Q4 2020 Centrus Energy Corp Earnings Call
[music].
Greetings and welcome to the Central energy fourth quarter of year end 2020 earnings call.
At this time all participants are in a listen only mode.
And the answer session will follow the formal presentation.
And today should require operator assistance during the conference. Please press star zero from your telephone keypad.
Please note on this conference is being recorded.
At this time I'll turn the call over to Dan Leistikow, Vice President Corporate Communications. Mr. Lascar, you may now begin.
Good morning, and thank you for joining us today's call will cover the results for Q4 and year end 2020 ended December 31.
Here today for the call are Dan Hahnemann, President and Chief Executive Officer, Philip Strawbridge, Senior Vice President and Chief Financial Officer, Chief Administrative officer, and Treasurer, and John Dorrian Controller, and Chief Accounting Officer before turning the call over to Dan <unk> I'd like to welcome all of our callers as well as those listening to our webcast. This conference call follows our earnings news.
Please issued yesterday, we expect to file our annual report on form 10-K later today all of our news releases and SEC filings, including our 10-K 10, Qs and eight Ks are available on our website. A replay of this call will also be available later this morning on the center of <unk> website.
I would like to remind everyone that certain of the information that we may discuss on this call today may be considered forward looking information that involves risk and uncertainty, including assumptions about the future performance of Suntrust's. Our actual results may differ materially from those in our forward looking statements additional information concerning factors that could cause actual results to materially differ from those.
On a forward looking statements is contained in our filings with the SEC, including our annual report on form 10-K, and quarterly reports on form 10-Q. Finally, the forward looking information provided today is time sensitive and is accurate only as of today March 19th 2021 on one.
Otherwise noted this call is the property of the central energy any transcription redistribution retransmission or rebroadcast of the call in any form without the express written consent of centers is strictly prohibited.
You for your participation and I will now turn the call over today and part of them.
Yeah.
Thank you Dan.
And thank you to everyone on the call today I am pleased to report that in 2020. Despite the challenges brought on by the COVID-19 pandemic Central energy returned to profitability.
With total revenue growing to $247 $2 million, we posted a net profit of $54 $4 million.
Driven by the rising value of our stock we wanted the public offering that raised about $25 million before expenses.
We also completed a cash tender offer to retire approximately 60 million shares of series B senior preferred stock and did so at a 25% discount creating more value for all of our class a shareholders.
These efforts have strengthened our balance sheet and benefited our shareholders as reflected in the recent stock performance.
There are a number of factors driving the success, but none of it could have been possible without the hard work and incredible talent of our employees I am so proud of each and every one of them and all of that we have accomplished together.
At this time of year ago. The country had just entered locked out we could not of known at the time that extensive teller working masking and social distancing will be of part of our lives for so long, but everyone. In the company has risen to the challenge we have not only endured we've gotten stronger and I am convinced that the best is yet to come.
We are of course quite fortunate that the COVID-19 pandemic does not affect our revenue and the way that it does for many direct to consumer.
Nearly all of our revenue comes from stable long term contracts with utilities and the U S government the Pea.
Pandemic hasn't taken away our ability to make deliveries to our customers and.
And we expect to continue making those deliveries without interruption.
But because of the health and welfare of our employees and their families is our Paramount concern. The pandemic has forced us to change the way we do our work.
We have shifted as many employees as possible to telework and taken aggressive steps to protect those who must continue their classified and technical work at our facilities in Tennessee, and Ohio building, what will be a first of all of a kind of advanced nuclear facility.
Under the three year $115 million cost metrics was awarded by the U S Department of energy in 2019.
Are deploying a cascade of our AC 100 M centrifuges to demonstrate production of a next generation nuclear fuel called high assay low enriched uranium or halo.
Construction is well underway and the nuclear regulatory Commission is conducting a technical review of our license Amendment request.
Upon NRC license and then the approval and successful completion of the NRC operational readiness review.
This will have the nation's first NRC license of Haynesville production facility and expects to begin production by early 2022.
As a regular listeners and investors the already know the low enriched uranium R. L. EU that is used in the existing fleet of reactors is enriched so that the concentration of the fissile isotope uranium 235 is little less than 5%.
Hey, Lou is further on rich so that the U 235 concentration is between five and 20% the higher concentration of Youtube 35, and the Halo allows for smaller fuel of course, better fuel utilization reduced volumes of waste and a variety of other advantages.
Most of the next generation reactor designs that are now under development are expected to operate on Hayward in fact of the 10 reactor designs of the department of energy selected <unk>.
The multibillion dollar advanced reactor demonstration program nine are designed to operate on Halo.
The Department of Defense also has a program underway called project Pele to build a prototype of a mobile mic military micro reactor within the next three years.
When they solicited the applications for the program one of the key requirements was that the reactor must operate on Hayward.
The same advantage of that Heyward can bring to the next generation reactors also make it attractive to our current fleet of nuclear reactors. There are a number of next generation fuel designs in development that would require higher enrichment levels than today's fuels.
This would allow the reactors to reduce the number of refueling outages and sell more power to the grid.
While our initial production capacity next year will be modest we can expand the facility in modular fashion.
Subject to the availability of funding and or offtake contracts centers can deploy additional centrifuges at our facility to meet whatever level of production is required for commercial <unk> U S government purposes.
Spot prices for enrichment measured in dollars per separative work units or swoop have increased by almost 60% since reaching their lowest point in August 2018.
