Q1 2020 Earnings Call
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Greetings and welcome to the Centrus energy first quarter 2020 earnings calls.
This time, all participants are in listen only knowledge.
First question and answer session will follow the formal presentation.
Anyone require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
And it's now my pleasure to introduce your host Dan My stucco VP corporate Communications. Please go ahead.
Good morning, Thank you for joining us today's call will cover the result.
For the first quarter 2020 ended March 31st year to date for the call or Dan on and then President and Chief Executive Officer build Strawbridge Senior Vice President Chief Financial Officer, Chief administrative officer and Treasurer.
I'm, Dorian controller, and Chief Accounting officer before turning the call over to Dan on them and I'd like to welcome all of our color as well as those listening to our red.
This conference call follows our earnings news release issued yesterday, we expect about our quarterly report on form 10-Q later today.
All of our news releases SBC thought Ireland, including our 10-K is an 8-K are available on our website. A replay of this call will also be available later this morning on the center slips but.
I would like to remind everyone that certain of the information that we may discuss on this call today, maybe considered forward looking information that involve risk and uncertainty, including assumptions about the future performance of central our actual results may differ materially from those in are forward looking statement.
Additional information concerning factors that could cause actual results to materially differ from those in our forward looking statements.
And in our filings with the FCC, including our annual report on form 10-K, and quarterly report on form 10 10-Q.
Finally, the forward looking information provided today I'm sensitive and is accurate only as of today may 12 2020.
Unless otherwise noted.
This call the property of Centrus energy any transcription redistribution retransmission or rebroadcast of this call.
Any form without the expressed written consent with Centrus is strictly prohibited. Thank you for your participation and I'll now turn the call over to dampen.
Thank you Dan and thank you everyone on the call today.
I hope that all of you and your family and friends are staying safe and healthy during this very apparel as time for people in our own country ended the world Oak.
Weve instructed our employees company wide telework to the maximum extent possible.
We're taking a series of other steps to protect those employees, who are not able telework, which includes a portion of our workforce at our secure facilities in Tennessee and Ohio.
We will follow local guidance as states begin to lift restrictions and plan to take a mindful approach to bringing employees back in.
Through it all the health and safety of our employee is are Paramount concern.
As we discussed on our last call even as the Cobot 19 pandemic has placed an enormous strain on the economy centers is fortunate the vast majority of our revenues tied to stable long term contracts with large entities like electrical utilities and the U.S. government.
We've not had any interruptions and our nuclear fuel deliveries to our customers in the United States or around the world and we expect that we'll continue to make those deliveries as planned in the months and years ahead.
In the first quarter tenders reported $45 million in total revenue and net income of $11.3 million. That's a significant improvement over the first quarter of 2019, when we saw net loss of $20.9 million.
As always however, I want to caution that our revenues and results tend to vary considerably from quarter to quarter, because our customers have any old purchase commitments not quarterly commitments and they can take delivery at whatever point in the year they choose.
Some quarters have more deliveries than others, some have fewer and given market dynamics most choose to take those deliveries late in the year.
In other big variable is the price.
As you'll recall prices declined 75% between 2010 and 2018.
Since they hit their low point in August 2018.
They have subsequently increased by about 30%.
Spot sales are infrequent in the nuclear fuel market. So most of our sales revenues in that segment are tied to long term contracts that were side over the last several years at different points longer price curve.
So quarters, when you happened to be delivering a higher price contract can look better than when you're delivering on the lower priced contracts, which is why is the full year performance that really matters most.
Having said that are positive net income number during the first quarter reflects the fact that we've lowered our overheads lowered our debt and lowered our enrichment supply cost those lower supply cost on a per unit basis are principally the result of the price reset provision and our largest supply contract, which took effect last year.
Along with other steps, we've taken to obtain low cost supply from other sources in the current price environment.
We ended the quarter, maintaining a long term order book and are heavily you segment valued at approximately $1 billion, which includes approximately $300 million in deferred revenue.
The U.S. Department of Commerce, seeking a significant extension of the Russian suspension agreement potentially extending limits on imports of Russian nuclear fuel pass the scheduled expirations of those limits at the end of this year.
We are engaging with the U.S. government industry stakeholders and other urgent any potential extension.
Extension includes sufficient quota to allow all existing us contracts with us with Russian suppliers of enriched uranium, including our own supply contract to be fully implemented.
Turning to our technical solutions segment, we have continued to execute well on our three year 115 million dollar contract with the U.S. Department of energy to the plant Cascade of our 8100 and machines to demonstrate production of pie as they low enriched uranium, which we call Halo.
Today, we have not experienced delays as a result of a pandemic, but we can't rule out that possibility the future and we'll continue to work with the department of energy to minimize any possible impact to the cost of course schedule of the program.
As we've discussed Halo is a new kind of nuclear fuel that is not available commercially today, but will be needed to power. Many of the advance reactor designs that are now under developed.
It may also be used in the coming years to fabricate advance fields for the existing fleet of reactors, allowing improvement in safety as well as in reactor economic.
Along these lines in April Centrus line, a letter of intent with advanced reactor concepts or park for the potential future supply of Halo as art works. The deployed its next generation reactor technology in the late Twentys Twentys.
While it's non binding at this stage. This letter of intent shows. The fact that there is keen commercial interest in what we believe will be the nuclear few of the future.
