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Dynamic quotes 
OFFON

GENIE ENERGY LTD.

(GNE)
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GENIE ENERGY : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/07/2021 | 01:45pm EDT
The following information should be read in conjunction with the accompanying
consolidated financial statements and the associated notes thereto of this
Quarterly Report, and the audited consolidated financial statements and the
notes thereto and our Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in our Annual Report on Form 10-K
for the year ended December 31, 2020, as filed with the U.S. Securities and
Exchange Commission (or SEC).



As used below, unless the context otherwise requires, the terms "the Company," "Genie," "we," "us," and "our" refer to Genie Energy Ltd., a Delaware corporation, and its subsidiaries, collectively.



Forward-Looking Statements



This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements that contain the words
"believes," "anticipates," "expects," "plans," "intends," and similar words and
phrases. These forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from the results projected
in any forward-looking statement. In addition to the factors specifically noted
in the forward-looking statements, other important factors, risks and
uncertainties that could result in those differences include, but are not
limited to, those discussed below under Part II, Item IA and under Item 1A to
Part I "Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2020. The forward-looking statements are made as of the date of
this report and we assume no obligation to update the forward-looking
statements, or to update the reasons why actual results could differ from those
projected in the forward-looking statements. Investors should consult all of the
information set forth in this report and the other information set forth from
time to time in our reports filed with the SEC pursuant to the Securities Act of
1933 and the Securities Exchange Act of 1934, including our Annual Report on
Form 10-K for the year ended December 31, 2020.


Coronavirus Disease (COVID 19)

Starting in the first quarter 2020, the world and the United States experienced the unprecedented impacts of the coronavirus disease 2019 (COVID-19) pandemic.

For the three months ended March 31, 2021, the impacts of COVID-19 are evident in several key aspects of our business operations and the corresponding financial impact has been mixed.



Our customer base is predominantly residential, so we benefited from the
increased demand for residential electricity when customers are working from
their homes. On the other hand, like other retail providers, we suspended our
face-to-face customer acquisition programs in March 2020 as public health
measures were implemented to combat COVID-19, resulting in a decrease in gross
meter acquisitions and a reduction in the U.S. domestic meters served. The
reduction in gross meter acquisitions decreased our customer acquisition expense
in the first quarter of 2021. compared to the same period in 2020. Churn for the
first quarter of 2021 decreased compared to the same period in 2020, in part,
due to our competitors suspending face to face marketing programs.


We did not experience any significant changes in our workforce composition and
were able to implement our business continuity plans with no significant impact
to our ability to maintain our operations. We continue to maintain strong
physical and cybersecurity measures in order to both serve our operational needs
with a remote workforce and to ensure that we continue to provide services to
our customers. We face challenges due to the need to operate with a remote
workforce and are continuing to address those challenges so as to minimize the
impact on our ability to operate.


In the fourth quarter of 2020, authorities began relaxing certain COVID-19 public health restrictions in some of our markets which allows us to resume face-to-face sales and marketing. Looking ahead, we expect to see a modest rebound in meter acquisition, however, any reversal of the easing of restrictions would impact that expected rebound.



There are many uncertainties regarding the impacts of the COVID-19 pandemic, and
we are closely monitoring those impacts of on all aspects of its business,
including how it will impact our customers, employees, suppliers, vendors, and
business partners. We are currently unable to predict the impact that COVID-19
will have on our financial position and operating results due to the
complexities of the impacts and numerous uncertainties that are beyond the
Company's control. We expect to continue to assess the evolving impact of
COVID-19 on our business and assets and intend to make adjustments accordingly.


Overview



We are comprised of Genie Retail Energy ("GRE"), Genie Retail Energy
International ("GRE International") and Genie Renewables. In March 2021, the
Company modified its management reporting to rename the Genie Energy Services
("GES") segment as "Genie Renewables."


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GRE owns and operates retail energy providers ("REPs"), including IDT Energy,
Residents Energy, Town Square Energy ("TSE"), Southern Federal and Mirabito
Natural Gas. GRE's REP businesses resell electricity and natural gas primarily
to residential and small business customers, with the majority of the customers
in the Eastern and Midwestern United States and Texas.


