Via Renewables (Spark Energy) Provides Update On Purchase Price For 2021 Book Acquisition

Via Grows Customer Book, Reports Q4 And Full-Year Results

March 3, 2022

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Reporting by Paul Ring • ring@energychoicematters.com

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Via Renewables, Inc. ("Via Renewables" or the "Company", formerly known as Spark Energy) provided an update on the purchase price for a book acquisition which occurred in 2021, as the Company reported fiscal results for the fourth quarter and full year 2021

As previously reported, in May 2021, Via entered into a series of asset purchase agreements and agreed to acquire up to approximately 56,900 RCEs (residential customer equivalents) for a cash purchase price of up to a maximum of $11.5 million. These customers began transferring in August 2021, and are located in Via's existing markets.

In an update, Via reported that, during the year ended December 31, 2021, a total of $3.8 million was paid for approximately 45,000 RCEs under this transaction ($9.1 million for acquired customer contracts, net of $5.3 million related holdbacks under the terms of the purchase agreement). In addition, approximately $1.2 million was released back to Via for a reduction in RCEs to be acquired.

"As part of the acquisitions, we funded an escrow account, the balance of which is reflected as restricted cash in our consolidated balance sheet. As we acquire customers, we make payments to the sellers from the escrow account. As of December 31, 2021, the balance in the escrow account was $6.4 million, and these funds are expected to be released to the sellers as acquired customers transfer from the sellers to the Company in accordance with the asset purchase agreement, and any unallocated balance will be returned to the Company once the acquisition is complete," Via reported

Separately, as previously reported, Via in July 2021 entered into an agreement to acquire up to approximately 50,000 RCEs and derivatives related to the customer load under a five-year contingent fee structure based on gas volume billed and collected for the acquired customer contracts. These customers began transferring in the fourth quarter of 2021, and are located in Via's existing markets. Due to the contingent fee structure, the cost of the RCEs will be recognized when probable and reasonably estimable.

In a 10-K, Via listed the RCEs acquired and flowing under the transactions listed above as 45,000 for the May 2021 transaction, and 33,000 for the July 2021 transaction

Via did not identify the supplier(s) involved in either transaction, but as exclusively reported by EnergyChoiceMatters.com, Starion Energy customers in several states were transferred to Via Energy brands in the second half of 2021

Via stated in a 10-K that, "We will continue to evaluate potential acquisitions during the remainder of 2022."

Via reported RCE growth, versus both September 30, 2021 and December 30, 2020, as a result of the acquisitions

As of December 31, 2021, Via was serving 408,000 RCEs, versus 368,000 as of September 30, 2021, and 400,000 a year ago.

During the year ended December 31, 2021, Via added a gross of approximately 79,000 RCEs through various organic sales channels. "This amount was significantly lower than historical periods primarily due to limitation of our door-to-door marketing as a result of COVID-19 during the majority of 2021, a reduction in targeted organic customer acquisitions as we focused our efforts to improve our organic sales channels, including vendor selection and sales quality, and a slow ramp-up of marketing once restrictions were lifted. As these orders have largely expired, we expect our customer growth to return to historical levels. However, we are unable to predict the ultimate effect on our organic sales, financial results, cash flows, and liquidity at this time," Via said in a 10-K

As noted above, during the year ended December 31, 2021, Via added approximately 78,000 RCEs as a result of a series of asset purchase agreements entered in May 2021 and July 2021.

Gross attrition during the year 2021 was 149,000 RCEs, versus gross attrition of 318,000 RCEs in 2020

Average monthly attrition was 3.3%

At December 31, 2021, Via's customer base was 73% residential and 27% C&I customers

As of December 31, 2021, approximately 64% of Via's RCEs were located in five states. Specifically, 17%, 16%, 13%, 9% and 8% of Via's customers on an RCE basis were located in TX, PA, NY, MA, and NJ respectively

"2021 was a stand out year for Via Renewables. We successfully rebranded to show our commitment to provide green energy to our customers. We persevered through winter storm Uri, which resulted in power and ancillary costs reaching maximum allowed clearing prices coupled with increased demand, the result of which resulted in a significant loss reflected in the first quarter. In spite of this loss we were able to remain liquid and secured customer book acquisitions for approximately 107k RCEs to bolster our customer book," said Keith Maxwell, Via's Chief Executive Officer and Chairman of the Board.

