spke-20220630


UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36559

Via Renewables, Inc.

(Exact name of registrant as specified in its charter)

Delaware

46-5453215

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

12140 Wickchester Ln, Suite 100

Houston, Texas 77079

(Address of principal executive offices)

(713) 600-2600

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols(s)	Name of exchange on which registered
Class A common stock, par value $0.01 per share	VIA	The NASDAQ Global Select Market
8.75% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share	VIASP	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

There were 15,857,766 shares of Class A common stock, 20,000,000 shares of Class B common stock and 3,567,543 shares of Series A Preferred Stock outstanding as of August 2, 2022.


VIA RENEWABLES, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended June 30, 2022
						Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2022 AND DECEMBER 31, 2021 (unaudited)						5

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (unaudited)						6

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (unaudited)						7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (unaudited)						11

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)						12

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS						38
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK						56
ITEM 4. CONTROLS AND PROCEDURES						58
PART II. OTHER INFORMATION						59
ITEM 1. LEGAL PROCEEDINGS						59
ITEM 1A. RISK FACTORS						59




ITEM 6. EXHIBITS						61

SIGNATURES						63

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Cautionary Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) 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,” “could,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “plan,” “intend,” “project,” or other similar words. Forward-looking statements appear in a number of places in this Report. All statements, other than statements of historical fact, included in this Report are forward-looking statements. The forward-looking statements include statements regarding the impacts of COVID-19 and the 2021 severe weather event, cash flow generation and liquidity, business strategy, prospects for growth and acquisitions, outcomes of legal proceedings, ability to pay and amount of cash dividends and distributions on our Class A common stock and Series A Preferred Stock, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, objectives, beliefs of management, availability and terms of capital, competition, governmental 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 that could cause actual results to materially differ from those projected in the forward-looking statements include, but are not limited to:

•evolving risks, uncertainties and impacts relating to COVID-19, including the geographic spread, the severity of the disease, the scope and duration of the COVID-19 outbreak, actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to treat its impact, and the potential for continuing negative impacts of COVID-19 on economies and financial markets;

•the ultimate impact of the 2021 severe weather event, including future benefits or costs related to ERCOT market securitization efforts, and any corrective action by the State of Texas, ERCOT, the Railroad Commission of Texas, or the Public Utility Commission of Texas;

•changes in commodity prices, the margins we achieve, and interest rates;

•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 regulations, 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;

•our ability to acquire customers and actual attrition rates;

•changes in costs to acquire customers;

•accuracy of billing systems;

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

•significant changes in, or new changes by, the independent system operators (“ISOs”) in the regions we operate;

•competition; and

•the “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, in "
Item 1A — Risk Factors" of this Report, and in our other public filings and press releases.

You should review the risk factors and other factors noted throughout or incorporated by reference in this Report 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 Report. 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

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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.

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PART I. — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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VIA RENEWABLES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share counts)

(unaudited)


	June 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	43,196	$	68,899
Restricted cash	2,327		6,421
Accounts receivable, net of allowance for doubtful accounts of $4,040 at June 30, 2022 and $2,368 at December 31, 2021	56,292		66,676
Accounts receivable—affiliates	5,709		3,819
Inventory	2,391		1,982
Fair value of derivative assets, net	45,956		3,930
Customer acquisition costs, net	2,084		946
Customer relationships, net	6,591		8,523

Deposits	6,606		6,664
Renewable energy credit asset	16,811		14,691

Other current assets	10,785		14,129
Total current assets	198,748		196,680
Property and equipment, net	4,451		4,261
Fair value of derivative assets, net	990		340
Customer acquisition costs, net	1,177		453
Customer relationships, net	660		5,660
Deferred tax assets	18,321		23,915
Goodwill	120,343		120,343
Other assets	4,127		3,624
Total assets	$	348,817	$	355,276

Liabilities, Series A Preferred Stock and Stockholders' Equity
Current liabilities:
Accounts payable	$	31,770	$	43,285
Accounts payable—affiliates	427		491
Accrued liabilities	12,485		19,303
Renewable energy credit liability	9,469		13,548
Fair value of derivative liabilities, net	2,468		4,158






