Just Energy Group Inc.
Q1 2019 Earnings Call Transcript

Published: 9 Aug 2018

[Operator:]

Good day, and welcome to the Just Energy Group Fiscal First Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I'd like to turn the conference over to Pat McCullough, Chief Executive Officer. Please go ahead.

[Pat McCullough:]

Thank you, operator. Good morning, everyone, and thank you for joining us for our fiscal 2019 first quarter conference call. I'm Pat McCullough, Chief Executive Officer of Just Energy. With me today is our Chief Financial Officer, Jim Brown. Jim and I will discuss the results for the quarter, as well as our expectations for the future. We will then open the call to questions. Let me preface the call by telling you that our earnings release and potentially our answers to your questions will contain forward-looking financial information. This information may eventually prove to be inaccurate, so please read the disclaimer regarding such information at the bottom of our press release. Today, we will offer some perspective on our results followed by a deeper dive into a few of the key strategic initiatives we are pursuing that will begin to deliver measurable contributions to our growth in the second half of the year and beyond. Our accomplishments during the first quarter of fiscal 2019 are setting the stage for profitable long-term growth, while also positioning the Company to achieve our stated financial objectives for the year. Our earnings were essentially on plan for our fiscal 2019 guidance. Despite traditionally being our seasonally slowest quarter, our first quarter of fiscal 2019 results met our expectations. The core business performed well with sales hitting targets, net RCE growth and record gross margin levels for new and renewing residential customers. We exited the first quarter confident that we are on course to achieve our strategic operational and financial objectives for the fiscal year. A few items that I'd like to highlight for the quarter. Our positive sales momentum continued into the new fiscal year. During the quarter, we delivered strong customer additions and positive net RCE additions. We have now exceeded six consecutive quarters of gross customer growth in our consumer division and positive net RCE additions in total during each of the past four quarters. We believe we can continue this momentum into fiscal 2019 and beyond. As Just Energy deploys a more consistent value creation product strategy across our consumer business, we expect to become less dependent on price based commodities to become a leading provider of profitable value-add products and services globally. During the quarter, we have implemented successful pricing initiatives that will result in tens of million dollars of benefit in the second half of the year. This is the first time the Company has raised prices holistically over four years. Residential customers added or renewed at record level gross margins in the face of ongoing competitive pricing pressures. Our core business performed well and we continue to build on strong underlying trends that are an early estimate that our suite of value-added products and services are resonating among our target customers. What is also important to note is the aggregation costs are down in residential as we focus on scaling the business in a sustainable manner that ultimately boosts our profitability profile. Our embedded gross margin, a metric which we believe is the best indicator of our future profits, which levels the rivals and all-time company record. As we look ahead, we feel we are well positioned to maximize profits and cash flow from the growing book of business. I find it interesting that while our embedded gross margin is approaching an all-time record high, our market cap is testing relative to historic lows. We recognized this early and there are still a lot to be done. We are confident that our level of focus and commitment to a manageable set of strategic priorities combined with a renewed sense of urgency and accountability is setting the stage for sustainable, predictable and profitable growth. Let me go a bit further to outline what exactly this means and highlight the strategic initiatives will be most critical to driving measurable results within our business and for our shareholders. First, we are actively working to remove the volatility in our performance and establish a strong level of predictability in our results through improved weather hedges and insurance products. Second, we are successfully implementing pricing actions. As you saw in our first quarter results, those actions are taking hold and leading to elevated levels of residential gross margins, which will continue to expand in Q2 and beyond. We expect these efforts to contribute more as we go deeper into the fiscal year. We can expand on these actions as we continue to reach the right fit customers that demand our value added products and services through our new strategic alternative channels. Third, we are taking great measures to get organized in a manner that will better facilitate our ability to cross-sell our value added products and unlock new level of profitability and growth for Just Energy. As we better aligning our team and coordinate our sales and marketing efforts in a way that better maximizes our new sales channels, results will improve. We believe you will see this transformation very clearly over the next year in the form of measurable financial results and real growth. These cross-sell and opportunities are present today and primarily center around our energy efficient heat and retrofitting businesses, for what we referred to was Just Energy advanced solutions. We believe these efforts will begin to noticeable contribute to our earnings results in a second half of this year. Finally, our geographic expansion efforts remain on track. The UK continues to grow, having grown 9% during the quarter and now representing 11% of our RCE base. In our newer markets, Ireland is signing new customers every day and we fully expect this market to contribute to our growth in the short-term. In summary, Just Energy is becoming less depended on commodity products and we believe in the convergence of the smart connected home, home automation security energy in water representing a significant opportunity for us. We are building a platform to seamlessly integrate energy efficiency, water conservation, renewable, storage, and commodity products into any integrator of these products and services. Our strategy is to develop a more profitable offering with value added products and services were Just Energy owns and controls customer relationships throughout the entire customer experience. With that, I would like to turn the call over to Jim Brown, our Chief Financial Officer. Jim?

