly cash dividend for the fourth quarter of 2018 in the amount of $0.18125 per share on its Class A Common Stock. This amount represents an annualized dividend of $0.725 per share. The fourth quarter dividend will be paid on March 15, 2019 to holders of record of Spark’s Class A Common Stock on March 1, 2019.

Additionally, in accordance with the terms of the 8.75% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock (“Series A Preferred Stock”) of the Company, the Board of Directors has declared a quarterly cash dividend in the amount of $0.546875 per share on the Series A Preferred Stock. This amount represents an annualized dividend of $2.1875 per share. The dividend will be paid on April 15, 2019 to holders of record of Spark’s Series A Preferred Stock on April 1, 2019.

Conference Call and Webcast

The Company has also announced today that it plans to present its fourth quarter and full year 2018 financial results in a conference call and webcast on Monday, March 4, 2019 at 10:00 AM Central (11:00 AM Eastern).

A live webcast of the conference call can be accessed from the Events & Presentations page of the Spark Energy Investor Relations website at ir.sparkenergy.com/events-and-presentations. An archived replay of the webcast will be available for twelve months following the live presentation.

About Spark Energy, Inc.

Spark Energy, Inc. is an established and growing independent retail energy services company founded in 1999 that provides residential and commercial customers in competitive markets across the United States with an alternative choice for their natural gas and electricity. Headquartered in Houston, Texas, Spark currently operates in 19 states and serves 94 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

We use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should note that new materials, including press releases, updated investor presentations, and financial and other filings with the Securities and Exchange Commission are posted on the Spark Energy Investor Relations website at ir.sparkenergy.com. Investors are urged to monitor our website regularly for information and updates about the Company.

Contact: Spark Energy, Inc.

Investors:

Christian Hettick, 832-200-3727

Media:

Kira Jordan, 832-255-7302

Source: Spark Energy, Inc

Spark Energy, Inc. Announces Management Changes

HOUSTON, Dec. 14, 2018 (GLOBE NEWSWIRE) — Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ: SPKE), an independent retail energy services company, today announced the resignation of Gil Melman, Spark’s Vice President, General Counsel, and Corporate Secretary.  Mr. Melman is resigning to pursue other opportunities, effective December 31, 2018.

“It is with mixed feelings that we have accepted Gil’s resignation,” said Nathan Kroeker, Spark’s President and Chief Executive Officer.  “He has been an important member of Spark’s management team for the past five years, and has been instrumental in our growth, our acquisitions, and our initial public offering.  We wish him the best of luck in his future endeavors.”

C. Alexis Keene, currently Spark’s Deputy General Counsel, will be Spark’s Interim General Counsel and Corporate Secretary.  Spark has begun a process to appoint a permanent successor for Mr. Melman.

“We are very fortunate to have Alexis here at Spark,” continued Kroeker.  “With nearly three decades of experience, a deep knowledge of our business, and the trust and respect of her colleagues within the organization and throughout the industry, we expect a very smooth transition.”

About Spark Energy, Inc.

Spark Energy, Inc. is an established and growing independent retail energy services company founded in 1999 that provides residential and commercial customers in competitive markets across the United States with an alternative choice for their natural gas and electricity. Headquartered in Houston, Texas, Spark currently operates in 19 states and serves 94 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

We use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should note that new materials, including press releases, updated investor presentations, and financial and other filings with the Securities and Exchange Commission are posted on the Spark Energy Investor Relations website at ir.sparkenergy.com. Investors are urged to monitor our website regularly for information and updates about the Company.

Cautionary Note Regarding Forward Looking Statements

This press release contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. These forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) can be identified by the use of forward-looking terminology including “may,” “should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “plan,” “intend,” “projects,” or other similar words. All statements, other than statements of historical fact included in this press release, regarding strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, objectives and beliefs of management are forward-looking statements. Forward-looking statements appear in a number of places in this press release and may include statements about business strategy and prospects for growth, customer acquisition costs, ability to pay cash dividends, cash flow generation and liquidity, availability of terms of capital, competition and government regulation and general economic conditions. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove correct.

