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Edited Transcript of JE.TO earnings conference call or presentation 7-Nov-19 3:00pm GMT

Q2 2020 Just Energy Group Inc Earnings Call

TORONTO Nov 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Just Energy Group Inc earnings conference call or presentation Thursday, November 7, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* James Brown

Just Energy Group Inc. - CFO

* R. Scott Gahn

Just Energy Group Inc. - CEO, President & Director

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Conference Call Participants

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* Christopher Ralph Van Horn

B. Riley FBR, Inc., Research Division - Analyst

* Mark Thomas Jarvi

CIBC Capital Markets, Research Division - Director of Institutional Equity Research

* Nelson Ng

RBC Capital Markets, Research Division - Analyst

* Raveel Afzaal

Canaccord Genuity Corp., Research Division - Analyst

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and welcome to the Just Energy Second Quarter Fiscal 2020 Results Conference Call. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to turn the conference over to your host, Mr. Scott Gahn, CEO. Please go ahead, sir.

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R. Scott Gahn, Just Energy Group Inc. - CEO, President & Director [2]

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Thank you, operator. Good morning, everyone. Welcome to the 2020 Second Quarter Conference call of Just Energy. With me today is Chief Financial Officer, Jim Brown. Jim and I will discuss the results for the quarter as well as our expectations for the future, and then we'll conduct a question-and-answer session following our prepared remarks.

I need to preface the call by saying that our earnings release and our -- and potentially our answers to your questions will contain forward-looking information. Information may ultimately prove inaccurate, so please read the disclaimer regarding that information at the bottom of the press release.

Let me begin by saying that the strategic review process, coupled with significant internal efforts to enhance our stand-alone financial performance and long-term strategic outlook continued throughout the quarter and are progressing well. The special committee overseeing the strategic reveals the process is progressing within their expectations. The macroeconomic conditions continue to support the process, and we're confident that whatever the result, it will be in the best interest of our shareholders.

Last quarter, I was clear with you that we are moving forward with a new resolve to improve operational controls and elevate our financial discipline as we return to the core fundamentals that make Just Energy, a leading energy retail for over 20 years. And while we've made significant progress in my first full quarter leading the organization, we can and will do much more to deliver better, more sustainable performance. As we reported last quarter, we identified and began rectifying certain enrollment controls in Texas that led to an AR impairment due to bad debt. The control issues allowed a significant number of high credit risk customers to be enrolled over a period stretching back to mid-2018 and ending even when the control fixes were completed in July of Q2 fiscal '20. While we've largely divided more high-risk customers from being enrolled, and we have made substantial progress in reducing the bad debt in Texas, some residual bad debt risk is in the customer book and is working its way through the P&L, as you've seen in our results for Q2.

To ensure we deliver on our promise of improved performance and solidify our position as a leading North American energy retailer, our objective for the remainder of the fiscal year will be twofold. First, we are focused on finding high-quality customers. These customers are targeted with higher credit scores and larger energy footprints that fit our core business model. Correcting our enrollment controls and pivoting to these targeted customer segments has temporarily impacted our sales teams. However, we're now focusing on restoring sales momentum with a razor-sharp focus on value, and we look forward to restoring sales growth in the quarters ahead. Second, we will continue to optimize our cost structure by eliminating redundancies and improving processes. I'm working closely with our leaders to identify and pursue opportunities to drive efficiencies and improve performance, and I'm confident that these actions will drive improved profitability and ultimately maximize the inherent value of the business.

Moving forward, we'll also be more decisive regarding business initiatives. What we sell, where we sell, how we sell and to whom we sell? All of these attributes will be evaluated at as close to a customer level return is possible, keeping only the combinations of products, markets and customers that read -- that meet our threshold returns on invested capital. We're undergoing a rigorous performance improvement review process that will allow us to identify the very specific actions that we'll take in fiscal '20 that will result in greater sales optimization through a focus on data analysis and maximizing internal rate return on each sales campaign with improved margin activities and additional cost efficiencies and further strengthening of capital structure. In addition to these stringent controls and evaluations, we have made the strategic decision to dispose of our noncore operations. This will allow us to focus on our higher-margin North American operations that better aligns us with our future as a leading North American energy retail.

In line with this objective, we executed an agreement for the sale of the operations in the United Kingdom in October and our sale of our Irish operations earlier this month. Both transactions are expected to close before year-end. The sale of our U.K. operations aligns with our broader strategy to concentrate on our higher-margin North American business.