[Jim Brown:]

Thank you, Pat. First I'll begin with an earnings update on the first quarter. Then I'll provide additional color on some key performance metrics, the balance sheet, and the outlook for fiscal 2019. Gross margin during the quarter was $153 million, a decrease of 3% from $157 million in the same quarter last year. The decrease in gross margin relates to lower deliveries to our Canadian residential customer due to regulatory selling constraint, the impact of foreign exchange and one-time favorable resettlement in the first quarter of the prior year for our commercial division. This decrease was partially offset by favorable U.S. residential results or the Company continues to focus on value selling, an optimization of customer pricing. Embedded gross margin continues to grow to approximately $2 billion as we increase our sign profitability per customer and increase our customer base. The Company continues to focus on maximizing the profitability of our products offered to customers as well as pricing optimization. During the quarter, the consumer division added customers at $229 per RCE as opposed to $194 per RCE, the same quarter last year. In the commercial division, customers were added at $81 per RCE versus $75 per RCE in the prior year. In all cases, the margin rate of customers added exceeded the margin rate of customers lost. We continue to assess and prioritize the return on investment of our sales dollars deployed to maximize shareholder return. Turning to expenses, administrative expenses increased $7 million to $56 million during the quarter. This increase is the result of continued geographic expansion, investment and growth and the full quarter cost of bolt-on acquisitions they occurred after the end of the first quarter last year. The Company remains focused on controlling cost and continues to consolidate operational functions to increase effectiveness and efficiency. Selling and marketing expenses decreased 13% from the prior year to $51 million during the first quarter. This decrease is due to lower selling costs related to the Canadian consumer market. This continuation of the solar business, foreign exchange and the time of selling expenses related to the commercial division. All of this resulted in Base EBITDA of $27 million for the first quarter of fiscal year 2019, a decrease of $5 million as compared to the first quarter of fiscal 2018. Now, turning to the some key performance metrics for our business and the balance sheet. As discussed earlier, our positive net-add trend continues. First quarter gross RCEs of 389,000, improved 34% year-over-year with strong double-digit improvements driven by the Commercial businesses. Net RCE additions of positive 10,000 during the quarter improved 145,000 from a negative 135,000 net RCE additions in the same quarter for last year. Attrition rates remain low and stable a combined attrition rate of 13% for the trailing 12 months. As we continue to test customer price electricity through pricing optimization with moderate attrition rates to ensure maximum profitability. The renewal rate was 56% for the trailing 12 months, a decline of six percentage points year-over-year. The decline was driven by the roll-off of a customer aggregation added in the prior year and normal first quarter renewal pressure inherent in the Commercial business that was more than over come back gross ads. Base FFO was $18 million for the first quarter, down $2 million from the same quarter last year, primarily driven by lower EBITDA. The payout ratio of FFO on a trailing 12 months basis was 98%, higher than our target ratio and higher than our payout ratio of 65% in the prior year. This was largely driven by weather events of fiscal 2018 which will continue to roll off of the year goes on. Book value net debt to the trailing 12 months Base EBITDA was 3.2 times, higher than the 2.8 times report in the prior quarter due to lower Base EBITDA and higher utilization of the credit facility to fund growth. In summary, we've reached several important milestones in our path restore and predictable, profitable growth in the business. First, we expanded their gross margin which is now approaching $2 billion. Second, we continue to grow our customer base increasing net ads by a $145,000 on a quarter-over-quarter basis. Third, we are expanding margins related to new and renewal business transact during the quarter. With that, I will turn it over to Pat, for a fiscal 2019 outlook and final comments.