Other current liabilities	345		1,707
Total current liabilities	56,964		82,492
Long-term liabilities:
Fair value of derivative liabilities, net	11,185		36

Long-term portion of Senior Credit Facility	95,000		135,000
Subordinated debt—affiliates	20,000		—




Other long-term liabilities	—		109
Total liabilities	183,149		217,637
Commitments and contingencies (Note 12)

Series A Preferred Stock, par value $0.01 per share, 20,000,000 shares authorized, 3,567,543 shares issued and outstanding at June 30, 2022 and December 31, 2021	87,036		87,288

Stockholders' equity:
Common Stock:

Class A common stock, par value $0.01 per share, 120,000,000 shares authorized, 16,002,360 shares issued and 15,857,766 shares outstanding at June 30, 2022 and 15,791,019 shares issued and 15,646,425 shares outstanding at December 31, 2021	160		158
Class B common stock, par value $0.01 per share, 60,000,000 shares authorized, 20,000,000 shares issued and outstanding at June 30, 2022 and December 31, 2021	201		201


Additional paid-in capital	56,447		54,663
Accumulated other comprehensive loss	(40)		(40)
Retained earnings	9,004		776
Treasury stock, at cost, 144,594 shares at June 30, 2022 and December 31, 2021	(2,406)		(2,406)
Total stockholders' equity	63,366		53,352
Non-controlling interest in Spark HoldCo, LLC	15,266		(3,001)
Total equity	78,632		50,351
Total liabilities, Series A Preferred Stock and Stockholders' equity	$	348,817	$	355,276

The accompanying notes are an integral part of the condensed consolidated financial statements.

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VIA RENEWABLES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Revenues:
Retail revenues	$	98,347	$	82,309	$	226,405	$	195,454
Net asset optimization (expense) revenues	(1,248)		(114)		(2,152)		(254)
Total Revenues	97,099		82,195		224,253		195,200
Operating Expenses:
Retail cost of revenues	61,702		36,176		130,409		158,344
General and administrative	13,583		10,663		28,518		23,334
Depreciation and amortization	4,936		5,413		10,120		11,449
Total Operating Expenses	80,221		52,252		169,047		193,127
Operating income	16,878		29,943		55,206		2,073
Other (expense)/income:
Interest expense	(1,820)		(1,552)		(3,127)		(2,863)
Interest and other income	206		79		255		165
Total other expenses	(1,614)		(1,473)		(2,872)		(2,698)
Income (loss) before income tax expense	15,264		28,470		52,334		(625)
Income tax expense	2,730		3,674		8,774		2,139
Net income (loss)	$	12,534	$	24,796	$	43,560	$	(2,764)
Less: Net income (loss) attributable to non-controlling interests	7,916		14,313		25,968		(5,616)
Net income attributable to Via Renewables, Inc. stockholders	$	4,618	$	10,483	$	17,592	$	2,852
Less: Dividend on Series A Preferred Stock	1,700		1,951		3,651		3,902
Net income (loss) attributable to stockholders of Class A common stock	$	2,918	$	8,532	$	13,941	$	(1,050)







Net income (loss) attributable to Via Renewables, Inc. per share of Class A common stock
Basic	$	0.19	$	0.58	$	0.89	$	(0.07)
Diluted	$	0.18	$	0.58	$	0.88	$	(0.07)

Weighted average shares of Class A common stock outstanding
Basic	15,745		14,685		15,701		14,656
Diluted	15,776		14,821		15,793		14,767

The accompanying notes are an integral part of the condensed consolidated financial statements.

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VIA RENEWABLES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands)

(unaudited)


Six Months Ended June 30, 2022
	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, 2021	15,791	20,000	(144)	$	158	$	201	$	(2,406)	$	(40)	$	54,663	$	776	$	53,352	$	(3,001)	$	50,351
Stock based compensation	—	—	—			—		—		—		1,857		—		1,857		—		1,857
Restricted stock unit vesting	211		—	2		—		—		—		(471)		—		(469)		—		(469)
Consolidated net income	—	—	—	—		—		—		—		—		17,592		17,592		25,968		43,560

