/NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES/
Growth strategy continues to diversify the business and contribute to positive results
TORONTO, Nov. 12, 2015 /CNW/ - Crius Energy Trust ("Crius Energy" or the "Trust") (TSX: KWH.UN), today announced its financial results as at and for the three and nine month periods ended September 30, 2015. All figures are in U.S. dollars unless otherwise noted, references to "C$" are to Canadian dollars and references to the Company are to Crius Energy, LLC the operating subsidiary of the Trust.
Q3 2015 HIGHLIGHTS
- Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") of $16.1 million during the quarter representing a payout ratio of 74.0%, compared to $15.2 million and 54.1% respectively in the third quarter of 2014
- During the last twelve months, Adjusted EBITDA and distributable cash ("Distributable Cash") were $58.6 million and $36.5 million respectively, resulting in a payout ratio of 56.2%
- The credit facility, which had a $19.0 million balance at the end of the second quarter of 2015 primarily related to the acquisition of TriEagle Energy LP ("TriEagle Energy") in April 2015, was fully repaid during the third quarter of 2015, increasing cash availability to pre-acquisition levels of $47.5 million
- Achieved net customer growth of 1.1%, with 9,000 residential customer equivalents ("RCE") added during the third quarter
- Gross customer adds of 89,000, were higher than the average organic customer adds over the prior four quarters of 83,000, driven by a strong contribution from our direct marketing activities
- Gross customer drops of 80,000, improved over the average customer drops over the prior four quarters of 85,000 due to the transition of the customer portfolio to more fixed-price and longer-term commercial customers
- Gross sales of solar systems reached new highs in the quarter with 1,372 systems sold representing 11.8 MW of generating capacity, an increase of 16.8% and 29.7% respectively over the second quarter of 2015
- Continued growth of the partnership with Comcast Corporation ("Comcast") in the third quarter
- Following a successful launch in the second quarter of 2015, at the end of the third quarter, the Company had access to 33% of Comcast's addressable subscribers across three states
- During the quarter, Crius Energy added 4,000 subscribers, which, along with 1,200 subscribers from the second quarter of 2015, totals more than 5,000 subscribers added to the portfolio through the Comcast partnership
- Began expansion of distribution channels into Texas
- In July 2015, the Company expanded the TriEagle Energy electricity license to include the Viridian Energy ("Viridian") and Comcast Energy Rewards trade names
- Expansion into Texas will enable the introduction of the Comcast strategic partnership and network marketing channels into the state, which are expected to be operational during the fourth quarter of 2015
- Launch of Viridian program enhancements
- In September 2015, the Company launched new program enhancements at its annual "PowerUp!" national convention which saw record attendance of nearly 2,000 independent contractors
- Developments included a new compensation plan, product enhancements and an upgraded technology platform
- Selling costs were impacted in the quarter by non-recurring incremental incentives of $3.2 million offered in the channel as part of the transition to the new compensation plan
Growth and Corporate Highlights
- Entered into a strategic alliance with Sungevity, Inc. ("Sungevity")
- The alliance allows the Company to co-brand and offer Sungevity residential solar energy systems and products through Crius Energy's family of world-class energy brands, retaining brand awareness and upsell opportunity through the life of the solar customer relationship
- Increased compensation from each solar system sold through Sungevity including enhanced recurring revenue for the life of the system including all customer renewals
- Received equity warrant position in Sungevity providing partner alignment and additional upside potential from solar growth
- Completed acquisition of 2,000 electricity customers in New Hampshire and Rhode Island
- Purchased from Gulf Oil, LP for $0.2 million
- Customers serviced by existing infrastructure with minimal incremental costs
- Completed bought deal offering of 6.8 million Units for gross proceeds of C$46.1 million
- Net proceeds primarily used to increase the Trust's indirect ownership of Crius Energy to 43.1% from 26.8%
- Remaining net proceeds of approximately $5.3 million were retained for general corporate purposes
"Our third quarter results delivered strong cash flow and growth in Adjusted EBITDA which allowed us to fully repay the working capital facility used primarily to acquire TriEagle Energy in April 2015," commented Michael Fallquist, CEO of Crius Energy Trust. "For the remainder of the year and into 2016, we expect continued strong financial results and a low payout ratio which will allow us to use excess cash to invest into our growth strategy. We will continue to make investments in the successful roll-out of the Comcast partnership, expansion of our commercial business, transition to Sungevity as our solar partner, enhancements in the network marketing channel, and our expansion into the state of Texas. These investments are expected to positively impact long-term unit holder value through increased scale and diversity of our business."