As the price of has continued to decline more utilities have gone back to the market to secure their fuel supply for future years. So we expect to have strong selling opportunities moving forward in fact from November through the end of January our sales team had one of its most productive periods in recent years secured.
The new contracts on sales commitments valued over $100 million.
That includes long term sales through 2027.
These new sales and others. We made throughout 2020 have enabled centers to maintain the value of our long term order book at approximately $960 million EBIT as some of our oldest and highest price contracts have rolled off.
The other major development in our <unk> segment last year was the resolution of the Russian suspension agreement, which is a trade agreement between the United States and Russia that places limits on the amount of Russian nuclear fuel that can be important as.
As you may recall the negotiations between the U S Department of Commerce, and the Russian Federation over extending that trade agreement had cash considerable uncertainty over our largest supply contract because it was not clear how new import limits starting in 2021 might affect our ability to execute on our existing <unk>.
The <unk> contract and make deliveries to our U S utility customers.
The agreement reached in October and codified in legislation set aside a portion of the annual import quota to be used for central supply contract, which runs through 2028.
The amount set aside are sufficient for us to meet our strategic plan objectives and deliver on our sales commitments in the U S market.
This has removed a significant source of uncertainty for us and gives us access to reliable affordable supply for many years as we work to reestablish our own domestic production and now for more details on the ear on the financial results I'll turn the call over to Phil.
Thank you Dan and good morning to everyone on the call.
As Dan mentioned for the year end 2020, we had total revenue of $247 million $247 2 million and achieved net profit of $54 4 million.
On an EPS on an adjusted basis that equates to about $4 71.
Diluted per share for the year and the fourth quarter, we achieved on on an adjusted basis of $1 46 per share again on a diluted basis.
Revenue for the <unk> segment increased about $21 1 million in 2020 compared to 2019, our suite of revenue for 2020 includes $32 6 million collected and settlement of the supply contract that was subject to the customer bankruptcy proceeding as we've talked about before.
Excluding these proceeds the average price billed to customers increased 13%.
As we mentioned before we tend to see variability from quarter to quarter because of our customers in the <unk> segment generally have multiyear contracts with purchase obligations that are annual.
Non quarterly so they can decide on which month they want to take their purchase commitments and that's the quarter. When we recorded the revenue.
Some quarters look worse, because we have fewer deliveries, while others look better because we have more deliveries the.
The third quarter of 2020, as you'll recall was a good illustration.
We didn't have any deliveries during those three months, but when we announce our third quarter results. We also said that we anticipate a fourth quarter revenues for the <unk> segment would be the highest of any quarter for 2020.
And that's exactly what happened, we had $77 $7 million of <unk> revenue in the fourth quarter significantly higher than any of the quarter.
More than 40% of our <unk> revenue for the year.
We continue to benefit from the price reset provision on our largest supply contract, which runs through 2028, because our cost of sales are calculated based on the long term rolling average it took some time for those lower costs to be fully reflected in our financials, but you can see now of what the difference is making even though of our revenue.
On the <unk> segment was $21 1 million higher in 2022 2019, our cost of sales for that segment was $25 9 million lower.
Our technical solutions segment revenue increased by $16 4 million in 2020 as compared to 2019, as we ramped up construction activities under the Halo of contract.
Cost of sales for this segment decreased by $1 7 million compared to 2019, reflecting the mix of technical solutions work performed in each of the periods.
Now on to talk about our SG&A cost in 2020, our total SG&A increased by $2 3 million compared to last year overall, our SG&A costs for 2020 versus 2019 would have been lower except for the incentive compensation expense increased to $92 9 million.
Merrily related to Remeasurement of our obligations under the long term incentive plans.
Based on our stock price, which has increased over 500% in the past two years.
Consulting costs related to capital financing evaluation claims recoveries international trade et cetera increased $1 5 million in 2020 compared to 2019 and other consulting costs decreased $1 $2 million Sal.
Salary and benefit costs decrease.
600000 travel expenses decreased by half a million and other SG&A expenses increased by a net of about 200000.
We will continue to look at opportunities to reduce our SG&A cost as we have over the last several years.
As far as cash.
Even after purchasing in retiring approximately $60 million of series B preferred stock the Dan talked about and again, which represented a little over 62000 shares. We ended 2020 with the higher consolidated cash balance of the $152 million.
As Dan mentioned in 2020, we focused on strengthening our balance sheet by raising $25 million in the third quarter and.
As we mentioned of eliminating the 60% of the preferred shares at a 25% discount in the fourth quarter of 2020.
We're pleased that our shareholders have been of beneficiaries of these actions will continue to look at opportunities to strengthen our balance sheet and I'm going to turn the call back over to Dan.
Thank you Philip.
Let me offer a final thought about the future of the nuclear industry and the important role we can play in it.
As the United States and other countries confront the growing need for reliable carbon free electricity.
As we work to reduce emissions and combat climate change and the coming years. It is increasingly clear that nuclear energy must be part of the solution in recent years, we've seen bipartisan action around the country to preserve existing reactors and bipartisan action at the federal level to deploy the next generation.
Of the advanced reactors. Most recently in December the Energy Act of 2020 was adopted as part of the omnibus Appropriations Bill.
Among other things the new law is designed to promote deployment of advanced nuclear reactors and specifically requires the department of energy to create a new program to make halo of available by 2026 for civilian domestic research development demonstration.
The interest plans to be the first to come to market with Hayward.
In addition to meeting the emerging commercial requirements of our Halo. We are also uniquely suited to meet the government's own requirements for Hulu and other forms of enriched uranium the.
