Crius Energy Trust Reports Second Quarter 2013 Financial Results
/NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES/
- Higher Gross Margins and Continued Customer Growth -
TORONTO, Aug. 7, 2013 /CNW/ - Crius Energy Trust(TSX: KWH.UN) ("Crius Energy" or the "Trust"), today announced its financial results for the three-month period ended June 30, 2013. The Trust commenced operations on November 13, 2012 with the acquisition of a 26.8% ownership interest in Crius Energy, LLC (the "Company") by the Trust's wholly-owned subsidiary. All figures in U.S. dollars unless otherwise noted.
"The second quarter was highlighted by improved gross margin performance and continued organic growth in our customer base helped by the continued success of Viridian and the ramping up of our FTR Energy Services brand," said Michael Fallquist, President and CEO of Crius Energy Trust. "We were pleased with the improved gross margin performance in the period, particularly in April and May, which resulted in good financial results considering the operational challenges experienced and impact of seasonality on energy usage. Furthermore, our improved balance sheet will help to create more opportunities to invest in organic customer growth, strategic initiatives and positions us for acquisition opportunities in a market ready for consolidation.
"We strengthened our management team with the addition of two highly experienced executives--Chaitu Parikh in the position of Chief Operating Officer and Seth Zuckerman as Senior Vice President of Finance—who are charged with streamlining operations and helping position the Company for long-term growth to support distributions. We believe attracting top industry talent combined with our continued success validates us as a market leader in the retail energy industry. Our unique go-to-market strategy, through a family of brands approach, is paramount to our success and will continue to differentiate us in the industry going forward."
Q2 2013 Financial and Operational Highlights
-- Residential customer equivalents ("RCEs") totaled 595,899 at the end of the second quarter, up 2.2% quarter-over-quarter and 20.2% year-over-year -- Sold 1.1 million MWh of electricity and 0.7 million MMBtu of natural gas -- Revenue of $113.9 million -- Gross margin of $27.6 million -- Gross margin as a percentage of revenue of 24.2% -- Adjusted EBITDA of $10.1 million, which accounted for 8.9% of revenue -- Total cash availability of $32.1 million, up from $28.2 million in the prior quarter, consisting of $18.5 million of cash, no long-term debt, and availability on the working capital line of credit with Macquarie Energy of $13.6 million as of June 30, 2013 -- Three-year extension of the exclusive marketing relationship with Cincinnati Bell Inc. (NYSE:CBB) to continue to market natural gas and electricity through the Cincinnati Bell Energy brand -- Appointed Seth Zuckerman as a Senior Vice President of Finance. Mr. Zuckerman has over 15 years of experience in the retail energy industry, serving as the Chief Financial Officer of several energy retailers including Gateway Energy Services and Your Energy Highlights Subsequent to Quarter-End -- Appointed Chaitu Parikh to the position of Chief Operating Officer. Mr. Parikh has more than 16 years of experience in the retail energy industry, most recently serving as CEO/President of MXEnergy -- Launched Viridian Energy natural gas products in select markets in Maryland, Virginia and the District of Columbia -- Expanded the reach of the Public Power electricity brand in Pennsylvania, entering three new utility service areas -- FairPoint Energy celebrated its first anniversary of offering electricity products in Maine and New Hampshire. The brand performed above expectations by achieving a penetration rate well in excess of 5% of FairPoint Communications' eligible customer base in the first year Review of Financial Results Revenue for the quarter ending June 30, 2013 was $113.9 million, and was driven by robust customer growth in the first half of the year and higher retail rates. Revenue from electricity sales during the period was $108.6 million based on volume of 1,132,102 MWh, accounting for 95.4% of total revenue. Revenue from natural gas sales was $4.3 million based on volume of 719,216 MMbtu, accounting for 3.7% of total revenue. Fee revenue consists of sign-up fees and other monthly fees received from independent contractors in the network marketing channel. Fee revenue for the period was $1.0 million, accounting for 0.9% of total revenue. Gross margin for the period was $27.6 million, representing 24.2% of revenue. Monthly gross margins were 24.3% in April, 26.9% in May and 22.1% in June. Gross margins returned to more typical levels during the period, although the June gross margin percentage was lower than expected due to hedging losses resulting from lower-than-forecasted electricity usage due to unusually cool weather and lower wholesale prices in the month. Management's ability to limit future volatility in earnings was enhanced by the first-quarter addition of a new executive-level position charged with gross margin realization, including responsibility for price forecasting and energy procurement. Gross margin realization also benefitted from input from a third-party provider of energy forecasting services. Management expects the Company to realize the full impact of these additions to its forecasting capacity in the third quarter of 2013. Adjusted EBITDA for the period was $10.1 million, or 8.9% of revenue. Adjusted EBITDA was negatively impacted by an estimated $0.9 million due to lower-than-normal electricity volumes in June, $0.9 million as a result of customer rate increases not implemented as part of the transition of billing systems in April 2013, and $1.9 million related to non-recurring expenses stemming from the investment in the integration of pre-IPO legacy IT platforms. This integration has taken longer than anticipated, and is expected to continue into the