Category: Press Releases

HOUSTON, Sept. 06, 2017 (GLOBE NEWSWIRE) — Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ:SPKE), an independent retail energy services company, today provided an operational update on the effects of Hurricane Harvey.

“Spark is proud to call Houston home, and celebrates the triumph of the human spirit and generosity of its citizens while at the same time mourning the losses that the city and all of the Gulf Coast have experienced,” said Nathan Kroeker, Spark Energy’s President and Chief Executive Officer. “Our primary concern has been our employees, all of whom have been accounted for, and our customers.  We applaud the entire community, including our own employees, who have gone beyond the call of duty to help friends, neighbors, and all those affected by the storm.

“We also want to acknowledge our operations teams who kept the business up and running through our emergency operations plan which we executed on Friday, August 25 ahead of Harvey’s landfall.  Between our emergency operations center in Lufkin, Texas and our team members in Maine, we were able to continue serving our customers without disruption.”

Less than seven percent of Spark’s customer base is located in the areas affected by Hurricane Harvey, most of which experienced little or no disruption in power.  Although Spark is unable to assess the full financial impact of the storm, if any, at this point, the Company’s operations continue to be running at full strength.  Spark and its employees remain committed to serving its customers and rebuilding in the affected communities.

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 includes forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements 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. 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. However, a variety of factors could cause actual results to differ materially from those projected in the forward-looking statements, including (i) restrictions in our debt agreements and collateral requirements, (ii) our ability to borrow funds and access credit markets, (iii) our level of indebtedness, (iv) our ability to successfully and efficiently integrate acquisitions into our operations, (iv) federal, state and local regulation, including the industry’s ability to prevail on its challenge to the New York Public Service Commission’s orders enacting new regulations that seek to impose significant new restrictions on retail energy providers operating in New York, (v) other business risks affecting our liquidity and results of operations. Additional important risk factors that could cause actual results to differ materially from expectations are disclosed in Item 1A of Spark’s Form 10-K for the year ended December 31, 2016 and subsequent Form 10-Q’s filed with the SEC. While Spark makes these statements and projections in good faith, neither Spark nor its management or affiliates can guarantee that anticipated future results will be achieved. Spark assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by Spark, whether as a result of new information, future events, or otherwise.

 

Contact: Spark Energy, Inc.

Investors:
Robert Lane, 832-200-3727
ir@sparkenergy.com

Media:
Eric Melchor, 281-833-4151


Source: Spark Energy, Inc.

HOUSTON, Aug. 03, 2017 (GLOBE NEWSWIRE) — Spark Energy, Inc. (“Spark” or the “Company”) (NASDAQ:SPKE), an independent retail energy services company, today reported financial results for the second quarter ended June 30, 2017.

Key Highlights

• Produced a record $20.0 million in Adjusted EBITDA, $43.1 million in Retail Gross Margin, and $4.7 million in Net Income for the second quarter
• Total RCE count increased 2% to a record 826,000 as of June 30, 2017
• Held overall attrition to 4.1% for the second quarter
• Closed on a new $120 million credit facility with added flexibility for acquisition strategy
• Announced the closing of the Verde Energy acquisition effective July 1, adding 145,000 RCEs

“Spark achieved its strongest second quarter performance in company history as the successful execution of our strategy to drive net customer growth across markets and channels allowed us to overcome the challenges of a milder-than-expected spring across our service area,” said Nathan Kroeker, Spark Energy’s President and Chief Executive Officer. “During the quarter we remained focused on adding high quality customers, as well as customer retention through our refined pricing approach, product selection and outstanding customer service.

“We also closed on the acquisition of Verde Energy on July 1, our tenth acquisition since our IPO. Verde’s 100% renewable energy brand and unique sales channels will supplement our existing platform for achieving continued organic growth. With the closing of Verde, Spark now serves well over nine hundred thousand RCEs in 94 utilities across 19 states and we remain well-positioned to aggressively pursue future growth opportunities that will provide sustained value to our shareholders.”

Summary Second Quarter 2017 Financial Results

For the quarter ended June 30, 2017, Spark reported Adjusted EBITDA of $20.0 million compared to Adjusted EBITDA of $15.7 million for the quarter ended June 30, 2016. This increase of $4.3 million is primarily attributable to increased volumes from the Provider acquisition and lower per-RCE general and administrative expenses.

For the quarter ended June 30, 2017, Spark reported Retail Gross Margin of $43.1 million compared to Retail Gross Margin of $38.8 million for the quarter ended June 30, 2016. This increase of $4.3 million is primarily attributable to the increased volumes of retail electricity following the Provider acquisition.

Net income for the quarter ended June 30, 2017 was $4.7 million compared to net income of $19.0 million for the quarter ended June 30, 2016, primarily due to non-cash losses on Spark’s hedge portfolio of $(5.7) million in the second quarter, compared to non-cash gains of $14.3 million in the prior year.

Strategic Update

During the quarter, Spark closed on a new $120.0 million credit facility, which replaced the previous credit facility that was scheduled to expire on July 7, 2017.  The current facility matures in May 2019.

Effective July 1, Spark acquired Verde Energy (“Verde”), which operates in eight states selling 100% renewable electric and carbon-neutral gas products. Spark paid $65.0 million, consisting of $45.0 million of cash at closing and a $20.0 million sellers’ note, plus $20.8 million for working capital. There is an additional earnout that is subject to Verde’s ability to achieve defined performance metrics. The Company believes Verde’s sales channels and strong brand will assist in its continued organic growth strategy.

Liquidity and Capital Resources

($ in thousands)	June 30, 2017
Cash and cash equivalents	$	13,126
Senior Credit Facility Availability	2,293
Subordinated Debt Availability	10,000
Total Liquidity	$	25,419

Dividend

Spark’s Board of Directors declared quarterly dividends of $0.18125 per share of Class A common stock payable on September 14, 2017 and $0.546875 per share of Series A Preferred Stock payable on October 16, 2017.

2017 Financial Guidance

Spark is maintaining 2017 Adjusted EBITDA guidance in the range of $110.0 million to $120.0 million.

