Crius Energy Trust Reports First Quarter 2017 Results

First quarter performance highlighted by growth in Adjusted EBITDA and achievement of one million customer milestone

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

TORONTO, May 11, 2017 /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, 2017. 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 $177.4 million in the first quarter of 2017, representing a 1.9% decrease from $180.8 million in the first quarter of 2016, partially due to a lower electricity price environment during the first quarter of 2017 in our core markets.
  • Gross margin of 20.9% of total revenue for the first quarter of 2017, representing a decrease from the gross margin of 22.2% achieved in the first quarter of 2016, primarily due to the increased proportion of lower margin commercial and municipal aggregation customers the Company now serves.
  • Adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA") of $14.5 million during the first quarter of 2017, representing an increase from $13.0 million achieved in the first quarter of 2016. For the first quarter of 2017, Adjusted EBITDA has been adjusted for a legal reserve charge of $6.5 million related to pending litigation and regulatory matters, and associated legal fees incurred in the first quarter of 2017 of $2.5 million.
  • Cash available for distribution ("Distributable Cash") for the first quarter of 2017 was $7.7 million and total distributions made to unitholders ("Total Distributions") were $5.8 million, resulting in a quarterly proportion of Distributable Cash paid out as distributions on units of the Trust ("Units") to holders of Units ("Unitholders") over a defined period, expressed as a percentage ("Payout Ratio") of 75.3%. This compares to Distributable Cash of $9.8 million, and Total Distributions of $5.7 million and a Payout Ratio of 58.2% for the quarter ending March 31, 2016. The decrease in Distributable Cash and increase in Payout Ratio are due to increased unit-based compensation payments made during the first quarter of 2017 on account of the vesting of phantom unit rights granted under the phantom unit rights plan of the Company, which vest three years from the date of grant. For the last twelve months, Distributable Cash was $36.6 million and Total Distributions paid were $22.7 million, representing a Payout Ratio of 62.0%.

Operational Highlights

  • Achieved net customer growth of 21,000 customers in the first quarter of 2017, representing 2.1% quarter-over-quarter growth, with Crius Energy's total customer count reaching 1,003,000.
    • Added 156,000 customers from sales and marketing channels, representing an increase over the average in the prior four quarters of 97,000, with the increase primarily driven by a large contribution coming from municipal aggregations and default service auctions.
    • Gross customer drops in the first quarter of 135,000 customers were higher than the average in the prior four quarters of 75,000 primarily due to the non-renewal of several large commercial accounts.
  • Continued expansion of the solar business.
    • Sold 271 solar systems, representing 1.8MW of generating capacity, which is in line with Management expectations.
    • Integration of the solar assets acquired from SunEdison Inc. ("SunEdison") continued during the first quarter of 2017, which is expected to increase solar sales and enhance margin by enabling the Company to manage a solar customer from prospect to installation, leveraging first-party and third-party lead generation, sales capability, and installation, combined with a third-party finance strategy.
    • Continued progress on the purchase of certain residential solar installation assets from Verengo, Inc. ("Verengo"), which is expected to close in the second quarter of 2017.
      • The Verengo platform and team, which have a track-record of more than 20,000 solar installations dating back to 2008, will augment our recent acquisition of the SunEdison residential solar platform, as it provides vertically integrated capability in California.

