Crius Energy Trust Reports First Quarter 2016 Results

Strong operating performance in Q1 2016 highlighted by 12% growth in customers

/NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES/

TORONTO, May 12, 2016 /CNW/ - Crius Energy Trust ("Crius" or the "Trust") (TSX: KWH.UN), today announced its financial results as at and for the three month period ended March 31, 2016. All figures are in U.S. dollars unless otherwise noted. In this news release, references to "C$" are to Canadian dollars and references to the "Company" are to Crius Energy, LLC. the operating subsidiary of the Trust.

Financial Highlights

  • Revenue of $180.8 million in the first quarter, representing an increase from $168.3 million in the first quarter of 2015, primarily due to greater electricity revenues as a result of higher average electricity customer numbers
  • Gross margin of 22.2% of total revenue for the quarter, representing a decrease from the 23.9% of revenue achieved in the first quarter of 2015, largely due to the increased proportion of commercial customers the Company now serves
  • After removing the impact of non-recurring items totaling $1.4 million, Adjusted EBITDA of $14.4 million is consistent with the $14.4 million achieved in the first quarter of 2015
  • Distributable cash for the first quarter was $9.8 million and total distributions were $5.7 million, resulting in a quarterly payout ratio of 58.2%, which compares to a quarterly payout ratio of 54.5% for the first quarter of 2015

Operational Highlights

  • Achieved net customer growth of 97,000 customers in the first quarter, representing 11.8% quarter-over-quarter growth, with total customers reaching 916,000
    • Added 95,000 customers from sales and marketing channels, which represents an increase over average quarterly organic customer adds over the last twelve months of 92,000
    • Added 75,000 customers from the acquisition of Iron Energy d/b/a Kona Energy ("Kona Energy") in February 2016
    • Gross customer drops in the first quarter of 73,000, improved over the quarterly average customer drops over the last twelve months of 78,000 due to the transition of the customer portfolio to more fixed-price and longer-term commercial customers
  • Solar system installations growth
    • Solar systems installed in the quarter represented 2.3 MW of generating capacity, compared to the 1.8 MW installed in the first quarter of 2015
    • Quarter over quarter growth in installations achieved despite the impact of the transition to Sungevity Inc. ("Sungevity") and seasonality that commonly occurs in the solar industry in northeast markets during the winter season
  • Continued advancement of the partnership with Comcast Corporation ("Comcast") in the first quarter
    • Following a successful launch of Comcast Energy Rewards in the second quarter of 2015, the Company continued to see growth in line with management's expectations during the first quarter of 2016
    • Continued focus on market, product and sales channel expansion during the quarter is expected to result in increased growth throughout the remainder of 2016 as the ongoing launch of the strategic channel continues

Growth and Corporate Highlights

  • Announced a 2% distribution increase
    • In January 2016, the Trust announced that the board of directors approved a 2% increase to distributions paid on Units of the Trust for the first quarter of 2016, representing an annualized increase of C$0.014 per Unit and a total annualized distribution of C$0.714 per Unit.
    • The increase was the result of the successful completion of several acquisitions and continued organic growth, both of which raised the growth profile of the business
  • Completed the acquisition of 75,000 customers from Kona Energy
    • In February 2016, the Company successfully completed the acquisition of the customer contracts and associated assets for approximately 75,000 electricity customers for a total acquisition cost of approximately $7.0 million.
    • The acquisition further increases the Company's scale and expands the Company's customer base in Illinois, New York, Ohio, and Texas
    • Positive impacts on Distributable Cash and payout ratio expected from the $5.0 million in reduced fees over the next four years negotiated with Macquarie Energy as part of the acquisition

"In the first quarter of 2016, the Company continued to deliver on its stated growth strategy as we grew the customer base by 58% over this time last year, surpassing 900,000 customers by the end of the quarter", commented Michael Fallquist, CEO of Crius. "The confidence that both management and the board of directors have in the strategy and long-term outlook for Crius resulted in an additional distribution increase in early April 2016. We are well positioned to continue to execute on our growth strategy throughout the remainder of the year and beyond, with our core focus on accelerating customer growth and increasing the value of each customer relationship, which we expect to have long-term positive impacts on our financial results and unitholder value."

Review of Q1 2016 Results

Crius continued to show the positive impacts from the successful execution of the Company's organic and acquisition growth strategy in the first quarter of 2016, highlighted by significant year-over-year growth in the customer base, up 57.7%. While investing to accelerate customer growth and maximize the value of each customer relationship, the Company maintained a conservative payout ratio of 58.2% in the first quarter, while growing the distribution payment to Unitholders.

