UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): August 12, 2015
 
Spark Energy, Inc.
(Exact Name of Registrant as Specified in its Charter)

	

 	 	 	 	 	
Delaware	 	001-36559	 	46-5453215	
(State or Other Jurisdiction
of Incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification Number)	

2105 CityWest Blvd., Suite 100
Houston, Texas 77042
(Address of Principal Executive Offices)
(Zip Code)

(713) 600-2600
(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

		

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

Item 2.02 Results of Operations and Financial Condition

On August 12, 2015 Spark Energy, Inc. (the "Company") issued a press release announcing second quarter 2015 earnings (the "Press Release"). The Press Release is being furnished as Exhibit 99.1 to this Current Report and is incorporated by reference herein.

The information above is being furnished, not filed, pursuant to Item 2.02 of Form 8-K. Accordingly, the information in Item 2.02 of this Current Report, including the Press Release, will not be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, unless specifically identified therein as being incorporated by reference.

Item 9.01    Financial Statements and Exhibits.  

(d)	Exhibits.	

		

Exhibit No.	Description	
 	 	
99.1	Press Release of Spark Energy, Inc. dated August 12, 2015	

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

					

Dated: August 13, 2015	 	Spark Energy, Inc.	
 	 	 	
 	 	By:	 	/s/ Georganne Hodges	
 	 	Name:	 	Georganne Hodges	
 	 	Title:	 	Chief Financial Officer	
 	 	 	 	(Principal Financial Officer and Principal Accounting Officer)	

EXHIBIT INDEX

		

Exhibit No.	Description	
 	 	
99.1	Press Release of Spark Energy, Inc. dated August 12, 2015	

Spark Energy, Inc. Reports Second Quarter 2015 Financial Results
HOUSTON, Aug. 12, 2015 (GLOBE NEWSWIRE) -- Spark Energy, Inc. (NASDAQ:SPKE), a Delaware corporation ("Spark"), today reported financial results for the quarter ended June 30, 2015.
For the second quarter of 2015, Adjusted EBITDA was $4.6 million and Retail Gross Margin was $23.1 million on revenue of $65.4 million, compared to Adjusted EBITDA of $1.4 million and Retail Gross Margin of $17.9 million for the second quarter of 2014.
"The second quarter yielded positive results for us, both organically and from an M&A perspective," said Nathan Kroeker, Spark Energy, Inc.'s President and Chief Executive Officer. "Our retail gross margin and Adjusted EBITDA were enhanced as a result of lower supply costs across several of our markets. We added approximately 25,000 customers from our Entrust transaction that, along with the Connecticut customers we acquired at the end of last year, will continue to be accretive to Adjusted EBITDA.
"More recently, we closed on the CenStar Energy and Oasis Energy transactions, and also amended and restated our credit facility in order to provide us with the capacity to acquire companies and large books of customers in order to continue to execute on our strategy to grow the business. The Oasis and CenStar acquisitions added over 100,000 residential customer equivalents, bringing our total to over 400,000. In addition, these acquisitions enable us to access twenty new markets to support our continued organic growth efforts."
Second Quarter 2015 Highlights

•	$4.6 million in Adjusted EBITDA and $23.1 million in Retail Gross Margin	

•	Enhanced margins in retail electricity and retail natural gas segments	

•	Strong cash flow during the quarter allowed us to reduce the working capital facility loan balance by $11.0 million	

•	Invested $6.2 million in organic customer acquisitions	

•	Paid first quarter dividend of $0.3625 per share of Class A common stock on June 15, 2015	

•	Declared second quarter dividend of $0.3625 per share of Class A common stock payable on September 14, 2015	
Strategic Developments

•	Amended and restated existing senior credit facility on July 8	

•	Closed CenStar Energy and Oasis Energy transactions in July, bringing our total residential customer equivalent count to over 400,000	
Summary Second Quarter 2015 Financial Results
For the quarter ended June 30, 2015, Spark reported Adjusted EBITDA of $4.6 million on $65.4 million of revenue compared to Adjusted EBITDA of $1.4 million for the quarter ended June 30, 2014. This increase of $3.2 million is primarily attributable to increased retail gross margin across both our electricity and natural gas segments, partially offset by increased general and administrative expenses, including increased billing and other variable costs associated with increased customer count and increased costs associated with being a public company.