GRE International holds the Company's REPs that serve retail customers in United
Kingdom under the name Orbit Energy, its 98.8% interest in venture in Japan
("Genie Japan"), its 91.7% interest in Lumo Energia Oyj ("Lumo Finland"), a REP
serving residential customers in Finland and its 98.9% interest in
Lumo Energi AB ("Lumo Sweden"), which was formed in 2019 to serve retail energy
customers in Sweden.


Genie Renewables holds Diversegy, a retail energy advisory and brokerage company
that serves commercial and industrial customers throughout the United States,
Genie Solar Energy and CityCom Solar and manages our 60.0% controlling interest
in Prism. Prism is a solar solutions company that is engaged in U.S. based
manufacturing of solar panels, solar installation design and solar energy
project management. Genie Solar Energy sells rooftop solar systems to commercial
and industrial clients. CityCom Solar is a marketer of community solar energy
solutions.


As part of our ongoing business development efforts, we seek out new
opportunities, which may include complementary operations or businesses that
reflect horizontal or vertical expansion from our current operations. Some of
these potential opportunities are considered briefly and others are examined in
further depth. In particular, we seek out acquisitions to expand the geographic
scope and size of our REP businesses.


Genie Retail Energy



GRE operates REPs that resell electricity and/or natural gas to residential and
small business customers in Connecticut, Delaware, Georgia, Illinois, Maryland,
Massachusetts, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Florida,
Texas, Rhode Island, and Washington, D.C. GRE's revenues represented
approximately 67.0% and 76.1%% of our consolidated revenues in the three months
ended March 31, 2021 and 2020, respectively.


Seasonality and Weather



The weather and the seasons, among other things, affect GRE's REPs' revenues.
Weather conditions have a significant impact on the demand for natural gas used
for heating and electricity used for heating and cooling. Typically, colder
winters increase demand for natural gas and electricity, and hotter summers
increase demand for electricity. Milder winters and/or summers have the opposite
effects. Unseasonable temperatures in other periods may also impact demand
levels. Potential changes in global climate may produce, among other possible
conditions, unusual variations in temperature and weather patterns, resulting in
unusual weather conditions, more intense, frequent and extreme weather events
and other natural disasters. Some climatologists believe that these extreme
weather events will become more common and more extreme which will have a
greater impact on our operations. Natural gas revenues typically increase in the
first quarter due to increased heating demands and electricity revenues
typically increase in the third quarter due to increased air conditioning use.
Approximately 47.7% and 49.6% of GRE's natural gas revenues for the relevant
years were generated in the first quarter of 2020 and 2019, respectively, when
demand for heating was highest. Although the demand for electricity is not as
seasonal as natural gas (due, in part, to usage of electricity for both heating
and cooling), approximately 31.8% of GRE's electricity revenues for 2020 and
2019, were generated in the third quarters of those years. GRE's REP's revenues
and operating income are subject to material seasonal variations, and the
interim financial results are not necessarily indicative of the estimated
financial results for the full year.


Winter Storm in Texas



In mid-February of 2021, the State of Texas experienced unprecedented cold
weather and snow. With the grid overtaxed due to demand and weather-related
reduced supply and rolling blackouts being enforced, by order of the ERCOT,
real-time commodity prices during the crisis escalated significantly. Although
our supply commitment for our customers in Texas was reasonably hedged for
reasonably foreseen winter weather conditions, the market conditions exposed us
to further unexpected cost increases. Despite our cost increases related to the
unprecedented price volatility in real-time electricity prices, we maintained
customer rates under current agreements with customers. The impact on our
consolidated profitability was approximately $13.0 million in additional costs
related to the situation, which were in the cost of revenue for the first
quarter of 2021.