The department of Energy National Nuclear Security Administration for example needs of the supply of low enriched uranium for the production of tritium, which is necessary to maintain our existing nuclear deterrent.
It may also need halo potentially in significant quantities, if the department of defense decided to move forward with micro reactor deployments.
Finding non proliferation agreement and long standing U S policy prohibit the use of force enrichment technology for the purposes, which is why the department of energy has said that a domestic technology enrichment capability will ultimately be required to meet these national security needs are.
<unk> hundred centrifuge is the only deployment ready technology capable of meeting these needs we stand ready to support the department in whatever way we can.
<unk> ability to meet both civilian and defense requirements as part of what makes US unique is the company all of US at Central are strongly committed to support U S national security and to provide clean and affordable energy to all <unk>.
Many of US have been proud of work the center of sport predecessor organizations for decades and in some cases for generations.
To those of you who have invested in centers and believe in this book.
How much we appreciate the trust and confidence you have put on us.
We look forward to continuing to build value for you for the U S nuclear industry and for the country.
Operator, we would be happy to entertain any questions at this time.
Thank you, we'll now be conducting a question and answer session. If you'd like to ask the question. Please press star one on your telephone keypad and the confirmation tone will indicate your line is on the question queue.
So maybe first start to if you would like to move your question from the queue.
For participants are you speak of equipment, so may be necessary to pick up your handset before pressing the star keys.
In the interest of time until the line of as many as possible to ask a question. Please limit yourself to one question.
And then re queue for additional questions.
Our first question comes from the line of Rob Brown with Lake Street Capital. Please proceed with your question.
Mr. Brown. Your line is open for questions. Please proceed.
Good morning.
Hi, good morning.
First question is on the the.
The pricing environment, how that's been trending lately and have you seen that the.
Changed since the beginning of the year on sort of what's your sort of view on how that's playing out here.
So.
Ever since Rob the market bottomed in August of 2018, we have seen.
Rising curve for sure price.
The spot and term prices.
And those trends have continued.
We have seen.
As I think I indicated in my remarks.
Increased activity as.
As the uncertainty of the pension.
Pension agreement and the lack of resolution behind that has gone away a lot of the demand that had.
Then basically withheld as people were not sure what was the important environment that that demand has now come to market and that demand and churn as put some upward pressure on both term and spot prices. So we continue to observe.
Those kinds of the.
Those trends.
And we expect we expect that general.
Rising.
To continue.
Thank you as a reminder, you May press star one to ask the question.
Our next question is from Joseph Reagor with Roth Capital Partners. Please proceed with your question.
Good morning, guys and congrats on a great finish to the year.
Good morning, Joe.
So.
I know you guys don't give specific guidance, but could you give us any color on.
On expectations this year versus 2020.
And anything you can as far as the quarter.
Quarterly expert expectations on it and we're almost done with the first quarter of ready so any color there would be great.
Yes, Joe I'll take that I mean, if you if you look at it we did give some.
Some guidance as you'll recall, we said the 22021 and 2022.
From a revenue perspective, we expect to be slightly higher than the two.
<unk> 2020.
If you exclude that the bankruptcy settlement.
And we say that margins would be about the same right. So.
Again.
What we anticipate on a quarterly basis.
As mixed if you know what I mean, we don't give that guidance on kind of reluctant to say anything, but but we do believe that we're at right now it'll be probably a little more balanced than in previous years, but.
Again, we don't give quarter by quarter guidance of.
Does that help.
Okay.
Thank you.
Thank you our net.
Question comes from the line of Richard sales with Odeon Capital. Please proceed with your question.
Good morning, everyone and thank you for your hard work.
My question is.
Two part question one can you give us any view on.
On census is hard.
In reestablishing.
Production domestically what would that look like.
In the next three to five years.
On a national scale and the centers play a part in that or could you see <unk> playing a part in that.
Yeah do you want to say the other part of your question.
The other part is it.
Depending on how you answer the question.
Do you think that you would use the.
Favorable capital markets to raise additional capital to possibly.
Control produce possess.
Positioning yourself to be a beneficiary of the reestablishment of U S production facilities.
That is mandated by the government.
Yeah those are great questions. So thank you.
So the short answer and thanks for the question.
The first question is yes.
Interest does view itself as an essential part of reestablishing the production of enriched uranium the.
United States stopped enriching uranium in 2013 and this is the first time since 1945 day period in which we have not had domestic sourced domestic technology uranium enrichment.
And we.
We have been focused like a laser.
On reversing that and that's why we've been very grateful to the U S Department of energy for entering into the cost share contract that I mentioned in my remarks.
And notwithstanding Covid, which has been a tremendous challenge for all of us, but wasn't one of its dealing with.
Building nuclear machines, and an environment in which people can't tell of work all the time, we have been very grateful that we able to manage the thing so that we're actually on track and we are working very well with nuclear regulatory Commission and by early next year, we will actually be starting production of this exciting new.
Fuel for them. This 19, 75% high assay low enriched uranium with a nuclear regulatory commission to cover that so that does put us in a position. It's a modest cascade that will be beginning with it just 16 machines in the first instance, but it is very much our ambition to build on.
On that.
The initial cascade a larger production.
Capability. There was the survey performed by the nuclear industry Council of members of the advance.
Reactor community.
They were asked in the survey what is the problem that keeps you up at night and the number one the answer was access to the special fuel form this halo.
And so we want to meet that demand, there's a variety of curves out there that talk about.
