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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended June 30, 2020
 
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from          to          
 
Commission File Number: 001-36559
Spark Energy, Inc.
(Exact name of registrant as specified in its charter)
Delaware46-5453215
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
12140 Wickchester Ln, Suite 100
Houston, Texas 77079

(Address of principal executive offices)
 
(713) 600-2600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbols(s)Name of exchange on which registered
Class A common stock, par value $0.01 per shareSPKEThe NASDAQ Global Select Market
8.75% Series A Fixed-to-Floating Rate

Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share
SPKEPThe NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.        
Large accelerated filer                  Accelerated filer  
Non-accelerated filer Smaller reporting company



Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
    
        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
         Yes  No

There were 14,672,432 shares of Class A common stock, 20,800,000 shares of Class B common stock and 3,567,543 shares of Series A Preferred Stock outstanding as of August 3, 2020.



SPARK ENERGY, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended June 30, 2020
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2020 AND DECEMBER 31, 2019 (unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (unaudited) 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (unaudited) 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (unaudited) 
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
SIGNATURES

1

Table of Contents
Cautionary Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. These forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), can be identified by the use of forward-looking terminology including “may,” “should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “plan,” “intend,” “project,” or other similar words. All statements, other than statements of historical fact included in this Report, regarding strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, objectives and beliefs of management are forward-looking statements. Forward-looking statements appear in a number of places in this Report and may include statements about expected impacts of COVID-19, business strategy and prospects for growth, customer acquisition costs, legal proceedings, ability to pay cash dividends, cash flow generation and liquidity, availability of terms of capital, competition and government regulation and general economic conditions. We caution readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, expected, projected or assumed in the forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove correct.
The forward-looking statements in this Report are subject to risks and uncertainties. Important factors that could cause actual results to materially differ from those projected in the forward-looking statements include, but are not limited to:

potential and evolving risks and uncertainties relating to COVID-19, including the geographic spread, the severity of the disease, the scope and duration of the COVID-19 outbreak, actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to treat its impact, and the potential for continuing negative impacts of COVID-19 on economies and financial markets;
changes in commodity prices;
the sufficiency of risk management and hedging policies and practices;
the impact of extreme and unpredictable weather conditions, including hurricanes and other natural disasters;
federal, state and local regulations, including the industry's ability to address or adapt to potentially restrictive new regulations that may be enacted by public utility commissions;
our ability to borrow funds and access credit markets;
restrictions in our debt agreements and collateral requirements;
credit risk with respect to suppliers and customers;
changes in costs to acquire customers as well as actual attrition rates;
accuracy of billing systems;
our ability to successfully identify, complete, and efficiently integrate acquisitions into our operations;
significant changes in, or new changes by, the independent system operators ("ISOs") in the regions we operate;
competition; and
the "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in "Item 1A— Risk Factors" of this Report, and in our other public filings and press releases.

You should review the risk factors and other factors noted throughout or incorporated by reference in this Report that could cause our actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements speak only as of the date of this Report. Unless required by law, we disclaim any obligation to publicly update or revise these statements whether as a result of new information, future events or otherwise. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

