Just Energy Reports Fiscal Second Quarter 2022 Results
November 10 2021 - 6:45AM
Just Energy Group Inc. (“Just Energy” or the “Company”) (TSXV:JE;
OTC:JENGQ), a retail energy provider specializing in electricity
and natural gas commodities and bringing energy efficient
solutions, carbon offsets and renewable energy options to customers
announced its second quarter results for fiscal year 2022.
“Although our second quarter financial results continue to be
impacted by the loss of customers in the prior year, the Company
delivered net positive mass markets RCE additions for the first
time since the first quarter of fiscal 2019, further validating our
strategic investment in digital marketing and rebound of
face-to-face retail channels following the impacts of the COVID-19
pandemic. We remain focused on our strategy as we navigate a
challenging margin environment brought on by rising commodity
prices across North America while we also work with the regulator
and market participants on potential changes in the ERCOT market in
response to the extreme weather event in Texas in February 2021,”
said Scott Gahn, Just Energy’s President and Chief Executive
Officer.
“Our operational performance during the second
quarter demonstrates our continued commitment to our customers,
employees, partners, and our pursuit of growth in key markets,”
added Mr. Gahn, continuing, “we are also continuing to work closely
with our valued stakeholders towards a successful restructuring
plan.”
Second Quarter FY 2022 Performance
- Base EBITDA decreased by 6% from the
prior year comparable quarter to $30.9 million due to lower Base
Gross Margin and increased investment in digital marketing and
sales agent costs, partially offset by lower administrative,
selling commission and bad debt expenses.
- Base Gross Margin decreased by 16%
from the prior year comparable quarter to $116.6 million, with the
decrease primarily driven by a lower customer base, unfavourable
exchange rate fluctuations and resettlements related to prior
periods.
- Mass Markets RCE Net Additions for
the quarter totaled 9,000 compared to a loss of 55,000 for the
three months ended September 30, 2020. Excluding the one–time
29,000 loss related to the regulatory changes in New York coming
into effect in April 2021, Mass Markets RCE Net Additions for the
six months ended September 30, 2021 was a positive 32,000.
- The Company ended the quarter with
$200.0 million of total liquidity, comprised of cash and cash
equivalents. The Company owes $158.4 million under its DIP facility
and has $1,032.4 million of total liabilities subject to
compromise.
- Profit from continuing operations
was $326.0 million, compared to a loss from continuing operations
of $51.4 million during the prior year comparable quarter primarily
driven by unrealized mark to market gains on derivative financial
instruments associated with supply contracts, as well as a $29.0
million gain on investment associated with the shares of ecobee
Inc. held by the Company. Unrealized mark to market gains and
losses on derivative financial instruments relate to the supply the
Company has purchased to deliver future customer usage at fixed
prices1.
1 See “Non-IFRS financial measures” in the MD&A.
Fiscal
Second Quarter Financial Highlights: |
|
|
For the three months ended September 30 |
|
|
|
$ in thousands, except
customer data |
Fiscal 2022 |
Fiscal 2021 |
Change |
Sales |
$704,769 |
$737,994 |
-5% |
Base Gross Margin1 |
$116,577 |
$138,274 |
-16% |
Base EBITDA1 |
$30,897 |
$32,774 |
-6% |
Unlevered Free Cash Flow (Year
to date) |
$38,031 |
$53,146 |
-28% |
Cash and cash equivalents |
$199,952 |
$77,965 |
156% |
RCE Mass Markets count |
1,149,000 |
1,206,000 |
-5% |
RCE Commercial count |
1,661,000 |
1,880,000 |
-12% |
1 See “Non-IFRS financial measures” in the
MD&A
- Sales: Decrease
was primarily driven by the loss of customers in the prior year
from regulatory restrictions in Ontario, New York and California,
selling constraints posed by COVID-18 pandemic in direct in–person
channels and by competitive pressures on pricing in the Commercial
segment. The overall decrease is partially offset by growth in
sales through increased investment in digital marketing in Mass
Markets.
- Base Gross Margin:
Decrease was primarily driven by a lower customer base,
unfavourable exchange rate fluctuations and resettlements related
to prior periods.
- Base EBITDA:
Decrease resulted from lower Base Gross Margin and increased
investment in digital marketing and sales agent costs, partially
offset by lower administrative, selling commission and bad debt
expenses.