Conference Call and Webcast

Spark will host a conference call to discuss second quarter 2017 results on Friday, August 4, 2017 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 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 intend to 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 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 “guidance,” “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 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 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,
• extreme and unpredictable weather conditions,
• the sufficiency of risk management and hedging policies,
• customer concentration,
• federal, state and local regulation, including the industry’s ability to prevail on its challenge to the New York Public Service Commission’s order enacting new regulations that sought to impose significant new restrictions on retail energy providers operating in New York,
• 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,
• actual results of the companies we acquire,
• accuracy of 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,
• ability to achieve expected future results attributable to acquisitions,
• changes in the assumptions we used to estimate our 2017 Adjusted EBITDA, including weather and customer acquisition costs,
• competition, and
• the “Risk Factors” in our Form 10-K for the year ended December 31, 2016, 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. The Adjusted EBITDA guidance for 2017 is an estimate as of August 3, 2017. This estimate is based on assumptions believed to be reasonable as of that date. 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 JUNE 30, 2017 AND DECEMBER 31, 2016 (in thousands) (unaudited)
	June 30, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	13,126		$	18,960
Restricted cash		919			—
Accounts receivable, net of allowance for doubtful accounts of $2.1 million and $2.3 million as of June 30, 2017 and December 31, 2016, respectively		95,690			112,491
Accounts receivable—affiliates		3,883			2,624
Inventory		3,442			3,752
Fair value of derivative assets		835			8,344
Customer acquisition costs, net		18,377			18,834
Customer relationships, net		13,225			12,113
Prepaid assets		1,466			1,361
Deposits		6,374			7,329
Deposit – Verde consideration		65,785			—
Other current assets		9,203			12,175
Total current assets		232,325			197,983
Property and equipment, net		3,993			4,706
Fair value of derivative assets		122			3,083
Customer acquisition costs, net		7,880			6,134
Customer relationships, net		20,218			21,410
Deferred tax assets		54,105			55,047
Goodwill		80,947			79,147
Other assets		9,123			8,658
Total assets	$	408,713		$	376,168
Liabilities, Series A Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable	$	49,341		$	52,309
Accounts payable—affiliates		4,089			3,775
Accrued liabilities		21,749			36,619
Fair value of derivative liabilities		6,947			680
Current portion of Senior Credit Facility		7,500			51,287
Current payable pursuant to tax receivable agreement—affiliates		1,454			—
Current contingent consideration for acquisitions		5,856			11,827
Current portion of note payable		—			15,501
Convertible subordinated notes to affiliates		—			6,582
Other current liabilities		1,024			5,476
Total current liabilities		97,960			184,056
Long-term liabilities:
Fair value of derivative liabilities		3,711			68
Payable pursuant to tax receivable agreement—affiliates		48,432			49,886
Long-term portion of Senior Credit Facility		76,500			—
Subordinated debt—affiliate		15,000			5,000
Deferred tax liability		—			938
Contingent consideration for acquisitions		3,986			10,826
Other long-term liabilities		1,330			1,658
Total liabilities	$	246,919		$	252,432
Commitments and contingencies (Note 13)
Series A Preferred Stock, par value $0.01 per share, 20,000,000 shares authorized, 1,610,000 shares issued and outstanding at June 30, 2017 and zero shares issued and outstanding at December 31, 2016		39,111			—
Stockholders’ equity:
Common Stock (1) :
Class A common stock, par value $0.01 per share, 120,000,000 shares authorized, 13,235,082 issued, and 13,175,356 outstanding at June 30, 2017 and 12,993,118 issued and outstanding at December 31, 2016		132			65
Class B common stock, par value $0.01 per share, 60,000,000 shares authorized, 21,485,126 issued and outstanding at June 30, 2017 and 20,449,484 issued and outstanding at December 31, 2016		216			103
Additional paid-in capital		35,277			25,413
Accumulated other comprehensive (income)/loss		(17	)		11
Retained earnings		2,132			4,711
Treasury stock, at cost, 59,726 shares at June 30, 2017 and zero shares at December 31, 2016		(1,285	)		—
Total stockholders’ equity		36,455			30,303
Non-controlling interest in Spark HoldCo, LLC		86,228			93,433
Total equity		122,683			123,736
Total liabilities, Series A Preferred Stock and stockholders’ equity	$	408,713		$	376,168
(1)  Outstanding shares of common stock reflect the two-for-one stock split, which took effect on June 16, 2017. See Note 4 “Equity” in our 10-Q for further discussion.

SPARK ENERGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016 (in thousands) (unaudited)
	Three Months Ended June 30,								Six Months Ended June 30,
		2017			2016 (2)				2017 (1)				2016 (2)
Revenues:
Retail revenues	$	151,604			$	110,058			$	348,104			$	220,077
Net asset optimization (expense)/revenues (3)		(168	)			(677	)		(361		)		(150		)
Total Revenues		151,436				109,381			347,743				219,927
Operating Expenses:
Retail cost of revenues (4)		114,637				56,963			260,398				125,763
General and administrative (5)		19,346				19,799			43,839				37,179
Depreciation and amortization		9,656				8,253			18,926				15,042
Total Operating Expenses		143,639				85,015			323,163				177,984
Operating income		7,797				24,366			24,580				41,943
Other (expense)/income:
Interest expense		(2,452	)			(832	)		(5,897		)		(1,585		)
Interest and other income		(265	)			195			(66		)		100
Total other expenses		(2,717	)			(637	)		(5,963		)		(1,485		)
Income before income tax expense		5,080				23,729			18,617				40,458
Income tax expense		409				4,735			2,814				5,723
Net income	$	4,671			$	18,994			$	15,803			$	34,735
Less: Net income attributable to non-controlling interests		3,592				16,653			12,454				28,221
Net income attributable to Spark Energy, Inc. stockholders	$	1,079			$	2,341			$	3,349			$	6,514
Less: Accumulated dividend on Series A preferred stock		991				—			1,174				—
Net income attributable to stockholders of Class A common stock	$	88			$	2,341			$	2,175			$	6,514
Other comprehensive loss, net of tax:
Currency translation loss	$	(26	)		$	(61	)		$	(75	)		$	(61	)
Other comprehensive loss		(26	)			(61	)		(75		)		(61		)
Comprehensive income	$	4,645			$	18,933			$	15,728			$	34,674
Less: Comprehensive income attributable to non-controlling interests		3,576				16,620			12,407				28,188
Comprehensive income attributable to Spark Energy, Inc. stockholders	$	1,069			$	2,313			$	3,321			$	6,486
(1)  Financial information has been recast to include results attributable to the acquisition of Perigee Energy, LLC by an affiliate on February 3, 2017. See Notes 2 and 3 “Basis of Presentation and Summary of Significant Accounting Policies” and “Acquisitions” for further discussion.
(2)  Financial information has been recast to include results attributable to the acquisition of the Major Energy Companies by an affiliate on April 15, 2016. See Note 2 and 3 “Basis of Presentation and Summary of Significant Accounting Policies” and  “Acquisitions” for further discussion.
(3)  Net asset optimization revenues (expenses) includes asset optimization revenues—affiliates of $0 and $41 for the three months ended June 30, 2017 and 2016, respectively, and asset optimization revenues—affiliates cost of revenues of $0 and $376 for the three months ended June 30, 2017 and 2016, respectively, and asset optimization revenues—affiliates of $0 and $154 for the six months ended June 30, 2017 and 2016, respectively, and asset optimization revenue—affiliates cost of revenues of $0 and $1,633 for the six months ended June 30, 2017 and 2016, respectively.
(4)  Retail cost of revenues includes retail cost of revenues—affiliates of $0 and less than $100 for the three months ended June 30, 2017 and 2016, respectively, and $0 and less than $100 for the six months ended June 30, 2017 and 2016, respectively.
(5)  General and administrative includes general and administrative expense—affiliates of $6,100 and $4,000 for the three months ended June 30, 2017 and 2016, respectively, and $13,400 and $8,400 for the six months ended June 30, 2017 and 2016, respectively.

