Just Energy Reports Fiscal Third Quarter 2021 Results
26 Fevereiro 2021 - 10:33AM
Just Energy Group Inc. (“Just Energy” or the “Company”) (TSX:JE;
NYSE:JE), a retail energy provider specializing in electricity and
natural gas commodities and bringing energy efficient solutions and
renewable energy options to customers and carbon offsets, announced
its third quarter results for fiscal year 2021 and updated its
previous announcement advising that management is continuing to
assess the impact of the extreme cold weather experienced in the
State of Texas commencing on or about February 13, 2021 continuing
through February 19, 2021 (the “Weather Event”).
The Weather Event resulted in the Company having
to balance its power supply through the Electric Reliability
Council of Texas (ERCOT) at artificially mandated high electricity
prices and significantly increased ancillary service costs as
described in the Company’s Management Discussion and Analysis filed
today. As at February 22, 2021, the Company reviewed the
available information regarding the Company’s customer load for the
Weather Event and estimated that the Company may have incurred a
loss of CAD $315 million (approximately USD $250 million).
This week, the Company received initial settlement statements from
ERCOT, which are subject to resettlements, that may be material,
showing lower customer load. The initial statements from ERCOT,
without any resettlement, would result in significantly lowering
the Company’s exposure to approximately CAD $50 million
(approximately USD $40 million). Given the material
differences between the load information, the Company continues to
investigate the differences in load information. Under normal ERCOT
protocols resettlements occur 55 days after the operating day.
However, ERCOT has indicated that it may resettle earlier.
The total financial impact may materially change due to ERCOT final
settlement data as it becomes available, any government or
regulatory actions or potential litigation with respect thereto,
failure of other parties to pay amounts owing to ERCOT and the
impact of customer credit losses.
“Regardless of uncertainty created by the
Weather Event, our customers of Just Energy, Amigo Energy, Hudson
Energy and Tara Energy can be certain that we are committed to
doing all we can to be there for them in this extraordinary time.
If you have a residential or small business fixed rate plan, our
customers can rest assured that your fixed energy rate is locked in
for the duration of your contracted term. Variable rate
(month-to-month) residential customers will not see their rates
impacted by the high settlement prices of the Weather Event,” said
Scott Gahn, Just Energy’s President and Chief Executive Officer.
Mr. Gahn added, “We are also focused on supporting our partners and
dedicated employees through this extraordinary event.”
Third Quarter Developments
- Base EBITDA increased by 47% to
$55.8 million in the third quarter of fiscal year 2021 compared to
$38.0 million in the year ago period, primarily driven by lower bad
debt and lower expenses offsetting the lower Base gross margin and
increased investment in digital marketing.
- Base gross margin was $131.6
million in the third quarter of fiscal year 2021, an 8% decrease as
compared to $142.5 million in the year ago period.
- Bad debt expense decreased by 83%
to $3.4 million in the third quarter of fiscal year 2021 compared
to $20.0 million in the year ago period, with lower expenses in all
areas.
- The Company ended the quarter with
$91.2 million of total liquidity available, comprised of cash and
cash equivalents of $66.6 million and available borrowing capacity
of $24.6 million under the senior secured credit facility.
- Loss from continuing operations of
$52.3 million in the third quarter, inclusive of $71.6 million of
unrealized losses of derivative instruments and other.
|
|
|
Fiscal
Third Quarter Financial Highlights: |
|
|
As of
December 31, 2020 |
|
|
|
$ in
thousands, except customer data |
Fiscal 2021 |
Fiscal 2020 |
Change |
Sales |
$ |
540,067 |
|
$ |
658,521 |
|
-18 |
% |
Base
gross margin1 |
$ |
131,608 |
|
$ |
142,484 |
|
-8 |
% |
Base
EBITDA2 |
$ |
55,785 |
|
$ |
37,950 |
|
47 |
% |
Unlevered free cash flow (Year to date) |
$ |
27,813 |
|
$ |
49,892 |
|
-44 |
% |
Total
liquidity |
$ |
91,200 |
|
$ |
56,960 |
|
60 |
% |
Total
net consumer (RCE) additions |
|
(18,000 |
) |
|
(33,000 |
) |
NMF3 |
Total
net commercial (RCE) additions |
|
(105,000 |
) |
|
48,000 |
|
NMF3 |
1 “Base gross margin” represents gross margin
adjusted to include the effect of applying IFRS Interpretation
Committee Agenda Decision 11, Physical Settlement of Contracts to
Buy or Sell a Non-Financial Item, for realized gains (losses) on
derivative instruments and other. Base gross margin is a key
measure used by management to assess performance and allocate
resources. Management believes that these realized gains (losses)
on derivative instruments reflect the long-term financial
performance of Just Energy and thus has included them in the Base
gross margin calculation.2See “Non-IFRS financial measures”3 Not a
meaningful figure.