The forward-looking statements in this press release are subject to risks and uncertainties. Important factors that could cause actual results to materially differ from those projected in the forward-looking statements include, but are not limited to:

  • changes in commodity prices and the sufficiency of risk management and hedging policies;
  • extreme and unpredictable weather conditions, and the impact of hurricanes and other natural disasters;
  • federal, state and local regulation, including the industry’s ability to address or adapt to potentially restrictive new regulations that may be enacted by the New York Public Service Commission;
  • our ability to borrow funds and access credit markets and restrictions in our debt agreements and collateral requirements;
  • credit risk with respect to suppliers and customers;
  • changes in costs to acquire customers and actual customer attrition rates;
  • accuracy of billing systems;
  • whether our majority stockholder or its affiliates offer us acquisition opportunities on terms that are commercially acceptable to us;
  • ability to successfully identify and complete, and efficiently integrate acquisitions into our operations;
  • competition; and
  • the “Risk Factors” in our latest Annual Report on Form 10-K, and in our quarterly reports, other public filings and press releases.

You should review the risk factors and other factors noted throughout or incorporated by reference in this press release that could cause our actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements speak only as of the date of this press release. Unless required by law, we disclaim any obligation to publicly update or revise these statements whether as a result of new information, future events or otherwise. It is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Contact: Spark Energy, Inc.

Investors:
Christian Hettick, 832-200-3727
Media:
Kira Jordan, 832-255-7302

Source: Spark Energy, Inc.

 

Spark Energy, Inc. Reports Third Quarter 2018 Financial Results

Acquired 60,000 residential RCEs; on track to exceed high end of cost reduction guidance

HOUSTON, Nov. 01, 2018 (GLOBE NEWSWIRE) — Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ: SPKE), an independent retail energy services company, today reported financial results for the quarter ended September 30, 2018.

          Key Highlights

  • Achieved $18.6 million in Adjusted EBITDA, $45.8 million in Retail Gross Margin, and a $18.8 million in Net Income for the third quarter
  • Expects to exceed upper end of cost reduction guidance range by 10 to 20 percent
  • Total RCE count of 979,000 as of September 30, 2018
  • Acquired 60,000 residential RCEs subsequent to the close of fiscal third quarter 2018

“Our third quarter was highlighted by continued improvement in organic customer acquisitions as well as significant strides in realizing the brand and platform consolidations that we expect to lead to stronger margins,” said Nathan Kroeker, Spark Energy’s President and Chief Executive Officer. “Efforts to improve customer mix and migrate customers to more cost-effective billing platforms are more than halfway complete and our cost saving actions are tracking ahead of our expectations.”

Kroeker continued, “Since the closing of our third quarter, we announced our acquisition of up to 60,000 residential RCEs in the Midwest and Mid-Atlantic regions. This acquisition will be immediately accretive to 2018 earnings and will require minimal integration activity.”

Summary Third Quarter 2018 Financial Results

For the quarter ended September 30, 2018, Spark reported Adjusted EBITDA of $18.6 million compared to Adjusted EBITDA of $19.6 million for the quarter ended September 30, 2017. This decrease of $1.0 million was driven by a lower Retail Gross Margin.

For the quarter ended September 30, 2018, Spark reported Retail Gross Margin of $45.8 million compared to Retail Gross Margin of $50.6 million for the quarter ended September 30, 2017. This decrease of $4.8 million is primarily attributable to lower natural gas volumes and electricity unit margins.

Net income for the quarter ended September 30, 2018, was $18.8 million compared to net income of $12.9 million for the quarter ended September 30, 2017. The increase in performance compared to the prior year was primarily the result of non-cash gains on our derivative instruments.