Review of Quarterly Results
During the third quarter of 2015, the Company continued to show positive financial results from the successful execution of the Company's organic and acquisition growth strategy to expand and diversify the business both geographically and through new product offerings.
Revenue increased 32.1% in the quarter to $204.1 million from $154.6 million in the third quarter of 2014. The increase was largely due to 34.6% greater electricity revenues primarily as a result of higher average electricity customer numbers resulting from the acquisition of TriEagle Energy in April 2015.
Gross sales of solar systems reached new highs in the quarter with 1,372 systems sold representing 11.8 MW of generating capacity, an increase of 16.8% and 29.7% respectively over the second quarter of 2015. During the quarter, the Company entered into a Reseller Agreement with Sungevity. This strategic alliance allows the Company to co-brand and offer Sungevity residential solar energy systems and products through Crius Energy's family of world-class energy brands, retaining brand awareness and upsell opportunity through the life of the solar customer relationship. As part of the partnership, Crius Energy received a one-time grant of 120 million warrants to purchase Series C Preferred Shares of Sungevity with a five year term, at a strike price of US$0.09 per share. The warrants vest at the latter of the one year anniversary of the Reseller Agreement or once certain performance criteria have been met. Due to Sungevity shares being private and with no observable market price, the value of the warrants is not recorded on our financial statements.
While our solar business produced strong underlying gross sales, net solar revenues recognized were $1.0 million during the third quarter of 2015, down 49.0% from the same period in 2014 and the net margin after selling costs was $(0.5) million for the third quarter of 2015 down from $1.3 million in the same period in 2014, with the $1.8 million reduction attributable to increased cancellation rates related to sales reported in current and prior periods that had not reached installation. Crius recognizes solar revenues upon the execution of contracts with customers, net of expected cancellations that may occur prior to installation of the solar systems. Management anticipates a continued temporary impact on solar revenues recognized as the Company transitions to the new solar reseller partnership with Sungevity, following which, cancellations are expected to decrease due to Sungevity's technology platform and broad installation network. In addition, the Company is expected to see improved economics per system sold, a more than 20 year co-branded customer relationship, and starting in early 2016, Sungevity will become a new selling channel for the Company's energy products.
Gross margin for the quarter was $48.0 million, 26.7% greater than $37.9 million in the third quarter of 2014. As a percentage of total revenue, gross margin was 23.5% in the third quarter of 2015, slightly below the 24.5% in the same quarter the previous year. The decline in gross margin as a percentage of revenue is due to the increased proportion of commercial customers the Company now services as a result of the TriEagle Energy acquisition. 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 third quarter of 2015 was $16.1 million, a 5.7% increase over $15.2 million in the third quarter of 2014, with the current quarter being impacted by increased selling costs due to incremental incentives offered in the Viridian channel as part of the transition to the new compensation plan, which was part of broader program enhancements announced at the national sales convention, PowerUP!, in September. The prior year comparative period was elevated due to the strategy employed in 2014 to spread extremely high wholesale energy prices incurred in the first quarter due to the "polar vortex" weather event over the balance of the year to recover costs and mitigate customer attrition.
Distributable Cash was $6.9 million in the quarter, representing a quarterly payout ratio of 74.0%. In addition to the impacts on Selling expenses discussed above, Distributable Cash was impacted by elevated levels of capital expenditures during the quarter of $3.2 million, related to development work on our growth initiatives, including the integration of TriEagle Energy, new technology in the network marketing channel, the ongoing launch of the Comcast partner channel, and the transition to the Company's new solar partner, Sungevity. These capital expenditures are non-recurring, and expected to contribute to the long-term growth of the Company. It is the intention of Management to maintain a conservative payout ratio to ensure funds are available to execute its growth strategy into 2016.