For the quarter ended June 30, 2015, Spark reported Retail Gross Margin of $23.1 million compared to Retail Gross Margin of $17.9 million for the quarter ended June 30, 2014. This increase of $5.2 million is primarily attributable to higher retail natural gas and retail electricity unit margins. Favorable supply costs across several of our markets were a key driver of these elevated unit margins in the second quarter.
Net income and EPS for the quarter ended June 30, 2015 were $4.6 million and $0.23, respectively. An unrealized gain on the hedge portfolio valuation of our future supply positions positively impacted net income and EPS by $0.3 million and $0.02, respectively. Net income for the quarter ended June 30, 2014 was $0.2 million and contained an unrealized loss on the hedge portfolio valuation of $(4.5) million.
Liquidity and Capital Resources

				
(in thousands)	June 30, 2015	
Cash and cash equivalents	$	4,237		
Senior Credit Facility Availability  (1)	50,155		
Total Liquidity	$	54,392		
(1)  Subject to Senior Credit Facility borrowing base restrictions	
Conference Call and Webcast
Spark will host a conference call to discuss second quarter 2015 results on Thursday, August 13, 2015 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.cfm. 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 16 states and serves 66 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.
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 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 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 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 report are subject to risks and uncertainties. Important factors which 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,	

•	extreme and unpredictable weather conditions,	

•	the sufficiency of risk management and hedging policies,	

•	customer concentration,	

•	federal, state and local regulation,	

•	key license retention,	

•	increased regulatory scrutiny and compliance costs,	

•	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,	

•	level of indebtedness,	

•	changes in costs to acquire customers,	

•	actual customer attrition rates,	

•	actual bad debt expense in non-POR markets,	

•	accuracy of internal billing systems,	

•	ability to successfully navigate entry into new markets,	

•	whether our majority shareholder or its affiliates offers us acquisition opportunities on terms that are commercially acceptable to us,	

•	ability to successfully and efficiently integrate acquisitions into our operations,	

•	competition, and	

•	other factors discussed in "Risk Factors" in our Form 10-K for the year ended December 31, 2014.	
You should review the risk factors and other matters disclosed throughout our Report on Form 10-K for the year ended December 31, 2014 and the Form 10-Q for the quarter ended June 30, 2015, both of which are filed with the Securities and Exchange Commission, which 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 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 JUNE 30, 2015 AND DECEMBER 31, 2014	
(in thousands)	
(unaudited)	
 	
 	June 30, 2015	December 31, 2014	
Assets	 	 	
Current assets:	 	 	
Cash and cash equivalents	 $ 4,237	 $ 4,359	
Restricted cash	 --	 707	
Accounts receivable, net of allowance for doubtful accounts of $4.1 million and $8.0 million as of June 30, 2015 and December 31, 2014, respectively	 40,011	 63,797	
Accounts receivable—affiliates	 534	 1,231	
Inventory	 2,945	 8,032	
Fair value of derivative assets	 924	 216	
Customer acquisition costs, net	 14,514	 12,369	
Intangible assets - customer acquisitions, net	 1,421	 486	
Prepaid assets	 789	 1,236	
Prepaid assets—affiliates	 173	 --	
Deposits	 5,335	 10,569	
Other current assets	 2,615	 2,987	
Total current assets	 73,498	 105,989	
Property and equipment, net	 4,448	 4,221	
Fair value of derivative assets	 --	 --	
Customer acquisition costs	 4,450	 2,976	
Intangible assets - customer acquisitions	 2,292	 1,015	
Deferred tax assets	 23,770	 24,047	
Other assets	 82	 149	
Total Assets	 $ 108,540	 $ 138,397	
Liabilities and Member's Equity	 	 	
Current liabilities:	 	 	
Accounts payable	 $ 26,504	 $ 38,210	
Accounts payable—affiliates	 789	 1,017	
Accrued liabilities	 7,032	 7,195	
Fair value of derivative liabilities	 8,825	 11,526	
Note payable	 9,000	 33,000	
Other current liabilities	 673	 1,868	
Total current liabilities	 52,823	 92,816	
Long-term liabilities:	 	 	
Fair value of derivative liabilities	 531	 478	
Payable pursuant to tax receivable agreement—affiliates	 20,767	 20,767	
Other long-term liabilities	 1,553	 219	
Total liabilities	 75,674	 114,280	
Stockholders' equity:	 	 	
Common Stock:	 	 	