Liquidity and Capital Resources

($ in thousands) September 30, 2018
Cash and cash equivalents $ 42,796
Senior Credit Facility Availability (1) 19,281
Subordinated Debt Availability (2) 15,000
Total Liquidity $ 77,077

(1) Subject to Senior Credit Facility borrowing base and covenant restrictions.
(2) The availability of the Subordinated Facility is dependent on our Founder’s financial position and liquidity.

Dividend

Spark’s Board of Directors declared quarterly dividends of $0.18125 per share of Class A common stock payable on December 14th, 2018, and $0.546875 per share of Series A Preferred Stock payable on January 15, 2019.

Business Outlook

Kroeker concluded, “As we look to fiscal 2019, we expect to see the benefits of improved customer mix and normalized RCE counts. We expect our Adjusted EBITDA to positively reflect the success of our synergy and cost reduction initiatives. Year-to-date we have implemented significant general and administrative cost savings, and we will continue to evaluate opportunities to improve long-term profitability.”

Conference Call and Webcast

Spark will host a conference call to discuss third quarter 2018 results on Friday, November 2, 2018, at 10:00 AM Central Time (11:00 AM Eastern).

A live webcast of the conference call can be accessed from the Events & Presentations page of the Spark Energy Investor Relations website at http://ir.sparkenergy.com/events-and-presentations. An archived replay of the webcast will be available for twelve months following the live presentation.

About Spark Energy, Inc.

Spark Energy, Inc. is an established and growing independent retail energy services company founded in 1999 that provides residential and commercial customers in competitive markets across the United States with an alternative choice for their natural gas and electricity. Headquartered in Houston, Texas, Spark currently operates in 19 states and serves 94 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

We use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should note that new materials, including press releases, updated investor presentations, and financial and other filings with the Securities and Exchange Commission are posted on the Spark Energy Investor Relations website at ir.sparkenergy.com. Investors are urged to monitor our website regularly for information and updates about the Company.

Cautionary Note Regarding Forward Looking Statements

This earnings release contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. These forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) can be identified by the use of forward-looking terminology including “may,” “should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “plan,” “intend,” “projects,” or other similar words. All statements, other than statements of historical fact included in this earnings release, regarding strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, objectives and beliefs of management are forward-looking statements. Forward-looking statements appear in a number of places in this earnings release and may include statements about business strategy and prospects for growth, customer acquisition costs, ability to pay cash dividends, cash flow generation and liquidity, availability of terms of capital, competition and government regulation and general economic conditions. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove correct.

The forward-looking statements in this earnings release are subject to risks and uncertainties. Important factors that could cause actual results to materially differ from those projected in the forward-looking statements include, but are not limited to:

  • changes in commodity prices and the sufficiency of risk management and hedging policies;
  • extreme and unpredictable weather conditions, and the impact of hurricanes and other natural disasters;
  • federal, state and local regulation, including the industry’s ability to address or adapt to potentially restrictive new regulations that may be enacted by the New York Public Service Commission;
  • our ability to borrow funds and access credit markets and restrictions in our debt agreements and collateral requirements;
  • credit risk with respect to suppliers and customers;
  • changes in costs to acquire customers and actual customer attrition rates;
  • accuracy of billing systems;
  • whether our majority stockholder or its affiliates offer us acquisition opportunities on terms that are commercially acceptable to us;
  • ability to successfully identify and complete, and efficiently integrate acquisitions into our operations;
  • significant changes in, or new charges by, the ISOs in the regions in which we operate;
  • competition; and
  • the “Risk Factors” in our latest Annual Report on Form 10-K, and in our quarterly reports, other public filings and press releases.

