GENIE ENERGY LTD 2026 Q2 Earnings Call

Thank you, operator. In the second quarter, Genie delivered strong bottom-line results in both operating segments while continuing to invest in growth opportunities across our businesses and return value to shareholders. At Genie Retail Energy, relatively normalized wholesale energy market conditions enabled us to achieve gross margin on a level comparable to our long-term historical average, and that drove a significant year-over-year improvement in our bottom-line results. GRE's top line declined 5%, primarily reflecting the expiration of aggregation deals over the past year. The deals typically generate low margin revenue, so the impact of their expiration on our bottom line was minimal. At quarter end, we served 345,000 RCEs and 363,000 meters compared to 413,000 RCEs and 419,000 meters a year earlier.

During the second quarter, we added 65,000 gross new customers compared to 70,000 a year earlier. Total customer acquisition expense increased materially as we acquired a higher percentage of customers through higher cost of acquisition channels and fewer through lower cost channels. We approach these low-cost channels opportunistically as they generate lower margin customers compared to higher cost channels. We allowed low-cost channel acquisition volumes to fluctuate depending on how competitive market rates compare to the incumbent utilities offerings. In the second quarter, with these low-cost channels underperforming, we increased our investment in acquisitions through higher cost channels, increasing our base of higher lifetime value customers and building a tailwind that we expect to positively impact the coming quarters.

Acquisitions through high-cost channels also enabled us to prioritize further diversification of our customer base through strong growth in some of our newer markets, including Texas Power Market and California's Gas Market. At GREW, the top line was flat year-over-year. However, contributions from our Diversegy energy brokerage and Genie Solar businesses enabled the segment to achieve positive EBITDA. Diversegy had a particularly strong quarter as it continues to execute its growth strategy. Both Diversegy and Genie Solar are on track to further expand their bottom lines in the coming quarters. Diversegy continues to build its book of business at a double-digit annualized growth rate. Even better, because new business frequently entails upfront customer payments, growth from a cash perspective has been stronger than what is reflected in EBITDA.

This new business will drive revenue growth for several years to come as we earn revenue over the lifetime of the contracts. One of the key drivers for Diversegy's extension has been our ability to leverage AI to optimize our customer acquisition efforts across channels, analyzing the energy requirements of our customers and their industries so that we can tailor our offerings to meet their needs with greater precision. At Genie Solar, we turned on our second community solar project in New York State late in the second quarter, and that will positively impact results starting in the third quarter. GREW's second quarter's results also reflected our continued investment in several early-stage growth initiatives, most notably at Roded. As we've discussed previously, Roded utilizes a patented recycling technology to manufacture useful plastic products from agricultural and other plastic waste. At Roded, we made terrific progress during the quarter.

The company continued to expand production in Israel to meet strong local demand for its pallet products. In fact, we are only approaching the production capacity of our current facility and received a commitment from the Ministry of Environmental Protection to underwrite a material portion of the cost of constructing a larger manufacturing plant. To diversify Roded's revenue, we are preparing to begin manufacturing a second product utilizing the same recycled plastic feedstock. Also, the company was certified as a producer of plastic credits through Verra's Plastic Waste Reduction Standard program, a global platform to incentivize businesses to utilize the vast quantities of waste plastic that otherwise would end up in our oceans or our landfills. This certification will enable Roded to enhance profitability through the monetization of credits it receives for the plastic it collects and converts to finished product.

Looking a little further ahead, Roded is moving forward on an international expansion. The company has identified several potential manufacturing sites in the southeastern U.S. and is now working to select the final site, hire key managers and design the initial palettes it will offer for the North American market. To wrap up at Genie Energy, for the balance of the year, we're looking to boost cash generation across GRE, Diversegy, and Genie Solar, make good on operational progress in our growth initiatives, and return value to shareholders through opportunistic stock purchases and our quarterly dividends. I will turn the call over to Avi for his discussion of our financial results.

Thank you, Michael, and thanks to everyone on the call for joining us this morning. My remarks today cover our financial results for the period ended June 30, 2026. In my commentary, I'll compare the results for the second quarter 2026 to the second quarter of 2025 to remove from consideration the seasonal factors that impact our results, particularly our retail energy business. The second quarter, which includes spring and the early stages of the summer cooling season, is typically characterized by moderate levels of electricity consumption and low levels of natural gas consumption. The quarter's financial results were highlighted by strong margin and Adjusted EBITDA expansion of GRE and profitability at GREW, both of which helped to drive an increase in our consolidated bottom-line performance. Consolidated revenue in the second quarter decreased 4.6% to $100.4 million.

GRE revenue decreased 4.9% to $94.1 million as our customer base contracted through the expiration of low margin aggregation deals. The resulting decrease in consumption was partially offset by increased revenue per unit sold for both electricity and natural gas. Sales of electricity, which contribute 89% of GRE's revenues, decreased 7% to $83.6 million. Kilowatt hours sold decreased by 17%, while revenue per kilowatt hour sold increased to 12%. Natural gas revenue decreased 16.2% to $10.6 million. Therms sold decreased 23%, while revenue per therms sold increased to 50%. At GREW, second quarter revenue was relatively unchanged at $6.3 million. Consolidated gross profit increased 43.4% to $33.7 million, while gross margin increased to 33.5%.

At GRE, gross profit increased 42.2% to $30.3 million, and gross margin increased to 32.2%. GRE achieved a gross margin within historical range given normalized commodity market conditions. Note that the year-ago second quarter was impacted by unusually low natural gas profitability. At GREW, gross profit increased 55% to $3.3 million, driven by increased contributions from both Diversegy and Genie Solar, the two more mature businesses within the segment, both of which are already generating cash. Consolidated SG&A increased 28% to $27.2 million, largely reflecting a mix shift of Genie Retail's customer acquisition channels towards higher per acquisition cost methods. Despite their higher costs upfront, these channels typically generate customer cohorts with higher customer lifetime values.

The gross profit increase at GRE drove a $4.3 million year-over-year increase in consolidated income from operations to $6.5 million and a $4.5 million increase in Adjusted EBITDA to $7.5 million. At GRE, income from operations increased 108.3% to $8.3 million and Adjusted EBITDA increased 96.7% to $8.7 million. Strong contributions from Diversegy and Genie Solar enabled GREW to achieve profitability. Income from operations increased to $100,000 from a loss from operations of $200,000 a year earlier, and Adjusted EBITDA increased to $300,000 from an Adjusted EBITDA loss of $97,000 in the second quarter of 2025.

Consolidated net income attributable to Genie common stockholders was $11.4 million or $0.42 per diluted share, compared to $2.3 million or $0.09 per share a year earlier. Turning now to the balance sheet. At June 30, 2026, cash equivalents, long and short-term restricted cash and marketable equity securities totaled $204.3 million. Working capital was $199.6 million. Our net debt totaled $6.8 million, the largest component of which is the financing for our portfolio of operational solar arrays. We repurchased approximately 47,000 shares of our Class B common stock in the second quarter for $659,000, and we paid our regular quarterly dividend, returning an additional $2 million directly to our stockholders.

Wrapping up, normalized energy market conditions helped us to restore margins at GRE to their long-term range. While GREW generated positive EBITDA even as we continue to invest in early-stage growth initiatives. The improved performance has helped us significantly enhance our profitability, while our balance sheet remains strong with robust levels of cash and minimal debt. Operator, back to you for Q&A.