[Pat McCullough:]

Thanks, Jim. Our core business is healthy and growing; our profitability for customers improving in the early indications are positive around our strategic shift to a consumer focused company. We're working to match our aggressive growth objectives with a new level of accountability and transparency to history. This will be showcased on September 13 in Manhattan, the Company's Investor Day presentation. While there is still much work to be done we're focused on a manageable set of strategic initiatives that will build on our current momentum and begin to be attributing to our profitability in the second half of fiscal 2019. We're taking the necessary measures to remove the volatility and improve the transparency in our results and are committed to setting the stage for predictable for long growth while maximizing return for shareholders. As part of our outlook for the business we remain focused on capital stewardship. We feel our cash generation capabilities are stable and fully support our commitment to the dividend and our needs to grow the business. We are committed to maintaining balance sheet discipline while continuing to generate superior returns on our invested capital. Before we go into Q&A, I want to once again emphasize our commitment to transparency performance accountability and shareholder value creation. You'll hear much more about this during on Inaugural Investor Day to be held on September 13 of this year. With that, I would like to open the call up of questions.

[Operator:]

We'll now begin the question-and-answer session. [Operator Instructions] This question is from Carter Driscoll of B. Riley FBR. Please go ahead.

[Carson Sippel:]

Hi, this is Carson Sippel on for Carter. I had another geographical question you mentioned that you're expanding in the UK and Ireland. But can you comment on Canada and becoming a drag on your customer additions or gross margins?

[Pat McCullough:]

Yes. Thanks for the question Carson. Canada is a tough market for us right now. The quality regulated markets that we serve make it difficult to reach out and even communicate with existing customers. So we are experiencing a decline in long-term value with Canadian customers. We do however expect with new channel rollouts like retail and digital to be able to reverse that trend, but in the short-term it is definitely a drag on U.S. and UK growth.

[Carson Sippel:]

Great. Thank you. And also can you comment quickly on Germany and Japan as well?

[Pat McCullough:]

Yes. Germany and Japan are longer-term play. The German market is really about the openness to accepting energy efficiency devices in premise. The majority of the German electricity bills are actually consumption based tariffs from their feed and tariff for solar and wind installers over the past decade. So really if you want to be a commodity supplier, you're only competing for the minority of the bill and you're not very interesting to the customer. So we're testing whether or not our advantages in energy efficiency devices and the markets willingness to receive those are in place to really scale there. But again, we're seeing that as a longer-term play. That's probably a multi-year path to a decent size scaled business. Japan is not fully deregulated yet. They deregulated the retail space ahead of wholesale. Wholesale liquidity still remains low relative to other markets that we compete in. Also the price is not volatile yet. The government is controlling price. So until those mechanisms fully open up, this is not a market that we plan to scale. What we're doing right now is small deals, learning the market, getting a foothold, waiting for a facility open up, which we expect over the next year or two. So again, longer term multi-year strategy in Japan, but we're funding a couple million Canadian both markets to ensure annual OpEx to ensure that we get a foothold we need for the long-term opportunity, but not a big drag on capital for us at all.

[Carson Sippel:]

Great. Thank you. And then switching gears for a second. When do you expect to report separate and quantifiable metrics for the smart energy management push through the attach rate or other important metrics?

[Pat McCullough:]

Yes. You're going to see us unpack the channel and the product differences economically at our Investor Day in September. So that will be the first crack at us showing the market. Here's the nuances of selling in retail versus digital, here's the nuances in selling a bundled smart, connected home integrated product suite versus commodity. So you'll see a transition in how the company communicates to the outside world starting in September 13.

[Carson Sippel:]

Great. And then the last one for me is, have you made progress on the insurance wrap and do you think that would materially change how you hedged?

[Pat McCullough:]

Yes, we have made great progress. We expect to close the final insurance wrap this quarter. It will not change the way we had. In fact, we have gotten more conservative in our overall hedging this fiscal year than prior years and this will be an added buttress beyond those more conservative hedged.

[Carson Sippel:]

Great. Thank you very much.

[Pat McCullough:]

You are welcome. Thank you.

[Operator:]

The next question is from Raveel Afzaal of Canaccord. Please go ahead.

