/NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES/
Strong financial and operating performance in 2015 highlighted by 37% growth in Adjusted EBITDA
TORONTO, March 15, 2016 /CNW/ - Crius Energy Trust ("Crius" or the "Trust") (TSX: KWH.UN), today announced its financial results as at and for the three and twelve month periods ended December 31, 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.
- In the fourth quarter of 2015, revenue was $147.5 million, representing an increase of 9.8% from $134.3 million in the fourth quarter of 2014. For the year 2015, revenue was $686.3 million, representing an increase of 14.3% from $600.5 million in 2014
- After adjusting for the one-time impact of the change in the application of our accounting policy for the recognition of solar revenue as described below, the Company achieved adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") of $13.2 million during the quarter and distributable cash of $9.0 million representing a payout ratio of 65.6%, compared to $14.4 million and 56.0% respectively, in the fourth quarter of 2014
- For the year 2015, Adjusted EBITDA and distributable cash ("Distributable Cash") were $52.6 million and $34.7 million respectively, resulting in a payout ratio of 58.2%
- The Trust continues to have no long-term debt and sufficient resources to execute its growth strategy. At the end of 2015, the Company had $4.0 million outstanding under its credit facility
- As a result of our successful ongoing strategic growth initiatives, the Company achieved net customer growth in the fourth quarter of 2.5%, with 20,000 residential customer equivalents ("RCEs") added, ending the year with a total customer count of 819,000
- Gross customer adds of 98,000, were 8.9% higher than the 90,000 average organic customer adds over the prior four quarters, driven by our diversified channel strategy and an increased quarterly contribution from the Comcast Energy Rewards brand
- Gross customer drops in the fourth quarter of 78,000, were 9.3% lower than the 86,000 average customer drops over the prior four quarters due to the transition of the customer portfolio to more fixed-price contracts and commercial customers
- Continued growth of the partnership with Comcast Corporation ("Comcast") in the fourth quarter
- Following a successful launch in the second quarter of 2015, the Company launched in five markets servicing 26 utilities by the end of 2015, and management expects continued market, product and sales channel expansion for 2016
- Achieved continued growth in the quarter when compared to the prior quarter, adding high quality, longer-term customers to the portfolio
- Continued geographic expansion of distribution channels
- Acquisition of TriEagle Energy ("TriEagle") in 2015 allowed expansion into Texas through the Comcast strategic partnership and network marketing channels, which were both operational in the state during the fourth quarter of 2015
- The Company is actively increasing its presence in the U.S. market by expanding its brands and channels, with licensing activities currently underway in Delaware, Georgia, Maryland, Massachusetts, Michigan, and New Hampshire
Growth and Corporate Highlights
- During the year, the Trust successfully completed the acquisition of TriEagle for $19.3 million, funded primarily by existing cash and availability under the credit facility
- Increased commercial and municipal aggregation customer growth potential as the TriEagle platform is now leveraged across the Crius footprint.
- Acquisition provides added portfolio diversity with longer-term, fixed price customers with more consistent energy usage profiles
- Integration of the TriEagle commercial platform into the Crius business was largely completed in 2015
- During the fourth quarter of 2015, the Trust announced the Company's acquisition of 75,000 electricity customers in Illinois, New York, Ohio and Texas
- Purchased from Iron Energy LLC d/b/a Kona Energy ("Kona Energy") for approximately $7.0 million
- Increases the commercial customer base and the proportion of fixed rate contracts
- Customers serviced by existing infrastructure with minimal incremental costs
- Positive impacts on Distributable Cash and payout ratio expected from the $5.0 million in pricing improvements over the next four years that was negotiated with Macquarie Energy LLC as part of the acquisition
- Greater diversification to Midwest states (Ohio and Illinois) further diluting exposure to North East and mid-Atlantic wholesale energy markets
- Entered into a new exclusive reseller partnership with Sungevity, Inc. ("Sungevity")
- The agreement allows the Company to co-brand and offer residential solar energy systems and products through Crius' 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 20+ year life of the system including all customer renewals
- Received 120 million warrants in Sungevity which provides additional potential upside from solar growth
- Integration to new reseller is progressing in line with management expectations and we completed our first full quarter of co-branded sales under the Viridian Solar and Citra Solar brands
- During the year, the Trust completed a 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 the Company to 43.1% from 26.8%
- Remaining net proceeds of $5.3 million were retained for general corporate purposes
"2015 was a statement year for Crius Energy as we delivered material growth in customers and profitability, each up more than 35% year-over-year, by reinvesting our operating cash flow back into the business," commented Michael Fallquist, CEO of Crius Energy Trust. "We continue to have no long-term debt on our balance sheet which we believe positions us well to execute on our strategic plan to accelerate customer growth and maximize the value of each customer relationship. We expect 2016 will be another significant step forward for our business as we continue to focus on creating long-term value for our Unitholders."