Distributions paid to non-controlling unit holders	—	—	—	—		—		—		—		—		—		—		(7,303)		(7,303)
Dividends paid to Class A common stockholders ($0.3625 per share)	—	—	—	—		—		—		—		—		(5,713)		(5,713)		—		(5,713)
Dividends paid to Preferred Stockholders	—	—	—	—		—		—		—		—		(3,651)		(3,651)		—		(3,651)



Changes in ownership interest	—	—	—	—		—		—		—		398		—		398		(398)		—
Balance at June 30, 2022	16,002	20,000	(144)	$	160	$	201	$	(2,406)	$	(40)	$	56,447	$	9,004	$	63,366	$	15,266	$	78,632

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Three Months Ended June 30, 2022
	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 March 31, 2022	15,804	20,000	(144)	$	158	$	201	$	(2,406)	$	(40)	$	55,209	$	8,960	$	62,082	$	11,114	$	73,196


Stock based compensation	—	—	—	—		—		—		—		1,512		—		1,512		—		1,512
Restricted stock unit vesting	198	—	—	2		—		—		—		(413)		—		(411)		—		(411)
Consolidated net income	—	—	—	—		—		—		—		—		4,618		4,618		7,916		12,534
Distributions paid to non-controlling unit holders	—	—	—	—		—		—		—		—		—		—		(3,625)		(3,625)
Dividends paid to Class A common stockholders ($0.18125 per share)	—	—	—	—		—		—		—		—		(2,874)		(2,874)		—		(2,874)
Dividends paid to Preferred Stockholders	—	—	—	—		—		—		—		—		(1,700)		(1,700)		—		(1,700)


Changes in Ownership Interest	—	—	—	—		—		—		—		139		—		139		(139)		—
Balance at June 30, 2022	16,002	20,000	(144)	$	160	$	201	$	(2,406)	$	(40)	$	56,447	$	9,004	$	63,366	$	15,266	$	78,632

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Six Months Ended June 30, 2021
	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, 2020	14,772	20,800	(144)	$	148	$	209	$	(2,406)	$	(40)	$	55,222	$	11,721	$	64,854	$	23,607	$	88,461


Stock based compensation	—	—	—	—		—		—		—		1,402		—		1,402		—		1,402
Restricted stock unit vesting	145	—	—	1		—		—		—		(588)		—		(587)		—		(587)
Consolidated net income (loss)	—	—	—	—		—		—		—		—		2,852		2,852		(5,616)		(2,764)

Distributions paid to non-controlling unit holders	—	—	—	—		—		—		—		—		—		—		(10,186)		(10,186)
Dividends paid to Class A common stockholders ($0.3625 per share)	—	—	—	—		—		—		—		(2,651)		(2,677)		(5,328)		—		(5,328)
Dividends paid to Preferred Stockholders	—	—	—	—		—		—		—		—		(3,902)		(3,902)		—		(3,902)



Changes in ownership interest	—	—	—	—		—		—		—		(507)		—		(507)		507		—
Balance at June 30, 2021	14,917	20,800	(144)	$	149	$	209	$	(2,406)	$	(40)	$	52,878	$	7,994	$	58,784	$	8,312	$	67,096

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Three Months Ended June 30, 2021
	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 March 31, 2021	14,772	20,800	(144)	$	148	$	209	$	(2,406)	$	(40)	$	52,904	$	2,139	$	52,954	$	(2,717)	$	50,237


Stock based compensation	—	—	—	—		—		—		—		1,025		—		1,025		—		1,025
Restricted stock unit vesting	145	—	—	1		—		—		—		(588)		—		(587)		—		(587)
Consolidated net income	—	—	—	—		—		—		—		—		10,483		10,483		14,313		24,796

Distributions paid to non-controlling unit holders	—	—	—	—		—		—		—		—		—		—		(3,747)		(3,747)
Dividends paid to Class A common stockholders ($0.18125 per share)	—	—	—	—		—		—		—		—		(2,677)		(2,677)		—		(2,677)
Dividends paid to Preferred Stockholders	—	—	—	—		—		—		—		—		(1,951)		(1,951)		—		(1,951)


Changes in ownership interest	—	—	—	—		—		—		—		(463)		—		(463)		463		—
Balance at June 30, 2021	14,917	20,800	(144)	$	149	$	209	$	(2,406)	$	(40)	$	52,878	$	7,994	$	58,784	$	8,312	$	67,096

The accompanying notes are an integral part of the condensed consolidated financial statements.