[Raveel Afzaal:]

Good morning. Thank you for hosting the call. My first question is regarding the Texas weather which has been volatile. Can you tell us what you think the net impact on your financial performance will be because of the volatility?

[Pat McCullough:]

Yes. Thanks for the question Raveel. You are clearly talking about mid July. We saw some volatility there at pricing. We saw a little bit of volatility on real time, but the truth is there was a well-run ERCOT market during the first volatility that we've really seen in several years. We don't expect that material impact on our earnings this quarter or an impact on our guidance, that's why we reaffirmed the guidance. With strong weather hedges in the ERCOT market, we take extremes when hedging. There's obviously a little performance around the hedges, but we don't see that as a material impact to us. We are seeing interestingly those some books become available for sale. So we do think there were some collateral liquidity challenges for some smaller competitors.

[Raveel Afzaal:]

Thank you. And then I mean for you to maintain your guidance, you're obviously expecting significant improvement in your EBITDA run rate over the next three quarters. Can you give us like one or two key drivers that's not going to lead to the significant improvement in EBITDA sequentially?

[Pat McCullough:]

Sure. No problem. I think it boils down to the two metrics that we're highlighting. We are growing customers, again if you look at gross add, we've had a great deal of success growing customers this year versus last. Our sales and marketing organization is doing a fantastic job. In fact this quarter was the first quarter that retail became our largest residential channel. So that's a very interesting development and one that continue to watch. You will be seeing us talk about that in detail at the Investor Day. But that customer growth in that margin expansion and margin expansion is happening due to a lot of things. First of all, ERCOT volatility has not some of the discount prices out of their growth mode. So the pricing pressure is being relieved a bit in ERCOT at least as we sit here today. Number two, we're selling more value added products and services. We're getting higher penetration rate, that's really becoming an important part of our business as we mentioned last quarter is going to be about 10% of our overall guidance this year and we're tracking probably ahead of schedule to that rate. And then the price increases we've taken. Our Company had not raised prices in over four years, maybe further at least in my tenure here and we are taking some aggressive pricing actions where we have the ability to price and first of all we've got to cover costs going up like ERCOT some across much more costly market than we've seen in the past. But number two will price in excess of that drop through tens of millions of dollars, which is where you'll see the support or third and fourth quarter where you'll really see a difference versus prior year.

[Raveel Afzaal:]

Okay. And just - I mean if possible, not sure if it's possible, but when do you look at your ruling 12-month gross margin for RCE for the consumer division? It's a $232 right now. Where do you think this number could potentially go just for modeling purposes?

[Pat McCullough:]

Yes, we're looking at pretty impressive margin improvements on the design contract margin that we're signing on a daily basis. So we really think, we can push that and be on journey to 300 over a couple of years, okay. So that will happen immediately that we really believe we're on that journey. I think by the time, we're reporting third quarter. You're really going to see the full effect of our pricing actions that took place that start to drop through. In the second quarter, our pricing actions are hitting, but they're overcoming some higher ERCOT costs than we seeing in prior year. So a little bit of a break even story kind of in Q2, but Q3 and Q4 you're really going to see that breakout and I think will be testing $260 by the end of this fiscal year on a trailing 12-month basis.

[Raveel Afzaal:]

Great. Thank you so much for that. And my final question and this maybe an ignorant question, looking at GEO Q1 2019 gross margin per RCE and comparing it with Q4 2018, so just sequentially and we saw I mean a modest decline in gross margin per RCE going from $236 to $238, yet we look at gross ads, in the margin that you guys are realizing on them was losing that that defense in the still there. So why do - I mean it's a very modest decline, but why are we seeing a modest decline and not it holding steady or increasing even in Q1 fiscal 2019.

[Pat McCullough:]

Yes. So, Q1 fiscal 2019, if you're looking at the trailing 12-month numbers. I could talk about both. You're picking up some of the financial challenges that we had in Q4 and Q2 of last year, as well as this being a small quarter. It's not really going to change the story line. It's not in service - volume associated with Q2, Q3 and Q4 this year where that average will fundamentally change. We're very encouraged by Q1 where we started to see signing the contract margin expansion and greater numbers than the contracts that we're losing and that's the trend that we watch like a hawk and know that there's other income streams, which can be added to those design margins. Generally, you don't lose any of that margin on residential as you go forward to give the ability to pick up some more with fees or cross-selling with value added product. So we're encouraged Q1 small volume. It a little bit misleading when you're looking at averages were trailing 12-month, Q1 was also were we took our aggressive pricing actions, not all of those impacted the volume of Q1. Some of those were done late in a quarter. So you're going to see that step up coming as we go into Q2 and move forward.