"Looking forward to 2022, our plan is to grow organically by ramping up our door-to-door and telemarketing channels now that COVID restrictions are winding down. We will be expanding our product offerings starting with a new surge protection product, which has launched in Texas. We look to complement our organic sales channels with customer book acquisitions as opportunities present themselves. Via Renewables has committed to having a 100% green book and will continue to purchase Renewable Energy Credits to offset all our electric and natural gas load," Maxwell said

For the quarter ended December 31, 2021, Via Renewables reported Adjusted EBITDA of $11.6 million compared to Adjusted EBITDA of $24.7 million for the quarter ended December 31, 2020. The decrease in Adjusted EBITDA was due to lower gross margin quarter over quarter, partially offset by decreases in G&A expenses.

For the quarter ended December 31, 2021, Via Renewables reported Retail Gross Margin of $25.2 million compared to Retail Gross Margin of $49.0 million for the quarter ended December 31, 2020. This decrease is attributable to fewer customers in Via's overall portfolio throughout the year and margin compression caused by high commodity prices.

Net income (loss) for the quarter ended December 31, 2021, was $(35.8) million, heavily impacted by record commodity prices offset by a reduction in G&A expenses. This compares to net income of $8.8 million for the quarter ended December 31, 2020.

For the full year 2021, Via Renewables reported Adjusted EBITDA of $80.7 million compared to Adjusted EBITDA of $106.6 million for the year ended December 31, 2020. The decrease was primarily due to decreases in both power and gas usage partially offset by higher gas margins. The decrease was also offset by G&A reductions pertaining to bad debt, legal settlement expenses and lower customer acquisitions costs.

For the year ended December 31, 2021, Via Renewables reported Retail Gross Margin of $132.5 million compared to Retail Gross Margin of $196.5 million for the year ended December 31, 2020. The decrease was primarily attributable to a smaller customer book, particularly due to restrictions on Via's organic sales channels, limiting Via's ability to ramp up sales. "The shift in the customer mix towards more residential contracts not only reduces the risk in the portfolio, but also has a positive impact on our G&A and balance sheet," Via said

For the year 2021, electricity Retail Gross Margin was $35.86 per MWh versus $35.37 per MWh a year ago

For the year 2021, natural gas Retail Gross Margin was $4.24 per MMBtu, versus $4.80 per MMBtu a year ago

For the year 2021, electricity volumes were 2,677,681 MWh, versus 4,049,543 MWh a year ago

For the year 2021, natural gas volumes were 8,611,285 MMBtus, versus 11,100,446 MMBtus a year ago

Net income (loss) for the year ended December 31, 2021, was $(4.0) million compared to net income of $68.2 million for the year ended December 31, 2020. The decrease compared to the prior year was primarily the result of a $64.4 million loss due to winter storm Uri. In addition, Via had a mark-to-market gain this year of $5.5 million, compared to a mark-to-market gain of $14.3 million a year ago.

Via reported that, "As of December 31, 2021, we recorded a net loss of approximately $64.4 million as a direct result of Winter Storm Uri. Although our hedge position was 120% of our forecasted demand in Texas for the month of February, we were still required to purchase power at unprecedented prices for an extended period of time during the storm. These price caps imposed by ERCOT for the duration of the storm and beyond have never been experienced in any deregulated market in which we serve. The policies imposed on the electricity markets by ERCOT related to pricing resulted in overall negative impact on our electricity unit margin for 2021."

Via reported that, "During the year ended December 31, 2021, we experienced lower bad debt expense versus 2020 primarily due to an increased focus on collection efforts, timely billing and credit monitoring for new enrollments in non-POR markets. We have also been able to collect on debts that were previously written off, which has further reduced our bad debt expense during the year ended December 31, 2021."

Via's total liquidity as of December 31, 2021 was $122.2 million

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