You should review the risk factors and other factors noted throughout or incorporated by reference in this earnings release that could cause our actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements speak only as of the date of this earnings release. Unless required by law, we disclaim any obligation to publicly update or revise these statements whether as a result of new information, future events or otherwise. It is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
(in thousands, except share counts)
(unaudited)

September 30, 2018 December 31, 2017
Assets
Current assets:
Cash and cash equivalents $ 42,796 $ 29,419
Accounts receivable, net of allowance for doubtful accounts of $4,324 at September 30 and $4,023 at December 31 134,183 158,814
Accounts receivable—affiliates 3,807 3,661
Inventory 4,077 4,470
Fair value of derivative assets 23,427 31,191
Customer acquisition costs, net 15,600 22,123
Customer relationships, net 18,360 18,653
Deposits 12,631 7,701
Other current assets 31,074 20,706
Total current assets 285,955 296,738
Property and equipment, net 5,383 8,275
Fair value of derivative assets 1,873 3,309
Customer acquisition costs, net 3,466 6,949
Customer relationships, net 28,247 34,839
Deferred tax assets 24,935 24,185
Goodwill 120,343 120,154
Other assets 11,075 11,500
Total assets $ 481,277 $ 505,949
Liabilities, Series A Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable $ 55,496 $ 77,510
Accounts payable—affiliates 2,836 4,622
Accrued liabilities 45,518 33,679
Fair value of derivative liabilities 269 1,637
Current portion of Senior Credit Facility 7,500
Current payable pursuant to tax receivable agreement—affiliates 2,508 5,937
Current contingent consideration for acquisitions 2,980 4,024
Other current liabilities 856 2,675
Current portion of note payable 10,535 13,443
Total current liabilities 120,998 151,027
Long-term liabilities:
Fair value of derivative liabilities 489 492
Payable pursuant to tax receivable agreement—affiliates 26,067 26,355
Long-term portion of Senior Credit Facility 112,000 117,750
Subordinated debt—affiliate 10,000
Long-term portion of note payable 7,051
Contingent consideration for acquisitions 626
Other long-term liabilities 172
Total liabilities 269,554 303,473
Commitments and contingencies (Note 13)
Series A Preferred Stock, par value $0.01 per share, 20,000,000 shares authorized, 3,707,256 shares issued and outstanding at September 30 and 1,704,339 shares issued and outstanding at December 31 90,758 41,173
Stockholders’ equity:
Common Stock:
Class A common stock, par value $0.01 per share, 120,000,000 shares authorized, 13,493,158 issued, and 13,393,712 outstanding at September 30 and 13,235,082 issued and 13,135,636 outstanding at December 31 135 132
Class B common stock, par value $0.01 per share, 60,000,000 shares authorized, 21,485,126 issued and outstanding at September 30 and December 31 216 216
Additional paid-in capital 25,387 26,914
Accumulated other comprehensive loss (15 ) (11 )
Retained earnings 2,885 11,008
Treasury stock, at cost, 99,446 shares at September 30 and December 31 (2,011 ) (2,011 )
Total stockholders’ equity 26,597 36,248
Non-controlling interest in Spark HoldCo, LLC 94,368 125,055
Total equity 120,965 161,303
Total liabilities, Series A Preferred Stock and stockholders’ equity $ 481,277 $ 505,949

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(in thousands)
(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Revenues:
Retail revenues $ 258,127 $ 215,856 $ 773,616 $ 563,960
Net asset optimization revenues/(expense) 348 (320 ) 3,798 (681 )
Total Revenues 258,475 215,536 777,414 563,279
Operating Expenses:
Retail cost of revenues 193,409 160,373 645,954 420,771
General and administrative 25,695 25,566 83,522 69,405
Depreciation and amortization 13,917 11,509 39,797 30,435
Total Operating Expenses 233,021 197,448 769,273 520,611
Operating income 25,454 18,088 8,141 42,668
Other (expense)/income:
Interest expense (2,762 ) (2,863 ) (7,323 ) (8,760 )
Interest and other income (loss) (47 ) 168 707 102
Total other expenses (2,809 ) (2,695 ) (6,616 ) (8,658 )
Income before income tax expense 22,645 15,393 1,525 34,010
Income tax expense 3,818 2,451 602 5,265
Net income $ 18,827 $ 12,942 $ 923 $ 28,745
Less: Net income attributable to non-controlling interests 13,218 10,595 140 23,049
Net income attributable to Spark Energy, Inc. stockholders $ 5,609 $ 2,347 $ 783 $ 5,696
Less: Dividend on Series A preferred stock 2,027 932 6,081 2,106
Net income (loss) attributable to stockholders of Class A common stock $ 3,582 $ 1,415 $ (5,298 ) $ 3,590
Other comprehensive income, net of tax:
Currency translation gain (loss) $ 47 $ (13 ) $ (11 ) $ (88 )
Other comprehensive income (loss) 47 (13 ) (11 ) (88 )
Comprehensive income $ 18,874 $ 12,929 $ 912 $ 28,657
Less: Comprehensive income attributable to non-controlling interests 13,247 10,587 133 22,994
Comprehensive income attributable to Spark Energy, Inc. stockholders $ 5,627 $ 2,342 $ 779 $ 5,663

