Just Energy Reports Second Quarter 2019 Results
Base EBITDA growth of 81% year-over-year.
Embedded gross margin highest in the Company’s history.
Base Funds from Operations TTM payout ratio improved to 82%.
TORONTO, Nov. 07, 2018 — Just Energy Group, Inc. (TSX:JE; NYSE:JE), a leading consumer company specializing in electricity and natural gas commodities, energy efficiency solutions, renewable energy options, and water quality and filtration devices, today announced results for its fiscal 2019 second quarter ended September 30, 2018.
- Gross margin of $173.3 million for the second quarter increased 22% from the prior year, mainly due to improved pricing power in North America and increased international sales activities.
- Base EBITDA of $37.3 million for the second quarter increased 81% due to the significant improvement in gross margin driven by improved pricing power, offset by higher bad debts and an increase in administrative expenses to support the growth initiatives.
- Embedded gross margin reached a Company record of $2.3 billion increasing $721.2 million or 45% compared to the prior comparable period, as the result of pricing optimization actions during the quarter. The embedded gross margin includes $45.2 million from Filter Group Inc. which was acquired on October 1, 2018.
- Base FFO increased 241% to $26.2 million year-over-year, driven by the significant improvements in Base EBITDA.
- The payout ratio on Base FFO for the second quarter was 85%, compared with 279% in the prior comparable quarter. The payout ratio for the trailing 12 months was 82%, compared with 106% for the trailing 12 months one year ago.
- Administrative expenses increased by $11.7 million, or 25%, to support talent acquisition and retention, investment in process improvements and operational efficiencies and ongoing business acquisition activities. The Company continues its efforts to reduce administrative expenses through greater automation and consolidation of support activities. Selling and marketing expenses decreased $1.8 million, or 3%, for the three months ended September 30, 2018 due to the capitalization of upfront commission expenses and the reduction of non-commission selling expenses as a result of the consolidation of regional sales offices and diversification of sales channels.
- Finance costs of $20.1 million increased by 61% in the second quarter, primarily driven by the premium and fees associated with the partial redemption of the 6.5% convertible bonds, higher collateral related costs associated with Texas electricity markets and interest expense from the increased utilization of the credit facility and higher interest rates.
- Customer count increased 3% to 1.6 million, which includes 27,230 distinct customers from Filter Group Inc.’s water filter subscriptions. Filter Group Inc. has 32,488 home water filtration systems installed throughout Canada and the U.S.
- Total RCEs of 4.2 million improved 2% year-over-year. During the second quarter, gross RCE additions were 290,000 and net RCE additions were a negative 9,000.
- The Company reaffirms its fiscal 2019 Base EBITDA guidance range of $200 million to $220 million, including the implementation of IFRS 15. This represents approximately 10% year-over-year Base EBITDA growth at the midpoint of guidance over an adjusted fiscal 2018 Base EBITDA.
“We are pleased with the second quarter results and our progress toward our fiscal year expectations, as our accomplishments are demonstrating our resolve and commitment to faster execution,” said Just Energy’s Chief Executive Officer, Patrick McCullough. “The second quarter results exceeded expectations as swift pricing optimization actions successfully expanded to a broader audience and our risk management discipline neutralized the impact of summer weather on supply costs. These actions are also evident in our record-level embedded gross margin on our existing book of business as our core commodity business continues to perform well. We expect to see these actions continue to contribute in the fiscal third and fourth quarters, driving performance beyond historical levels and supporting guidance for the current fiscal year and earnings growth into the future.”
Mr. McCullough continued expressed that looking ahead, the company’s core business, combined with the expanded offering of value added products and services, will generate significant capital to not only support future dividend payments, but also the pursuit of growth opportunities that support Just Energy’s strategic shift to be a consumer-focused company.
“While there is still much work to be done, we are beginning to demonstrate our resolve and commitment to faster execution, and we are confident we will build on our current momentum in delivering on our fiscal 2019 expectations while also setting the stage for profitable long-term growth.” McCullough said.
The Company will host a conference call and live webcast to review the fiscal second quarter results beginning at 10:00 a.m. Eastern Time on November 8th, 2018 followed by a question and answer period. Chief Executive Officer, Patrick McCullough, and Chief Financial Officer, Jim Brown will participate on the call.
Those who wish to participate in the conference call may do so by dialing toll-free, 1-877-300-9306 in the U.S. or 1-855-669-9657 in Canada, and ask to be joined into the Just Energy call. The call will also be webcast live over the internet at the following link:
About Just Energy Group Inc.
Founded in Canada in 1997, Just Energy (NYSE:JE, TSX:JE) is a leading consumer company focused on essential needs, including electricity and natural gas commodities; health and well-being, such as water quality and filtration devices; and utility conservation, bringing energy efficient solutions and renewable energy options to consumers. Currently operating in the United States, Canada, the United Kingdom, Germany, Ireland and Japan, Just Energy serves residential and commercial customers. Just Energy is the parent company of Amigo Energy, EdgePower Inc., Filter Group Inc., Green Star Energy, Hudson Energy, Interactive Energy Group, Just Energy Advanced Solutions, Tara Energy, and terrapass.