- Sales: Decrease
due to the smaller customer base resulting from the shift in focus
to the Company’s strategy to increase the credit quality of
customers and to onboard higher quality customers; a reduction in
customers in Ontario, New York and California due to regulatory
restrictions; selling constraints posed by the COVID-19 pandemic;
as well as prior competitive pressures on pricing in the United
States.
- Base gross margin:
Decrease was primarily driven by a decline in the customer base,
partially offset by higher realized margins across several
markets.
- Base EBITDA:
Increase was primarily driven by a reduction in bad debt expense
and lower expenses, partially offset by lower Base gross margin and
increased investment in digital marketing.
- Unlevered free cash
flow: Decrease was primarily driven by the additional
transaction costs incurred for the Recapitalization and payments to
decrease commodity and supplier payables.
Expense
Detail: |
|
|
|
($
thousands) |
Fiscal 2021 |
Fiscal 2020 |
Change |
Administrative expenses1 |
$ |
30,408 |
$ |
39,616 |
-23 |
% |
Selling
commission expenses |
$ |
30,485 |
$ |
36,698 |
-17 |
% |
Selling
non-commission and marketing expense |
$ |
11,784 |
$ |
14,572 |
-19 |
% |
Bad debt
expense |
$ |
3,358 |
$ |
19,996 |
-83 |
% |
1 Includes $1.6
million and $4.2 million of Strategic Review costs for the third
quarter of fiscal 2021 and 2020, respectively. |
- Administrative
expenses: Decline was primarily driven by savings from the
Canadian emergency wage subsidy and a reduction of expense related
to the Strategic Review. Excluding expenses related to the
Strategic Review, Administrative expenses decreased by 19% to $28.8
million for the three months ended December 31, 2020 compared to
$35.4 million for the three months ended December 31, 2019 due to
savings from the Canadian emergency wage subsidy and savings from
cost containment efforts.
- Selling commission
expenses: Decrease was driven by lower commission expenses
from lower sales from direct in-person channels driven by the
impact of the COVID-19 pandemic and lower customer additions in
prior periods.
- Selling non-commission and
marketing expenses: Decline was a result of cost
reductions from the shut-down of the internal door-to-door sales
channel and continued focus on cost containment, partially offset
by increased investment in digital marketing.
- Bad debt expense:
Decrease was a result of enhanced operating controls and
operational processes implemented in the summer of 2019 and release
of previous credit reserves as the Company continues to see
consistent payment trends and minimal impact from the COVID-19
pandemic.
Consumer Segment
Performance |
|
|
|
|
|
|
|
Consumer Operating
Highlights: |
|
|
|
|
Fiscal 2021 |
Fiscal 2020 |
Change |
Consumer gross margin on added/renewed |
$303/RCE |
$273/RCE |
11 |
% |
Embedded gross margin1 ($ millions) |
$1,023 |
$1,271 |
-20 |
% |
Total gross (RCE)
additions |
42,000 |
55,000 |
-24 |
% |
Attrition (trailing 12
months) |
23% |
25% |
-8 |
% |
Renewals (trailing 12
months) |
80% |
72% |
11 |
% |
1See “Non-IFRS financial
measures” |
|
|
|
|
- Average Consumer gross margin per RCE for the customers
added or renewed: The increase in the average gross margin
on Consumer customers added and renewed was a result of the
Company’s increased focus on profitable customer growth.
-
Consumer embedded gross margin: The decline
resulted from the decrease in the Consumer customer base and
unfavourable exchange rate fluctuations.
-
Consumer RCE additions: The decrease in customer
additions was driven by selling constraints posed by the COVID-19
pandemic in the direct in-person channels offset by increases in
digital sales channel. However, Consumer RCE additions increased by
24% from the three months ended September 30, 2020 due to increases
in the digital and continued improvement in the retail sales
channel.
-
Consumer attrition rate: The improvements in
attrition reflect the benefits of focus on sales to higher quality
customers and increased focus on the customer experience.
-
Consumer renewal rate: The increase was driven by
improved retention offerings and increased focus on the customer
experience.