Purchase of Receivables



Utility companies offer purchase of receivable, or POR, programs in most of the
service territories in which GRE operates. GRE's REPs reduce their customer
credit risk by participating in POR programs for a majority of their
receivables. In addition to providing billing and collection services, utility
companies purchase those REPs' receivables and assume all credit risk without
recourse to those REPs. GRE's REPs' primary credit risk is therefore nonpayment
by the utility companies. In the three months ended March 31, 2021 the
associated cost was approximately 1.1% of GRE's revenue. At March 31, 2021,
86.7% of GRE's net accounts receivables were under a POR program.


Class Action Lawsuits

Although GRE endeavors to maintain best sales and marketing practices, such practices have been the subject of certain class action lawsuits.

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On February 18, 2020, named Plaintiff Danelle Davis filed a putative class
action complaint against Residents Energy and GRE in United States District of
New Jersey alleging violations of the Telephone Consumer Protection Act, 47
U.S.C § 227 et seq. Residents Energy denies allegations in the complaint and
plans to vigorously defend this action. On or around October 9, 2020, Residents
Energy filed a preliminary motion to dismiss one of the counts in the complaint,
and to dismiss GRE as a named defendant.  Although Residents Energy and GRE
denies any wrongdoing in connection with the complaints, the parties settled the
matter for a minimal amount which was included in selling general and
administrative expenses for three months ended March 31, 2021.


See Note 18, Commitments and Contingencies, in this Quarterly Report on Form 10-Q, which is incorporated by reference.

Agency and Regulatory Proceedings



From time to time, the Company responds to inquiries or requests for information
or materials from public utility commissions or other governmental regulatory or
law enforcement agencies related to investigations under statutory or regulatory
schemes. The Company cannot predict whether any of those matters will lead to
claims or enforcement actions or whether the Company and the regulatory parties
will enter into settlements before a formal claim is made. See Notes 18,
Commitments and Contingencies, in this Quarterly Report on Form 10-Q, which is
incorporated by reference, for further detail on agency and regulatory
proceedings.


New York Public Service Commission Proceedings



In December 2017, the New York Public Service Commission ("PSC") held an
evidentiary hearing to assess the retail energy market in New York. On December
12, 2019, following the completion of post-hearing briefings in the proceedings,
the PSC issued orders adopting changes to the New York retail energy market,
effective April 14, 2021 ("2020 Orders"). The 2020 Orders limits the types of
services energy retailer marketers may offer new customers or renewals, in terms
of pricing for non-renewable commodities, and renewable product offerings.
Although the Company is working to ensure that its products and services are
fully compatible with the 2020 Orders, such compliance may adversely impact
customer acquisition and renewal revenue and profitability. The Company is
evaluating its options, both by itself and in tandem with other industry
participants, to challenge or petition for additional clarity and changes to the
2020 Orders. There is insufficient basis to deem any loss probable or to assess
the amount of any possible loss based on the changes instituted by the 2020
Orders. As of March 31, 2021, New York represented 18.6% of GRE's total meters
served and 14.0% of the total residential customer equivalents ("RCEs")
of GRE's customer base. For the three months ended March 31, 2021 and 2020 New
York gross revenues were $17.1 million and $17.5 million, respectively.


An RCE represents a natural gas customer with annual consumption of 100 mmbtu or
an electricity customer with annual consumption of 10 MWh. Because different
customers have different rates of energy consumption, RCEs are an industry
standard metric for evaluating the consumption profile of a given retail
customer base.



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State of Connecticut Public Utilities Regulatory Authority