	
			
Class A common stock, par value $0.01 per share, 120,000,000 shares authorized, 3,097,193 issued and outstanding at June 30, 2015 and 3,000,000 issued and outstanding at December 31, 2014	 31	 30	
Class B common stock, par value $0.01 per share, 60,000,000 shares authorized, 10,750,000 issued and outstanding at June 30, 2015 and 10,750,000 issued and outstanding at December 31, 2014	 108	 108	
Preferred Stock:	 	 	
Preferred stock, par value $0.01 per share, 20,000,000 shares authorized, zero issued and outstanding at June 30, 2015 and December 31, 2014	 --	 --	
Additional paid-in capital	 10,494	 9,296	
Retained earnings (deficit)	 132	 (775)	
Total stockholders' equity	 10,745	 8,659	
Non-controlling interest in Spark HoldCo, LLC	 22,101	 15,458	
Total equity	 32,866	 24,117	
Total Liabilities and Stockholders' Equity	 $ 108,540	 $ 138,397	

	

SPARK ENERGY, INC.	
CONDENSED COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014	
(in thousands, except per share data)	
(unaudited)	
 	 	 	 	 	
 	Three Months Ended June 30,	Six Months Ended June 30,	
 	2015	2014	2015	2014	
Revenues:	 	 	 	 	
Retail revenues (including retail revenues—affiliates of $0 and $681 for the three months ended June 30, 2015 and 2014, respectively and retail revenues—affiliates of $0 and $2,170 for the six months ended June 30, 2015 and 2014, respectively)	 $ 65,500	 $ 65,743	 $ 165,375	 $ 170,095	
Net asset optimization (expenses) revenues (including asset optimization revenues—affiliates of $176 and $4,634 for the three months ended June 30, 2015 and 2014, respectively, and asset optimization revenues—affiliates cost of revenues of $3,114 and $10,654 for the three months ended June 30, 2015 and 2014, respectively and asset optimization revenues—affiliates of $665 and $7,134 for the six months ended June 30, 2015 and 2014, respectively, and asset optimization revenues—affiliates cost of revenues of $6,207 and $18,554 for the six months ended June 30, 2015 and 2014, respectively)	 (67)	 197	 1,862	 1,821	
Total Revenues	 65,433	 65,940	 167,237	 171,916	
Operating Expenses:	 	 	 	 	
Retail cost of revenues (including retail cost of revenues—affiliates of less than $0.1 million for both the three months and six months ended June 30, 2015 and 2014)	 42,120	 52,387	 111,207	 140,508	
General and administrative (including general and administrative expense—affiliates of $0 and $6 for the three months ended June 30, 2015 and 2014, respectively and general and administrative expense—affiliates of $0 and $12 million for the six months ended June 30, 2015 and 2014, respectively)	 12,978	 9,747	 27,683	 17,860	
Depreciation and amortization	 5,231	 3,252	 9,508	 6,211	
Total Operating Expenses	 60,329	 65,386	 148,398	 164,579	
Operating income	 5,104	 554	 18,839	 7,337	
Other (expense)/income:	 	 	 	 	