- Unlevered Free Cash Flow
(year to date): Decrease was primarily driven by higher
payments to ERCOT associated with the Weather Event, partially
offset by the non–payment of trade and other payables subject to
compromise under the CCAA.
Fiscal Second Quarter Expense Detail: |
|
|
|
For the three months ended
September 30 |
|
|
|
($ thousands) |
Fiscal 2022 |
Fiscal 2021 |
Change |
Administrative expenses |
$37,181 |
$43,957 |
-15% |
Selling commission
expenses |
$27,851 |
$34,894 |
-20% |
Selling non-commission and
marketing expense |
$16,936 |
$13,017 |
30% |
Bad debt expense |
$3,692 |
$11,662 |
-68% |
|
|
|
|
- Administrative
expenses: Decrease was primarily driven by higher
professional fees and legal fees in the prior year, including a
provision related to the Hurt and Hill class-action
litigation.
- Selling commission
expenses: Decrease was primarily driven by lower
amortization expense of upfront customer acquisition costs that
resulted from lower direct in–person channel sales, which were
impacted by the COVID–19 pandemic in prior periods, as well as
lower commercial sales driven by competitive price pressures.
- Selling non-commission and
marketing expenses: Increase was driven by the investment
in digital marketing and sales agent costs.
- Bad debt expense:
Decrease was driven by the release of reserves due to continued
consistent payment trends along with recovery of previous
write-offs in the Commercial segment.
Mass Markets Segment Performance
Operating Highlights: |
|
|
|
For the three months ended
September 30 |
|
|
|
|
Fiscal 2022 |
Fiscal 2021 |
Change |
Mass Markets gross margin on
added/renewed |
$266/RCE |
$309/RCE |
-14% |
Embedded Gross Margin1 ($
millions) |
$1,047 |
$1,130 |
-7% |
Total gross (RCE)
additions |
86,000 |
36,000 |
139% |
Attrition (trailing 12
months) |
18% |
18% |
0% |
Renewals (trailing 12
months) |
77% |
73% |
5% |
1 See “Non-IFRS financial measures” in the MD&A
-
Average Mass Markets gross margin per RCE added or
renewed: The decrease was due to a change in channel mix,
including lower cost of acquisition channels and overall margin
pressure related to increasing commodity prices.
-
Mass Markets Embedded Gross Margin: The decline
resulted from the lower customer base and the unfavourable foreign
exchange
-
Mass Markets gross RCE additions: The increase was
driven by investment in digital marketing and the continued
improvement in direct face–to–face channels, as well as the impact
that the COVID–19 pandemic had on the prior year period.
-
Mass Markets attrition rate: The unchanged level
of attrition reflects the benefits of focused sales to higher
quality customers and continued focus on the customer
experience.
-
Mass Markets renewal rate: The increase in renewal
rate was driven by improved retention offerings and continued focus
on the customer experience.
Mass Markets RCE Summary:
|
7/1/2021 |
Additions |
Attrition |
Failed to renew |
9/30/2021 |
Change |
Gas |
239,000 |
7,000 |
(6,000) |
(2,000) |
238,000 |
0% |
Electricity |
901,000 |
79,000 |
(44,000) |
(25,000) |
911,000 |
1% |
Total Mass Markets RCEs |
1,140,000 |
86,000 |
(50,000) |
(27,000) |
1,149,000 |
1% |
Commercial Segment Performance
Operating Highlights: |
|
|
|
For the three months ended
September 30 |
|
|
|
|
Fiscal 2022 |
Fiscal 2021 |
Change |
Commercial gross margin on
added/renewed |
$88/RCE |
$88/RCE |
0% |
Embedded Gross Margin1 ($
millions) |
$336 |
$391 |
-14% |
Total gross Commercial (RCE)
additions |
41,000 |
51,000 |
-20% |
Attrition (trailing 12
months) |
8% |
13% |
-38% |
Renewals (trailing 12
months) |
49% |
52% |
-6% |
1 See “Non-IFRS financial measures” in the MD&A
-
Average Commercial gross margin per RCE added or
renewed: There was no change in the average gross margin
per RCE compared to the prior year.
- Commercial Embedded Gross
Margin: The decline resulted from the decline in the
customer base and the unfavourable foreign exchange.
-
Commercial gross RCE additions: Decreased compared
to the prior year was driven by a very large customer added in
during the prior year. Excluding the large customer addition,
Commercial gross additions increased by 28% compared to the prior
year.