Town Square



On September 19, 2018, the State of Connecticut Public Utilities Regulatory
Authority ("PURA") commenced an investigation into Town Square following
customer complaints of allegedly misleading and deceptive sales practices on the
part of Town Square. The Connecticut Office of Consumer Counsel has joined in
the investigation Although Town Square denies any basis for those complaints and
any wrongdoing on its part, has cooperated with the investigation and responded
to subpoenas for discovery. On June 17, 2020, the PURA notified Town Square that
it was advancing it's investigation by assigning Prosecutorial ("PRO") staff for
the purpose of investigating Town Square's compliance with licensed electric
supplier billing, marketing, and licensing requirements, and, if appropriate,
facilitating settlement discussions among the parties that contains, but is not
limited to, an appropriate civil penalty, extensive retraining of the supplier's
third-party agents, and retention of all sales calls with continued auditing. As
of March 2021, the parties have been engaging in settlement discussions. In
connection with the foregoing, the Company accrued $0.4 million in the first
quarter of 2021. As of March 31, 2021, Town Square's Connecticut customer base
represented 9.3% of GRE's total meters served and 10.1% of the total RCEs of
GRE's customer base. For three months ended March 31, 2021, Town Square's gross
revenues from sales in Connecticut were $9.4 million and $7.5 million,
respectively.


In May 2021, the parties reached a settlement in principle, subject to finalization of a definitive settlement agreement, pursuant to which Town Square will pay $0.4 million. Town Square has also volunteered to refrain, from door-to-door marketing activities in Connecticut for a period of 15 months.

Residents Energy



In August of 2020, Residents Energy began marketing retail energy services in
Connecticut. Residents Energy serves 270 meters in Connecticut, and for the
three months ended March 31, 2021, Residents Energy's gross revenues from sales
in Connecticut was $0.1 million. During the fourth quarter of 2020, the
enforcement division of PURA contacted Residents Energy concerning customer
complaints received in connection with alleged door-to-door marketing activities
in violation of various rules and regulations, including a ban on door-to-door
activities during the pertinent time period as a result of the COVID-19
pandemic. In January and February of 2021, Residents Energy responded to the
limited information requests and discovery made by the enforcement division. On
March 12, 2021, the enforcement division filed a motion against Resident Energy
with the adjudicating body of PURA, seeking the assessment of $1.5 million in
penalties, along with a suspension of license for eighteen months, auditing of
marketing practices upon reinstatement and an invitation for settlement
discussions. Residents Energy believes that the initial demand is
disproportionate to its scope of activity. Nevertheless, Residents Energy has
been engaging in settlement discussions with PURA. In connection with the
foregoing, the Company accrued $0.3 million in the first quarter of 2021.


In May 2021, the parties reached a settlement in principle, subject to
finalization of a definitive settlement agreement, pursuant to which Residents
will pay $0.3 million. Residents Energy has also volunteered to withdraw from
the market in Connecticut for a period of 36 months.



Critical Accounting Policies




Our consolidated financial statements and accompanying notes are prepared in
accordance with accounting principles generally accepted in the United States of
America, or U.S. GAAP. Our significant accounting policies are described in Note
1 to the consolidated financial statements included in our Annual Report on Form
10-K for the year ended December 31, 2020. The preparation of financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses as well as the
disclosure of contingent assets and liabilities. Critical accounting policies
are those that require application of management's most subjective or complex
judgments, often as a result of matters that are inherently uncertain and may
change in subsequent periods. Our critical accounting policies include those
related to revenue recognition, allowance for doubtful accounts, acquisitions,
goodwill, and income taxes. Management bases its estimates and judgments on
historical experience and other factors that are believed to be reasonable under
the circumstances. Actual results may differ from these estimates under
different assumptions or conditions. For additional discussion of our critical
accounting policies, see our Management's Discussion and Analysis of Financial
Condition and Results of Operations in our Annual Report on Form 10-K for the
year ended December 31, 2020.


Recently Issued Accounting Standards

Information regarding new accounting pronouncements is included in Note 20-Recently Issued Accounting Standards, to the current period's consolidated financial statements.




Results of Operations



We evaluate the performance of our operating business segments based primarily
on income (loss) from operations. Accordingly, the income and expense line items
below income (loss) from operations are only included in our discussion of the
consolidated results of operations.



