Crius Energy Trust Tr Unit CRIUF

RBC

[retiredcf]

Super_Cycle.  Interesting that you just post the negative comment and talk about adding on weakness. Next time you might want to post the entire report which also highlights the positive cost savings. GLTA

November 14, 2018

Crius Energy Trust

First Glance: Q3 falls short, but core results look better

Impact: Modestly negative

First impression

Q3/18 results below our expectations. Crius Energy reported Q3/18 Adjusted EBITDA of $15 million, falling short of our estimate of $22 million and consensus of $23 million (consensus range of $22–25 million). The variance to our estimate is largely due to regulatory changes in the municipal aggregation portfolio that reduced gross margins by $4.4 million during the quarter, and one-time severance and restructuring costs of $2.3 million. Please refer to Exhibit 1 for additional details.

Exiting the municipal aggregation business. Gross margins in Q3/18 were negatively impacted by the municipal aggregation portfolio due to regulatory changes that resulted in significant cost factors in New Jersey and Massachusetts, which the company was not able to fully pass through to customers. Management plans to exit and run off the business and pursue higher-margin customers.

Winding down the solar business. As expected, as of the end of the quarter, Crius has substantially wound down its solar business and management does not expect a meaningful negative financial impact from the solar business in Q4/18. Management noted that excluding any potential proceeds from a sale, it expects a one-time cost of up to $2 million to be incurred in Q4/18.

Cost-saving initiatives on track to meet high end of guidance. As at the end of Q3/18, Crius has achieved an annualized run-rate of $22.3 million in cumulative cost synergies and has plans in place to achieve $25.1 million in total cost synergies by the end of the year. This is at the high end of management's previous guidance range of $20–25 million. After the cost savings and wind-down of solar, management believes the company can deliver a minimum steady-state base of Adjusted EBITDA of $100 million annually.

Conference call: Thursday, November 15, at 8:30AM ET. The dial- in number is 1-888-231-8191. We expect investors to focus on the economics and regulatory outlook of the municipal aggregation portfolio, gross margin trend of the underlying portfolio, and commentary on management's ability to achieve an Adjusted EBITDA base of $100 million