Lastly, let me add a little more color on our liquidity. We are focused on delivering stronger liquidity and building momentum from higher cash receipts, lower selling and administrative cost and more efficient capital expenditures. All of this will equate to increased liquidity and add flexibility to our business. I am confident that our unwavering commitment to balance sheet discipline generate superior returns on invested capital and improving performance will position the company for more predictable, stable performance.

In closing, we are driving performance improvements and focusing on best-in-class customer service as we shape a brighter future for Just Energy. We're operating the business aggressively, evaluating opportunities for further streamlining of the business, and the strategic review process remains in parallel on track.

Now I'd like to turn it over to Jim Brown to give you some specifics about our financial results. Jim?

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James Brown, Just Energy Group Inc. - CFO [3]

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Thank you, Scott. As Scott noted, the efforts and difficult choices made in the quarter allowed us to lay the groundwork for continued strategic review, identifying efficiencies, driving down costs, streamlining processes in our core business. However, we're still not happy with where we are and must continue to evaluate every factor our business to drive shareholder value. As Scott said, subsequent to the quarter end, we signed agreements to sell both our Ireland assets and our U.K. business. We expect these transactions to close prior to [calendar] (added by the company after the call) year-end. Combined, these efforts reinforce our decision to streamline our operations, free up liquidity and build a solid book of business within our core geographies. I want to remind everybody that our fiscal financial results for Q2 are reflective of continuing operations on a year-over-year basis, and have been updated to reflect discontinued operations.

Turning to the second fiscal quarter. Gross margin of $155 million was up 4% from prior year due to lower hedged supply costs in Texas despite our decline in customer base. The company continues to maintain a discipline in its layered hedging strategy, and is pleased with the outcome of one of the most volatile summers in ERCOT history.

Base EBITDA from continuing operations was $49 million for the second quarter. Base EBITDA for the quarter benefit from higher gross margin of approximately $6 million, lower G&A costs reduced by higher bad debt and higher selling cost. Included in second quarter base EBITDA was a gain on the reduction in contingent consideration from the company's acquisition of Filter Group of $15 million. As Scott stated, bad debt expense for the quarter was higher than prior year, driven by the Texas residential market as customers that historically exploited enrollment controls that were disclosed last quarter continue to drop from the portfolio. We've seen a significant decline in the number of customers who are high-risk in the portfolio since the enrollment gaps were closed in Q1 and continuing positive trends in collections and provision rates that we expected to continue to improve and stabilize in future quarters.

We are pleased to report that the cost-cutting actions we initiated in recent quarters are beginning to yield results. Administrative expenses from continuing operations declined 7% to $41 million due to the savings we realized from the restructuring actions that occurred in prior fiscal year as well as our efforts to reduce administrative expenses through greater automation and consolidation of support activities. Included in the $41 million of administrative expenses is $3.6 million associated with our strategic review. Excluding the strategic review costs, administrative expenses were down $7 million or 14% for the comparative period.

Selling and marketing expenses were $54 million, an increase of 8% from the prior year. The increase stems from increased amortization of previously capitalized cost.

Financing costs amounted to $29 million, an increase of 43% from the $20 million reported in the comparative period. The increase was driven by increased interest expense from higher debt levels and higher interest rates.

Our operating cash flow and liquidity increased during the quarter due to seasonality in the company's business and the timing of settlement of certain trades in Texas market, which experienced record high prices. We expect continued seasonality in our cash flows with the second and fourth quarter being the most favorable quarters for liquidity.

Turning briefly to capital allocation. Last quarter, the Board of Directors made a difficult choice to suspend the quarterly dividend to common shareholders for the foreseeable future. This was one of the tough decisions we made to better align our capital to promote long-term health of the business. Scott and I are working closely with the Board to ensure that we prioritize the use of cash, prudently pay down debt and pursue near-term organic growth opportunities that will support the business in the future.

Before I turn back to Scott, I'd like to discuss our fiscal year 2020 guidance. As we close the summer, but begin to enter the period of potentially extreme winter weather in some of our primary North American markets, our robust hedging programs and our insurance wrap will help offset headwinds that can significantly impact markets in which we operate. Furthermore, we continue to make strides in eliminating costs, attracting higher quality customers and improving liquidity. As a result of these efforts, we are maintaining our fiscal year EBITDA guidance of $180 million to $200 million as well as fiscal free cash flow guidance of $50 million to $70 million.