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018
(in thousands)
(unaudited)

Issued Shares of Class A Common Stock Issued Shares of Class B Common Stock Treasury Stock Class A Common Stock Class B Common Stock Treasury Stock Accumulated Other Comprehensive Loss Additional Paid-in Capital Retained Earnings (Deficit) Total Stockholders’ Equity Non-controlling Interest Total Equity
Balance at December 31, 2017 13,235 21,485 (99 ) $ 132 $ 216 $ (2,011 ) $ (11 ) $ 26,914 $ 11,008 $ 36,248 $ 125,055 $ 161,303
Stock based compensation 3,596 3,596 3,596
Restricted stock unit vesting 258 3 (715 ) (712 ) (712 )
Consolidated net income 783 783 140 923
Foreign currency translation adjustment for equity method investee (4 ) (4 ) (7 ) (11 )
Distributions paid to non-controlling unit holders (23,701 ) (23,701 )
Dividends paid to Class A common stockholders (2,381 ) (4,852 ) (7,233 ) (7,233 )
Dividends to Preferred Stock (2,027 ) (4,054 ) (6,081 ) (6,081 )
Acquisition of Customers from Affiliate (7,119 ) (7,119 )
Balance at September 30, 2018 13,493 21,485 (99 ) $ 135 $ 216 $ (2,011 ) $ (15 ) $ 25,387 $ 2,885 $ 26,597 $ 94,368 $ 120,965

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(in thousands)
(unaudited)