 

 

SPARK ENERGY, INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY  FOR THE SIX MONTHS ENDED JUNE 30, 2017 (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 Income (Loss)			Additional Paid-in Capital			Retained Earnings (Deficit)			Total Stockholders’ Equity			Non-controlling Interest			Total Equity
Balance at December 31, 2016	6,497		10,225		—		$	65		$	103		—		$	11		$	25,413		$	4,711		$	30,303		$	93,433		$	123,736
Stock based compensation	—		—		—			—			—		—			—			1,195			—			1,195			—			1,195
Restricted stock unit vesting	121		—		—			1			—		—			—			1,053			—			1,054			—			1,054
Consolidated net income	—		—		—			—			—		—			—			—			3,349			3,349			12,454			15,803
Foreign currency translation adjustment for equity method investee	—		—		—			—			—		—			(28	)		—			—			(28	)		(47	)		(75	)
Distributions paid to non-controlling unit holders	—		—		—			—			—		—			—			—			—			—			(19,822	)		(19,822	)
Net contribution by NG&E	—		—		—			—			—		—			—			—			—			—			210			210
Dividends paid to Class A common stockholders	—		—		—			—			—		—			—			—			(4,754	)		(4,754	)		—			(4,754	)
Dividends to Preferred Stock	—		—		—			—			—		—			—			—			(1,174	)		(1,174	)		—			(1,174	)
Conversion of Convertible Subordinated Notes to Class B Common Stock	—		518		—			—			5		—			—			7,790			—			7,795			—			7,795
Treasury Shares	—		—		(60	)		—			—		(1,285	)		—			—			—		$	(1,285	)		—			(1,285	)
Stock Split	6,617		10,742		—			66			108		—			—			(174	)		—			—			—			—
Balance at June 30, 2017	13,235		21,485		(60	)	$	132		$	216		(1,285	)	$	(17	)	$	35,277		$	2,132		$	36,455		$	86,228		$	122,683

 

SPARK ENERGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016 (in thousands) (unaudited)
	Six Months Ended June 30,
	2017 (1)				2016 (2)
Cash flows from operating activities:
Net income	$	15,803			$	34,735
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization expense		18,411				17,474
Deferred income taxes		3				2,597
Stock based compensation		2,905				2,442
Amortization of deferred financing costs		531				235
Excess tax benefit related to restricted stock vesting		179				—
Change in Fair Value of Earnout liabilities		(2,568	)			1,000
Accretion on fair value of Major Earnout and Provider Earnout liabilities		2,660				—
Bad debt expense		919				462
Loss (gain) on derivatives, net		31,473				(3,496	)
Current period cash settlements on derivatives, net		(11,828	)			(15,829	)
Accretion of discount to convertible subordinated notes to affiliate		1,004				71
Other		224				51
Changes in assets and liabilities:
Decrease in accounts receivable		18,072				21,001
(Increase) decrease in accounts receivable—affiliates		(1,925	)			831
Decrease in inventory		310				1,704
Increase in customer acquisition costs		(12,074	)			(5,356	)
Decrease in prepaid and other current assets		5,394				2,306
(Increase) decrease in other assets		(788	)			536
Decrease in accounts payable and accrued liabilities		(18,422	)			(9,248	)
Increase (decrease) in accounts payable—affiliates		313				(291	)
Decrease in other current liabilities		(2,862	)			(414	)
Decrease in other non-current liabilities		(328	)			(1,612	)
Net cash provided by operating activities		47,406				49,199
Cash flows from investing activities:
Purchases of property and equipment		(371	)			(1,449	)
Payment of the Major Energy Companies Earnout		(7,403	)			—
Payment of the Provider Companies Earnout and Installment Note		(7,353	)			—
Acquisitions		(9,353	)			—
Deposit for Verde Acquisition		(65,785	)			—
Contribution to equity method investment in eRex Spark		—				(413	)
Net cash used in investing activities		(90,265	)			(1,862	)
Cash flows from financing activities:
Proceeds from issuance of Series A Preferred Stock, net of issuance costs paid		37,937				—
Borrowings on notes payable		121,000				—
Payments on notes payable		(93,789	)			(25,152	)
Proceeds from disgorgement of stockholders short-swing profits		666				580
Restricted stock vesting		(2,009	)			(909	)
Excess tax benefit related to restricted stock vesting		—				141
Payment of dividends to Class A common stockholders		(4,754	)			(3,657	)
Payment of distributions to non-controlling unitholders		(19,822	)			(9,967	)
Purchase of Treasury Stock		(1,285	)			—
Net cash provided by (used in) financing activities		37,944				(38,964	)
(Decrease) increase in Cash and cash equivalents and Restricted cash		(4,915	)			8,373
Cash and cash equivalents and Restricted cash—beginning of period		18,960				4,474
Cash and cash equivalents and Restricted cash—end of period	$	14,045			$	12,847
Supplemental Disclosure of Cash Flow Information:
Non-cash items:
Property and equipment purchase accrual	$	50			$	22
Liability due to tax receivable agreement	$	0				(27,462	)
Tax benefit from tax receivable agreement	$	0			$	31,490
Cash paid during the period for:
Interest	$	1,395			$	944
Taxes	$	7,232			$	1,892
(1) Financial information has been recast to include results attributable to the acquisition of Perigee Energy, LLC by an affiliate on February 3, 2017. See Notes 2 and 3 “Basis of Presentation and Summary of Significant Accounting Policies” and “Acquisitions,” respectively, for further discussion.
(2) Financial information has been recast to include results attributable to the acquisition of the Major Energy Companies by an affiliate on April 15, 2016. See Notes 2 and 3 “Basis of Presentation and Summary of Significant Accounting Policies” and “Acquisitions,” respectively, for further discussion.