	
					
Interest expense	 (207)	 (222)	 (588)	 (535)	
Interest and other income	 187	 1	 322	 71	
Total other expenses	 (20)	 (221)	 (266)	 (464)	
Income before income tax expense	 5,084	 333	 18,573	 6,873	
Income tax expense	 459	 132	 1,019	 164	
Net income	 $ 4,625	 $ 201	 $ 17,554	 $ 6,709	
Less: Net income attributable to non-controlling interests	 3,917	 --	 14,437	 --	
Net income attributable to Spark Energy, Inc. stockholders	 $ 708	 $ 201	 $ 3,117	 $ 6,709	
 	 	 	 	 	
Net income attributable to Spark Energy, Inc. per share of Class A common stock	 	 	 	 	
Basic	 $ 0.23	 	 $ 1.03	 	
Diluted	 $ 0.23	 	 $ 0.83	 	
 	 	 	 	 	
Weighted average shares of Class A common stock outstanding	 	 	 	 	
Basic	 3,062	 	 3,031	 	
Diluted	 3,062	 	 13,781	 	

											
SPARK ENERGY, INC.	
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	
FOR THE SIX MONTHS ENDED JUNE 30, 2015	
(in thousands)	
(unaudited)	
 	
 	Issued Shares of Class A Common Stock	Issued Shares of Class B Common Stock	Issued Shares of Preferred Stock	Class A Common Stock	Class B Common Stock	Additional Paid In Capital	Retained Earnings (Deficit)	Total Stockholders Equity	Non-controlling Interest	Total Equity	
Balance at 12/31/14:	 3,000	 10,750	 $ --	 $ 30	 $ 108	 $ 9,296	 $ (775)	 $ 8,659	 $ 15,458	 $ 24,117	
Stock based compensation	 --	 --	 --	 --	 --	 716	 --	 716	 --	 716	
Restricted stock unit vesting	 97	 --	 --	 1	 --	 353	 	 354	 	 354	
Contribution from NuDevco	 --	 --	 --	 --	 --	 129	 --	 129	 --	 129	
Consolidated net income	 --	 --	 --	 --	 --	 --	 3,117	 3,117	 14,437	 17,554	
Distributions paid to Class B non-controlling unit holders	 --	 --	 --	 --	 --	 --	 --	 --	 (7,794)	 (7,794)	
Dividends paid to Class A common shareholders	 --	 --	 --	 --	 --	 --	 (2,210)	 (2,210)	 --	 (2,210)	
Balance at 6/30/15:	 3,097	 10,750	 --	 $ 31	 $ 108	 $ 10,494	 $ 132	 $ 10,765	 $ 22,101	 $ 32,866	

	
			
SPARK ENERGY, INC.	
CONDENSED COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS	
FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014	
(in thousands)	
(unaudited)	
 	