Consumer RCE Summary:
CONSUMER |
10/1/2020 |
Additions |
Attrition |
Failed to renew |
12/31/2020 |
Change |
12/31/2019 |
Change |
Gas |
285,000 |
1,000 |
-8,000 |
-3,000 |
275,000 |
-4 |
% |
343,000 |
-20 |
% |
Electricity |
820,000 |
41,000 |
-36,000 |
-13,000 |
812,000 |
-1 |
% |
896,000 |
-9 |
% |
Total Consumer RCEs |
1,105,000 |
42,000 |
-44,000 |
-16,000 |
1,087,000 |
-2 |
% |
1,239,000 |
-12 |
% |
|
|
|
|
|
|
|
|
|
|
|
Commercial Segment Performance
Commercial Operating Highlights: |
|
|
|
|
Fiscal 2021 |
Fiscal 2020 |
Change |
Commercial gross margin on added/renewed |
$70/RCE |
$65/RCE |
8 |
% |
Embedded gross margin1($ millions) |
$360 |
$569 |
-37 |
% |
Total
gross commercial (RCE) additions |
41,000 |
165,000 |
-75 |
% |
Attrition (trailing 12 months) |
11% |
9% |
22 |
% |
Renewals (trailing 12 months) |
49% |
54% |
-9 |
% |
1See “Non-IFRS financial measures
-
Average Commercial gross margin per RCE for the customers
added or renewed: The increase was due to adding and
renewing a larger proportion of lower usage, higher margin
Commercial customers.
- Commercial embedded gross
margin: The decline resulted from the decrease in the
Commercial customer base and unfavourable exchange rate
fluctuations.
-
Commercial RCE additions: The decrease is
primarily due to the selling constraints posed by the COVID-19
pandemic and the prior competitive pressures on pricing in the U.S.
market. Commercial RCE additions increased by 46% from a low of
28,000 RCE additions for the three months ended June 30, 2020.
-
Commercial attrition rate: The increase reflects a
very competitive pricing market for commercial customers.
-
Commercial renewal rate: The decrease reflects a
competitive market with competitors pricing aggressively and Just
Energy’s focus on retaining longer-term, profitable customers
rather than pursuing low margin sales.
Commercial RCE Summary:
COMMERCIAL |
10/1/2020 |
Additions |
Attrition |
Failed to renew |
12/31/2020 |
Change |
12/31/2019 |
Change |
Gas |
407,000 |
- |
-11,000 |
-10,000 |
386,000 |
-5 |
% |
448,000 |
-14 |
% |
Electricity |
1,574,000 |
41,000 |
-62,000 |
-63,000 |
1,490,000 |
-5 |
% |
1,828,000 |
-18 |
% |
Total Commercial RCEs |
1,981,000 |
41,000 |
-73,000 |
-73,000 |
1,876,000 |
-5 |
% |
2,276,000 |
-18 |
% |
|
|
|
|
|
|
|
|
|
|
|
Outlook
As previously announced, the Company is
withdrawing its Base EBITDA and unlevered free cash flow guidance
for fiscal 2021 and is continuing to assess the financial impact of
the Weather Event. As of the time of this press release, the
Company estimates that the financial impact of the Weather Event on
the Company could be a loss of between $50 million and $315
million. The total financial impact may materially change due to
ERCOT final settlement data as it becomes available, any government
or regulatory actions or potential litigation with respect thereto,
failure of other parties to pay amounts owing to ERCOT and impacts
of customer credit losses. The estimated substantial losses could
be materially adverse to the Company’s liquidity and its ability to
continue as a going concern. The Company is in discussions with its
key stakeholders regarding the impact of the Weather Event and will
provide an update as appropriate.
About Just Energy Group
Inc.
Just Energy is a retail energy provider
specializing in electricity and natural gas commodities and
bringing energy efficient solutions 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. 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 financial impact of
the Weather Event on the Company, the potential for government or
regulatory action or litigation, the quantum of the financial loss
to the Company from the Weather Event and its impact on the
Company’s liquidity, the Company’s ability to continue as a going
concern, the Company’s discussions with key stakeholders regarding
the Weather Event 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; 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.justenergygroup.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 Q3 Fiscal 2021’s Management’s
Discussion and Analysis for the Company’s definition of “EBITDA”
and other non-IFRS measures.
Neither the Toronto Stock Exchange nor the New
York Stock Exchange has approved nor disapproved of the information
contained herein.