 

SPARK ENERGY, INC. OPERATING SEGMENT RESULTS FOR THE THREE AND SIX MONTHS ENDED June 30, 2017 AND 2016 (in thousands, except per unit operating data) (unaudited)
	Three Months Ended June 30,								Six Months Ended June 30,
	2017				2016				2017				2016
	(in thousands, except volume and per unit operating data)
Retail Natural Gas Segment
Total Revenues	$	19,528			$	21,986			$	82,141			$	70,599
Retail Cost of Revenues	12,558				7,246				49,475				29,746
Less: Net Asset Optimization (Expenses) Revenues	(168		)		(677		)		(361		)		(150		)
Less: Net Gains on non-trading derivatives, net of cash settlements	(1,148		)		4,228				(3,088		)		5,658
Retail Gross Margin — Gas	$	8,286			$	11,189			$	36,115			$	35,345
Volumes — Gas (MMBtus)	2,629,087				3,006,025				10,848,366				9,118,456
Retail Gross Margin — Gas per MMBtu	$	3.15			$	3.72			$	3.33			$	3.88
Retail Electricity Segment
Total Revenues	$	131,908			$	87,395			$	265,602			$	149,328
Retail Cost of Revenues	102,079				49,717				210,923				96,017
Less: Net Gains (Losses) on non-trading derivatives, net of cash settlements	(5,034		)		10,047				(16,955		)		10,274
Retail Gross Margin — Electricity	$	34,863			$	27,631			$	71,634			$	43,037
Volumes — Electricity (MWhs)	1,379,051				879,814				2,764,165				1,466,491
Retail Gross Margin — Electricity per MWh	$	25.28			$	31.41			$	25.92			$	29.35

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.

Reconciliation of Spark’s estimate of Adjusted EBITDA for the year ended December 31, 2017 to the relevant GAAP line items is not being provided as Spark is not providing 2017 guidance for net income (loss), net cash provided by operating activities, or the reconciling items between these GAAP financial measures and Adjusted EBITDA. Spark does not provide guidance for such items because it is not possible to forecast the future non-cash impacts of net gains and losses on derivative instruments and non-cash compensation expense attributable to grants of equity under our Long Term Incentive Plan. Additionally, it is not possible to forecast our provision for income taxes due to the potential for change in our non-controlling interests’ ownership percentage, given the nature of our Up-C structure. Accordingly, a reconciliation to net income (loss) or net cash provided by operating activities is not available without unreasonable effort.

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 June 30,								Six Months Ended June 30,
(in thousands)		2017				2016			2017				2016
Reconciliation of Adjusted EBITDA to Net Income (Loss):
Net income	$	4,671			$	18,994			$	15,803			$	34,735
Depreciation and amortization		9,656				8,253			18,926				15,042
Interest expense		2,452				832			5,897				1,585
Income tax expense		409				4,735			2,814				5,723
EBITDA		17,188				32,814			43,440				57,085
Less:
Net, (losses) gains on derivative instruments		(9,677	)			13,245			(31,473		)		3,496
Net, Cash settlements on derivative instruments		3,996				1,024			11,351				12,296
Customer acquisition costs		4,384				4,670			12,074				6,975
Plus:
Non-cash compensation expense		1,538				1,824			2,905				2,442
Adjusted EBITDA	$	20,023			$	15,699			$	54,393			$	36,760
	Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2017				2016			2017				2016
Reconciliation of Adjusted EBITDA to net cash provided by operating activities:
Net cash provided by operating activities	$	23,031			$	23,697			$	47,406			$	49,199
Amortization of deferred financing costs		(283	)			(118	)		(531		)		(235		)
Allowance for doubtful accounts and bad debt expense		(563	)			445			(919		)		(462		)
Interest expense		2,452				832			5,897				1,585
Income tax expense		409				4,735			2,814				5,723
Changes in operating working capital
Accounts receivable, prepaids, current assets		(19,159	)			(20,531	)		(21,541		)		(24,138		)
Inventory		3,012				1,780			(310		)		(1,704		)
Accounts payable and accrued liabilities		7,423				4,148			18,109				9,539
Other		3,701				711			3,468				(2,747		)
Adjusted EBITDA	$	20,023			$	15,699			$	54,393			$	36,760
Cash Flow Data:
Cash flows provided by operating activities	$	23,031			$	23,697			$	47,406			$	49,199
Cash flows used in investing activities		(80,652	)			(1,029	)		(90,265		)		(1,862		)
Cash flows provided by (used in) financing activities		46,741				(12,770	)		37,944				(38,964		)

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 June 30,								Six Months Ended June 30,
(in thousands)	2017				2016				2017				2016
Reconciliation of Retail Gross Margin to Operating Income (Loss):
Operating income	$	7,797			$	24,366			$	24,580			$	41,943
Depreciation and amortization	9,656				8,253				18,926				15,042
General and administrative	19,346				19,799				43,839				37,179
Less:
Net asset optimization (expenses) revenues	(168		)		(677		)		(361		)		(150		)
Net, Losses on non-trading derivative instruments	(10,202		)		13,322				(31,578		)		3,702
Net, Cash settlements on non-trading derivative instruments	4,020				953				11,535				12,230
Retail Gross Margin	$	43,149			$	38,820			$	107,749			$	78,382
Retail Gross Margin – Retail Natural Gas Segment	$	8,286			$	11,189			$	36,115			$	35,345
Retail Gross Margin – Retail Electricity Segment	$	34,863			$	27,631			$	71,634			$	43,037

Contact: Spark Energy, Inc.

Investors:

Robert Lane, 832-200-3727

ir@sparkenergy.com

Media:

Eric Melchor, 281-833-4151


Source: Spark Energy, Inc.

HOUSTON, July 24, 2017 (GLOBE NEWSWIRE) — Spark Energy, Inc. (NASDAQ:SPKE), a Delaware corporation (“Spark” or the “Company”), announced today that it plans to present its Second Quarter 2017 financial results in a conference call and webcast on Friday, August 4, 2017 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.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 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 intend to 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:
Robert Lane, 832-200-3727

Media:
Eric Melchor, 281-833-4151


Source: Spark Energy, Inc.

HOUSTON, June 19, 2017 (GLOBE NEWSWIRE) — Spark Energy, Inc. (NASDAQ:SPKE), a Delaware corporation (“Spark” or the “Company) has received regulatory approval under the Hart-Scott-Rodino Act (“HSR”) for its pending acquisition of Verde Energy (“Verde”).  In addition, as of today, shares of the Company’s Common Stock will begin trading on a split-adjusted basis reflecting the Company’s two-for-one stock split. The Company has also begun repurchases of its common stock under the previously announced share buyback program implemented in May.

“We are pleased to have received HSR approval for Verde,” said Nathan Kroeker, Spark’s President and Chief Executive Officer. “We continue to work with the Verde team to facilitate a smooth transition at close, which we still expect to occur early in the third quarter.”

Spark completed the two-for-one stock split through a share dividend to holders of its Class A and Class B Common Stock after the close of the market on Friday, June 16, 2017. Beginning today, Spark’s Common Stock will trade on a split-adjusted basis. The stock split does not change a shareholder’s proportional ownership in the Company.