Growth and Corporate Highlights

  • Announced a 2% distribution increase.
    • In January 2017, the board of directors of Crius Energy Administrator Inc., the administrator for and on behalf of the Trust (the "Board"), approved a 2% increase to distributions paid on Units during the first quarter of 2017, representing an annualized increase of C$0.0152 per Unit and a Total Distribution (annualized) of C$0.7730 per Unit.
    • Represents the fifth increase since the beginning of 2016, signaling both Management and the Board's confidence in the positive results from the Company's growth strategy in the deregulated energy and solar businesses.
  • Announced a five-year extension to our exclusive agreement with Comcast Corporation ("Comcast") to sell electricity and natural gas products under the Comcast Energy RewardsTM brand to Comcast customers.
    • Future initiatives include closer integration with core smart home initiatives under the Xfinity® business unit.
  • Announced expanded relationship with Comcast to offer Energy RewardsTM Integrated Energy Platform ("IEP") to additional third-party services providers.
    • Five-year strategic agreement enables additional third-party service providers across the U.S. to leverage the IEP for enhanced customer retention and value.
    • The IEP is expected to formally launch in the second half of 2017 and will leverage existing assets from both Comcast and Crius, including technology and resources, to provide partner service providers with a holistic home energy solution to efficiently offer their customers, among other products, electricity, natural gas and solar.
    • Crius and Comcast will co-market the IEP to potential third-party service providers. Crius will continue to directly service all existing and future electricity and natural gas customer relationships.
  • Announced Rise Broadband as first IEP Partner.
    • Entered into a three-year strategic agreement with Rise Broadband, the largest U.S. fixed wireless internet and digital voice provider, to offer energy products to Rise Broadband's customers through the Energy RewardsTM IEP developed jointly by Crius Energy and Comcast.
    • Platform offerings will initially be available to Rise Broadband's customers in Illinois, Indiana, and Texas with plans to offer the services throughout Rise Broadband's coverage area in 16 states. Rise Broadband currently serves several hundred thousand rural and suburban homes and businesses with fixed wireless high-speed internet and digital phone technology.
  • Received forgivable $8.0 million subordinated term loan (the "Term Loan") from the Connecticut Department of Economic and Community Development ("DECD").
    • During the second half of 2016, the Company relocated to a renovated, 48,000 square foot space in Connecticut to accommodate current operating requirements and space for future growth.
    • The Connecticut DECD provided an $8.0 million forgivable loan package at an interest rate of 2.0% for a term of up to ten years to support the headquarter move.
    • The principal portion of the loan is deferred for the first four years and will be eligible for forgiveness credits as new jobs are created in the state. In addition, the Company is eligible to receive up to $2.0 million in tax credits through the Urban Redevelopment Authority Program as well as a $0.1 million grant to train employees.

"Our first quarter results highlight the fundamental strength and diversity of our deregulated energy business", commented Michael Fallquist, Chief Executive Officer of Crius. "We are encouraged with the initial results from our expanded solar business, and remain focused on realizing synergies that exist between the deregulated energy and solar industries. The Company's future growth prospects remain robust in 2017 and beyond, and are expected to contribute to continued growth in value for our unitholders."

Review of Q1 2017 Results

The first quarter of 2017 highlighted the positive impacts from continued growth of the Company's core retail energy business, Management's prudent approach to cost control and efficiencies achieved across Crius' platform. The strong operating results allowed Management to make strategic investments in the solar industry which are expected to enhance long-term Unitholder value.

In the first quarter of 2017, as a result of Management and the Board's confidence in the positive results from the Company's growth strategy in the deregulated energy and solar businesses, the Board approved a 2% increase to the distribution while maintaining a conservative Payout Ratio. The 2% increase was the fifth consecutive quarterly increase to distributions.

Overall revenues decreased 1.9% in the first quarter of 2017 to $177.4 million from $180.8 million in the first quarter of 2016. The period-over-period decrease was due to a lower retail electricity price environment despite increased overall electric volumes, lower solar revenues impacted by the ongoing transition from the reseller model to the fully integrated installer model and associated ramp-up in solar sales as the Company integrates the assets acquired from SunEdison and the elimination of fees received from independent contractors following the Viridian sales channel restructuring completed in July 2016.

Revenues from solar system sales in the first quarter of 2017 were $0.3 million, down from $0.9 million in the first quarter of 2016, and continue to reflect the ongoing transition from the reseller model to the integrated installer model and the associated ramp-up in sales as the Company integrates the assets acquired from SunEdison. Gross solar sales of 271 systems, representing 1.8 MW during the quarter are in line with management expectations as the transition to the integrated model moves forward. During the quarter, 15 solar installations were completed, representing 0.1 MW.