-
Commercial attrition rate: The increase reflects
the improvement in customer retention following the reduction of
restrictions due to the COVID–19 pandemic.
-
Commercial renewal rate: The decrease reflects a
competitive market for Commercial renewals.
Commercial RCE Summary:
|
7/1/2021 |
Additions |
Attrition |
Failed to renew |
9/30/2021 |
Change |
Gas |
403,000 |
15,000 |
(6,000) |
(4,000) |
408,000 |
1% |
Electricity |
1,293,000 |
26,000 |
(27,000) |
(39,000) |
1,253,000 |
-3% |
Total Commercial RCEs |
1,696,000 |
41,000 |
(33,000) |
(43,000) |
1,661,000 |
-2% |
|
|
|
|
|
|
|
About Just Energy Group
Inc.
Just Energy is a retail energy provider
specializing in electricity and natural gas commodities and
bringing energy efficient solutions, carbon offsets and renewable
energy options to customers. Currently operating in the United
States and Canada, Just Energy serves residential and commercial
customers. Just Energy is the parent company of Amigo Energy,
Filter Group Inc., Hudson Energy, Interactive Energy Group, Tara
Energy, and terrapass. Visit https://investors.justenergy.com to
learn more.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking
statements, including, without limitation, statements with respect
to the Company’s strategic investment in digital marketing, rebound
of face-to-face retail channels following the impacts of the
COVID-19 pandemic, navigating a challenging margin environment and
working closely with the Company’s stakeholders towards a
successful restructuring plan. These statements are based on
current expectations that involve several risks and uncertainties
which could cause actual results to differ from those anticipated.
These risks include, but are not limited to, risks with respect to
the ability of the Company to continue as a going concern; the
final amount received by the Company with respect to the
implementation of Texas House Bill 4492 to recover certain costs
incurred during the February 2021 extreme weather event in Texas
(the “Weather Event”); the outcome of any invoice dispute with the
Electric Reliability Council of Texas in connection with the
Weather Event; the outcome of any potential litigation with respect
to the Weather Event ; the outcome of the Company’s proceedings
under the Companies’ Creditors Arrangement Act (“CCAA”) and similar
legislation in the United States; the quantum of the financial loss
to the Company from the Weather Event and its impact on the
Company’s liquidity; the Company’s restructuring discussions with
key stakeholders regarding the CCAA proceedings and the outcome
thereof; the impact of the evolving COVID-19 pandemic on the
Company’s business, operations and sales; reliance on suppliers;
uncertainties relating to the ultimate spread, severity and
duration of COVID-19 and related adverse effects on the economies
and financial markets of countries in which the Company operates;
the ability of the Company to successfully implement its business
continuity plans with respect to the COVID-19 pandemic; the
Company’s ability to access sufficient capital to provide liquidity
to manage its cash flow requirements; general economic, business
and market conditions; the ability of management to execute its
business plan; levels of customer natural gas and electricity
consumption; extreme weather conditions; rates of customer
additions and renewals; customer credit risk; rates of customer
attrition; fluctuations in natural gas and electricity prices;
interest and exchange rates; actions taken by governmental
authorities including energy marketing regulation; increases in
taxes and changes in government regulations and incentive programs;
changes in regulatory regimes; results of litigation and decisions
by regulatory authorities; competition; and dependence on certain
suppliers. Additional information on these and other factors that
could affect Just Energy’s operations or financial results are
included in Just Energy’s annual information form and other reports
on file with Canadian securities regulatory authorities which can
be accessed through the SEDAR website at www.sedar.com on the U.S.
Securities and Exchange Commission’s website at www.sec.gov or
through Just Energy’s website at www.investors.justenergy.com.
NON-IFRS MEASURES
The financial measures such as “EBITDA”, “Base
EBITDA”, “Base Gross Margin”, “Free Cash Flow”, “Unlevered Free
Cash Flow” and “Embedded Gross Margin” do not have a standardized
meaning prescribed by International Financial Reporting Standards
(“IFRS”) and may not be comparable to similar measures presented by
other companies. This financial measure should not be considered as
an alternative to, or more meaningful than, net income (loss), cash
flow from operating activities and other measures of financial
performance as determined in accordance with IFRS, but the Company
believes that these measures are useful in providing relative
operational profitability of the Company’s business. Please refer
to “Key Terms” in the Just Energy Q1 Fiscal 2022’s Management’s
Discussion and Analysis for the Company’s definition of “EBITDA”
and other non-IFRS measures.