“We want to thank our customers, employees, and shareholders for being so supportive of Spark over the last three years to get us to where we are today in terms of size and success,” added Mr. Kroeker. “We believe that with our improved capital structure, including our new credit facility and our preferred stock, we are well positioned to continue this growth into the future.”

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 91 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

 

Contact: Spark Energy, Inc.

Investors:

Christian Hettick, 832-200-3727

Media:

Eric Melchor, 281-833-4151


Source: Spark Energy, Inc.

HOUSTON, July 05, 2017 (GLOBE NEWSWIRE) — Spark Energy, Inc. (NASDAQ:SPKE), a Delaware corporation (“Spark” or the “Company”) announced today it has completed its previously announced acquisition of Verde Energy (“Verde”).

“We are very excited for Verde to join the Spark family,” said Nathan Kroeker, Spark’s President and Chief Executive Officer. “Verde adds a number of unique offerings, including a 100% renewable portfolio of customers and a unique sales channel, that we look forward to expanding throughout Spark. We believe this transaction significantly enhances and further diversifies our cash flow profile, and we expect it to be immediately accretive to earnings.”

“On behalf of Verde, its customers and employees, we could not be happier to be a part of the Spark family of companies,” said Thomas FitzGerald, Verde’s Founder and Chief Executive Officer. “We expect to build on our prior successes in the renewable energy space and to pursue a number of exciting opportunities and initiatives within the Spark platform.”

The acquisition of Verde is effective as of July 1, 2017. The Company financed the transaction with a combination of cash on hand and borrowings from its credit facilities. This represents the tenth acquisition by Spark since the Company’s initial public offering in August 2014, and brings Spark to nearly 1,000,000 total RCEs.

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.

Contact: Spark Energy, Inc.
Investors:
Robert Lane, 832-200-3727
Media:
Eric Melchor, 281-833-4151


Source: Spark Energy, Inc.

HOUSTON, June 19, 2017 (GLOBE NEWSWIRE) — Spark Energy, Inc. (NASDAQ:SPKE), a Delaware corporation (“Spark” or the “Company) has received regulatory approval under the Hart-Scott-Rodino Act (“HSR”) for its pending acquisition of Verde Energy (“Verde”).  In addition, as of today, shares of the Company’s Common Stock will begin trading on a split-adjusted basis reflecting the Company’s two-for-one stock split. The Company has also begun repurchases of its common stock under the previously announced share buyback program implemented in May.

“We are pleased to have received HSR approval for Verde,” said Nathan Kroeker, Spark’s President and Chief Executive Officer. “We continue to work with the Verde team to facilitate a smooth transition at close, which we still expect to occur early in the third quarter.”

Spark completed the two-for-one stock split through a share dividend to holders of its Class A and Class B Common Stock after the close of the market on Friday, June 16, 2017. Beginning today, Spark’s Common Stock will trade on a split-adjusted basis. The stock split does not change a shareholder’s proportional ownership in the Company.

“We want to thank our customers, employees, and shareholders for being so supportive of Spark over the last three years to get us to where we are today in terms of size and success,” added Mr. Kroeker. “We believe that with our improved capital structure, including our new credit facility and our preferred stock, we are well positioned to continue this growth into the future.”

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 91 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

 

Contact: Spark Energy, Inc.

Investors:

Christian Hettick, 832-200-3727

Media:

Eric Melchor, 281-833-4151

Source: Spark Energy, Inc.

HOUSTON, May 24, 2017 (GLOBE NEWSWIRE) — Spark Energy, Inc. (NASDAQ:SPKE), a Delaware corporation (“Spark” or the “Company”), announced today that its Board of Directors has authorized a share buyback program of up to $50 million of Spark Class A common stock. The Company intends to fund the program through available cash balances and its Subordinated Credit Facility, as well as future operating cash flows.

“We are extremely pleased with the financial results and growth the Company has achieved since our initial public offering in 2014,” said Nathan Kroeker, Spark’s President and Chief Executive Officer. “With the Company’s strong financial position and both management’s and the Board’s confidence in our continued performance, we believe a balanced approach to capital allocation, including share repurchases, will greatly enhance shareholder value.”

“The Board does not believe Spark’s current share price accurately reflects the Company’s intrinsic value and we are confident that a share buyback program will capitalize on this disconnect,” said W. Keith Maxwell III, Founder and Chairman of Spark.

These shares may be repurchased from time to time in the open market or in privately negotiated transactions based on ongoing assessments of capital needs, the market price of the stock, and other factors, including general market conditions. The repurchase program does not obligate Spark to acquire any particular amount of common stock and it may be modified or suspended at any time, and could be terminated prior to completion.

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 91 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

 

Contact: Spark Energy, Inc.

Investors:

Robert Lane, 832-200-3727

Media:

Eric Melchor, 281-833-4151

Source: Spark Energy, Inc.

HOUSTON, May 23, 2017 (GLOBE NEWSWIRE) — Spark Energy, Inc. (NASDAQ:SPKE), a Delaware corporation (“Spark” or the “Company”), announced today its Board of Directors declared a two-for-one stock split of its issued Class A and Class B Common Stock, to be effected in the form of a stock dividend. Shareholders of record at the close of business on June 5, 2017 will be issued one additional share of Common Stock of the Company for each share of Common Stock held by such shareholders on that date. Such additional shares of Common Stock will be distributed on June 16, 2017.

“We believe that this stock split will result in greater market liquidity for our Class A Common Stock across a wider investor base,” said Nathan Kroeker, Spark’s President and Chief Executive Officer.

The stock split will not change a shareholder’s proportional ownership in the Company.

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 91 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

 

Contact: Spark Energy, Inc.
Investors:
Robert Lane, 832-200-3727
Media:
Eric Melchor, 281-833-4151

Source: Spark Energy, Inc.

HOUSTON, May 22, 2017 (GLOBE NEWSWIRE) — Spark Energy, Inc. (NASDAQ:SPKE), a Delaware corporation (“Spark” or the “Company”), announced today the closing of a new $120 million senior secured borrowing base credit facility (the “Facility” or the “Agreement”) to replace the existing senior secured credit facility.

The Facility, which includes a $30 million accordion, replaces the current $107.5 million credit facility, which was set to mature July 2017. This new larger facility will include Verde Energy as a co-borrower upon the closing of that transaction in the coming months.

Coöperatieve Rabobank U.A., New York Branch will act as Joint Lead Arranger, Sole Bookrunner, and Administrative Agent. BBVA Compass will act as Joint Lead Arranger and Syndication Agent. Other financial institutions who have joined the facility include Woodforest National Bank, Credit Agricole Corporate & Investment Bank, and Brown Brothers Harriman & Co.