The demand curve in this new fuel farm will look like.
But the good thing about our technology is it's modular so we can meter out the.
The deployment of additional centrifuges to not to neither underbelly of the overbuild, but to meet that demand and since you can build enrichment facilities faster than you can build reactors that that sort of relative timescale favors us in terms of.
The measuring and planning.
So we hope and expect to play a pivotal role.
And perform that function. It's also important to note that there are national security requirements that are also anticipated apart from the advanced generation community.
Our enriched uranium and we are uniquely suited to be able to do that because as I said in my remarks, we have the only U S origin technology that is deployable to meet those requirements and Theres a long long history going all the way back to President Eisenhower and had the Arctic over all of the federal.
Government and the commercial sector working in tandem so that the national security requirements and the nuclear energy of sphere can actually be used to leverage and enhance the commercial prospects. That's exactly how the U S. Commercial industry was launched in shipment Port, Pennsylvania back of 1957 so.
On your first question on the second question about the use of favorable capital markets. It was really gratifying to us in this past year five years after emerging from chapter 11, we were finally able to do a public offering we raised equities.
We have brought in.
80% of our preferred.
<unk>.
The $80 million days.
We intend to continue to be focused on capital markets and as we find opportunities to.
Make good use of the cash that range.
Thats something thats always on our menu of ways to do that and it could benefit the company in a number of ways the.
Raises we've done before have I think of Philip indicated facilitated our strengthening of our balance sheet through the preferred offer.
We did to bring in our preferred shares this past year, but there are also other investment opportunities that might appear that would help us in our quest to return to production.
To the extent that the.
Best use of of capital that we might raise in capital markets would be dedicated to that that's another option. We always look at the highest and best use of whatever cash we raise and we always do keep an eye on the overall tenor of capital market, whether the moment is propitious for us too.
Thank you.
As a reminder, the ask the question you May press Star one.
The next question is a follow up from Joseph <unk> with the West capital.
Okay.
Hey, guys.
Just one more thing of kind of <unk>.
Following on a little bit of the answer you just gave.
With the improved balance sheet is there an opportunity in the near term to look at either more preferred repurchases or some debt repayment or maybe of debt refi.
Anything like that.
Thanks for the question.
And the answer is we're always looking for those kinds of opportunities and we have now that we have filed the K. We've been focused on the last few days, obviously on on doing that in closing our books and so forth.
But we're always on the lookout for those kinds of opportunities I can't tell you exactly today, what we will of rollout do obviously, but.
It's something that we continuously monitor effectively on a daily basis, when we will have opportunities to do that and the bottom line is for us. It's very very important to continue the strength of our balance sheet. We feel very good about the progress we made going back to our earlier.
Tender offer on where are we.
We were able to cut our debt load of about three years ago by 60% that was the first step and then the.
Preferred exchange that I've already mentioned in the remarks, and Philip mentioned, so each one of the steps has put us into a better position and has been part of why it's.
The possible for us to access capital on the way that we've had.
In the past so we will continue to keep all of these options on the table and to take advantage of the opportunistically when the conditions look favorable.
And Joe just as the.
Youll note that last month.
We filed that we did do a little bit more preferred with one of the.
One of the one of the major holders of the preferred will be exchanged for common.
So yes, we will continue to focus on that.
Thank you. Our next question is from the follow up from the line of Rob Brown with Lake Street Capital. Please proceed with your question.
Thanks for taking my follow up question here I just wanted to get your thoughts on the kind of advanced reactor market there's been a.
A few months Theres a number of of good movement positive movements, but how do you sort of see you fitting into that and how.
What are sort of the cadence of development work that that's true.
Flows from that for you.
Well look our sort of consider it like soup and sandwich like the old commercial that's of great question.
Look.
Sometimes on a very simple analogy.
I talk about Henry Ford NFC et said I've got this great cargo of the model T. I don't have gasoline that would not have been a very good pitch right. So we are absolutely essential to.
To that advanced reactor community and Thats why the Congress passed the legislation calling for the Haywood to be made available by 2026 and so forth.
On the advanced reentry of community itself is very exciting right now and.
In the advanced reactor development program that was managed and run by the department of energy, which itself was the product of bipartisan legislation of.
The 10 award eats.
Of that program nine of the reactor designs require halos and indeed, both of the two largest awards the ones that went for the actual construction of demonstration reactors. One was by one by Terrapower. One was won by ex energy both of them also require a halo so.
<unk>.
We believe.
That we are integrally related to that growth and in fact, you may have noticed back in September terrapower in ourselves.
We issued a release talking about our work together, we have made it our business to basically engage with all developers we want to be the preferred haywood provider to that market and you've probably seen the.
Numbers published by nuclear Energy Institute and elsewhere as to what those forward demand curves for the advanced reactor development community look like and it is our hope and expectation to be in tandem right. There with the deployment of the reactors with the fuel supply to <unk>.
Excuse me to support them.
And we feel very good about that especially because of as I mentioned the cadence. If you use the word cadence is such that it's faster to build centrifuges than it is to build reactors. So we feel very good about being in a position to be able to calibrate.
Our expansion of capacity to meet the demand that we expect to see in the advanced reactor community.
Yeah.
Thank you.
At this time I will turn the flow back to Dan Leistikow for closing remarks.
Thank you operator, and thanks, everyone for joining.
Joining was of great discussion today. This will conclude our fourth quarter 2020, investor call and we look forward to speaking with you all again next quarter the.
Thank you all for your time.