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Three Months Ended March 31, 2021 and  Compared to Three Months Ended March 31,
2020



Genie Retail Energy Segment



                                                Three months ended
                                                    March 31,                       Change
(amounts in thousands)                      2021               2020            $              %
Revenues:
Electricity                             $    73,387         $   63,075     $   10,312           16.3 %
Natural gas                                  17,280             16,070          1,210            7.5
Total revenues                               90,667             79,145         11,522           14.6
Cost of revenues                             75,701             51,542         24,159           46.9
Gross profit                                 14,966             27,603        (12,637 )        (45.8 )
Selling, general and administrative
expenses                                     13,762             14,585           (823 )         (5.6 )
       Income from operations           $     1,204         $   13,018     $  (11,814 )         90.8 %



Revenues. Electricity revenues increased by 16.3% in three months ended March
31, 2021 compared to the same period in 2020. The increase is due to an increase
in electricity consumption partially offset by a decrease in the average rate
per kilowatt hour sold in the three months ended March 31, 2021 compared to the
same period in 2020. Electricity consumption by GRE's REPs' customers increased
by 22.8% in the three months ended March 31, 2021, compared to the same period
in 2020. The increase in electricity consumption reflected a 23.0% increase in
average consumption per meter partially offset by a 0.2% decrease in average
number of meters served. The increase in per meter consumption reflects a
sustained focus on the acquisition of higher consumption meters, colder weather
in the three months ended March 31, 2021 compared to the same period in 2020 and
increased residential electricity consumption resulting from COVID-19
"stay-at-home" orders. The average rate per kilowatt hour sold decreased 5.2% in
the three months ended March 31, 2021 compared to the same period in 2020.


GRE's natural gas revenues increased by 7.5% in the three months ended March 31,
2021 compared to the same period in 2020.  The increase in natural gas revenues
in the three months ended March 31, 2021 compared to the same period in 2020 was
a result of an increase in natural gas consumption partially offset by a
decrease in average revenue per therm sold. Natural gas consumption
by GRE's REPs' customers increased by 11.3% in the three months ended March 31,
2021 compared to the same period in 2020, reflecting a 17.4% increase in average
consumption per meter partially offset by a 5.2% decrease in average meters
served in the three months ended March 31, 2021 compared to the same period in
2020. The average revenue per therm decreased by 3.4% in the three months ended
March 31, 2021, compared to the same period in 2020.


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The customer base for GRE's REPs as measured by meters served consisted of the
following:



                               March        December 31,      September 30,
(in thousands)                31, 2021         2020                2020           June 30, 2020       March 31, 2020
Meters at end of quarter:
Electricity customers              308                305                309                 310                  313
Natural gas customers               65                 65                 67                  64                   71
Total meters                       373                370                376                 374                  384




Gross meter acquisitions in three months ended March 31, 2021, were
62,000 compared to 69,000 for the same period in 2020. The decrease reflects the
effects of COVID-19 related public health restrictions on certain sales channels
that remain in effect.


Meters served increased by 3,000 meters or 0.8% from December 31, 2020 to March
31, 2021. In three months ended March 31, 2021, average monthly churn increased
to 4.9% compared to 4.4% for same period in 2020.



The average rates of annualized energy consumption, as measured by RCEs, are presented in the chart below. An RCE represents a natural gas customer with annual consumption of 100 mmbtu or an electricity customer with annual consumption of 10 MWh. Because different customers have different rates of energy consumption, RCEs are an industry standard metric for evaluating the consumption profile of a given retail customer base.



                                                                         September 30,
(in thousands)                March 31, 2021      December 31, 2020           2020           June 30, 2020       March 31, 2020
RCEs at end of quarter:
Electricity customers                    291                     284                294                 288                  272
Natural gas customers                     56                      53                 56                  55                   58
Total RCEs                               347                     337                350                 343                  330




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RCEs increased 5.2% at March 31, 2021 compared to March 31, 2020 reflecting our
recent focus on adding higher consumption meters, colder than average weather in
three months ended March 31, 2021 compared the same period in 2020 and COVID-19
driven shift to work-from-home which increased per-meter consumption in our
residential centric customer base.