FOR FURTHER INFORMATION PLEASE
CONTACT:
Michael CarterChief Financial OfficerJust
Energymcarter@justenergy.com
or
InvestorsMichael CummingsAlpha IRPhone: (617)
982-0475JE@alpha-ir.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 December 31. |
|
|
|
(thousands of
dollars, except where indicated and per share amounts) |
|
|
|
|
Fiscal 2021 |
|
Change |
|
Fiscal 2020 |
Sales |
$ |
540,067 |
|
|
(18 |
)% |
|
$ |
658,521 |
|
Base gross margin1 |
|
131,608 |
|
|
(8 |
)% |
|
|
142,484 |
|
Administrative expenses2 |
|
30,408 |
|
|
(23 |
)% |
|
|
39,616 |
|
Selling commission
expenses |
|
30,485 |
|
|
(17 |
)% |
|
|
36,698 |
|
Selling non-commission and
marketing expense |
|
11,784 |
|
|
(19 |
)% |
|
|
14,572 |
|
Bad debt expense |
|
3,358 |
|
|
(83 |
)% |
|
|
19,996 |
|
Finance costs |
|
17,677 |
|
|
(37 |
)% |
|
|
28,178 |
|
Profit (loss) from continuing
operations |
|
(52,327 |
) |
|
NMF |
3 |
|
|
20,601 |
|
Base EBITDA1 |
|
55,785 |
|
|
47 |
% |
|
|
37,950 |
|
Total gross consumer (RCE)
additions |
|
42,000 |
|
|
(24 |
)% |
|
|
55,000 |
|
Total gross commercial (RCE)
additions |
|
41,000 |
|
|
(75 |
)% |
|
|
165,000 |
|
Total net consumer (RCE)
additions |
|
(18,000 |
) |
|
NMF |
3 |
|
|
(33,000 |
) |
Total
net commercial (RCE) additions |
|
(105,000 |
) |
|
NMF |
3 |
|
|
48,000 |
|
See “Non-IFRS financial measures” on page 6 of the MD&A.2
Includes $1.6 million and $4.2 million of Strategic Review costs
for the third quarter of fiscal 2021 and 2020, respectively.3 Not a
meaningful figure. 4 Profit (loss) includes the impact of
unrealized gains (losses), which represents the mark to market of
future commodity supply acquired to cover future customer demand as
well as weather hedge contracts entered into as part of the
Company’s risk management practice. The supply has been sold to
customers at fixed prices, minimizing any realizable impact of mark
to market gains and losses.
Balance sheet
(thousands of dollars)
|
|
As at |
|
|
As at |
|
|
As at |
|
12/31/2020 |
|
|
3/31/2020 |
|
12/31/2019 |
Assets: |
|
|
|
|
|
|
|
|
Cash |
$ |
66,635 |
|
$ |
26,093 |
|
$ |
17,988 |
Trade and other receivables,
net |
|
344,080 |
|
|
403,907 |
|
|
404,124 |
Total fair value of derivative
financial assets |
|
49,267 |
|
|
65,145 |
|
|
121,363 |
Other current assets |
|
143,145 |
|
|
203,270 |
|
|
140,923 |
Total assets |
|
1,069,042 |
|
|
1,215,833 |
|
|
1,294,205 |
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Trade payables and other |
$ |
472,763 |
|
$ |
685,665 |
|
$ |
523,650 |
Total fair value of derivative
financial liabilities |
|
246,495 |
|
|
189,706 |
|
|
199,731 |
Total long-term debt |
|
518,768 |
|
|
782,003 |
|
|
774,600 |
Total
liabilities |
|
1,284,778 |
|
|
1,711,121 |
|
|
1,559,955 |
Summary of Cash
Flows |
|
|
|
|
|
For the nine months ended
December 31. |
|
|
|
|
|
(thousands of dollars) |
|
|
|
|
|
|
Fiscal 2021 |
|
|
Fiscal 2020 |
|
Operating activities |
$ |
(11,030 |
) |
|
$ |
8,135 |
|
Investing activities |
|
(3,353 |
) |
|
|
(17,065 |
) |
Financing activities,
excluding dividends |
|
61,820 |
|
|
|
42,570 |
|
Effect of foreign currency
translation |
|
(6,895 |
) |
|
|
(244 |
) |
Increase in cash before
dividends |
|
40,542 |
|
|
|
33,396 |
|
Dividends (cash payments) |
|
- |
|
|
|
(25,335 |
) |
Increase (decrease) in
cash |
|
40,542 |
|
|
|
8,061 |
|
Cash and cash equivalents –
beginning of period |
|
26,093 |
|
|
|
9,927 |
|
Cash
and cash equivalents – end of period |
$ |
66,635 |
|
|
$ |
17,988 |
|
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