[Raveel Afzaal:]

Perfect and just before I let you go, could you just speak to gross margin per RCE target for the commercial division as well?

[Jim Brown:]

Thanks Raveel. This is Jim.

[Raveel Afzaal:]

Hi, Jim.

[Jim Brown:]

Yes, that's a division I used to run. So I'm very familiar with that. We increased not only the net ads in RCE, but also the number of contracts signed, which means the number of customers to increasing - the size of customers is generally getting smaller. As the customers get smaller, margin tends to expand and we also like the fact and you see that now with not having the big dip in failed to renew in Q1 that you're getting more stability in the customer base versus having large customers, very price competitive and when they leave because you're not happy with the margins anymore. Take a big negative bad hit. So I would say we'd like to see it continue to trend based on the number of customers and expanded margins.

[Raveel Afzaal:]

All right. So at $79 per RCE right now as of Q1 2019, so we should think maybe goes back to I mean in 2017 you add $89 than $83 in 2018. So somewhere around there?

[Pat McCullough:]

Yes, I think the potential for the company especially as we add more value added products and services in the commercial book is to push that up. The challenge in the commercial space is it highly commodities. So a little bit more prone to reacting to where market price is go and when they go well we try to avoid the business. When they come higher and we could take the business will grab it and it could meets our returns threshold you will see us making $80 to $90 as we go forward. And then slowly growing that as we get penetration with the valuable items.

[Raveel Afzaal:]

Perfectly. Helpful. Thank you for time.

[Pat McCullough:]

Thank you.

[Operator:]

The next question is from Sophie Karp of Guggenheim. Please go ahead.

[Sophie Karp:]

Hey, good morning. Thank you for taking my questions. So I wanted to ask you about the insurance program that you had in place. First, do you still have on place and secondly some of your competitors recently made some skeptical comments about the viability of this products and that costs given where the volatility or recently. Could you comment that you think costless colored on what you've seen there and if that still viable strategy for you and if using it. Thank you.

[Pat McCullough:]

Yes. Thanks for the question Sophie. So you're referring to the costless colored swap whether program that we've installed. Yes, we have costless colored swaps in place this summer with reinsurance counterparties we have multiple reinsures counterparty for supporting us on this. It is a costly program, but the avoidance of a mild weather or an extreme weather events impact on our earnings is super helpful to us. So we see enormous value in that program. We do constantly get the question is it economically viable, it is for us because we are willing to give up the incremental load has extreme weather comes on before the spot market prices move above our customers prices. That some people look at it and say well the premium itself is expensive when you get to the scale of Just Energy and some of these bigger markets we can really leverage that and get a better per unit rate on that reinsurance products. So we're quite happy with that strategy and we see that as being viable. In fact this year when we've put our summer weather hedge in place we were able to extend it out to include some of next year summer. So we're actually moving now into a multiyear strategy with that reinsurance product which to me tell you that market's more viable the network because when we started it was a one-year product and now we're moving the optionality between one in multiyear products.

[Sophie Karp:]

Got it. Thank you. And so what do you say, that fair to say that having the spark has largely insulated you from the weather related activity I guess this summer in Texas elsewhere.

[Pat McCullough:]

Absolutely having these weather structures in place in July alone helped us avoid $10 to $20 million of potential profit first. So it's a very effective strategy is going to very effective strategy for the company for several years.

[Sophie Karp:]

All right. Thank you. I'll jump back into the queue.

[Operator:]

[Operator Instructions] The next question is from Sameer Joshi of H.C. Wainwright. Please go ahead.

[Sameer Joshi:]

Thanks for taking my questions Pat and Jim. Do you have any further disclosure from the EdgePower acquisition, how would that progressing and when do you see going back of that on the topline?