third quarter of the year. However, management is confident this non-recurring IT investment will generate cost savings, streamline processes and promote long-term organic growth. The Company's balance sheet improved in the period with total cash availability increasing to $32.1 million. The total cash availability consists of $18.5 million in cash, no long-term debt and availability of $13.6 million under the Company's working capital facility. The Company continued to grow its customer base in the second quarter, increasing RCEs by 2.2% over the first quarter and by 20.2% on a year-over-year basis. Overall customer growth was dampened by higher-than-typical attrition driven primarily by the higher rates charged during the period at the Public Power brand, which is marketed through traditional door-to-door and telemarketing channels. Management made meaningful progress in ramping up the FTR Energy Services brand, which enrolled over 2,000 customers during the quarter and is now licensed to enroll customers in New York, Ohio, Illinois and Indiana. The Company also completed its first year of marketing under the FairPoint Energy brand, which is marketed through a partnership agreement with FairPoint Communications (NYSE: FRP), in Maine and New Hampshire. FairPoint Energy achieved customer penetration well in excess of the 5% target of Fairpoint Communications' addressable customer base during its first year of operations. The Company's Viridian Energy brand added more than 35,000 customers and 3,800 independent contractors to its network marketing channel. The second and third quarters are historically weaker periods for customer and contractor additions for the network marketing industry due to the summer season. Sales efforts for the network marketing channel will ramp up again in September at the company's annual convention, PowerUp!®, in Washington D.C. Management sees the higher-usage, higher-retention Viridian marketing channel as a key source of long-term revenue growth that will help support distributions in the future. The Trust's consolidated financial statements for the period ended June 30, 2013 and accompanying management's discussion and analysis ("MD&A") have been filed with the securities regulators and are available via SEDAR at www.sedar.com and are available on the Trust's website at www.criusenergytrust.ca. Conference Call Notice The Trust will hold a conference call to discuss its second quarter 2013 financial results today August 7, 2013 at 10:00 a.m. Eastern. To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. A live audio webcast of the conference call will be available at www.cnw.ca. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web site for 30 days. A taped rebroadcast will be available to listeners until 12 a.m. Eastern on August 14, 2013. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter passcode 22862548, followed by the number sign. About Crius Energy Crius Energy has been established to provide investors with a stable and consistent distribution-producing investment through the acquisition of a 26.8% ownership interest in Crius Energy LLC (the "Company"). The Company is one of the largest independent energy retailers operating in the United States, with approximately 590,000 residential customer equivalents. The Company serves residential and small to medium-size commercial customers in the United States and markets its products through a variety of sales channels and brand names. The Company currently sells electricity in 11 states and the District of Columbia and natural gas in seven states and the District of Columbia. Crius Energy intends to qualify as a "mutual fund trust" under the Income Tax Act (Canada) (the "Tax Act"). The Trust will not be a "SIFT trust" (as defined in the Tax Act), provided that the Trust complies at all times with its investment restriction which precludes the Trust from holding any "non-portfolio property" (as defined in the Tax Act). Material information pertaining to Crius Energy may be found on www.sedar.com or www.criusenergytrust.ca. Forward-Looking Statements This news release contains forward-looking information that involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Crius Energy, including, without limitation, those listed under "Risk Factors" and "Forward-Looking Statements" in Crius Energy's Annual Information Form dated March 28, 2013 (collectively, "forward-looking information"). Forward-looking information in this news release includes, but is not limited to, Crius Energy's objectives and status as a mutual fund trust and not a SIFT trust, results of operations, financial position or cash flows, customer revenues and margins, customer additions and renewals, customer attrition, customer consumption levels, general and administrative expenses, treatment under governmental regulatory regimes, distributable cash and Crius Energy's expectations and estimates regarding the payment of distributions to unit holders. Crius Energy cautions investors of Crius Energy's securities about important factors that could cause Crius Energy's actual results to differ materially from those projected in any forward-looking statements included in this news release. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. No assurance can be given that the expectations set out in this news release will prove to be correct and accordingly, prospective investors should not place undue reliance on these forward-looking statements. These statements speak only as of the date of this news release and Crius Energy does not assume any obligation to update or revise them to reflect new events or circumstances. Michael Fallquist Chief Executive Officer (203) 663-7545 Roop Bhullar Chief Financial Officer (203) 883-9900 Frank Condron TMX Equicom email@example.com (416) 815-0700 ext. 233 SOURCE: Crius Energy Trust To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/August2013/07/c4402.html CO: Crius Energy Trust ST: Ontario NI: ERN CONF -0- Aug/07/2013 11:00 GMT