Cost of Revenues and Gross Margin Percentage. GRE's cost of revenues and gross margin percentage were as follows:



                            Three months ended
                                March 31,                 Change
(amounts in thousands)     2021             2020        $         %
Cost of revenues:
Electricity             $    66,460       $ 43,072   $ 23,388    54.3 %
Natural gas                   9,241          8,470        771     9.1
Total cost of revenues  $    75,701       $ 51,542   $ 24,159    46.9 %




                                   Three months ended
                                        March 31
(amounts in thousands)          2021      2020     Change
Gross margin percentage:
Electricity                      9.4 %   31.7 %   (22.3) %
Natural gas                     46.5     47.3      (0.8)
Total gross margin percentage   16.5 %   34.9 %   (18.4) %



nm-not meaningful


Cost of revenues for electricity increased in the three months ended March 31,
2021 compared to the same period in 2020 primarily because of increases in
electricity consumption by GRE's REPs' customers and the average unit cost of
electricity. The average unit cost of electricity increased 25.7% in the three
months ended March 31, 2021 compared to the same period in 2020. A significant
portion of the increase resulted from incremental cost incurred as an effect of
a major winter storm in Texas as discussed above. Gross margin on electricity
sales decreased in the three months ended March 31, 2021 compared to the same
period in 2020 because the average rate charged to customers decreased while the
average unit cost of electricity increased.


Cost of revenues for natural gas increased in the three months ended March 31,
2021 compared to the same period in 2020 primarily because of an increase in
natural gas consumption by GRE's REPs' customers partially offset by a decrease
in average unit cost of natural gas. The average unit cost of natural gas
decreased 2.0% in the three months ended March 31, 2021 compared to the same
period in 2020. Gross margin on natural gas sales decreased in the three months
ended March 31, 2021 compared to the same period in 2020 because the average
rate charged to customers decreased more than the decrease in the average unit
cost of natural gas.


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Selling, General and Administrative. The decrease in selling, general and
administrative expense in the three months ended March 31, 2021 compared to the
same period in 2020 was primarily due to decreases in customer acquisition costs
and employee-related costs partially offset by an increase in marketing
expenses. Customer acquisition expenses decreased by $1.3 million in the three
months ended March 31, 2021, compared to the same period in 2020 due to reduced
pace of customer acquisition activities resulting from COVID-19 related public
health restrictions. Employee-related expenses decreased by $0.6 million in
the three months ended March 31, 2021 compared to the same period
in 2020 primarily due to a reduction in the number of employees. Marketing
expenses increased by $.0.7 million in three months ended March 31, 2021
compared to the same period in 2020 as a result of expenses incurred on
different marketing channels to offset the effect of COVID-19 related public
health restrictions on door-to-door marketing. As a percentage of GRE's total
revenues, selling, general and administrative expense decreased from 18.4% in
the three months ended March 31, 2020 to 15.2% in the three months ended March
31, 2021.



GRE International Segment


                                     Three Months Ended March 31,                 Change
(amounts in thousands)                  2021               2020              $               %
Revenues
   Electricity                     $        30,284      $     6,897     $    23,387           339.1 %
   Natural gas                              11,792                -          11,792              nm
   Others                                      110               56              54            96.4
Total revenues                     $        42,186      $     6,953     $    35,233           506.7
Cost of revenue                             40,741            7,241          33,500           462.6
Gross profit                                 1,445             (288 )         1,733          (601.7 )
Selling, general and
administrative expenses                      8,106            2,231           5,875           263.3
Loss from operations               $        (6,661 )    $    (2,519 )   $     4,142           164.4 %



nm-not meaningful

GRE International holds our stakes in REPs outside of North America. These businesses currently include Shoreditch, which operates as Orbit Energy in the U.K., Genie Japan, our controlling stakes in Lumo Finland and Lumo Sweden. Lumo Sweden began operations in the second quarter of 2020.



Prior to our acquisition of the remaining 23.0% of Shoreditch, we accounted for
our 77.0% interest in Shoreditch under the equity method of accounting. Under
this method, we recorded our share in the net income or loss of Shoreditch.
Therefore, revenue generated, and expenses incurred were not reflected in our
consolidated revenue and expenses. In October 2020, we acquired the
remaining 23.0% controlling interest in Shoreditch which increased our interest
to 100%.