With that, I'll turn it back to Scott for concluding remarks. Scott?

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R. Scott Gahn, Just Energy Group Inc. - CEO, President & Director [4]

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Thanks, Jim. So again, a strategic review process is ongoing, and the special committee is satisfied with the progress being made there. From my perspective, as I've said -- I said last quarter and then again this quarter, which is my first full quarter, first thing we had to do was lock down some of the operational -- operating issues that were negatively impacted business performance. And we've done a great job of doing that, largely, the enrollment control issues that we had in Texas, but in other areas, too. The second thing that had to be done, which we have done a good job so far on is to shed some of the international noncore assets. We sold Ireland assets, we sold the U.K. business and so a lot of success there. We're looking forward to getting the benefit of that, both liquidity as well as the price. The third thing is rightsizing the company G&A and noncommission selling expense. We've done a great job with that, and we've taken 400 FTEs out of the cost structure of the company this year, 290 of those have been employees and the other 110 roughly have been a full-time equivalent contractors that have been taken out. The fourth thing we've done that I really feel like is important for our company as large as we are, is that we're embedding an intense data-driven mindset around all aspects of the business from investment decision to customer acquisition, to the targeting of customer segments and specific pricing. We evaluate everything about our customers, survival rates, long-term value, lifetime value of the customer. It's all critical to us. The idea that business decisions could be made on trailing 12-month average numbers when you got a book that is as diverse as our book. We are looking at very, very, very small and very tight cohorts of customers for their profitability, and that's the way we're going to look at the business going forward. And the fifth thing that we're going to do is we're going to do a lot of work on trying to restore customer growth. The company struggled to have net customer growth for a number of years, and I'm working with our sales teams now on what we need to do to restore the growth of the company on terms of net customer adds.

And that's it. And we're ready to turn it over to Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a question from the line of Chris Van Horn with Riley FBR.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [2]

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Maybe you could talk a little bit about -- you reiterated your $180 million to $200 million. Could you talk about maybe some of the puts and takes between that range?

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James Brown, Just Energy Group Inc. - CFO [3]

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I think the key contingencies are that we, as Scott said, continue to get the sales turned around, make sure we get back to positive RCEs. The second item is we need to ensure that we continue to narrow the bad debt with respect to taxes. I think that you're seeing signs that everything is moving in the right direction, but it takes time to realize that gain, and we want to make sure it happens.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [4]

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Okay, got it. Makes sense. And then you talked a lot about eliminating the cost and revisiting various cost structures within the business. How do we think about that in terms of timing? I mean, is that something that you want to -- do you have an end date goal here? Or is it just going to be a continuing effort until you're satisfied with the level?

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R. Scott Gahn, Just Energy Group Inc. - CEO, President & Director [5]

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Yes. This is Scott. It will be a continuing effort. If you're not continuing to try to keep costs down, they're going up. And for me, I always -- this is a sort of a tired story internally, people cramps every time they bring it up, and I left this company in 2011 as a North American commodity business. And that's really kind of what we are. We've got our value-added products that we -- I do continue to believe sexually being able to roll those in to engage our customers, but we had a fixed commodity business first. And I'm trying to get that G&A back to what it was in 2011. And I know that unless we are continually looking to get more efficient, we're going to end up with rising costs. So it is a continual process.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [6]

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Okay, fair enough. And then you mentioned your fifth item was customer growth. What's the kind of -- I'm sure there's many ways you can tackle that initiative. But is there something that's glaringly obvious in terms of what you need to do to help grow the customer? Or is it just a variety of things, and as you get through it, some might have more weight than others?

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R. Scott Gahn, Just Energy Group Inc. - CEO, President & Director [7]

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Yes. So I look at our business, we go after customers through a number of different channels. And I think we can optimize some of our channel strategy. We've got a retail strategy, but we've got people in Sam's Club, selling to customers who come into Sam's Club. We've got kiosk in other stores, and that's our sort of retail channel, which has really grown significantly over the last few years, and I feel very good about that. Our digital strategy is evolving. I think there's a lot of opportunity for the company to grow its digital footprint and its ability to bring in customers through that channel. But one of the areas that I have really challenged the organization to look at is our fail to renew customers. We've lost 180,000 customers so far this year, who concluded their contract with us and did not renew. Those are the most valuable customers we have. Because when I talk about valuable customers, I talk about customers who stick with us for a contract term. They pay their bill on time. We don't have to disconnect them. Those are really valuable. And we've also found that there's a high correlation in good customer characteristics. So when I've got a customer that's run through contract term, I need to try to keep that customer. Because they are, by definition, a high value customer. So one of the things we're looking at and that I've really challenged the team is to increase our ability to renew customers. It's its own channel, in effect, a 180,000 customers that go somewhere else for their energy, I want to keep as many of those as I can. So I think that's a key element of us being positive net adds. If I kept those customers, right now, I would be positive net adds. And I'm not going to keep them all. So I got to have some improvements on the new sales side, but just keeping the majority of those that leave, if I could keep them might be really close to positive net adds. And so that's really what we're trying to do.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [8]