Review of Year End Results
During 2015, Crius delivered strong financial and operating performance highlighted by year-over-year growth in the customer base, up 43.9%, and Adjusted EBITDA, up 36.9%. Management attribute the performance to the Company's successful sales and marketing channels, scalable operating platform, risk management capability and strong financial capacity as well as favorable commodity market conditions during the year.
Revenue increased 14.3% in 2015 to $686.3 million from $600.5 million in 2014. The increase was largely due to 17.8% greater electricity revenues primarily as a result of higher average electricity customer numbers resulting from organic customer additions and the acquisition of TriEagle in April 2015.
In the latter half of 2015, the Company entered into a new reseller agreement with Sungevity that allows the Company to co-brand and offer residential solar energy systems and products through Crius' family of world-class energy brands, retaining brand awareness and upsell opportunity through the more than 20 year life of the solar customer relationship.
While the solar business produced strong year-over-year growth in solar systems contracted, solar revenues in 2015 of $1.5 million, decreased compared to 2014 revenues of $6.1 million with the reduction attributable to a $4.8 million impact resulting from a change in application of our revenue recognition accounting policy for solar revenues, made during the fourth quarter of 2015. Prior to the fourth quarter, solar revenues were recognized upon the execution of contracts with customers, net of expected cancellations that may occur prior to installation of the solar systems. In the fourth quarter, due to elevated cancellation rates and the transition to a new solar reseller partnership, the accounting change was made to more conservatively recognize revenue at the time of the installation of the solar system. This resulted in a one-time charge in the fourth quarter to reduce revenues by $4.8 million for solar systems that had not yet been installed.
Gross margin for 2015 was $163.7 million, 27.0% greater than $128.9 million in 2014 and benefited from favourable commodity conditions in the year. As a percentage of total revenue, gross margin was 23.9% in 2015, an increase over the 21.5% in 2014. The increase in gross margin as a percentage of revenue was primarily a result of broadly consistent year-over-year electric unit gross margins in a lower energy price environment in 2015. Overall gross margin benefited from increased average customer numbers resulting from organic customer additions and the TriEagle acquisition.
Adjusted EBITDA in 2015 was $52.6 million, a 36.9% increase over the $38.5 million achieved in 2014. After adjusting for the above-mentioned one-time impact of $4.8 million from the change in the application of our solar revenue recognition policy, Adjusted EBITDA in the fourth quarter of 2015 was $13.2 million, compared to $14.4 million in the fourth quarter of 2014, with fourth quarter results being adversely impacted by a seasonally milder winter.
Distributable Cash was $34.7 million in 2015, representing a payout ratio of 58.2%. This compares to Distributable Cash of $28.6 million in 2014 and a payout ratio of 99.3%. The improved payout ratio resulted from improved Distributable Cash primarily related to strong operating cash flows, which were partially offset by non-recurring expenditures on several strategic initiatives during the year. Additionally, distributions paid to unitholders were positively impacted by the strength of the U.S. dollar against the Canadian dollar, with business operations generating earnings in U.S. dollars whereas distributions to Unitholders are in Canadian dollars. 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 December 31, 2015, Crius had 819,000 customers, up from 569,000 at the end of 2014, representing net customer growth of 250,000 customers, or 43.9% over 2014. Net customer adds in the year were higher than rates achieved in the prior year, and benefited from the 200,000 customers acquired in the TriEagle acquisition, success in the direct marketing channel and commercial sales activity, as well as from declining attrition rates across all customer segments attributable to longer-term fixed price residential and commercial customers in the portfolio.
During 2015, excluding changes in operating assets and liabilities, the Company achieved operating cash flows of $52.6 million as compared to $39.2 million in 2014. At December 31, 2015 the Trust had cash and cash availability of $42.9 million. This consisted of $11.2 million of cash and equivalents and $31.7 million available under the credit facility. This compared to cash and cash availability of $46.3 million at the end of 2014. Cash and availability was impacted by the $19.3 million acquisition of TriEagle in April 2015, which was primarily funded by cash.
During 2015, the Trust increased its indirect ownership of the Company 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 the Company and thus increasing the Trust's indirect ownership to 43.1% from 26.8%, a 16.3% increase. Management expects that the increased ownership of the 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 December 31, 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 fourth quarter and year end 2015 financial results on March 16, 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 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 11:30 a.m. (EST) on March 16, 2016 until March 23, 2016. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter passcode 46115383#.
The Trust was established to provide investors with a distribution-producing investment through its ownership interest in the Company. The Trust holds a 43.1% ownership interest in the Company. With approximately 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 involves 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 dated March 15, 2016 (under the headings "Risk Factors" and "Forward-Looking Statements") and in the MD&A of the Trust for the period ended December 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 period ended December 31, 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 December 31, 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, [email protected], (203) 663-7545; Roop Bhullar, Chief Financial Officer, [email protected], (203) 883-9900; Kelly Castledine, Investor Relations, [email protected], (416) 644-1753