Thank you everyone. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.
[music].
Greetings and welcome to the Central energy fourth quarter of year end 2020 earnings call.
At this time all participants are in a listen only mode.
The question answer session will follow the formal presentation.
On today's should require operator assistance during the conference. Please press star zero from your telephone keypad. Please.
Please note on this conference is being recorded.
At this time I'll turn the call over to Dan Leistikow, Vice President Corporate Communications. Mr. Lascar, you may now begin.
Good morning, and thank you for joining us on today's call will cover the results for Q4 and year end 2020 ended December 31 here today for the call are damp Hahnemann, President and Chief Executive Officer, Philip Strawbridge, Senior Vice President and Chief Financial Officer, Chief administrative officer on Treasurer, and John Dorrian controller.
<unk> and Chief Accounting officer before turning the call over to Dan <unk> I'd like to welcome all of our callers as well as those listening to our webcast. This conference call follows our earnings news release issued yesterday, we expect to file our annual report on form 10-K later today all of our news releases and SEC filings, including our 10-K 10, Qs and eight Ks are available.
On our website a replay of this call will also be available later this morning on the Sentras website.
I would like to remind everyone that certain of the information that we may discuss on this call today may be considered forward looking information that involves risk and uncertainty, including assumptions about the future performance of centrists. Our actual results may differ materially from those on a forward looking statements.
Additional information concerning factors that could cause actual results to materially differ from those in our forward looking statements is contained in our filings with the SEC, including our annual report on form 10-K, and quarterly reports on form 10-Q. Finally, the forward looking information provided today is time sensitive and is accurate only as of today March 19th.
2021 on one.
The otherwise noted this call is the property of the central energy any transcription redistribution retransmission or rebroadcast of the call in any form without the express written consent of the Suntrust is strictly prohibited.
You for your participation and I will now turn the call over today and part of them.
Okay.
Thank you Dan.
Thank you to everyone on the call today I am pleased to report that in 2020. Despite the challenges brought on by the COVID-19 pandemic Sandridge energy returned to profitability with.
With total revenue growing to $247 $2 million, we posted a net profit of $54 4 million.
Driven by the rising value of our stock we wanted the public offering that raised about $25 million before expenses.
We also completed a cash tender offer to retire approximately 60 million shares of series B senior preferred stock and did so at a 25% discount creating more value for all of our class a shareholders.
These efforts have strengthened our balance sheet and benefited our shareholders as reflected in the recent stock performance.
There are a number of factors driving the success, but none of it could have been possible without the hard work and incredible talent of our employees I am so proud of each and every one of them and all of that we have accomplished together.
At this time of year ago. The country had just entered locked out we could not of known at the time that extensive teller working masking and social distancing will be of part of our lives for so long, but every one of the company has risen to the challenge we have not only endured we've gotten stronger and I am convinced that the best is yet to come.
We are of course quite fortunate that the COVID-19 pandemic does not affect our revenue and the way that it does for many direct to consumer.
Nearly all of our revenue comes from stable long term contracts with utilities and the U S government.
The pandemic hasn't taken away our ability to make deliveries to our customers and.
And we expect to continue making those deliveries without interruption.
But because of the health and welfare of our employees and their families is our Paramount concern. The pandemic has forced us to change the way we do our work we.
We have shifted as many employees as possible to telework.
And taken aggressive steps to protect those who must continue their classified and technical work at our facilities in Tennessee, and Ohio building, what will be a first of all of kind of advanced nuclear facility.
Under the three year $115 million.
The <unk> was awarded by the U S Department of energy in 2019.
We are deploying a cascade of our AC 100, centrifuges to demonstrate production of a next generation nuclear fuel called high assay low enriched uranium or halo.
Construction is well underway and the nuclear regulatory Commission is conducting a technical review of our license Amendment request.
Upon the NRC license and then the approval and successful completion of the NRC operational readiness review.
Centers will have the nation's first NRC license of Haynesville production facility and expects to begin production by early 2022.
As a regular listeners and investors the already know the low enriched uranium R. L. EU that is used in the existing fleet of reactors is enriched so that the concentration of the FIS of all isotope uranium 235 is little less than 5%.
Hey, Lou is further on the edge so that the U 235 concentration is between five and 20% the <unk>.
Higher concentration of U 235, and the Halo allows for smaller fuel of course, better fuel utilization reduced volumes of waste and a variety of other advantages.
Most of the next generation reactor designs that are now under development are expected to operate on Hayward in fact of the 10 reactor designs of the department of energy selected for its multibillion dollar advanced reactor demonstration program nine are designed to operate on Halo.
The Department of Defense also had the program underway called project Pele to build a prototype of a mobile mic military micro reactor within the next three years.
When they solicited the applications for the program one of the key requirements was that the reactor must operate on Hayward.
The same advantage of that Heyward can bring to the next generation reactors also make it attractive to our current fleet of nuclear reactors.
Our of number of next generation fuel designs in development that would require higher enrichment levels than today's fuels.
This would allow the reactors to reduce the number of refueling outages and sell more power to the grid.
While our initial production capacity next year will be modest we can expand the facility and modular fashion.
Subject to the availability of funding and or offtake contracts centers can deploy additional centrifuges at our facility to meet whatever level of production is required for commercial <unk> U S government purposes.
Spot prices for enrichment measured in dollars per separative work units or <unk> have increased by almost 60% since reaching their lowest point in August 2018.