2

Table of Contents
PART I. — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
SPARK ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share counts)
(unaudited)
June 30, 2020December 31, 2019
Assets
Current assets:
Cash and cash equivalents$78,618  $56,664  
Restricted cash1,006  1,004  
Accounts receivable, net of allowance for doubtful accounts of $6,299 at June 30, 2020 and $4,797 at December 31, 2019
68,043  113,635  
Accounts receivable—affiliates4,148  2,032  
Inventory972  2,954  
Fair value of derivative assets312  464  
Customer acquisition costs, net10,382  8,649  
Customer relationships, net12,159  13,607  
Deposits6,086  6,806  
Renewable energy credit asset12,175  24,204  
Other current assets7,623  6,109  
Total current assets201,524  236,128  
Property and equipment, net2,779  3,267  
Fair value of derivative assets221  106  
Customer acquisition costs, net2,049  9,845  
Customer relationships, net11,729  17,767  
Deferred tax assets28,890  29,865  
Goodwill120,343  120,343  
Other assets4,477  5,647  
Total assets$372,012  $422,968  
Liabilities, Series A Preferred Stock and Stockholders' Equity
Current liabilities:
Accounts payable$31,979  $48,245  
Accounts payable—affiliates717  1,009  
Accrued liabilities38,289  37,941  
Renewable energy credit liability18,696  33,120  
Fair value of derivative liabilities11,282  19,943  
Other current liabilities1,461  1,697  
Total current liabilities102,424  141,955  
Long-term liabilities:
Fair value of derivative liabilities408  495  
Long-term portion of Senior Credit Facility100,000  123,000  
Other long-term liabilities73  217  
Total liabilities202,905  265,667  
Commitments and contingencies (Note 12)
Series A Preferred Stock, par value $0.01 per share, 20,000,000 shares authorized, 3,707,256 shares issued and 3,567,543 shares outstanding at June 30, 2020 and 3,707,256 shares issued and 3,677,318 shares outstanding at December 31, 2019
87,288  90,015  
Stockholders' equity:
       Common Stock:
Class A common stock, par value $0.01 per share, 120,000,000 shares authorized, 14,771,878 shares issued and 14,672,432 shares outstanding at June 30, 2020 and 14,478,999 shares issued and 14,379,553 shares outstanding at December 31, 2019
148  145  
Class B common stock, par value $0.01 per share, 60,000,000 shares authorized, 20,800,000 shares issued and outstanding at June 30, 2020 and 20,800,000 shares issued and outstanding at December 31, 2019
209  209  
       Additional paid-in capital53,409  51,842  
       Accumulated other comprehensive loss(40) (40) 
       Retained earnings 7,275  1,074  
       Treasury stock, at cost, 99,446 shares at June 30, 2020 and December 31, 2019
(2,011) (2,011) 
       Total stockholders' equity58,990  51,219  
Non-controlling interest in Spark HoldCo, LLC22,829  16,067  
       Total equity81,819  67,286  
Total liabilities, Series A Preferred Stock and Stockholders' equity$372,012  $422,968  

The accompanying notes are an integral part of the condensed consolidated financial statements.
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SPARK ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenues:
Retail revenues$128,618  $177,805  $294,978  $417,959  
Net asset optimization (expense) revenues(82) (56) 239  2,496  
Total Revenues128,536  177,749  295,217  420,455  
Operating Expenses:
Retail cost of revenues65,605  158,759  184,428  354,014  
General and administrative 21,331  37,247  47,007  66,723  
Depreciation and amortization8,010  10,312  16,806  22,467  
Total Operating Expenses94,946  206,318  248,241  443,204  
Operating income33,590  (28,569) 46,976  (22,749) 
Other (expense)/income:
Interest expense(1,193) (1,995) (2,746) (4,218) 
Interest and other income 53  494  213  683  
Total other expenses(1,140) (1,501) (2,533) (3,535) 
Income before income tax expense 32,450  (30,070) 44,443  (26,284) 
Income tax expense (benefit)5,673  (4,586) 7,598  (3,545) 
Net income (loss)$26,777  $(25,484) $36,845  $(22,739) 
Less: Net income (loss) attributable to non-controlling interests15,618  (18,369) 21,207  (16,406) 
Net income (loss) attributable to Spark Energy, Inc. stockholders$11,159  $(7,115) $15,638  $(6,333) 
Less: Dividends on Series A Preferred Stock2,039  2,027  3,539  4,054  
Net income (loss) attributable to stockholders of Class A common stock$9,120  $(9,142) $12,099  $(10,387) 
Other comprehensive income (loss), net of tax:
Currency translation loss$(63) $  $(98) 
Other comprehensive loss  (63)   (98) 
Comprehensive income (loss)$26,777  $(25,547) $36,845  $(22,837) 
Less: Comprehensive income (loss) attributable to non-controlling interests15,618  (18,407) 21,207  (16,464) 
Comprehensive income (loss) attributable to Spark Energy, Inc. stockholders$11,159  $(7,140) $15,638  $(6,373) 
Net income (loss) attributable to Spark Energy, Inc. per share of Class A common stock
       Basic$0.63  $(0.64) $0.84  $(0.73) 
       Diluted$0.62  $(0.73) $0.83  $(0.73) 
Weighted average shares of Class A common stock outstanding
       Basic14,558  14,246  14,469  14,191  
       Diluted14,763  35,046  14,569  34,991  