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Okay. Could you update us on the green portfolio? And is that a good opportunity set for you as you think about customers move in that direction?

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R. Scott Gahn, Just Energy Group Inc. - CEO, President & Director [9]

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Yes. Well, we like green. We've -- we're in the process now of really looking at the way that we price green. We've had some changes in the way we price green that's made it a challenge for customers. So some of what we're trying to do is change the way we price our green to customers. But it remains a good element. We use it oftentimes as an upsell to customers as they come in. So our customer base, we still have a significant segment of our customers that want to have a green footprint as it relates to their energy consumption, and we continue to offer that product too.

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James Brown, Just Energy Group Inc. - CFO [10]

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And Chris, I'd also like to comment on the commercial side. We've seen emergence of demand for sustainable energy solutions around what we've been calling direct green business where basically the customers directly contracting with us to point to an identifiable asset that produces green. We see that trend increasing. And those are sticky customers, good margin customers, and they have a very specific action that we're able to deliver. So it's not a non-issue on the commercial side either.

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Operator [11]

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And your next question comes from the line of Mark Jarvi with CIBC.

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Mark Thomas Jarvi, CIBC Capital Markets, Research Division - Director of Institutional Equity Research [12]

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Just wanted to go back on the guidance, which was reiterated. And just trying to think about the constant context of the contingent consideration with the Filter Group. If you didn't have that $15 million, would you have thought about altering the guidance? Or does this now mean that you think you can push to the upper end of the range with that $15 million?

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James Brown, Just Energy Group Inc. - CFO [13]

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No, Mark. Yes. We are talking about the range, absent that onetime gain. We understand that's an unusual accounting. And that's why we called it out, but it is GAAP. We believe that we'll still be within the range without that.

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Mark Thomas Jarvi, CIBC Capital Markets, Research Division - Director of Institutional Equity Research [14]

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Okay. Good to hear. And then the bad debt did tick higher? I know you guys are working through this enrollment controls issue in Texas. How do you guys see that trending over the next couple of quarters? Or any visibility as you've now moved into the current quarter?

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James Brown, Just Energy Group Inc. - CFO [15]

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We continue to see improvements. We actually -- the President of North American business and I have a weekly meeting on this because we have very keen eye on what's going on. And we see improvement, and we see a decrease in the number of customers that were problematic being billed, which, in turn, means the number of bad debts arising from those will be lower. It takes time for a billing month to flow out. So we see what the collections are with the different billing months and every month is better. So the rate at which those are increasing is a little less than we've expected. So there's some residual bad debt flowing through Q2, but all the trends are positive. We expect it to be better in Q3.

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Mark Thomas Jarvi, CIBC Capital Markets, Research Division - Director of Institutional Equity Research [16]

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Okay. Good to hear. And then Vistra who had their call earlier this week, and they talked a bit about the ERCOT volatility and how they thought for retailers that would make it more expensive or difficult to provide, I guess, hedging or against volatility and things like that. Anything you guys could point to in terms of your ability to stay really competitive in Texas and manage that volatility and any costs associated with seeing through that volatility over the next couple of years?

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R. Scott Gahn, Just Energy Group Inc. - CEO, President & Director [17]

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Yes, I'll start off. We don't see -- we have a very strong intercreditor group of suppliers that we rely on to provide us with all manner of products that help us be competitive, that help us manage our risks in the market. And so we actually feel very good about it. Jim can give you some more detail as the supply function rolls up to him. But from my perspective, the strength of our supplier group gives us a lot of capability. Our internal risk management supply team is very good and performed really well in a -- as Vistra has said, in a highly volatile, particularly that August volatility that we saw, we actually -- our supply team actually produced a slight net positive "P&L". In other words, their cost actually came in lower than first month forecast had them. So we feel very good about it and don't see any real challenges to our ability to go forward. In fact, we think our -- the sophistication of our risk management, we had -- we think actually gives us an advantage against a lot of other retailers out there. Jim, do you have something to add?

