FORM 10-K" This is an annual report filed by Genie Energy Ltd. with the United States Securities and Exchange Commission (SEC) for the fiscal year ended December 31, 2024.

Overview

Genie Energy Ltd. is comprised of two main business segments - Genie Retail Energy (GRE) and Genie Renewables (GREW). GRE owns and operates retail energy providers that resell electricity and natural gas primarily to residential and small business customers in the Midwestern, Eastern, and Texas markets. GREW holds interests in solar energy companies that develop, construct, and operate utility-scale solar projects, as well as a community solar marketing business and an energy procurement advisory service.

In 2022, the company discontinued its international retail energy operations in Finland and Sweden due to volatility in the European energy market. This represented a strategic shift that had a major impact on the company’s financial statements. The discontinued international operations are presented separately as discontinued operations for all reporting periods.

Financial Performance

In the year ended December 31, 2024, Genie Energy reported total revenues of $425.2 million, a 3.7% decrease from $428.7 million in 2023. This was driven by a 1.6% decline in GRE’s revenues, partially offset by a 16.1% increase in GREW’s revenues.

GRE’s electricity revenues were relatively flat, decreasing 0.1% year-over-year, as a 3.0% decrease in average electricity rates was mostly offset by a 3.0% increase in electricity consumption. GRE’s natural gas revenues decreased 6.9% due to an 11.6% decline in average natural gas rates, partially offset by a 5.3% increase in natural gas consumption.

GREW’s revenue growth was driven by increased contributions from its solar project development and energy procurement advisory businesses, partially offset by lower commissions from selling alternative products and services.

Consolidated gross profit decreased 7.8% to $138.5 million in 2024 from $146.2 million in 2023. GRE’s gross margin percentage declined from 35.0% to 32.8% due to the impact of higher wholesale electricity and natural gas costs that could not be fully passed through to customers. GREW’s gross margin improved from 15.1% to 29.0% due to the revenue mix shift towards higher-margin solar and advisory services.

Selling, general, and administrative (SG&A) expenses increased 5.3% to $93.4 million, representing 22.0% of total revenues compared to 21.3% in 2023. The increase was primarily due to higher marketing and customer acquisition costs, employee-related expenses, and regulatory fees at GRE, as well as increased headcount and other costs at GREW.

The company recorded a $33.6 million provision for captive insurance liabilities in 2024 related to the establishment of a wholly-owned captive insurance subsidiary to enhance its risk financing strategies.

Net income from continuing operations increased 9.6% to $15.2 million in 2024 from $13.9 million in 2023. However, the company reported a net loss from discontinued operations of $2.9 million in 2024 compared to net income of $6.4 million in 2023, primarily due to an estimated loss related to legal claims filed by the bankruptcy administrator of the company’s former Finnish subsidiary.

Overall, net income attributable to Genie Energy Ltd. decreased 35.6% to $12.6 million in 2024 from $19.5 million in 2023.

Segment Performance

Genie Retail Energy (GRE):

• Revenues decreased 1.6% to $403.3 million, with a 0.1% decline in electricity revenues and a 6.9% decrease in natural gas revenues.
• Gross profit decreased 7.8% to $132.1 million, with gross margin declining from 35.0% to 32.8% due to higher wholesale energy costs.
• Income from operations decreased 21.4% to $56.5 million.

Genie Renewables (GREW):

• Revenues increased 16.1% to $21.9 million, driven by growth in solar project development and energy procurement advisory services.
• Gross profit increased 122.6% to $6.3 million, with gross margin improving from 15.1% to 29.0%.
• Loss from operations decreased 48.6% to $3.0 million.

Corporate:

• General and administrative expenses decreased 21.4% to $8.7 million.
• The company recorded a $33.6 million provision for captive insurance liabilities.
• Loss from operations decreased 24.7% to $42.3 million.

Strengths and Weaknesses

Strengths:

• Diversified business model with both retail energy and renewable energy operations.
• Strong customer acquisition capabilities, as evidenced by 17.2% growth in GRE’s customer meter count in 2024.
• Established relationships with utility companies through purchase of receivables programs, reducing credit risk.
• Vertical integration in the solar business through Genie Solar’s development, construction, and operation of utility-scale projects.
• Proactive risk management through the establishment of a captive insurance subsidiary.

Weaknesses:

• Exposure to volatility in wholesale electricity and natural gas prices, which can compress margins if not passed through to customers.
• Reliance on a few large utility customers for a significant portion of revenues and receivables.
• Ongoing legal and regulatory risks related to the company’s retail energy operations.
• Losses in the discontinued international operations, which continue to impact the company’s financial results.
• Relatively small scale of the renewable energy business compared to the retail energy segment.

Outlook and Future Prospects

Genie Energy faces both opportunities and challenges in the years ahead. On the retail energy side, the company will need to navigate ongoing market volatility and regulatory scrutiny while continuing to grow its customer base. Investments in marketing, customer acquisition, and technology will be critical to maintaining a competitive position.

In the renewable energy segment, Genie has an opportunity to capitalize on the growing demand for solar power and related services. The company’s vertical integration and project development expertise position it well to compete in this market. However, the renewable energy business remains relatively small compared to the core retail energy operations, and the company will need to allocate capital and resources judiciously to drive growth.

The establishment of the captive insurance subsidiary is a proactive step to manage the company’s risk profile, but the ultimate success of this initiative will depend on the company’s ability to accurately assess and price the insured risks.

Overall, Genie Energy appears to be taking the necessary steps to strengthen its business model and position itself for future growth, but it continues to face headwinds from market volatility, regulatory challenges, and the lingering impact of its discontinued international operations. Prudent management of costs, risks, and capital allocation will be crucial to the company’s long-term success.