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VIA RENEWABLES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	43,560	$	(2,764)
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization expense	10,120		11,449
Deferred income taxes	5,595		4,680

Stock based compensation	1,922		1,571
Amortization of deferred financing costs	713		517


Bad debt expense	1,833		(113)
Gain on derivatives, net	(57,460)		(25,928)
Current period cash settlements on derivatives, net	21,844		390

Other	43		—
Changes in assets and liabilities:
Decrease in accounts receivable	8,585		25,057
(Increase) decrease in accounts receivable—affiliates	(1,890)		380
(Increase) decrease in inventory	(409)		400
Increase in customer acquisition costs	(2,590)		(456)
Decrease in prepaid and other current assets	2,678		6,324
Decrease in intangible assets—customer acquisition	13		27
(Increase) decrease in other assets	(705)		519
Decrease in accounts payable and accrued liabilities	(19,372)		(12,948)
Decrease in accounts payable—affiliates	(64)		(382)
(Decrease) increase in other current liabilities	(1,362)		473
Decrease in other non-current liabilities	(110)		(28)
Net cash provided by operating activities	12,944		9,168
Cash flows from investing activities:
Purchases of property and equipment	(1,126)		(1,063)
Acquisition of Customers	(4,034)		—

Net cash used in investing activities	(5,160)		(1,063)
Cash flows from financing activities:

Borrowings on notes payable	223,000		371,000
Payments on notes payable	(263,000)		(336,000)
Net borrowings on subordinated debt facility	20,000		10,000



Restricted stock vesting	(663)		(833)


Payment of dividends to Class A common stockholders	(5,713)		(5,328)
Payment of distributions to non-controlling unitholders	(7,303)		(10,186)
Payment of Preferred Stock dividends	(3,902)		(3,902)

Net cash (used in) provided by financing activities	(37,581)		24,751
(Decrease) Increase in Cash, cash equivalents and Restricted cash	(29,797)		32,856
Cash, cash equivalents and Restricted cash—beginning of period	75,320		71,684
Cash, cash equivalents and Restricted cash—end of period	$	45,523	$	104,540
Supplemental Disclosure of Cash Flow Information:
Non-cash items:
Property and equipment purchase accrual	$	4	$	69



Cash paid (received) during the period for:
Interest	$	2,270	$	2,145
Taxes	$	1,252	$	(5,866)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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VIA RENEWABLES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Formation and Organization

Organization

We are an independent retail energy services company that provides residential and commercial customers in competitive markets across the United States with an alternative choice for natural gas and electricity. The Company is a holding company whose primary asset consists of units in Spark HoldCo, LLC (“Spark HoldCo”). The Company is the sole managing member of Spark HoldCo, is responsible for all operational, management and administrative decisions relating to Spark HoldCo’s business and consolidates the financial results of Spark HoldCo and its subsidiaries. Spark HoldCo is the direct and indirect owner of the subsidiaries through which we operate our retail energy services. We conduct our retail energy services business through several brands across our service areas, including Electricity Maine, Electricity N.H., Major Energy, Provider Power Massachusetts, Spark Energy, and Verde Energy. Via Energy Solutions (“VES”) is a wholly owned subsidiary of the Company that offers broker services for retail energy customers.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) as it applies to interim financial statements. This information should be read along with our consolidated financial statements and notes contained in our annual report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”). Our unaudited condensed consolidated financial statements are presented on a consolidated basis and include all wholly-owned and controlled subsidiaries. We account for investments over which we have significant influence but not a controlling financial interest using the equity method of accounting. All significant intercompany transactions and balances have been eliminated in the unaudited condensed consolidated financial statements.

In the opinion of the Company's management, the accompanying condensed consolidated financial statements reflect all adjustments that are necessary to fairly present the financial position, the results of operations, the changes in equity and the cash flows of the Company for the respective periods. Such adjustments are of a normal recurring nature, unless otherwise disclosed.

Use of Estimates and Assumptions

The preparation of our condensed consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim financial statements and the reported amounts of revenues and expenses during the period. Actual results could materially differ from those estimates.