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James Brown, Just Energy Group Inc. - CFO [18]

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I just to reiterate everything Scott said. But I think the layered process we use of continuing to take volatility out of the stack, through our base hedges, our shaped hedges or were their contingent hedges, and then finally, the insurance wrap, which gives that final piece of not having to worry about Black Swan events as much allows the flexibility for the team to optimize the P&L. So we're happy with how our ERCOT ended up. It was definitely one of the most volatile summers I've ever seen. That's for sure. But we're happy with the results.

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Mark Thomas Jarvi, CIBC Capital Markets, Research Division - Director of Institutional Equity Research [19]

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And you don't anticipate those products becoming more expensive?

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James Brown, Just Energy Group Inc. - CFO [20]

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It's going to be expensive for everybody if it is. And yes, we consider that in our pricing as well. So we're somewhat indifferent to the price because it's going to be a market price. And yes, we're good. But one thing I can assure you is we will continue to hedge in a very conservative and effective method.

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Mark Thomas Jarvi, CIBC Capital Markets, Research Division - Director of Institutional Equity Research [21]

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Okay. And the last thing I want to talk about was the credit facility that kind of moves into current debt now given that it's 12 months from maturity. You guys obviously talked a little bit in the MD&A about a plan to manage that? Any commentary, if you guys think you're in a place to have that extended in the near term or if it's at a lower size or asset sales, whether it's ecobee state or things like that to help retire some of that credit facility in the next 12 months?

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James Brown, Just Energy Group Inc. - CFO [22]

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Maybe not that specific, Mark, but I can tell you that we're actively working to renew the facility.

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Operator [23]

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And your next question comes from the line of Nelson Ng with RBC Capital Markets.

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Nelson Ng, RBC Capital Markets, Research Division - Analyst [24]

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So the first question just relates to the $15 million EBITDA benefit from the reduced contingent consideration. So my understanding is the contingent consideration reduced by about $31 million. Could you just walk us through how that translates to a $15 million benefit to EBITDA?

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R. Scott Gahn, Just Energy Group Inc. - CEO, President & Director [25]

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Yes. What we did not -- since the continued consideration is in shares, we did not want our own share price flowing through base EBITDA. So we bifurcated the split of the contingent consideration into change due to movement in share price and change due to movement in performance of the ADI. So that's actually have wiped the split occurs.

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Nelson Ng, RBC Capital Markets, Research Division - Analyst [26]

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Okay. Got it. And then the second question just relates to the sale of the U.K. business. So it seems like the U.K. should be reinstating the capacity market. So does that mean that you'll be receiving that additional GBP 8.5-or-so million of proceeds from the purchase price?

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James Brown, Just Energy Group Inc. - CFO [27]

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Well, the way it actually works is if the market was reinstated, we don't get the payment. That was a open question at the time we close the deals, whether that market would be reinstated. If it wasn't reinstated, the buyer didn't have to pay it, and they're going to pass the cost or the savings through that. It has been reinstated, but the amount that we actually owe is still being determined. Any benefit below the cap on the contingent consideration be cash flow to us. And we're still working through that.

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Nelson Ng, RBC Capital Markets, Research Division - Analyst [28]

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And then can you just explain how the -- whether the capacity market is reinstated or not? How that impacts the value of the business? I generally thought the capacity market, that pain was a bit of a pass-through. So I was just wondering how it impacts the underlying business?

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James Brown, Just Energy Group Inc. - CFO [29]

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That's really just a -- so an important thing to understand about the sale of the U.K. business is at the signing date, everything was determined. We didn't want to have a contingencies with respect to working capital adjustments or anything like that. So we use what's called the Lockbox agreement. The -- so therefore, it's really just whether that payment had to be made or not. It's not indicative of the valuation of the business.

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Nelson Ng, RBC Capital Markets, Research Division - Analyst [30]

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Okay. Got it. And then just one last question. So I noticed in the quarter, the, I guess, net debt, including cash balances, the net debt reduced by, I think, over $100 million or so. But obviously, the cash flows from operations was less than that. Can you just talk about how like the changes in working capital or other things, or maybe if the timing item helped with the reduction in debt?