In January 2021, weather volatility and the lack of adequate gas reserves drove
the prices on the Japan Electric Power Exchange to $2,390 per megawatt hour for
an extended period of time. Although our supply commitment for our customers in
Japan was hedged reasonably for expected winter weather conditions, the extreme
price spike exposed us to further unexpected cost increases. The impact on our
first quarter 2021 consolidated result of operations was approximately $2.5
million.


On April 26, 2021, we entered into an Equity Purchase Agreement ("Purchase
Agreement") with Hanhwa Q Cells Japan Co., Ltd. pursuant to which, we agreed to
sell our interest in Genie Japan for ¥570.0 million (equivalent to approximately
$5.3 million at April 26, 2021) subject to certain terms and conditions set
forth in the Purchase Agreement. The sale is expected to close between May 11,
2021 and June 1, 2021.


Meters served by GRE International's REPs increased to 199,000 at March 31, 2021 from 195,000 at December 31, 2020 primarily as a result of the growth in Shoreditch's and Lumo Finland's customer bases.

RCEs at March 31, 2021 were 103,000, flat as compared to December 31, 2020.



Revenue and Cost of Revenue. GRE International's revenues and cost of revenue
increased in three months ended March 31, 2021 compared to the same period
in 2020 primarily due to the consolidation of Shoreditch in October 2020,
increase in meters served in Lumo Finland, Genie Japan and the start of
commercial operations of Lumo Sweden in the second quarter of
2020. Shoreditch increased GREI's revenue and cost of revenue in the three
months ended March 31, 2021 by $27.8 million and $23.0 million, respectively.
Meters served by Lumo Finland, Genie Japan and Lumo Sweden increased by 55.5% at
March 31, 2021 compared to March 31, 2020.


Selling, General and Administrative Expenses. The increase in selling, general
and administrative expenses in the three months ended March 31, 2021 compared to
the same period in 2020 was primarily due to the consolidation of Shoreditch in
October 2020, continued growth of operations at Lumo Finland and Genie Japan and
the start of commercial operation of Lumo Sweden in the second quarter of 2020.
Shoreditch increased GREI's selling, general and administrative expenses for the
three months ended March 31, 2021 by $5.9 million. Marketing and customer
acquisition-related expenses increased related to the increase in number of
meters acquired. The number of employees also increased in three months ended
March 31, 2021 compared to same period in 2020 as a result of the expansion of
operations.



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Genie Renewables Segment




The Genie Renewables (formerly GES) segment is composed of Prism, in which we
hold a 60.0% controlling interest, Diversegy, Genie Solar and CityCom Solar.


                                          Three Months Ended
                                               March 31,                           Change
(amounts in thousands)                 2021                 2020              $               %
Revenues                           $      2,488          $    17,953     $   (15,465 )        (86.1) %
Cost of revenue                           1,370               16,363         (14,993 )         (91.6 )
Gross profit                              1,118                1,590            (472 )         (29.7 )
Selling, general and                                                                 )               )
administrative expenses                     559                1,056            (497           (47.1
Impairment of assets                          -                  192            (192 )            nm
Loss from operations               $        559          $       342     $      (217 )          63.5 %



nm-not meaningful


Revenue. Genie Renewables' revenues decreased in the three months ended March
31, 2021 compared to the same period in 2020. The decrease in revenues was the
result of the discontinuance of a relationship with a customer of Prism in the
second quarter of 2020. Revenues from Diversegy include commissions, entry fees
and other fees from our energy brokerage and marketing services businesses.
Revenues from CityCom Solar include commission from selling third-party products
to customers.


Cost of Revenues. Cost of revenue decreased in the three months ended March 31,
2021 compared to the same period in 2020. The decrease in cost revenues was
consistent with the decrease in revenues for the period. Cost of revenues in
the three months ended March 31, 2021 also includes commissions incurred by our
energy brokerage and marketing services businesses.