Neither TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
FOR FURTHER INFORMATION PLEASE
CONTACT:
Michael CarterChief Financial OfficerJust
Energymcarter@justenergy.com
or
InvestorsMichael CummingsAlpha
IRPhone: (617) 982-0475 JE@alpha-ir.com
MonitorFTI Consulting
Inc.Phone: 416-649-8127 or
1-844-669-6340justenergy@fticonsulting.com
MediaBoyd ErmanLongview
CommunicationsPhone: 416-523-5885berman@longviewcomms.ca
Source: Just Energy Group
Inc.
Supplemental Tables:
Financial
and operating highlights |
For the three
months ended September 30 |
|
|
|
(thousands of
dollars, except where indicated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% increase |
|
|
|
|
Fiscal 2022 |
|
(decrease) |
|
|
Fiscal 2021 |
|
Sales |
$ |
704,769 |
|
(5 |
)% |
|
$ |
737,994 |
|
Base Gross Margin1 |
|
116,577 |
|
(16 |
)% |
|
|
138,274 |
|
Administrative expenses |
|
37,181 |
|
(15 |
)% |
|
|
43,957 |
|
Selling commission
expenses |
|
27,851 |
|
(20 |
)% |
|
|
34,894 |
|
Selling non-commission and
marketing expense |
|
16,936 |
|
30 |
% |
|
|
13,017 |
|
Bad debt expense |
|
3,692 |
|
(68 |
)% |
|
|
11,662 |
|
Reorganization Costs |
|
18,577 |
|
NMF2 |
|
|
– |
|
Finance costs |
|
11,895 |
|
(60 |
)% |
|
|
29,744 |
|
Profit (loss) for the
period |
|
326,049 |
|
NMF2 |
|
|
(51,366) |
|
Base EBITDA1 |
|
30,897 |
|
(6 |
)% |
|
|
32,774 |
|
RCE Mass Markets count |
|
1,149,000 |
|
(5 |
)% |
|
|
1,206,000 |
|
RCE Mass Markets net adds |
|
9,000 |
|
NMF2 |
|
|
(55,000) |
|
RCE
Commercial count |
|
1,661,000 |
|
(12 |
)% |
|
|
1,880,000 |
|
1 See “Non-IFRS financial measures” in the
MD&A.2 Not a meaningful figure.
Balance sheet
(thousands of dollars)
|
As at |
|
|
As at |
|
|
9/30/2021 |
|
|
3/31/2021 |
|
Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
199,952 |
|
$ |
215,989 |
|
Trade and other receivables,
net |
|
401,633 |
|
|
340,201 |
|
Total fair value of derivative
financial assets |
|
577,505 |
|
|
35,626 |
|
Other current assets |
|
155,855 |
|
|
163,405 |
|
Total assets |
|
1,733,538 |
|
|
1,091,806 |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
Trade and other payables |
$ |
1,024,383 |
|
$ |
921,595 |
|
Total fair value of derivative
financial liabilities |
|
30,957 |
|
|
75,146 |
|
Total debt |
|
630,849 |
|
|
655,740 |
|
Total
liabilities |
|
1,720,962 |
|
|
1,686,628 |
|
|
|
|
|
|
|
SUMMARY OF CASH
FLOWS |
|
|
|
|
|
For the six months ended
September 30 |
|
|
|
|
|
(thousands of dollars) |
|
|
|
|
|
|
|
Fiscal 2022 |
|
|
Fiscal 2021 |
|
Operating activities from
continuing operations |
$ |
22,376 |
|
$ |
22,798 |
|
Investing activities from
continuing operations |
|
(4,837) |
|
|
(4,673) |
|
Financing activities from
continuing operations |
|
(34,782) |
|
|
37,426 |
|
Effect of foreign currency
translation |
|
1,206 |
|
|
(3,679) |
|
Increase (decrease) in
cash |
|
(16,037) |
|
|
51,872 |
|
Cash and cash equivalents –
beginning of period |
|
215,989 |
|
|
26,093 |
|
Cash
and cash equivalents – end of period |
$ |
199,952 |
|
$ |
77,965 |
|
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