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James Brown, Just Energy Group Inc. - CFO [31]

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Yes. So yes, there's 2 things. One is we are a seasonal business. Q2 and Q4 are the positive cash flow quarters for us, becoming increasingly seasonal as well, for reasons they're probably deeper than we could talk about separately, Nelson, outside this call. The second is there is some timing. There was some trades in our content as a result of the extreme high prices settled positively in the quarter, and we'll have some negative cash flows in the next quarter. And that's just -- that's part of the business we're in.

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Nelson Ng, RBC Capital Markets, Research Division - Analyst [32]

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Okay. Because I know previously, you guys were kind of pushing out the payables date with suppliers. So I'm not sure whether you leaned on some of your suppliers a bit more in the last quarter? Or it's just more about timing of the quarter?

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James Brown, Just Energy Group Inc. - CFO [33]

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It's actually -- it is the extension of payables is somewhat what creates some of the seasonality. We haven't had material increases in any of the supplier terms in the quarter, but those supplier terms do create some of the timing differences in seasonality.

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Operator [34]

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(Operator Instructions) And the next question is from Raveel Afzaal with Canaccord.

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Raveel Afzaal, Canaccord Genuity Corp., Research Division - Analyst [35]

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A couple of housekeeping questions. First of all, how much of the selling costs were amortized in the quarter in Q2 '20?

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R. Scott Gahn, Just Energy Group Inc. - CEO, President & Director [36]

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Sorry. Raveel, could you repeat that, you kind of cut out for a second.

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Raveel Afzaal, Canaccord Genuity Corp., Research Division - Analyst [37]

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Yes, sorry about that. Can you tell me how much of the selling costs were amortized in the quarter?

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James Brown, Just Energy Group Inc. - CFO [38]

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What was the amortization of selling costs in the quarter as opposed to total selling costs?

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Raveel Afzaal, Canaccord Genuity Corp., Research Division - Analyst [39]

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Yes, that's right. Exactly.

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James Brown, Just Energy Group Inc. - CFO [40]

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Getting your number. Do you want to ask your second question, while we pull that up?

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Raveel Afzaal, Canaccord Genuity Corp., Research Division - Analyst [41]

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Sure. Can you also tell us like how much EBITDA was generated by the U.K. operations in the second half of last year -- last fiscal year?

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James Brown, Just Energy Group Inc. - CFO [42]

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We're pulling both of those up now, as you speak. So we will pull those. Is there any kind -- so those are straight up numbers I can give you after the call or we can pull them up right now.

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Raveel Afzaal, Canaccord Genuity Corp., Research Division - Analyst [43]

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Sure. It's okay. I can get them from you after the call. That's fine with me.

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James Brown, Just Energy Group Inc. - CFO [44]

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Just hold a second. This commentary, though, around the amortization, Raveel, is while we are pulling out the specific number that wasn't broken out. Yes. We have seen -- we saw a significant increase in capitalized selling costs last year. We are being more particular about how we spend those dollars. We're really focused on the IRR of what we get back from marketing capital deployed. And we are seeing a levelization of amortization cash spend in the quarter, which is what we -- yes, which we like.

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Raveel Afzaal, Canaccord Genuity Corp., Research Division - Analyst [45]

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Got it. And just with respect to the cash flow guidance that you have for the year. Now should I be using cash flow from operations after working capital changes minus investment capital, which equates to about $50 million in the first half of 2020 and calibrate that with the guidance that you have? Or should we take out this $12 million payment that you've made for the business in Q1 '20?

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James Brown, Just Energy Group Inc. - CFO [46]

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No. It's -- you're correct. It's operating cash flow minus investing net of acquisitions or excluding acquisitions.

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Raveel Afzaal, Canaccord Genuity Corp., Research Division - Analyst [47]

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Excluding acquisitions, so I should take out this $12 million then?

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James Brown, Just Energy Group Inc. - CFO [48]

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You're correct.

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Raveel Afzaal, Canaccord Genuity Corp., Research Division - Analyst [49]

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Got it. That's all for me.

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James Brown, Just Energy Group Inc. - CFO [50]

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Thanks, Raveel. I'll follow up with you on the other 2 numbers.

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Operator [51]

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And I'm showing no further questions at this time. I would now like to turn the conference back to Scott Gahn for closing remarks.

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R. Scott Gahn, Just Energy Group Inc. - CEO, President & Director [52]

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I want to thank everyone who was on the call today. We very -- we feel very positive about the business. We feel like we've done a lot of things to correct some of our problems, and we will look forward to talking to you again next quarter. Thank you.

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Operator [53]

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Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.