 	Six Months Ended June 30,	
 	2015	2014	
 	 	 	
Cash flows from operating activities:	 	 	
Net income	 $ 17,554	 $ 6,709	
Adjustments to reconcile net income to net cash flows provided by operating activities:	 	 	
Depreciation and amortization expense	 9,508	 6,211	
Deferred income taxes	 277	 --	
Stock based compensation	 1,159	 --	
Amortization of deferred financing costs	 101	 225	
Bad debt expense	 4,179	 2,027	
Gain (loss) on derivatives, net	 5,360	 (1,440)	
Current period cash settlements on derivatives, net	 (8,547)	 10,256	
Changes in assets and liabilities:	 	 	
Decrease in restricted cash	 707	 --	
Decrease in accounts receivable	 19,608	 12,266	
Decrease in accounts receivable—affiliates	 698	 6,754	
Decrease in inventory	 5,087	 311	
Increase in customer acquisition costs	 (11,809)	 (11,668)	
Decrease (increase) in prepaid and other current assets	 5,610	 (5,250)	
Increase in intangible assets - customer acquisitions	 (2,720)	 --	
Decrease in other assets	 65	 58	
Decrease in accounts payable and accrued liabilities	 (12,087)	 (3,895)	
Increase (decrease) in accounts payable—affiliates	 (228)	 261	
Increase (decrease) in other current liabilities	 (1,195)	 2,833	
Increase in other non-current liabilities	 1,553	 --	
Net cash provided by operating activities	 34,880	 25,658	
Cash flows from investing activities:	 	 	
Purchases of property and equipment	 (857)	 (1,404)	
Net cash used in investing activities	 (857)	 (1,404)	
Cash flows from financing activities:	 	 	
Borrowings on notes payable	 6,000	 48,550	
Payments on notes payable	 (30,000)	 (35,000)	
Contributions from NuDevco	 129	 --	
Member contributions (distributions), net	 --	 (43,506)	
Restricted stock vesting	 (270)	 --	
Payment of dividends to Class A common shareholders	 (2,210)	 --	
Payment of distributions to Class B unitholders	 (7,794)	 --	
Net cash used in financing activities	 (34,145)	 (29,956)	
Decreases in cash and cash equivalents	 (122)	 (5,702)	
Cash and cash equivalents—beginning of period	 4,359	 7,189	
Cash and cash equivalents—end of period	 $ 4,237	 $ 1,487	
Supplemental Disclosure of Cash Flow Information:	 	 	

	
			
Non cash items:	 	 	
Property and equipment purchase accrual	 $ 179	 $ --	
Cash paid during the period for:	 	 	
Interest	 $ 598	 $ 395	
Taxes	 $ 150	 $ 150	

	

SPARK ENERGY, INC.	
OPERATING SEGMENT RESULTS	
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014	
(in thousands, except per unit operating data)	
(unaudited)	
 	 	 	 	 	
 	Three Months Ended June 30,	Six Months Ended June 30,	
 	2015	2014	2015	2014	
Retail Natural Gas Segment	 	 	 	 	
Total Revenues	 $ 21,361	 $ 23,169	 $ 78,716	 $ 85,697	
Retail Cost of Revenues	 9,375	 16,634	 42,842	 67,138	
Less: Net Asset Optimization Revenues (Expenses)	 (67)	 197	 1,862	 1,821	
Less: Net Gains (Losses) on non-trading derivatives, net of cash settlements	 2,622	 (780)	 6,267	 (1,088)	
Retail Gross Margin—Gas	 $ 9,431	 $ 7,118	 $ 27,745	 $ 17,826	
Volume of Gas (MMBtu)	 2,262,749	 2,519,172	 8,826,794	 9,112,752	
Retail Gross Margin-Gas ($/MMBtu)	 $ 4.17	 $ 2.83	 $ 3.14	 $ 1.96	
Retail Electricity Segment	 	 	 	 	
Total Revenues	 44,072	 42,771	 88,521	 86,219	
Retail Cost of Revenues	 32,745	 35,753	 68,365	 73,370	
Less: Net Gains (Losses) on non-trading derivatives, net of cash settlements	 (2,335)	 (3,755)	 (3,066)	 (4,900)	
Retail Gross Margin—Electricity	 $ 13,662	 $ 10,773	 $ 23,222	 $ 17,749	
Volume of Electricity (MWh)	 378,403	 369,341	 751,254	 753,616	
Retail Gross Margin—Electricity ($/MWh)	 $ 36.10	 $ 29.17	 $ 30.91	 $ 23.55	
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 operating items. EBITDA is defined as net income before provision for income taxes, interest expense and depreciation and amortization. We deduct all current period customer acquisition costs in the Adjusted EBITDA calculation because such costs reflect a cash outlay in the year 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 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 a company's 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 combined and consolidated financial statements, such as industry analysts, investors, commercial banks and rating agencies, use to assess the following, among other measures:

•	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 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, its most directly comparable financial measure calculated and presented in accordance with GAAP.
The GAAP measures most directly comparable to Adjusted EBITDA are net income and net cash provided by operating activities. The GAAP measure most directly comparable to Retail Gross Margin is operating income. Our non-GAAP financial measures of Adjusted EBITDA and Retail Gross Margin should not be considered as alternatives to net income, net cash provided by operating activities, or operating income. 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 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 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 June 30,	Six Months Ended June 30,	
 	2015	2014	2015	2014	
Reconciliation of Adjusted EBITDA to Net Income:	 	 	 	 	
Net income	 $ 4,625	 $ 201	 $ 17,554	 $ 6,709	
Depreciation and amortization	 5,231	 3,252	 9,508	 6,211	
Interest expense	 207	 222	 588	 535	
Income tax expense	 459	 132	 1,019	 164	
EBITDA	 10,522	 3,807	 28,669	 13,619	
Less:	 	 	 	 	
Net, Gains (losses) on derivative instruments	 (4,055)	 (4,019)	 (5,360)	 1,440	
Net, Cash settlements on derivative instruments	 4,357	 (59)	 8,547	 (10,256)	
Customer acquisition costs	 6,180	 6,441	 11,809	 11,668	
Plus:	 	 	 	 	
Non-cash compensation expense	 609	 --	 1,159	 --	
Adjusted EBITDA	 $ 4,649	 $ 1,444	 $ 14,832	 $ 10,767	

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

					
 	 	 	
 	Three Months Ended June 30,	Six Months Ended June 30,	
 	2015	2014	2015	2014	
Reconciliation of Adjusted EBITDA to net cash provided by operating activities:	 	 	 	 	
Net cash provided by operating activities	 $ 15,634	 $ 19,448	 $ 34,880	 $ 25,658	
Amortization of deferred financing costs	 (51)	 (112)	 (101)	 (225)	
Bad debt expense	 (1,232)	 (1,462)	 (4,179)	 (2,027)	
Interest expense	 207	 222	 588	 535	
Income tax expense	 459	 132	 1,019	 164	
Changes in operating working capital	 	 	 	 	
Accounts receivable, prepaids, current assets	 (19,120)	 (40,878)	 (23,903)	 (13,770)	
Inventory	 2,434	 4,011	 (5,087)	 (311)	
Accounts payable and accrued liabilities	 6,504	 21,969	 12,315	 3,634	
Other	 (186)	 (1,886)	 (700)	 (2,891)	
Adjusted EBITDA	 $ 4,649	 $ 1,444	 $ 14,832	 $ 10,767	

	

APPENDIX TABLE A-3	
RETAIL GROSS MARGIN RECONCILIATION	
(in thousands)	
(unaudited)	
 	 	 	 	 	
 	Three Months Ended June 30,	Six Months Ended June 30,	
 	2015	2014	2015	2014	
Reconciliation of Retail Gross Margin to Operating Income:	 	 	 	 	
Operating income	 $ 5,104	 $ 554	 $ 18,839	 $ 7,337	
Depreciation and amortization	 5,231	 3,252	 9,508	 6,211	
General and administrative	 12,978	 9,747	 27,683	 17,860	
Less:	 	 	 	 	
Net asset optimization revenues (expenses)	 (67)	 197	 1,862	 1,821	
Net, Gains (losses) on non-trading derivative instruments	 (4,041)	 (4,438)	 (5,241)	 7,010	
Net, Cash settlements on non-trading derivative instruments	 4,328	 (97)	 8,442	 (12,998)	
Retail Gross Margin	 $ 23,093	 $ 17,891	 $ 50,967	 $ 35,575	

CONTACT: Spark Energy, Inc.
Investors:
Andy Davis, 832-200-3727
Media:
Jenn Korell, 281-833-4151