Nine Months Ended September 30,
2018 2017
Cash flows from operating activities:
Net income $ 923 $ 28,745
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization expense 38,538 30,584
Deferred income taxes (749 ) 681
Change in TRA liability 79
Stock based compensation 3,707 4,023
Amortization of deferred financing costs 1,243 750
Excess tax benefit related to restricted stock vesting (101 ) 179
Change in Fair Value of Earnout liabilities (63 ) (9,423 )
Accretion on fair value of Earnout liabilities 3,787
Bad debt expense 8,480 3,436
Loss on derivatives, net 1,371 34,225
Current period cash settlements on derivatives, net 6,189 (20,816 )
Accretion of discount to convertible subordinated notes to affiliate 1,004
Payment of the Major Energy Companies Earnout (1,104 )
Payment of the Provider Companies Earnout (677 )
Other (489 ) 123
Changes in assets and liabilities:
Decrease in accounts receivable 21,029 18,056
Increase in accounts receivable—affiliates (390 ) (2,508 )
Decrease (increase) in inventory 475 (1,936 )
Increase in customer acquisition costs (8,949 ) (18,642 )
(Increase) decrease in prepaid and other current assets (10,999 ) 1,536
Increase in intangible assets—customer acquisitions (86 ) (32 )
Decrease (increase) in other assets 92 (664 )
Decrease in accounts payable and accrued liabilities (11,062 ) (9,301 )
(Decrease) increase in accounts payable—affiliates (1,786 ) 1,165
(Decrease) increase in other current liabilities (5,140 ) 22
Decrease in other non-current liabilities (459 ) (1,170 )
Net cash provided by operating activities 41,853 62,043
Cash flows from investing activities:
Purchases of property and equipment (1,097 ) (1,438 )
Acquisitions of Perigee and other customers (11,464 )
Acquisition of the Verde Companies (65,785 )
Verde working capital settlement 470
Acquisition of HIKO (14,290 )
Acquisition of Customers from Affiliate (8,776 )
Net cash used in investing activities (23,693 ) (78,687 )
Cash flows from financing activities:
Proceeds from issuance of Series A Preferred Stock, net of issuance costs paid 48,490 40,312
Borrowings on notes payable 277,800 139,400
Payments on notes payable (281,050 ) (119,664 )
Payment of the Major Energy Companies Earnout (1,607 ) (6,299 )
Payment of the Provider Companies Earnout and installment consideration (7,061 )
Payments on the Verde promissory note (6,573 ) (2,149 )
Proceeds from disgorgement of stockholders short-swing profits 244 872
Restricted stock vesting (2,589 ) (2,009 )
Payment of Tax Receivable Agreement liability (3,577 )
Payment of dividends to Class A common stockholders (7,233 ) (7,137 )
Payment of distributions to non-controlling unitholders (23,701 ) (24,270 )
Payment of Dividends to Preferred Stock (4,987 ) (1,174 )
Purchase of Treasury Stock (1,888 )
Net cash (used in) provided by financing activities (4,783 ) 8,933
Increase (decrease) in Cash and cash equivalents 13,377 (7,711 )
Cash and cash equivalents—beginning of period 29,419 18,960
Cash and cash equivalents—end of period $ 42,796 $ 11,249
Supplemental Disclosure of Cash Flow Information:
Non-cash items:
Contingent consideration—earnout obligations incurred in connection with the Verde Companies acquisition $ $ 5,400
Net contribution by NG&E in excess of cash $ $ 1,019
Installment consideration incurred in connection with the Verde Companies acquisition $ $ 17,851
Property and equipment purchase accrual $ (123 ) $ 41
Cash paid during the period for:
Interest $ 5,955 $ 4,113
Taxes $ 7,461 $ 7,769

SPARK ENERGY, INC.
OPERATING SEGMENT RESULTS
FOR THE THREE AND NINE MONTHS ENDED September 30, 2018 AND 2017
(in thousands, except volume and per unit operating data)
(unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2018 2017 2018 2017
(in thousands, except volume and per unit operating data)
Retail Electricity Segment
Total Revenues $ 246,182 $ 202,259 676,528 $ 467,861
Retail Cost of Revenues 186,449 153,594 587,949 364,518
Less: Net gains (losses) on non-trading derivatives, net of cash settlements 19,481 4,170 (4,034 ) (12,786 )
Retail Gross Margin (1) — Electricity $ 40,252 $ 44,495 $ 92,613 $ 116,129
Volumes — Electricity (MWhs) 2,432,314 2,063,894 6,784,345 4,828,629
Retail Gross Margin (2) — Electricity per MWh $ 16.55 $ 21.56 $ 13.65 $ 24.05
Retail Natural Gas Segment
Total Revenues $ 12,293 $ 13,277 $ 100,886 $ 95,418
Retail Cost of Revenues 6,960 6,779 58,005 56,253
Less: Net Asset Optimization Revenues (Expenses) 348 (320 ) 3,798 (681 )
Less: Net gains (losses) on non-trading derivatives, net of cash settlements (558 ) 743 (3,243 ) (2,344 )
Retail Gross Margin (1) — Gas $ 5,543 $ 6,075 $ 42,326 $ 42,190
Volumes — Gas (MMBtus) 1,395,377 1,706,132 11,913,180 12,554,497
Retail Gross Margin (2) — Gas per MMBtu $ 3.97 $ 3.56 $ 3.55 $ 3.36

(1) Reflects the Retail Gross Margin attributable to our Retail Natural Gas Segment or Retail Electricity Segment, as applicable. Retail Gross Margin is a non-GAAP financial measure. See “Other Performance Measures” in our Form 10-Q for a reconciliation of Adjusted EBITDA and Retail Gross Margin to their most directly comparable financial measures presented in accordance with GAAP.
(2) Reflects the Retail Gross Margin for the Retail Natural Gas Segment or Retail Electricity Segment, as applicable, divided by the total volumes in MMBtu or MWh, respectively.