At September 30, 2015, Crius Energy had 799,000 customers, up from 790,000 at the beginning of the quarter, representing net customer growth of 9,000 customers, or 1.1% over the quarter, which was in line with customer additions in the prior quarter. Current quarter customer additions benefited from the 2,000 customers acquired from Gulf Oil. Taking acquisitions into account, the Company achieved customer growth of 37.8% over the last twelve months. Net customer adds in the current quarter were consistent with customer growth rates achieved over the last twelve months and benefited from 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. Specifically, average monthly attrition rates in the third quarter of 2015 of 3.2% have improved compared to average monthly attrition rates of approximately 5.0% last year.
During the quarter, strong operating cash flows of $26.7 million helped to restore the Trust's liquidity position to pre-TriEagle Energy acquisition levels. At September 30, 2015 the Trust had cash and cash availability of $47.5 million. This consisted of $13.5 million of cash and equivalents and $34.0 million available under the credit facility. This compared to cash and cash availability of $20.6 million at the end of the second quarter, which was impacted by the acquisition of TriEagle Energy in April 2015 as it was primarily funded by cash. During the quarter, the credit facility balance, totaling $19.0 million at the end of the second quarter, was fully repaid, resulting in increased liquidity.
During the third quarter, Adjusted Working Capital improved by $7.2 million from the end of the second quarter to $(10.7) million at the end of the third quarter. Negative working capital resulted from the TriEagle Energy acquisition, and Management continue to be committed to returning to a positive Adjusted Working Capital position.
The Trust continues to have no long-term debt and sufficient resources to execute its growth strategy.
During the quarter, the Trust increased its indirect ownership of Crius Energy through the completion of a bought deal equity offering with a syndicate of underwriters for 6,785,000 Units at a price of C$6.80 per Unit for total gross proceeds of C$46.1 million. The net proceeds were used to purchase additional membership units of Crius Energy and thus increasing the Trust's indirect ownership of Crius Energy to 43.1% from 26.8%, a 16.3% increase. Management expects that the increased ownership of the operating company by the Trust will improve the float of the Trust's Units and market liquidity.
The Trust's interim condensed consolidated financial statements as at and for the period ended September 30, 2015 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 third quarter 2015 financial results on November 13, 2015 at 8:00 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 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 90 days.
A digital rebroadcast will be available to listeners starting at 11:00 a.m. EST on November 13 until November 20, 2015. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter passcode 53797553#.
About Crius Energy
Crius Energy Trust was established to provide investors with a distribution-producing investment through its 43.1% ownership interest in Crius Energy, LLC. With approximately 800,000 residential customer equivalents, Crius Energy, LLC is a comprehensive energy solutions partner that provides electricity, natural gas and solar products to residential and commercial customers. Crius Energy, LLC 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. Crius Energy, LLC currently sells energy products in 20 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 Trust may be found on http://www.sedar.com or www.criusenergytrust.ca.
Caution Regarding Forward-Looking Statements
This news release contains forward-looking statements and forward-looking information (collectively, "Forward-Looking Statements") that involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Crius Energy, including, without limitation, those risks described in the Annual Information Form of the Trust dated March 25, 2015 (under the headings "Risk Factors" and "Forward-Looking Statements") and in the MD&A of the Trust for the period ended September 30, 2015. 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 the remainder of 2015 and into 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 Energy's expectations and estimates regarding the impact on Crius Energy of the recently completed transactions discussed herein (including the TriEagle Energy acquisition), the bought deal financing and the strategic partnership with Comcast, and Crius Energy's expectations and estimates regarding the payment of distributions to unitholders. Crius Energy cautions investors of the Trust'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. 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, 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 period ended September 30, 2015 (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 period ended September 30, 2015 (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, firstname.lastname@example.org, (203) 663-7545; Roop Bhullar, Chief Financial Officer, email@example.com, (203) 883-9900; Kelly Castledine, Investor Relations, firstname.lastname@example.org, (416) 644-1753