“This new larger facility has additional features and flexibility that will better support our continued growth initiatives, and provides increased financial flexibility to capitalize on opportunities to enhance shareholder value,” said Nathan Kroeker, Spark’s President and Chief Executive Officer. “We want to thank our lenders for their commitment to Spark’s continued growth.”

“We appreciate Rabobank and BBVA Compass’s leadership in helping us to close this new credit facility,” said Robert Lane, Spark’s Vice President and Chief Financial Officer. “As Spark has continued to grow our footprint and demonstrate strong financial performance, we are pleased that our banks worked with us to create a facility that reflects our strong financial position.”

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 91 utility territories. Spark offers its customers a variety of product and service choices, including stable and predictable energy costs and green product alternatives.

Spark Energy, Inc.

Investors:
Robert Lane, 832-200-3727

Media:
Eric Melchor, 281-833-4151



Source: Spark Energy, Inc.

HOUSTON, May 08, 2017 (GLOBE NEWSWIRE) — Spark Energy, Inc. (NASDAQ:SPKE), a Delaware corporation (“Spark” or the “Company”), today reported financial results for the three months ended March 31, 2017 and announced the acquisition of Verde Energy (“Verde”).

Highlights

• Recorded $34.2 million in Adjusted EBITDA, $64.3 million in Retail Gross Margin, and $11.4 million in Net Income for the three months ended March 31, 2017
• Achieved record total RCE count of 789,000 as of March 31, 2017
• Announced the closing of Perigee Energy in April, adding 60,000 RCEs
• Signed purchase agreement to acquire Verde Energy, which is expected to add approximately 145,000 RCEs and $25 million in annual Adjusted EBITDA
• Improved attrition to 3.8% for the three months ended March 31, 2017, a 12% improvement from 2016
• Continued improvement in overall attrition to 3.8% for the three months ended March 31, 2017
• Net increase of 15,000 RCEs in organic growth for the first quarter 2017
• Sold 1,610,000 shares of Series A Preferred Stock for gross proceeds of $40.3 million, including the full exercise of the underwriters’ overallotment option
• Declared first quarter dividend of $0.3625 per share of Class A common stock payable on June 14, 2017
• Declared initial cash dividend of $0.72917 per share of Series A Preferred Stock for the period from issuance through June 30, 2017, payable on July 15, 2017

For the three months ended March 31, 2017, Spark reported record Adjusted EBITDA of $34.2 million, record Retail Gross Margin of $64.3 million, and Net Income of $11.4 million. This compares to Adjusted EBITDA of $21.1 million, Retail Gross Margin of $39.6 million, and Net Income of $15.7 million for the three months ended March 31, 2016, representing changes of 62%, 63%, and (28)%, respectively.

“Spark has continued to build on our successes in 2016 with our strongest first quarter in the company’s history,” said Nathan Kroeker, Spark Energy’s President and Chief Executive Officer. “Once again, we have delivered record Adjusted EBITDA and Retail Gross Margin and reached another high-water mark with 789,000 RCEs. In April we closed on the acquisition of Perigee Energy and exercised an option for additional customers that combined will add another 60,000 RCEs. This transaction establishes our presence in Delaware, bringing our totals to 91 utilities in 19 states.

“We are also pleased to announce today the pending acquisition of Verde Energy. We expect this acquisition to add approximately $25 million of annual Adjusted EBITDA after synergies and will add approximately 145,000 RCEs to our portfolio, bringing our total RCE count to nearly 1,000,000 RCEs. Verde provides us with a 100% renewable energy brand and additional capabilities with an established presence in 40 utility service territories across eight states. Verde is expected to close in the second half of 2017.

“As we complete the onboarding process for the customers acquired in the Perigee Energy transactions and prepare to close on and integrate Verde, we continue to anticipate growth through organic means and additional M&A opportunities throughout the rest of the year.”

2017 Financial Guidance

Spark is maintaining 2017 Adjusted EBITDA guidance in the range of $110.0 to $120.0 million, which includes the recent Perigee Energy transactions but excludes the pending Verde acquisition.

Strategic Update

As discussed above, Spark announced today that it has entered into a purchase and sale agreement for the acquisition of Verde, which operates in eight states selling 100% renewable electricity and natural gas products under the “Verde” brand. Spark will pay cash of $45 million at closing and installment payments totaling $20 million over 18 months. There is an additional earnout that is subject to Verde’s ability to achieve defined performance metrics. The Company expects to close the Verde acquisition in the second half of 2017 utilizing a combination of cash on hand along with additional borrowings under Spark’s credit facilities. This transaction is subject to lender consent and customary regulatory approvals.

Summary First Quarter 2017 Financial Results

For the quarter ended March 31, 2017, Spark reported Adjusted EBITDA of $34.2 million compared to Adjusted EBITDA of $21.1 million for the quarter ended March 31, 2016. This increase of $13.1 million is primarily attributable to increased Retail Gross Margin in the Company’s electricity and natural gas segments, partially offset by increased spending on customer acquisitions and increased general and administrative expenses due to Spark’s increased RCE count.

For the quarter ended March 31, 2017, Spark reported Retail Gross Margin of $64.3 million compared to Retail Gross Margin of $39.6 million for the quarter ended March 31, 2016. This increase of $24.7 million is primarily attributable to the increased volumes of retail electricity and natural gas following the acquisitions of Major and Provider.

Net income for the quarter ended March 31, 2017 was $11.4 million compared to net income of $15.7 million for the quarter ended March 31, 2016, due primarily to non-cash losses on Spark’s hedge portfolio of $14.0 million in the quarter.

Liquidity and Capital Resources

($ in thousands)	March 31, 2017
Cash and cash equivalents	$	24,931
Senior Credit Facility Working Capital Line Availability	43,172
Senior Credit Facility Acquisition Line Availability	2,763
Subordinated Debt Availability	25,000
Total Liquidity	$	95,866