Overall revenues increased 7.4% in the quarter to $180.8 million from $168.3 million in the first quarter of 2015. The increase was largely due to 16.5% greater electricity revenues primarily as a result of higher average electricity customer numbers resulting from organic customer growth and the acquisitions of TriEagle Energy LP ("TriEagle Energy") and Kona Energy, and offset by lower energy market conditions and lower usage per customer resulting from the seasonally milder winter causing temperatures to be approximately 26% higher than the prior comparable period, across our core markets, as measured in Heating Degree Days. 

Revenues from solar system sales in the first quarter were $0.9 million, a decrease of 58.7% from revenues of $2.3 million in the first quarter of 2015, with the prior period comparison impacted by the change in application of the revenue recognition policy adopted in the fourth quarter of 2015, where revenue is recognized upon the successful installation of a solar system as opposed to the previous method where revenue was recognized upon the execution of contracts. After adjusting for the impact from the change in the application of the solar revenue recognition policy, comparable period solar revenue in the first quarter of 2015 would have been $1.0 million. Additionally, solar revenues were impacted by the ongoing transition to the new reseller partnership with Sungevity and seasonality of solar sales in northeast markets during winter months.

Gross margin for the quarter was $40.2 million, largely in line with gross margin in the first quarter of 2015, impacted by the above-mentioned mild winter weather conditions experienced in the quarter. As a percentage of total revenue, gross margin was 22.2% in the first quarter of 2016, slightly below the 23.9% in the same quarter the previous year. The decline in gross margin as a percentage of revenue was primarily impacted by the increased proportion of commercial customers the Company now services as a result of the acquisitions of TriEagle Energy and Kona Energy. Commercial customers provide diversification to the customer portfolio and have a higher retention profile than residential customers, although with lower average unit margins.

Adjusted EBITDA in the first quarter of 2016 was $13.0 million, a 9.7% decrease over $14.4 million in the first quarter of 2015, with the current quarter being impacted by non-recurring costs of $0.7 million relating to a sales and use tax assessment in Texas and $0.7 million related to costs associated with a workforce restructuring, which is expected to generate savings over the balance of the year. Adjusting for these non-recurring costs, Adjusted EBITDA was $14.4 million in the quarter and was consistent with the first quarter of 2015.

Distributable Cash was $9.8 million in the first quarter of 2016 compared to $8.8 million in the first quarter of 2015, an increase of 11.4%. Total distributions paid in the first quarter of 2016 were $5.7 million, representing a quarterly payout ratio of 58.2%. Positive impacts on distributable cash primarily resulted from stronger operating cash flows, as well as lower, more normalized capital expenditures.

At March 31, 2016, Crius Energy had 916,000 customers, up from 819,000 at the beginning of the quarter, representing net customer growth of 97,000 customers, or 11.8% over the quarter. Net customer adds in the quarter benefited from the 75,000 customers acquired from Kona Energy, success in the direct marketing channel and commercial sales activity, as well as from declining attrition rates attributable to longer-term fixed price residential and commercial customers in the portfolio.

During the first quarter of 2016, excluding changes in operating assets and liabilities, the Company achieved operating cash flows of $14.3 million as compared to $12.4 million in the first quarter of 2015. At March 31, 2016 the Trust had total cash and cash availability of $22.8 million. This consisted of $9.5 million of cash and equivalents and $13.3 million available under the credit facility. This compared to total cash and cash availability of $42.9 million at the end of 2015. The reduction in total cash and availability in the quarter was impacted by $6.0 million in initial cash consideration paid for acquisitions that closed in the quarter, primarily Kona Energy, as well as by the timing of certain large payments of ordinary course liabilities totaling $15.8 million related to renewable energy certificates and related alternative compliance payments which relate to 2013 to 2015 renewable energy compliance periods.

The interim condensed consolidated financial statements of the Trust as at and for the three month period ended March 31, 2016 and accompanying management's discussion and analysis ("MD&A") have been filed with the securities regulators and are available on SEDAR at www.sedar.com under the Trust's issuer profile, 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 first quarter 2016 financial results on May 13, 2016 at 8:30 a.m. (EST).

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 question and answer session for analysts will follow management's presentation.

A live audio webcast of the conference call will be available at www.cnw.ca. Please connect at least 15 minutes prior to the 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 90 days.

A digital rebroadcast will be available to listeners starting at 11:30 a.m. ET on May 13 until May 20, 2016. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter passcode 88466986#.

About Crius

Crius Energy Trust was established to provide investors with a distribution-producing investment through its 43.1% ownership interest in Crius Energy LLC. With over 900,000 residential customer equivalents, the Company is a comprehensive energy solutions partner that provides electricity, natural gas and solar products to residential and commercial customers. The Company connects with energy customers through an innovative family-of-brands strategy and multi-channel marketing approach. This unique combination creates multiple access points to a broad suite of energy products and services that make it easier for consumers to make informed decisions about their energy needs. The Company currently sells energy products in 17 states and the District of Columbia with plans to continue expanding its geographic reach.