[Pat McCullough:]

Sure. Appreciate the question around the EdgePower acquisition. We will unpack those value added products and services on September 13, so you'll get a better feel for EdgePower, the value that brings to commercial accounts. The EdgePower business is performing quite well right now. It is ahead of schedule for what we forecasted which is an immaterial small amount of EBITDA this year, but nonetheless a couple single-digit millions of profit to our bottom line. With that EdgePower transaction, we really brought some capability and know how that we can take and scale to the rest of our business in terms of the commercial basis. We're already seeing big success of taking that monitoring and control platform to our existing customers who won't offer such a product from us in the past. So we're optimistic that that will be a very lucrative business for us and help us transform a commodity commercial book into something where those commercial accounts are truly getting value around monitoring and controlling large electrical appliances.

[Sameer Joshi:]

Okay. Thanks for that. Sort of a related question and probably - you will probably talk this at your Investor Day as well, but I saw that the thermostats customers are around 57,000 out of total of 1.6 million customers. Why is the penetration low and how should we see it getting up over the next few quarters?

[Pat McCullough:]

Sure. Good question. So you're asking about our Ecobee cross-selling capability and how that's going. So first of all that product is something that we're really proud of both as equity investors and Ecobee, but also having access to the development team there and working together on piloting the greatest value for our customers. We began cross-selling our existing customers in April over the telephone. So as they called in for customer care, we were cross-selling. We're seeing rates as much as 3,000 sales per month. So you could envision 25,000 to 50,000 Ecobee sales this fiscal year with a renewed effort to sell those products to our existing customer base. That's what we're planning for. That's what's built into our guidance. Congratulations to our team. They sold over 200 units yesterday alone. That gives you an idea that's about a 45,000 pace for the annum. So that compared to relatively new sales in the past couple years where the execution and focus hasn't been where we want to get. So we see this as mostly incremental to the bottom line. We see this is something our customers truly want, and we see our customer care agents and our sales people starting to put the right focus and energy into that, and really making a difference. One of the things I've done since taking over as I changed our sales commission compensation to heavily reward value-added products, commensurate with the higher margin and lifetime value of the customers. So you're going to see the company do great things with pushing value-added products and services in fiscal 2019 and beyond.

[Sameer Joshi:]

Great. That is good to know. In terms of retail, you spoke glowingly about that channel even on this call. But when do you think you will achieve the target I think of one to two product per day per store and expansion to 650 to 700 stores. I think that was the guidance given earlier.

[Pat McCullough:]

Yes. On previous call, I think it was last call, might have been two calls ago, we did announce that we achieved that public threshold of 700 stores. We will look to maintain that level or slightly grow it as we go forward. We're doing a nice job selling through that channel, hence why it has become our largest residential channel in the past quarter. So that's bigger than our digital channel, which had historically one of our largest residential channel. So we're really proud of that and think that going to be a very exciting place for growth as we go forward. We believe that means well in excess of 100,000 incremental ads from the prior year. So just to give you a bit of a perspective there, yes, we had a record quarter, this fast quarter. So we still see it moving up. We don't know exactly where it's going to settle and if we hold one, sale per store per day or two or something in between. I think that's the right range from a sensitivity and planning perspective, but very impressed with our sales team and our partners that help us go-to-market in that channel. They're an exceptional job and it's one of the great successes that Company has made in the recent history.

[Sameer Joshi:]

Great. Thanks a lot Pat, for taking my question.

[Pat McCullough:]

Thank you.

[Operator:]

Next question is from Endri Leno of National Bank. Please go ahead.

[Endri Leno:]

Hi, good morning. Thanks for taking my questions. Just a couple for me, first, in the last conference call you referenced quarterly run rate of 50,000 net ads. Does that still stand for the rest of 2019? Yes.

[Pat McCullough:]