Conference Call and Webcast

Spark will host a conference call to discuss first quarter 2017 results on Monday, May 8, 2017 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 19 states and serves 91 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 “guidance,” “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 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 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,
• extreme and unpredictable weather conditions,
• the sufficiency of risk management and hedging policies,
• customer concentration,
• federal, state and local regulation, including the industry’s ability to prevail on its challenge to the New York Public Service Commission’s order enacting new regulations that sought to impose significant new restrictions on retail energy providers operating in New York,
• 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,
• actual results of the companies we acquire,
• accuracy of 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,
• ability to achieve expected future results attributable to acquisitions,
• changes in the assumptions we used to estimate our 2017 Adjusted EBITDA, including weather and customer acquisition costs,
• competition, and
• the “Risk Factors” in our Form 10-K for the year ended December 31, 2016, 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. The Adjusted EBITDA guidance for 2017 is an estimate as of May 8, 2017. This estimate is based on assumptions believed to be reasonable as of that date. 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, 2017 AND DECEMBER 31, 2016
(in thousands)
(unaudited)
	March 31, 2017				December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	24,931			$	18,960
Accounts receivable, net of allowance for doubtful accounts of $2.4 million and $2.3 million as of March 31, 2017 and December 31, 2016, respectively		108,754				112,491
Accounts receivable—affiliates		2,013				2,624
Inventory		430				3,752
Fair value of derivative assets		2,388				8,344
Customer acquisition costs, net		18,515				18,834
Customer relationships, net		12,474				12,113
Prepaid assets		2,319				1,361
Deposits		6,264				7,329
Other current assets		13,595				12,175
Total current assets		191,683				197,983
Property and equipment, net		4,389				4,706
Fair value of derivative assets		—				3,083
Customer acquisition costs, net		8,776				6,134
Customer relationships, net		18,537				21,410
Deferred tax assets		54,335				55,047
Goodwill		79,407				79,147
Other assets		8,690				8,658
Total assets	$	365,817			$	376,168
Liabilities, Series A Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable	$	40,315			$	52,309
Accounts payable—affiliates		3,217				3,775
Accrued liabilities		40,022				36,619
Fair value of derivative liabilities		1,723				680
Current portion of Senior Credit Facility		22,236				51,287
Current contingent consideration for acquisitions		12,103				11,827
Current portion of note payable		8,185				15,501
Convertible subordinated notes to affiliates		—				6,582
Other current liabilities		2,230				5,476
Total current liabilities		130,031				184,056
Long-term liabilities:
Fair value of derivative liabilities		4,964				68
Payable pursuant to tax receivable agreement—affiliates		49,886				49,886
Subordinated debt—affiliate		—				5,000
Deferred tax liability		139				938
Contingent consideration for acquisitions		4,083				10,826
Other long-term liabilities		1,333				1,658
Total liabilities	$	190,436			$	252,432
Commitments and contingencies (Note 11)
Series A Preferred Stock, par value $0.01 per share, 20,000,000 shares authorized, 1,610,000 shares issued and outstanding at March 31, 2017 and zero shares issued and outstanding at December 31, 2016		38,346
Stockholders’ equity:
Common Stock:
Class A common stock, par value $0.01 per share, 120,000,000 shares authorized, 6,499,504 issued and outstanding at March 31, 2017 and 6,496,559 issued and outstanding at December 31, 2016		65				65
Class B common stock, par value $0.01 per share, 60,000,000 shares authorized, 10,742,563 issued and outstanding at March 31, 2017 and 10,224,742 issued and outstanding at December 31, 2016		108				103
Additional paid-in capital		33,812				25,413
Accumulated other comprehensive (income)/loss		(7	)			11
Retained earnings		4,625				4,711
Total stockholders’ equity		38,603				30,303
Non-controlling interest in Spark HoldCo, LLC		98,432				93,433
Total equity		137,035				123,736
Total liabilities, Series A Preferred Stock and stockholders’ equity	$	365,817			$	376,168

 

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
(in thousands)
(unaudited)
	Three Months Ended March 31,
		2017				2016
Revenues:
Retail revenues	$	194,539			$	110,019
Net asset optimization (expense)/revenues (1)		(194	)			527
Total Revenues		194,345				110,546
Operating Expenses:
Retail cost of revenues (2)		143,698				68,800
General and administrative (3)		24,377				17,380
Depreciation and amortization		9,232				6,789
Total Operating Expenses		177,307				92,969
Operating income		17,038				17,577
Other (expense)/income:
Interest expense		(3,445	)			(753	)
Interest and other income		199				(95	)
Total other expenses		(3,246	)			(848	)
Income before income tax expense		13,792				16,729
Income tax expense		2,406				988
Net income	$	11,386			$	15,741
Less: Net income attributable to non-controlling interests		9,117				11,568
Net income attributable to Spark Energy, Inc. stockholders	$	2,269			$	4,173
Other comprehensive loss, net of tax:
Currency translation loss		(49	)			—
Other comprehensive loss		(49	)			—
Comprehensive income	$	11,337			$	15,741
Less: Comprehensive income attributable to non-controlling interests		9,086				11,568
Comprehensive income attributable to Spark Energy, Inc. stockholders	$	2,251			$	4,173

(1)  Net asset optimization revenues (expenses) includes asset optimization revenues —affiliates of $0 and $113 for the three months ended March 31, 2017 and 2016, respectively, and asset optimization revenues—affiliates cost of revenues of $0 and $1,258 for the three months ended March 31, 2017 and 2016, respectively.
(2)  Retail cost of revenues includes retail cost of revenues—affiliates of $0 and less than $100 for the three months ended March 31, 2017 and 2016.
(3)  General and administrative includes general and administrative expense—affiliates of $7,300 and $4,400 for the three months ended March 31, 2017 and 2016, respectively.

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(in thousands)
(unaudited)
	Issued Shares of Class A Common Stock		Issued Shares of Class B Common Stock		Class A Common Stock			Class B Common Stock			Accumulated Other Comprehensive Income (Loss)				Additional Paid-in Capital			Retained Earnings (Deficit)			Total Stockholders’ Equity			Non-controlling Interest			Total Equity
Balance at December 31, 2016	6,497		10,225		$	65		$	103		$	11			$	25,413		$	4,711		$	30,303		$	93,433		$	123,736
Stock based compensation	—		—			—			—			—				531			—			531			—			531
Restricted stock unit vesting	3		—			—			—			—				78			—			78			—			78
Consolidated net income	—		—			—			—			—				—			2,269			2,269			9,117			11,386
Foreign currency translation adjustment for equity method investee	—		—			—			—			(18		)		—			—			(18	)		(31	)		(49	)
Distributions paid to non-controlling unit holders	—		—			—			—			—				—			—			—			(4,347	)		(4,347	)
Net contribution of the Major Energy Companies	—		—			—			—			—				—			—			—			260			260
Dividends paid to Class A common stockholders	—		—			—			—			—				—			(2,355	)		(2,355	)		—			(2,355	)
Conversion of Convertible Subordinated Notes to Class B Common Stock	—		518			—			5			—				7,790			—			7,795			—			7,795
Balance at March 31, 2017	6,500		10,743		$	65		$	108		$		(7	)	$	33,812		$	4,625		$	38,603		$	98,432		$	137,035

 