The Trust intends to continue 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 the Crius may be found on SEDAR under the Trust's issuer profile at www.sedar.com or on the Trust's website at www.criusenergytrust.ca.

Caution Regarding Forward-Looking Statements

This news release contains forward-looking statements and forward-looking information (collectively, "Forward-Looking Statements") that involve substantial known and unknown risks and uncertainties, most of which are beyond the control of Crius, including, without limitation, those risks described in the annual information form of the Trust for the fiscal year ended December 31, 2015, dated March 15, 2016 (under the headings "Risk Factors" and "Forward-Looking Statements") and in the MD&A of the Trust for the three month period ended March 31, 2016. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words of phrases such as "will likely result", "are expected to", "expects", "will continue", "is anticipated", "anticipates", "believes", "estimated", "intends", "plans", "forecast", "projection" and "outlook") are not historical facts and may be Forward-Looking Statements which involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such Forward-Looking Statements. Forward-Looking Statements in this news release include, but are not limited to, the Trust's objectives and status as a "mutual fund trust" and not a "SIFT trust", results of operations, financial position or cash flows, cash availability levels, continued growth of the partnership with Comcast, opportunities resulting from the strategic alliance with Sungevity, the long-term nature of the partnership with Sungevity, results for 2016 (including continued strong financial results and low payout ratio), the availability of excess cash to invest in the Company's growth strategy, the continued investment in the successful roll-out of the Comcast partnership, expansion of the Company's commercial business, the successful transition to Sungevity as the Company's solar partner, expected positive impact of the Company's investments on long-term unitholder value, expected decreases in the Company's solar energy cancellations, temporary nature of the decrease in the Company's solar revenues, improved economics in the solar systems sold, customer revenues and margins, customer additions and renewals, customer attrition, geographical expansion, customer consumption levels, general and administrative expenses, treatment under governmental regulatory regimes, distributable cash, growth of the business, improvement to the Company's risk management and operations, growth initiatives, customer cancellations, delayed installations, Canada-United States dollar exchange rate, size and expansion opportunities in the Texas market, growth of the solar market portfolio, Crius' expectations and estimates regarding the impact on Crius of the recently completed transactions discussed herein (including the TriEagle and Kona Energy acquisitions), the strategic partnership with Comcast, and Crius' expectations and estimates regarding the payment of distributions to unitholders. Crius cautions investors of the Trust's securities about important factors that could cause Crius' actual results to differ materially from those projected in any Forward-Looking Statements included in this news release. 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 does not assume any obligation to update or revise them to reflect new events or circumstances, except as required by law.

Non-IFRS Financial Measures

Statements in this news release make reference to Adjusted EBITDA, Distributable Cash and payout ratio, which are non-IFRS financial measures commonly used by financial analysts in evaluating the financial performance of companies, including companies in the energy industry. Accordingly, management believes Adjusted EBITDA, Distributable Cash and payout ratio may be useful metrics for evaluating the Trust's financial performance as they are measures that management uses internally to assess performance, in addition to IFRS measures. As there is no generally accepted method of calculating Adjusted EBITDA, Distributable Cash and payout ratio, these terms as used herein are not necessarily comparable to similarly titled measures of other companies. Adjusted EBITDA, Distributable Cash and payout ratio have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, net (loss) income or other data prepared in accordance with IFRS. Adjusted EBITDA is calculated as EBITDA adjusted to exclude any change in the fair value of derivative instruments, change in fair value of non-controlling interest, change in fair value of warrant liability, unit-based compensation, goodwill impairment and distributions to non-controlling interest. The items excluded from Adjusted EBITDA are significant in assessing the Trust's operating results and liquidity. See the MD&A of the Trust for the three month period ended March 31, 2016 (under the heading "Reconciliation of Net (Loss) Income and Comprehensive (Loss) Income to EBITDA and Adjusted EBITDA") for a reconciliation of Adjusted EBITDA to net (loss) income and comprehensive (loss) income, as calculated under IFRS for the relevant periods, the most directly comparable measure in the consolidated financial statements of the Trust. See the MD&A of the Trust for the three month period ended March 31, 2016 (under the heading "Distributable Cash and Payout Ratio") for a reconciliation of Distributable Cash to cash flows provided by (used in) operating activities as calculated under IFRS, the most directly comparable measure in the consolidated financial statements of the Trust. Other financial data has been prepared in accordance with IFRS.

SOURCE Crius Energy Trust

For further information: Michael Fallquist, Chief Executive Officer, mfallquist@criusenergy.com, (203) 663-7545; Roop Bhullar, Chief Financial Officer, rbhullar@criusenergy.com, (203) 883-9900; Kelly Castledine, Investor Relations, kcastledine@criusenergy.com, (416) 644-1753


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