Relationship with our Founder, Majority Shareholder, and Chief Executive Officer

W. Keith Maxwell, III (our "Founder") is the Chief Executive Officer, a director and the owner of a majority of the voting power of our common stock through his ownership of NuDevco Retail, LLC ("NuDevco Retail") and Retailco, LLC ("Retailco"). Retailco is a wholly owned subsidiary of TxEx Energy Investments, LLC ("TxEx"), which is wholly owned by Mr. Maxwell. NuDevco Retail is a wholly owned subsidiary of NuDevco Retail

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Holdings LLC ("NuDevco Retail Holdings"), which is a wholly owned subsidiary of Electric HoldCo, LLC, which is also a wholly owned subsidiary of TxEx.

ERCOT Securitization Proceeds

In June 2022, the Company received $9.6 million from ERCOT related to PURA Subchapter N Securitization financing. The Company accounted for the proceeds received as the recovery of costs of sales and services from a vendor under FASB ASC Topic 705, Cost of Sales and Services reflected as a reduction of retail cost of revenues within our consolidated statements of operations for the quarter ended June 30, 2022, as that is where the initial costs related to the impact of Winter Storm Uri were recorded.

New Accounting Standards Recently Adopted

There have been no changes to our significant accounting policies as disclosed in our 2021 Form 10-K, except as follows:

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform ("ASU 2021-01"), which clarifies the scope and application of certain optional expedients and exceptions regarding the original guidance. The amendments in these ASUs were effective upon issuance and can be applied prospectively through December 31, 2022. The Company's Series A Preferred Stock Certificate of Designations make reference to a LIBOR rate. We adopted ASU 2020-04 effective January 1, 2022 and the adoption did not have a material impact on our consolidated financial statements.

Standards Being Evaluated/Standards Not Yet Adopted

The Company considers the applicability and impact of all ASUs. New ASUs were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements.

3. Revenues

Our revenues are derived primarily from the sale of natural gas and electricity to customers, including affiliates. Revenue is measured based upon the quantity of gas or power delivered at prices contained or referenced in the customer's contract, and excludes any sales incentives (e.g. rebates) and amounts collected on behalf of third parties (e.g. sales tax).

Our revenues also include asset optimization activities. Asset optimization activities consist primarily of purchases and sales of gas that meet the definition of trading activities per FASB ASC Topic 815, Derivatives and Hedging. They are therefore excluded from the scope of FASB ASC Topic 606, Revenue from Contracts with Customers.

Revenues for electricity, natural gas, and related services are recognized as the Company transfers the promised goods and services to the customer. Electricity and natural gas products may be sold as fixed-price or variable-price products. The typical length of a contract to provide electricity and/or natural gas is twelve months. Customers are billed and generally pay at least monthly, based on usage. Electricity and natural gas sales that have been delivered but not billed by period end are estimated and recorded as accrued unbilled revenues based on estimates of customer usage since the date of the last meter read provided by the utility. Volume estimates are based on forecasted volumes and estimated residential and commercial customer usage. Unbilled revenues are calculated by multiplying these volume estimates by the applicable rate by customer class (residential or commercial). Estimated amounts are adjusted when actual usage is known and billed.

Table of Contents

The following table discloses revenue by primary geographical market, customer type, and customer credit risk profile (in thousands). The table also includes a reconciliation of the disaggregated revenue to revenue by reportable segment (in thousands).


	Reportable Segments
	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
	Retail Electricity (a)		Retail Natural Gas		Total Reportable Segments		Retail Electricity		Retail Natural Gas		Total Reportable Segments

Primary markets (b)
New England	$	23,636	$	1,349	$	24,985	$	21,398	$	1,402	$	22,800
Mid-Atlantic	25,124		7,602		32,726		23,309		3,223		26,532
Midwest	9,292		3,121		12,413		9,362		2,910		12,272
Southwest	24,238		3,985		28,223		17,620		3,085		20,705
	$	82,290	$	16,057	$	98,347	$	71,689	$	10,620	$	82,309

Customer type
Commercial	$	9,479	$	10,764	$	20,243	$	11,171	$	4,982	$	16,153
Residential	69,548		9,200		78,748		57,390