SPARK ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
(in thousands)
(unaudited)
	Three Months Ended March 31,
		2017				2016
Cash flows from operating activities:
Net income	$	11,386			$	15,741
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization expense		8,167				6,789
Deferred income taxes		(87	)			841
Stock based compensation		1,367				618
Amortization of deferred financing costs		248				117
Change in Fair Value of Earnout Liabilities		1,936				1,000
Bad debt expense		356				907
Loss on derivatives, net		21,456				9,749
Current period cash settlements on derivatives, net		(6,178	)			(10,457	)
Accretion of discount to convertible subordinated notes to affiliate		1,004				35
Other		7				235
Changes in assets and liabilities:
Decrease in accounts receivable		3,381				5,060
Increase in accounts receivable—affiliates		(55	)			(273	)
Decrease in inventory		3,322				3,484
Increase in customer acquisition costs		(7,690	)			(2,305	)
Increase in prepaid and other current assets		(1,597	)			(1,180	)
Decrease in other assets		—				265
Decrease in accounts payable and accrued liabilities		(9,348	)			(7,340	)
(Decrease) increase in accounts payable—affiliates		(558	)			1,949
(Decrease) increase in other current liabilities		(2,413	)			156
(Decrease) increase in other non-current liabilities		(324	)			111
Net cash provided by operating activities		24,380				25,502
Cash flows from investing activities:
Purchases of property and equipment		(112	)			(665	)
Payment of the Major Energy Companies Earnout		(7,403	)			—
Payment of the Provider Companies Earnout and Installment Note		(2,097	)			—
Contribution to equity method investment in eRex Spark		—				(168	)
Net cash used in investing activities		(9,612	)			(833	)
Cash flows from financing activities:
Proceeds from issuance of Series A Preferred Stock, net of issuance costs		38,607				—
Borrowings on notes payable		5,625				—
Payments on notes payable		(46,993	)			(18,825	)
Proceeds from disgorgement of stockholders short-swing profits		666				—
Payment of dividends to Class A common stockholders		(2,355	)			(1,493	)
Payment of distributions to non-controlling unitholders		(4,347	)			(5,876	)
Net cash used in financing activities		(8,797	)			(26,194	)
Increase in cash and cash equivalents		5,971				(1,525	)
Cash and cash equivalents—beginning of period		18,960				4,474
Cash and cash equivalents—end of period	$	24,931			$	2,949
Supplemental Disclosure of Cash Flow Information:
Non-cash items:
Property and equipment purchase accrual	$	76			$	57
Tax impact from tax receivable agreement upon exchange of units of Spark HoldCo, LLC to shares of Class A Common Stock	$	0			$	1,707
Cash paid during the period for:
Interest	$	888			$	539
Taxes	$	118			$	842

SPARK ENERGY, INC.
OPERATING SEGMENT RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
(in thousands, except per unit operating data)
(unaudited)
	Three Months Ended March 31,
		2017				2016
	(in thousands, except volume and per unit operating data)
Retail Natural Gas Segment
Total Revenues	$	62,612			$	48,613
Retail Cost of Revenues		36,918				22,500
Less: Net Asset Optimization (Expenses) Revenues		(194	)			527
Less: Net Gains on non-trading derivatives, net of cash settlements		(1,940	)			1,430
Retail Gross Margin — Gas	$	27,828			$	24,156
Volumes — Gas (MMBtus)		8,158,966				6,112,431
Retail Gross Margin — Gas per MMBtu	$	3.41			$	3.95
Retail Electricity Segment
Total Revenues		131,733				61,933
Retail Cost of Revenues		106,780				46,300
Less: Net Gains (Losses) on non-trading derivatives, net of cash settlements		(11,523	)			227
Retail Gross Margin — Electricity	$	36,476			$	15,406
Volumes — Electricity (MWhs)		1,360,430				586,677
Retail Gross Margin — Electricity per MWh	$	26.81			$	26.26

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.

Reconciliation of Spark’s estimate of Adjusted EBITDA for the year ended December 31, 2017 to the relevant GAAP line items is not being provided as Spark is not providing 2017 guidance for net income (loss), net cash provided by operating activities, or the reconciling items between these GAAP financial measures and Adjusted EBITDA. Spark does not provide guidance for such items because it is not possible to forecast the future non-cash impacts of net gains and losses on derivative instruments and non-cash compensation expense attributable to grants of equity under our Long Term Incentive Plan. Additionally, it is not possible to forecast our provision for income taxes due to the potential for change in our non-controlling interests’ ownership percentage, given the nature of our Up-C structure. Accordingly, a reconciliation to net income (loss) or net cash provided by operating activities is not available without unreasonable effort.

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 March 31,
(in thousands)		2017				2016
Reconciliation of Adjusted EBITDA to Net Income (Loss):
Net income	$	11,386			$	15,741
Depreciation and amortization		9,232				6,789
Interest expense		3,445				753
Income tax expense		2,406				988
EBITDA		26,469				24,271
Less:
Net, Losses on derivative instruments		(21,456	)			(9,749	)
Net, Cash settlements on derivative instruments		7,414				11,272
Customer acquisition costs		7,690				2,305
Plus:
Non-cash compensation expense		1,367				618
Adjusted EBITDA	$	34,188			$	21,061

	Three Months Ended March 31,
(in thousands)		2017				2016
Reconciliation of Adjusted EBITDA to net cash provided by operating activities:
Net cash provided by operating activities	$	24,380			$	25,502
Amortization of deferred financing costs		(248	)			(117	)
Allowance for doubtful accounts and bad debt expense		(356	)			(907	)
Interest expense		3,445				753
Income tax expense		2,406				988
Changes in operating working capital
Accounts receivable, prepaids, current assets		(1,729	)			(3,607	)
Inventory		(3,322	)			(3,484	)
Accounts payable and accrued liabilities		9,906				5,391
Other		(294	)			(3,458	)
Adjusted EBITDA	$	34,188			$	21,061
Cash Flow Data:
Cash flows provided by operating activities	$	24,380			$	25,502
Cash flows used in investing activities		(9,612	)			(833	)
Cash flows used in financing activities		(8,797	)			(26,194	)

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)		2017				2016
Reconciliation of Retail Gross Margin to Operating Income (Loss):
Operating income	$	17,038			$	17,577
Depreciation and amortization		9,232				6,789
General and administrative		24,377				17,380
Less:
Net asset optimization (expenses) revenues		(194	)			527
Net, Losses on non-trading derivative instruments		(21,037	)			(9,620	)
Net, Cash settlements on non-trading derivative instruments		7,574				11,277
Retail Gross Margin	$	64,304			$	39,562
Retail Gross Margin – Retail Natural Gas Segment	$	27,828			$	24.156
Retail Gross Margin – Retail Electricity Segment	$	36,476			$	15.406

Contact: Spark Energy, Inc.

Investors:

Robert Lane, 832-200-3727

Media:

Eric Melchor, 281-833-4151

Source: Spark Energy, Inc.