Selling, General and Administrative. Selling, general and administrative
expenses decreased the three months ended March 31, 2021 compared to the same
period in 2020 primarily because of the streamlining of operations of Prism in
first quarter of 2020 and the sale of the Prism facility in October 2020.


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Corporate




Corporate does not generate any revenues, nor does it incur any cost of
revenues. Corporate costs include unallocated compensation, consulting fees,
legal fees, business development expense and other corporate-related general and
administrative expense.


                                          Three months ended
(amounts in thousands)                         March 31,                           Change
                                        2021                 2020              $               %
General and administrative
expenses and loss from
operations                         $      1,677          $     1,627     $        50             3.1 %




Corporate general and administrative expenses increased in three months ended
March 31, 2021 compared to the same period in 2020 primarily because of an
increase in stock-based compensation expense. As a percentage of our
consolidated revenues, Corporate general and administrative expense decreased
to 1.2% in the three months ended March 31, 2021 from 1.6% in the three months
ended March 31, 2020.



Consolidated



Selling, general and administrative expenses. Stock-based compensation expense
included in consolidated selling, general and administrative expense was $0.6
million and $0.5 million in the three months ended March 31, 2021 and 2020,
respectively. At March 31, 2021, aggregate unrecognized compensation cost
related to non-vested stock-based compensation was $5.3 million. The
unrecognized compensation cost is recognized over the expected service period.



The following is a discussion of our consolidated income and expense line items below income from operations:



                                        Three months ended
                                            March 31,                         Change
 (amounts in thousands)                2021            2020              $               %
Income from operations             $     (6,575 )   $     9,214     $   (15,789 )         171.4 %
Interest income                              84             128             (44 )         (34.4 )
Interest expense                           (182 )          (123 )           (59 )          48.0
Equity in net loss in equity                110            (379 )           489          (129.0 )
method investees
Other income (loss), net                    297             150             147            98.0
Unrealized gain on marketable
equity securities and                     4,107               -           4,107              nm
investments
Provision for benefit from
income taxes                               (535 )        (2,569 )         2,034           (79.2 )
Net (loss) income                        (2,694 )         6,421          (9,115 )         142.0
Net (loss) income attributable
to noncontrolling interests                (708 )           589          

(1,297 ) (220.2 ) Net income attributable to Genie $ (1,986 ) $ 5,832 $ (7,818 ) 134.1 %




nm-not meaningful

37

--------------------------------------------------------------------------------

Other Income (loss), net. Other income (loss), net in the three months ended March 31, 2021 and 2020 consisted primarily foreign currency transactions.




Provision for Income Taxes. The decrease in the reported tax rate for the three
months ended March 31, 2021 compared to the same period in 2020, is a result of
changes in the mix of jurisdiction in which taxable income was earned which was
not offset by a benefit in some jurisdictions that had losses due to valuation
allowances in those jurisdictions.


Net Income Attributable to Noncontrolling Interests. The net loss attributable to noncontrolling interests in the three months ended March 31, 2021 was primarily due to the share of noncontrolling interest in net losses of Lumo Finland, Prism and CCE.



The net income attributable to noncontrolling interests in the three months
ended March 31, 2020 primarily due to the share of noncontrolling interest from
deconsolidation of non-operating subsidiaries partially offset by share in net
losses of noncontrolling interest in Lumo Finland, Prism and CCE.


Unrealized gain on marketable equity securities and investments. The unrealized
gain on marketable equity securities and investment for the three months ended
March 31, 2021 pertains to the appreciation of the Company's investments in
common stock and warrants to purchase common stock of Rafael Holdings, Inc.
("Rafael") which the Company acquired in December 2020.



Liquidity and Capital Resources



General



We currently expect that our cash flow from operations and the $24.4 million
balance of unrestricted cash and cash equivalents that we held at March 31, 2021
will be sufficient to meet our currently anticipated cash requirements for at
least the period from April 1, 2021 to May 7, 2022.



At March 31, 2021, we had working capital (current assets less current liabilities) of $35.4 million.

© Edgar Online, source Glimpses

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