Reconciliation of GAAP to Non-GAAP Measures

Adjusted EBITDA

We define “Adjusted EBITDA” as EBITDA less (i) customer acquisition costs incurred in the current period, (ii) net gain (loss) on derivative instruments, and (iii) net current period cash settlements on derivative instruments, plus (iv) non-cash compensation expense, and (v) other non-cash and non-recurring operating items. EBITDA is defined as net income (loss) before provision for income taxes, interest expense and depreciation and amortization. We deduct all current period customer acquisition costs (representing spending for organic customer acquisitions) in the Adjusted EBITDA calculation because such costs reflect a cash outlay in the period in which they are incurred, even though we capitalize such costs and amortize them over two years in accordance with our accounting policies. The deduction of current period customer acquisition costs is consistent with how we manage our business, but the comparability of Adjusted EBITDA between periods may be affected by varying levels of customer acquisition costs. For example, our Adjusted EBITDA is lower in years of customer growth reflecting larger customer acquisition spending. We do not deduct the cost of customer acquisitions through acquisitions of business or portfolios of customers in calculated Adjusted EBITDA. We deduct our net gains (losses) on derivative instruments, excluding current period cash settlements, from the Adjusted EBITDA calculation in order to remove the non-cash impact of net gains and losses on derivative instruments. We also deduct non-cash compensation expense as a result of restricted stock units that are issued under our long-term incentive plan.

We believe that the presentation of Adjusted EBITDA provides information useful to investors in assessing our liquidity and financial condition and results of operations and that Adjusted EBITDA is also useful to investors as a financial indicator of our ability to incur and service debt, pay dividends and fund capital expenditures. Adjusted EBITDA is a supplemental financial measure that management and external users of our condensed consolidated financial statements, such as industry analysts, investors, commercial banks and rating agencies, use to assess the following:

  • our operating performance as compared to other publicly traded companies in the retail energy industry, without regard to financing methods, capital structure or historical cost basis;
  • the ability of our assets to generate earnings sufficient to support our proposed cash dividends; and
  • our ability to fund capital expenditures (including customer acquisition costs) and incur and service debt.

Retail Gross Margin

We define retail gross margin as operating income (loss) plus (i) depreciation and amortization expenses and (ii) general and administrative expenses, less (i) net asset optimization revenues, (ii) net gains (losses) on non-trading derivative instruments, and (iii) net current period cash settlements on non-trading derivative instruments. Retail gross margin is included as a supplemental disclosure because it is a primary performance measure used by our management to determine the performance of our retail natural gas and electricity business by removing the impacts of our asset optimization activities and net non-cash income (loss) impact of our economic hedging activities. As an indicator of our retail energy business’ operating performance, retail gross margin should not be considered an alternative to, or more meaningful than, operating income (loss), its most directly comparable financial measure calculated and presented in accordance with GAAP.

We believe retail gross margin provides information useful to investors as an indicator of our retail energy business’s operating performance.

The GAAP measures most directly comparable to Adjusted EBITDA are net income (loss) and net cash provided by operating activities. The GAAP measure most directly comparable to Retail Gross Margin is operating income (loss). Our non-GAAP financial measures of Adjusted EBITDA and Retail Gross Margin should not be considered as alternatives to net income (loss), net cash provided by operating activities, or operating income (loss). Adjusted EBITDA and Retail Gross Margin are not presentations made in accordance with GAAP and have important limitations as analytical tools. You should not consider Adjusted EBITDA or Retail Gross Margin in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA and Retail Gross Margin exclude some, but not all, items that affect net income (loss) and net cash provided by operating activities, and are defined differently by different companies in our industry, our definition of Adjusted EBITDA and Retail Gross Margin may not be comparable to similarly titled measures of other companies.