As the price of has continued to climb more utilities have gone back to the market to secure their fuel supply for future years. So we expect to have strong selling opportunities moving forward in fact from November through the end of January our sales team had one of its most productive periods in recent years secured.
The new contracts on sales commitments valued over $100 million.
That includes long term sales through 2027.
These new sales and others. We made throughout 2020 have enabled centers to maintain the value of our long term order book at approximately $960 million, even as some of our oldest and highest price contracts have rolled off.
The other major development in our Leu segment last year was the resolution of the Russian suspension agreement, which is a trade agreement between the United States and Russia that places limits on the amount of Russian nuclear fuel that can be important.
As you may recall the negotiations between the U S Department of Commerce, and the Russian Federation over extending that trade agreement had cash considerable uncertainty over our largest supply contract because it was not clear how new import limits starting in 2021 might affect our ability to execute on our existing <unk>.
Supply contract.
And make deliveries to our U S utility customers the.
The agreement reached in October and codified in legislation set aside a portion of the annual import quota to be used for central supply contract, which runs through 2028 <unk>.
The amount set aside are sufficient for us to meet our strategic plan objectives and deliver on our sales commitments in the U S market.
Yeah.
Thank you Dan and good morning to everyone on the call.
As Dan mentioned for the year end 2020, we had total revenue of $247 million $247 2 million.
And achieved net profit of $54 4 million.
On an EPS on an adjusted basis that equates to about $4 71.
Diluted per share for the year and the fourth quarter, we achieved on on an adjusted basis of $1 46 per share again on a diluted basis.
Revenue for the <unk> segment increased about $21 1 million in 2020 compared to 2019, our suite of revenue for 2020 includes $32 6 million collected and settlement of the supply contract. It was subject to the customer's bankruptcy proceeding as we've talked about before.
Excluding these proceeds the average throughput sweet price billed to customers increased 13%.
As we mentioned before we tend to see variability from quarter to quarter because of the customers in the <unk> segment generally have multiyear contracts with purchase obligations that are annual.
Not quarterly so they can decide on which month they want to take their purchase commitments and that's the quarter. When we recorded the revenue Suncor.
Some quarters look worse, because we have fewer deliveries, while others look better because we have more deliveries the.
Third quarter of 2020, as you'll recall was a good illustration we.
He didn't have any deliveries during those three months, but when we announced our third quarter results. We also said that we anticipated fourth quarter revenues for the <unk> segment would be the highest of any quarter for 2020 and Thats exactly what happened you had $77 $7 million of <unk> revenue in the fourth quarter significantly higher than any of the quarter.
That was more than 40% of our <unk> revenue for the year.
We continue to benefit from the price reset provision on our largest supply contract, which runs through 2028, because our cost of sales are calculated based on the long term rolling average. It took some time for those lower cost will be fully reflected in our financials, but you can see now what are the differences, making even though our revenue in.
The <unk> segment was 21.
$1 million higher in 2000 22019, our cost of sales for that segment was $25 9 million lower.
Our technical solutions segment revenue increased by $16 4 million in 2020 as compared to 2019, as we ramped up construction activities under the Halo of contract.
Cost of sales for this segment decreased by $1 7 million compared to 2019, reflecting the mix of technical solutions work performed in each of the periods.
Now I want to talk about our SG&A cost in 2020, our total SG&A increased by $2 3 million compared to last year overall, our SG&A costs for 2020 versus 2019 would have been lower except for the incentive compensation expense increased to $92 $9 million primarily.
Weighted to re measurement of our obligations under the long term incentive plans.
Based on our stock price, which has increased over 500% in the past two years.
Insulting costs related to capital financing of valuation claims recoveries international trade et cetera increased $1 5 million in 2020 compared to 2019 and.
And other consulting costs decreased $1 2 million.
Salary and benefit costs decrease of.
600000 travel expenses decreased by <unk> 5 million and other SG&A expenses increased by a net of about 200000.
We will continue to look at opportunities to reduce our SG&A cost as we have over the last several years.
As far as cash.
Even after purchasing in retiring approximately $60 million in the series B preferred stock that Dan talked about and again, which represented.
A little over 62000 shares we ended 2020 with the higher consolidated cash balance of the $152 million.
As Dan mentioned in 2020, we focused on strengthening our balance sheet by raising $25 million on the third quarter.
And as previously mentioned of eliminating of 60% of the preferred shares at a 25% discount in the fourth quarter of 2020.
We're pleased that our shareholders have been the beneficiaries of these actions will continue to look at opportunities to strengthen our balance sheet now I'm going to turn the call back over to Dan.
Thank you Philip.
Let me offer a final thought about the future of the nuclear industry and the important role we can play on it.
The United States and other countries confront the growing need for reliable carbon free electricity as we work to reduce emissions and combat climate change and the coming years. It is increasingly clear that nuclear energy must be part of the solution in recent years, we've seen bipartisan action around the country.
To preserve existing reactors and bipartisan action at the federal level to deploy the next generation of advanced reactors. Most recently in December.
The Energy Act of 2020 was adopted as part of the omnibus Appropriations Bill.
Among other things the new law is designed to promote deployment of advanced nuclear reactors and specifically requires the department of energy to create a new program to make halo available by 2026 for civilian domestic research development demonstration.
Yeah.
The interest plans to be the first to come to market with Hayward in.
In addition to meeting the emerging commercial requirements of our Halo. We are also uniquely suited to meet the government's own requirements for Hulu and other forms of enriched uranium.