Gross margin for first quarter of 2017 was $37.1 million, a decrease from $40.2 million of gross margin in the first quarter of 2016. As a percentage of total revenue, gross margin was 20.9% in the first quarter of 2017, down from 22.2% in the same quarter of the previous year. The reduced gross margin as a percentage of revenue reflects a continuation of recent trends and driven by the increased proportion of commercial and municipal aggregation customers that the Company now services following the acquisitions of TriEagle Energy, LP and Iron Energy, LLC d/b/a/ Kona Energy. Commercial customers provide the benefit of 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 2017 was $14.5 million, an increase from the $13.0 million reported in the first quarter of 2016. Adjusted EBITDA has been adjusted for a legal reserve charge of $6.5 million related to pending litigation and regulatory matters, and associated legal fees of $2.5 million incurred in the first quarter of 2017. Management is pleased with the Adjusted EBITDA results for the quarter, given they were negatively impacted by the materially milder than normal winter temperatures, and the $2.4 million negative contribution to Adjusted EBITDA from the solar business due to ongoing costs related to the integration and ramp-up of the fully integrated solar business model.

As at March 31, 2017, Crius Energy had 1,003,000 customers, up from 982,000 at the beginning of the quarter, representing net customer growth of 21,000 customers, or 2.1%, consistent with net growth in recent quarters. Net customer adds were negatively impacted by elevated customer attrition in the first quarter of 2017. While the underlying trend over the last several years of improving customer retention rates remains intact, the first quarter was impacted by the non-renewal of several large commercial customers. The Company is pleased that it was able to offset these non-renewals with gross customer additions driven by success in the municipal aggregations segment as well as certain default service auctions, in which Crius Energy contracts with local utilities to provide tranches of load-following power to retail customers of that utility.

At March 31, 2017, the Trust had Total Cash and Availability of $37.5 million, consisting of $9.1 million of cash availability and $28.4 million available under the Company's credit facility, and was impacted by $8.3 million in temporary cash collateral posting requirements associated with the default service auctions the Company participated in during the first quarter of 2017, which have since been returned. This compares to the Total Cash and Availability of $49.9 million as at December 31, 2016, consisting of cash and cash equivalents of $10.9 million and $39.0 million, respectively, available under the credit facility. 

The interim condensed consolidated financial statements of the Trust as at and for the three month period ended March 31, 2017 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 on May 12, 2017 at 8:30 a.m. (Toronto time) to discuss the financial results from the first quarter 2017.

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 by clicking here or by visiting 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. (Toronto time) on May 12, 2017 until May 19, 2017. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter passcode 5277494#.

About Crius Energy Trust

The Trust provides investors with a distribution-producing investment through its 100% ownership interest in the Company. With over one million 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 16 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") including, without limitation, statements relating to non-IFRS financial measures; the confidence of Management and the Board; the Trust's outlook, strategy, and ability to execute its business objectives; future payments owed to the Company; the electricity, natural gas and solar industries; governmental regulatory regimes; acquisitions and strategic partnerships; marketing channels; customers and customer growth; hedging strategies; risk management; market risk; credit risk; off-balance sheet arrangements; related party-transactions; liquidity and capital resources; critical accounting estimates; ICFR; potential transactions; results of operations; financial position or cash flows; expenses and distributions to Unitholders. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or describes a "goal", or variation of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. All forward-looking statements reflect the Trust's beliefs and assumptions based on information available at the time the statements were made. Actual results or events may differ from those predicted in these forward-looking statements. All of the Trust's forward-looking statements are qualified by (i) the assumptions that are stated or inherent in such forward-looking statements, and (ii) the risks described in the section entitled "Financial Instruments and Risk Management" in this MD&A and in the sections entitled "Risk Factors" and "Forward-Looking Statements" in the annual information form of the Trust for the fiscal year ended December 31, 2016, dated March 16, 2017, which is available on SEDAR under the Trust's issuer profile at www.sedar.com and on the Trust's website at www.criusenergytrust.ca. Forward-looking statements involve known and unknown risks, future events, conditions, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, prediction, projection, forecast, performance or achievements expressed or implied by the forward-looking statements. Although the Trust has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Trust disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise, except in accordance with applicable securities laws.

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 income (loss) 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, 2017 (under the heading ""Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA") for a reconciliation of Adjusted EBITDA to net loss, 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, 2017 (under the heading ""Distributable Cash and Payout Ratio") for a reconciliation of Distributable Cash to cash flows provided by 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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