Yes, I appreciate the question. We think it can. We know that right now strategy for the Company is to take advantage of an opportunity we see, which is pricing power that's come back to us. Now that may create some attrition. We know that a month like July with the volatility due to the heavy load, the heavy demand that happened, growth customers builds to a larger extent. ERCOT was setting record production days, which means ERCOT customers even at flat pricing are going to see the largest build that they've seen. If you're trying to add price on top of that, you're probably going to drive a bit of attrition amongst the switchers. Now those normally are not most profitable customer. So you can live with some of that. But what I'm describing is a bit of a risk to that 50,000 net ad and idea that we have. The thing I'm focused on is gross ads, and gross ads are on target or ahead. You can see year-over-year, the major change in gross ad. Those are the more profitable customers in the stickier relationships as you see us reporting that is a more importantly metric to me in the short-term to really know I'm expanding long-term margins because I know I'm going to push a bit more expression than we'd planned a quarter ago with the pricing ability we have and think about it this way. If we're running at 13% net attrition and we move that up to 15%, we lose 2% of our customer base that impacts net ads. But we held pricing on with the 85% that remains. Now that a bit of a short term strategy, but an important part of being a dynamic retailer is to ensure when these windows of pricing power come your way you take advantage of them, which is what we're doing right now. So a little bit less focused on net ads or little bit more focused on margin expansion at the moment, but we manage those two levers together, coordinate them. And I don't think we've seen the retail channel peak yet. So with the retail channel busts through what we've targeted, we could quite easily do the 200,000 net ads this year. But again we're waiting to see where that stable retail growth starts to flatten out and that will give us a clearer picture on what the year's net ads will be. It's also worth noting over the last several years, we've started the first quarter with significant negative ad due to the seasonality of the renewal cycle of the commercial business. This year is not. So we're not starting a negative 100,000 like we have in prior years. We're starting it in a positive number.

[Endri Leno:]

Okay. Great. Thank you. Next question is on the - spend for growth initiatives you had about your $11 million in Q4 and about $5.5 this quarter. How do you see that progressing for the rest of 2019?

[Pat McCullough:]

Yes, I expected to be in that range on a quarterly basis there are some quarterly ebbs and flows with various markets that reserve. We want to have a consistent growth investment in terms of OpEx dollar into this business. We recently invested and resources internally that are leading a return on invested capital value creation framework. So we're going to be even smarter about how we invest those precious selling and marketing OpEx dollars to ensure that we're getting the highest imbedded margin returns on the those customer acquisition cost. And we're already starting to make decisions and changes based on early analysis there but I expect the growth initiatives will remain similar to what we see in the recent past.

[Endri Leno:]

Okay. Thanks and just to clarify I do see it in the range of $5.5 million are in the range of $10 and a little bit about?

[Pat McCullough:]

I think we will see $5 to $10 quarter in and quarter out there is a failing difference which is the main reason you are seeing what looks like major degrees - in fact not a major decrease on the full-year basis in fact similar year-over-year.

[Endri Leno:]

Great. Thank you. And last one for me is that other any thoughts or have you contemplated of monetizing asset like say Ecobee for example your equity investment in there?

[Pat McCullough:]

Yes. So we were very bullish on the short to mid-term outlook for Ecobee. We don't feel like monetizing that today is a great strategy. Because we see their potential to really grow into a scale profitable company in the short-term. We're quite supportive of some of their development efforts, some of the opportunity that brings their customers. We see a great flood of short-term of value creation which we're waiting for before we think about monetizing. Now we're not in control of what the company does and what that means to us. So there may be options that they pursue is drive monetization outside of our control we're not actively seeking monetization net that asset right now because of the short-term value creation that we think it's about to happen.

[Endri Leno:]

Okay. Great thanks. I just a quick follow-up on that and I mean I get to depend on funding in your situation et cetera. But would you try to maintain your investment in Ecobee through other on the financing. I mean just a hypothetical question I guess.

[Pat McCullough:]

Yes. I guess as Ecobee post money valuation grow with new funding that they may or may not do. It's obviously a different economic decision the one we made initially. While we add in early at quite reasonable prices. So it really depend what supportive of the company we look at everything they do and offer help and support any way we can. Whether we have invested and another question that hard to speculate on that would actually depend on the valuation and frankly how much of that value offer do they realize.

[Endri Leno:]

Okay. Great. Thanks. That's it for me.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Pat McCullough for any closing remarks.

[Pat McCullough:]

Thank you, operator. Before we conclude today's call I wanted to extend by deepest gratitude to the employees and Just Energy. Your dedication to building our business through innovation and commitment to a customer service organization is the backbone everything we're doing in our success thank you. We look forward to updating everyone on our strategy long-term goals on September 13th at our Investor Day. Thank you very much for the support and interest in us. Good bye.

[Operator:]

The conference call is now concluded. Thank you for attending today's presentation. You may now disconnect.