The department of Energy National Nuclear Security Administration for example needs of the supply of low enriched uranium for the production of tritium, which is necessary to maintain our existing nuclear deterrent.
They may also on a halo potentially in significant quantities. If the department of defense decided to move forward with micro reactor deployments.
Finding non proliferation agreements and longstanding U S policy prohibit the use of force enrichment technology for the purposes, which is why the department of energy has said that a domestic technology enrichment capability will ultimately be required to meet these national security needs.
Our AC 100 centrifuge is the only deployment ready technology capable of meeting these needs.
We stand ready to support the department in whatever way we can.
<unk> ability to meet both civilian and defense requirement is part of what makes US unique is the company all of US at Central are strongly committed to support U S National security and to provide clean and affordable energy to all of many of US have been proud of work the center of sport predecessor organizations for them.
And in some cases for generations.
To those of you who have invested in centers and believe in us.
No how much we appreciate the trust and confidence you have put on us.
We look forward to continuing to build value for you for the us nuclear industry and for the country.
Operator, we'd be happy to entertain any questions at this time.
Thank you on that.
I'll be conducting a question and answer session.
Wanted to ask the question. Please press star one on your telephone keypad and the confirmation tone will indicate your line is on the question queue.
Maybe first start to if you relate to move your question from the queue.
For participants are you speak of equipment may be necessary to pick up your handset before pressing the star keys.
In the interest of time until the line of as many as possible to ask a question. Please limit yourself to one question.
And then re queue for additional questions.
Our first question comes from the line of Rob Brown with Lake Street Capital. Please proceed with your question.
Okay.
Mr. Brown. Your line is open for questions. Please proceed.
Good morning.
Good morning.
First question is on the the <unk>.
The pricing environment, how thats been trending lately in the have you seen that the.
The changes since the beginning of the year and sort of what's your sort of view on how thats playing out here.
So.
Ever since Rob the market bottomed in August of 2018, we have seen.
Rising curve for share price, both spot and term prices.
And those trends have.
Have continued.
We have seen.
As I think I indicated in my remarks.
Increased activity as.
As the uncertainty of the pension.
Pension agreement and the lack of resolution the high that has gone away a lot of the demand that had the.
Then basically withheld as people were not sure what was the important environment.
That demand has now come to market and that demand in turn as put some upward pressure on both term and spot prices. So we continue to observe.
Those kinds of the.
Those trends.
And we expect we expect that general.
Rising.
To continue.
Thank you as a reminder, you May press star one to ask the question.
Our next question is from Joseph Reagor with Roth Capital Partners. Please proceed with your question.
Good morning, guys and congrats on a great finish to the year.
Good morning, Joe.
So.
Sure.
I know you guys don't give specific guidance, but could you give us any color on.
On expectations this year versus 2020.
And anything you can as far as the quarter.
The expert expectations on we're almost done with the first quarter of ready so any color there would be great.
Yes.
Yes, Joe I'll take that I mean, if you if you look at it we did give some.
Some guidance as Youll recall, we said the 22021 and 2022.
From a revenue perspective, we expect to be slightly higher than.
In 2020.
If you exclude that the bankruptcy settlement.
And we say that margins would be about the same right. So.
Again.
What we anticipate on a quarterly basis.
As mixed if you know what I mean, we don't give that guidance on kind of reluctant to say anything, but but we do believe that where we're at right now it'll be probably a little more balanced than in previous years, but.
But again, we don't give quarter by quarter guidance.
Does that help.
Okay.
Thank you.
Thank you.
Our next question comes from the line of Richard sales with Odeon Capital. Please proceed with your question.
Good morning, everyone and thank you for your hard work.
My question is.
Two part question one can you give us any view on.
On census is hard.
In reestablishing.
Production domestically what would that look like.
In the next three to five years.
On the national scale and the centers play a part in that or could you see <unk> playing a part in that.
Yes, do you want to say of the other part of your question.
The other part is depending on how you answered the question.
Do you think that you would use the.
The favorable capital markets to raise additional capital to possibly.
The control produce positioning yourself to be a beneficiary of the reestablishment of U S production facilities.
On.
That is mandated by the government.
Yes, those are great questions. So thank you.
So the short answer and thanks for the question.
To the first question is yes, Central's does view itself as an essential part of reestablishing the production.
All of enriched uranium.
The United States stopped enriching uranium in 2013 and this is the first time since 1945 this period in which we have not had domestic sourced.
Domestic technology uranium enrichment.
And.
We have been focused like a laser on.
On reversing that and that's why we've been very grateful to the U S Department of energy for entering into the cost share contract that I mentioned in my remarks.
Notwithstanding COVID-19, which has been a tremendous challenge for all of us, but when one is dealing with.
Building nuclear machines, and an environment in which people can't tell of work all the time, we have been very grateful that we are able to manage the things, though that we're actually on track and we are working very well with nuclear regulatory Commission and by early next year, we will actually be starting production of this exciting new shoe.
He will form the 19, 75% high assay low enriched uranium with a nuclear regulatory commission to cover that so that does put us in a position it as a modest cascade that will be beginning with just 16 machines in the first instance, but it is very much our ambition to build on.
On that initial.
The initial cascade a larger production.
Capability. There was the survey performed by the nuclear industry Council of members of the advanced <unk>.
<unk> community and they were asked in the survey.
What is the problem that keeps you up at night and the number one the answer was access to the special fuel form this halo.
And so we want to meet that demand theres a variety of curves out there that talk about.