In addition to commercial interest U.S. Department of Defense launched a program earlier this year that aims to build and demonstrate a prototype mobile micro reactor.
Which will also be powered by Halo.
While the government has a limited quantity of downs blended fuel available to power. The prototype if the U.S. military decide in the future to deploy a significant number of these reactors. They may require a significant volume of hailu and pursuant to U.S. nonproliferation commitment that halo would need.
Likely to be what is called on obligated.
Essentially that means that it must be produced from U.S. mind uranium and then converted to a gas and enriched to greater concentration of the uranium to 35 isotope using exclusively U.S. technology with no foreign components.
Centrus has the only deployment ready domestic technology that is capable of producing on obligated enrichment suitable for national Security mission.
The material we produced during this demonstration wont be on obligated since the program is geared toward commercial production and the he would produce is intended for civilian reactor demonstration.
A few of the legacy components, we are using in the demonstration cascade do contain some form material, but we could swap those out with identical U.S. components. It on obligated enrichment is needed in the future of course, we hope to these 16 machines will be the first of many and we have already identified the domestic supply.
Hi chain, so that all of those machines can produce an obligated enrichment if needed now for more details on a quarterly financial results I will turn the call over to fill up.
Thank you Dan good morning, everyone on the call.
For the first quarter 2020, we had total revenue of $45 million.
Including 30.7 million from our El you segment.
Revenue from the L., you segment decreased 4.4 million or 13% from the same period in 2019.
The revenue for sales of SWU increased 148% reflects an increase in average selling price and partially offset by that 7% design decline in sales volume.
As Dan mentioned, the prices and volumes can vary significantly from quarter to quarter.
Depending upon how our customers choose to time their annual purchase commitments over the course of year.
Our technical solutions segment revenue decreased significantly over the same period in 2019.
Centrus began work on the Hailu contract that Dan talked about.
Cost of sales per technical solutions segment is up 6.2 million compared to the corresponding period in 2019.
This reflects the mix of technical solution were performed in each of the periods, including work performed over the able to contract in the current period.
Cost of sales for L., you segment declined by $25 million or 65% in the first quarter 2020 compared to the same period in 2019.
Reflecting declines as SWU and uranium sales volumes and a decline in the average cost per SWU.
There were no uranium sales in the three months ended March 30, Onest 2020.
As Dan has noted.
In recent years, our revenue can vary significantly from quarter to quarter, depending upon the timing when the customers elect to take their annual deliveries and other factors.
Therefore, our operating results in cash flows can fluctuate significantly from quarter to quarter and year to year.
Operating results for the three months ended March 30, Onest 2020, or not necessarily indicative of the results that may be expected for the year ending December 31 2020.
Now with that I'll turn it back over to Dan.
Thanks Philip.
Before we close I would like to highlight one other important development from last month, which was the report released by the White House nuclear fuel working group I've been working on nuclear issues 1975, and then thinking back over the past 45 years I cannot recall, a more thorough and wide ranging statement of American policy on the nuclear fuel.
Cycle.
Report makes a strong call to restore the nuclear leadership at the nation has lost since that time and provides a strong basis upon which to steer our future efforts.
While many of the recommendations were focused on the mining and conversion steps of the nuclear fuel supply chain. We were pleased to see the explicit support for the Halo demonstration program and more broadly for restoration of us based uranium enrichment as a critical element of restoring Americas lost nuclear leadership.
Specifically the report notes and national security importance of restoring America's ability to produce on obligated enriched uranium material that as I mentioned earlier is enriched using technology that is freed from any piece will use obligations imposed by foreign government.
With the only domestic centrifuge technology that is deployment ready centrus can play a major role in helping the U.S. government meet this requirement in the years ahead.
We also welcome the reports focus on promoting American leadership in advanced reactor technologies and advanced nuclear fuels. The goal that enjoys strong bipartisan support.
Simple reality is that our country cannot expect to be competitive in the global market for next generation reactors and fuels unless and until we can develop and assured domestic source of fight and say low enriched uranium or halo.
Centrus is proud to stand at the forefront of that effort.
In addition to the commercial reactor market the nuclear fuel working group report encouraged effort by the department of defense to develop micro reactors that can be deployed to support our troops in the field and to provide reliable resilient power to key military installations.
The department of defense effort to design and build a prototype mobile micro reactor within three years reinforces the urgency of our mission since one of the departments design requirements is that director reactor must run on U.S. origin Halo.
The men and women of Centrus energy.
Many of whom have dedicated their whole professional lives to our enterprise and some of whose parents and grandparents did to going all the way back to the Manhattan project take pride in the roll This company and its predecessors have played in supporting America's National security requirements and fueling the peaceful use of the Adam.
Around the world.
I've never been more proud of them or more optimistic about what we can achieve together in the months and years ahead.
And operator with that we'd be happy to take any questions at this time.
Thank you.
We will now be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad, a confirmation 10 will indicate your line is and the question can you May press star to if he would like to remove your question kind of the care.
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One moment, please while they poll for questions.
There are no questions at this time.
I kinda Saar back over at Santana nice to count.
Thank you since there are no questions. At this time this will conclude central since first quarter 2020, investor call I want to thank our investors and others, who joined US today on the call or been listening online and we look forward to speaking with you again soon.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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