The accompanying notes are an integral part of the condensed consolidated financial statements.
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SPARK ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in thousands)
(unaudited)
Six Months Ended June 30, 2020
Issued Shares of Class A Common StockIssued Shares of Class B Common StockTreasury StockClass A Common StockClass B Common StockTreasury StockAccumulated Other Comprehensive LossAdditional Paid-in CapitalRetained Earnings (Deficit)Total Stockholders' EquityNon-controlling InterestTotal Equity
Balance at December 31, 201914,479  20,800  (99) $145  $209  $(2,011) $(40) $51,842  $1,074  $51,219  $16,067  $67,286  
Impact of adoption of ASC 326
—  —  —  —  —  —  —  —  (633) (633) —  (633) 
Balance at January 1, 202014,479  20,800  (99) 145  209  (2,011) (40) 51,842  441  50,586  16,067  66,653  
Stock based compensation—  —  —  —  —  —  1,772  —  1,772  —  1,772  
Restricted stock unit vesting293  —  —  3  —  —  —  (915) —  (912) —  (912) 
Consolidated net income—  —  —  —  —  —  —  —  15,638  15,638  21,207  36,845  
Distributions paid to non-controlling unit holders—  —  —  —  —  —  —  —  —  —  (13,735) (13,735) 
Dividends paid to Class A common stockholders ($0.3625 per share)
—  —  —  —  —  —  —  —  (5,265) (5,265) —  (5,265) 
Dividends paid to Preferred Stockholders—  —  —  —  —  —  —  —  (3,539) (3,539) —  (3,539) 
Changes in ownership interest—  —  —  —  —  —  —  710  —  710  (710) —  
Balance at June 30, 202014,772  20,800  (99) $148  $209  $(2,011) $(40) $53,409  $7,275  $58,990  $22,829  $81,819  

















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Three Months Ended June 30, 2020
Issued Shares of Class A Common StockIssued Shares of Class B Common StockTreasury StockClass A Common StockClass B Common StockTreasury StockAccumulated Other Comprehensive LossAdditional Paid-in CapitalRetained Earnings (Deficit)Total Stockholders' EquityNon-controlling InterestTotal Equity
Balance at March 31, 2020
14,495  20,800  (99) $145  $209  $(2,011) $(40) $52,710  $814  $51,827  $14,906  $66,733  
Stock based compensation443443443
Restricted stock unit vesting2773(876)(873)(873)
Consolidated net income11,15911,15915,61826,777
Distributions paid to non-controlling unit holders(6,563)(6,563)
Dividends paid to Class A common stockholders ($0.18125 per share)
(2,659)(2,659)(2,659)
Dividends paid to Preferred Stockholders(2,039)(2,039)(2,039)
Changes in Ownership Interest1,1321,132(1,132)
Balance at June 30, 202014,77220,800(99)$148$209$(2,011)$(40)$53,409$7,275$58,990$22,829$81,819















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Six Months Ended June 30, 2019
Issued Shares of Class A Common StockIssued Shares of Class B Common StockTreasury StockClass A Common StockClass B Common StockTreasury StockAccumulated Other Comprehensive LossAdditional Paid-in CapitalRetained Earnings (Deficit)Total Stockholders' EquityNon-controlling InterestTotal Equity
Balance at December 31, 2018
14,178  20,800  (99) $142  $209  $(2,011) $2  $46,157  $1,307  $45,806  $44,488  $90,294  
Stock based compensation301  —  —  —  —  —  —  2,511  —  2,511  —  2,511  
Restricted stock unit vesting—  —  —  3  —  —  —  (1,107) —  (1,104) —  (1,104) 
Consolidated net loss—  —  —  —  —  —  —  —  (6,333) (6,333) (16,406) (22,739) 
Foreign currency translation adjustment for equity method investee—  —  —  —  —  —  (40) —  —  (40) (58) (98) 
Distributions paid to non-controlling unit holders—  —  —  —  —  —  —  —  —  —  (7,978) (7,978) 
Dividends paid to Class A common stockholders ($0.3625 per share)
—  —  —  —  —  —  —  (5,170) —  (5,170) —  (5,170) 
Changes in ownership interest—  —  —  —  —  —  —  1,912  —  1,912  (1,912) —  
Dividends to Preferred Stockholders—  —  —  —  —  —  —  (2,029) (2,027) (4,056) —  (4,056) 
Proceeds from disgorgement of stockholder short-swing profits—  —  —  —  —  —  —  55  —  55  —  55  
Acquisition of Customers from Affiliate—  —  —  —  —  —  —  —  —  —  (10) (10) 
Balance at June 30, 2019
14,479  20,800  (99) $145  $209  $(2,011) $(38) $42,329  $(7,053) $33,581  $18,124  $51,705