What the demand curve in this new fuel farm will look like but the good thing about our technology is it's modular so we can meter out the deployment of additional centrifuges to not to neither underbelly of the overbuild, but to meet that demand and since you can build enrichment facilities faster the knee.
Can build reactors that that sort of relative timescale favors us in terms of.
Measuring and planning.
So we hope and expect to play a pivotal role.
In performing that function. It's also important to note that there are national security requirements that are also anticipated apart from the advanced generation community for enriched uranium and we are uniquely suited to be able to do that because as I said in my remarks, we have the only U S origin technology.
That is deployable to meet those requirements and Theres, a long long history going all the way back to President Eisenhower and had the Arctic over all of the federal government and the commercial sector working in tandem so that the national security requirements and the nuclear energy sphere can actually be used to leverage and enhance the commercial.
<unk>, that's exactly how the U S. Commercial industry was launched in shipment Port, Pennsylvania back of $19 57. So that's on your first question on the second question about the use of favorable capital markets. It was really gratifying to us in this past year five years after emerging from chapter 11, we were finally able to.
Or do a public offering we raised equities.
We have brought in.
The 8% of our preferred and.
$80 million days, and we intend to continue to be focused on capital markets and as we find opportunities to may.
Make good use of the cash that range.
Thats something thats always on our menu of ways to do that and it could benefit the company in a number of ways. The cap rates as we've done before have I think of Philip indicated facilitated our strengthening of our balance sheet through the preferred offer that.
That we did to bring in our preferred shares this past year, but there are also other investment opportunities that might appear that would help us in our quest to return to production and to the extent that the.
Best use of of capital that we might raise in capital markets would be dedicated to that that's another option. We always look at the highest and best use of whatever cash we raise and we always do keep an eye on the overall tenor of capital market, whether the moment is propitious for us to act.
Thank you.
As a reminder, the ask the question you May press Star one.
The next question is a follow up from Joseph Reagor with Roth capital.
Hey, guys just.
Just one more thing of kind of <unk>.
Following on a little bit of the answer you just gave.
<unk>.
With the improved balance sheet is there an opportunity in the near term to look at either more preferred repurchases or some debt repayment or maybe of debt refi.
Anything like that.
Thanks for the question.
And the answer is we are always looking for those kinds of opportunities and we have now that we have filed the K. We've been focused on the last few days, obviously on on doing that in closing our books and so forth.
We're always on the lookout for those kinds of opportunities I can't tell you exactly today, what we will of rollout do obviously, but the.
It's something that we continuously monitor effectively on a daily basis, when we will have opportunities to do that and the bottom line is for us. It's very very important to continue the strength of our balance sheet. We feel very good about the progress we made going back to our earlier.
Tender offer on where are we.
We're able to cut our debt load.
About three years ago by 60% that was the first step and then the.
The preferred exchange that I have already mentioned in the remarks on Philip mentioned, so each one of the steps has put us into a better position and has been part of why it's on.
Possible for us to access capital in the way that we've had.
In the past so we will continue to keep all of these options on the table and to take advantage of them opportunistically when the conditions look favorable.
And Joe just as the.
You'll note that last month the 8-K.
We filed that we did do a little bit more preferred with one of the one of the.
One of the major holders of the preferred exchange for common.
So yes, we will continue to focus on that.
Thank you. Our next question is from the follow up from the line of Rob Brown with Lake Street Capital. Please proceed with your question.
Right.
Thanks for taking my follow up question here I just wanted to get your thoughts on the kind of advanced reactor market. There's been a few months there is a number of.
Good movements positive movements, but how do you sort of see.
<unk> fitting into that.
How.
What are sort of the cadence of development work.
Flows from that for you.
Well I sort of consider it like soup and sandwich like the old commercial.
Question and.
Look <unk>.
Sometimes on a very simple analogy.
I talk about Henry Ford NFC had said I've got this great cargo on the model T. I don't have gasoline that would not have been a very good pitch right. So we are absolutely essential.
Of that advanced reactor community and Thats why the Congress passed legislation, calling for the Haywood to be made available by 2026 and so forth.
On the advanced reenter the community itself is very exciting right now and.
In the advanced reactor the development program that was managed and run by the department of energy, which itself was the product of bipartisan legislation of.
The 10 award eats.
Of that program nine of the reactor designs require halos and indeed, both of the two largest awards the ones that went for the actual construction of demonstration reactors. One was by one by Terrapower. One was won by ex energy both of them also require a halo so.
<unk>.
We believe.
We are integrally related to that growth and in fact, you may have noticed back in September terrapower and ourselves.
We issued a release talking about our work together, we have made it our business to basically engage with all developers we want to be the preferred haywood provider to that market and you've probably seen the.
Numbers published by nuclear Energy Institute and elsewhere as to what those forward demand curves for the advanced reactor development community look like and it is our hope and expectation to be in tandem right. There with the deployment of the reactors with the fuel supply to <unk>.
Excuse me to support them.
And we feel very good about that especially because of as I mentioned the cadence of I think you used the word cadence is such that it's faster to build centrifuges than it is to build reactors. So we feel very good about being in a position to be able to calibrate.
Our expansion of capacity to meet the demand that we expect to see in the advanced reactor community.
Okay.
Thank you.
At this time I will turn the floor back to Dan Leistikow for closing remarks.
Well, thank you operator, and thanks, everyone for joining.
Joining was of great discussion today. This will conclude our fourth quarter 2020, investor call and we look forward to speaking with you all again next quarter.
And thank you all for your time.
Thank you everyone. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.