Management compensates for the limitations of Adjusted EBITDA and Retail Gross Margin as analytical tools by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these data points into management’s decision-making process.

The following tables present a reconciliation of Adjusted EBITDA to net income (loss) and net cash provided by operating activities for each of the periods indicated.

APPENDIX TABLES A-1 AND A-2
ADJUSTED EBITDA RECONCILIATIONS
(in thousands)
(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2018 2017 2018 2017
Reconciliation of Adjusted EBITDA to Net Income:
Net income $ 18,827 $ 12,942 $ 923 $ 28,745
Depreciation and amortization 13,917 11,509 39,797 30,435
Interest expense 2,762 2,863 7,323 8,760
Income tax expense 3,818 2,451 602 5,265
EBITDA 39,324 29,765 48,645 73,205
Less:
Net, Gain (losses) on derivative instruments 18,117 (2,752 ) (1,371 ) (34,225 )
Net, Cash settlements on derivative instruments 922 7,457 (5,823 ) 18,808
Customer acquisition costs 2,695 6,568 8,949 18,642
Plus:
Non-cash compensation expense 1,021 1,118 3,707 4,023
Adjusted EBITDA $ 18,611 $ 19,610 $ 50,597 $ 74,003

 

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2018 2017 2018 2017
Reconciliation of Adjusted EBITDA to net cash provided by operating activities:
Net cash provided by operating activities $ 5,443 $ 16,418 $ 41,853 $ 62,043
Amortization of deferred financing costs (631 ) (219 ) (1,243 ) (750 )
Allowance for doubtful accounts and bad debt expense (2,755 ) (2,517 ) (8,480 ) (3,436 )
Interest expense 2,762 2,863 7,323 8,760
Income tax expense 3,818 2,451 602 5,265
Changes in operating working capital
Accounts receivable, prepaids, current assets 16,248 4,457 (9,640 ) (17,084 )
Inventory 2,218 2,246 (475 ) 1,936
Accounts payable and accrued liabilities (5,946 ) (12,857 ) 17,988 8,114
Other (2,546 ) 6,768 2,669 9,155
Adjusted EBITDA $ 18,611 $ 19,610 $ 50,597 $ 74,003
Cash Flow Data:
Cash flows provided by operating activities $ 5,443 $ 16,418 $ 41,853 $ 62,043
Cash flows provided by (used in) investing activities $ 307 $ (3,178 ) $ (23,693 ) $ (78,687 )
Cash flows provided by (used in) financing activities $ 1,344 $ (16,036 ) $ (4,783 ) $ 8,933

The following table presents a reconciliation of Retail Gross Margin to operating income (loss) for each of the periods indicated.

APPENDIX TABLE A-3
RETAIL GROSS MARGIN RECONCILIATION
(in thousands)
(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2018 2017 2018 2017
Reconciliation of Retail Gross Margin to Operating Income:
Operating income $ 25,454 $ 18,088 $ 8,141 $ 42,668
Depreciation and amortization 13,917 11,509 39,797 30,435
General and administrative 25,695 25,566 83,522 69,405
Less:
Net asset optimization revenues (expenses) 348 (320 ) 3,798 (681 )
Net, gains (losses) on non-trading derivative instruments 17,888 (2,568 ) (2,223 ) (34,146 )
Net, Cash settlements on non-trading derivative instruments 1,035 7,481 (5,054 ) 19,016
Retail Gross Margin $ 45,795 $ 50,570 $ 134,939 $ 158,319
Retail Gross Margin – Retail Electricity Segment $ 40,252 $ 44,495 $ 92,613 $ 116,129
Retail Gross Margin – Retail Natural Gas Segment $ 5,543 $ 6,075 $ 42,326 $ 42,190

Contact: Spark Energy, Inc.

Investors:

Christian Hettick, 832-200-3727

Media:

Kira Jordan, 832-255-7302

Source: Spark Energy, Inc.