Q2 2021 Centrus Energy Corp Earnings Call

August 12, 2021

[music].

Welcome to Sentras Energy's second quarter 'twenty 'twenty, one earnings call at this time, all participants are in a listen only mode.

<unk> and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Dan Leistikow, Vice President Corporate Communications. Thank you you may begin.

Good morning. Thank you all for joining US today's cover today's call will cover the results for the second quarter of 2021.

June 30th.

Turning the call over to Dan I'd like to welcome all of our callers as well as those listening tour webcast.

The eight Ks are available on our website a replay of this call will also be available later this morning on <unk> website.

I would like to remind everyone that certain of the information we may discuss on this call maybe considered forward looking information that involves risks and uncertainty including assumptions about the future performance of Sentras. Our actual results may differ materially from those in our forward looking statements.

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 quarterly reports on form 10-Q filing.

Finally, the forward looking information provided today is time sensitive and accurate only as of today August 12, 2021, unless otherwise noted.

This call is the property of the central synergy any transcription redistribution retransmission or rebroadcast of coal in any form without the express written consent of <unk> is strictly prohibited.

Thank you for your participation and I'll now turn the call over to Dan.

Thank you Dan and thank you to everyone on the call today.

I am pleased to report that after returning to profitability in 2020 centers energy is continuing that trend and had a strong and profitable second quarter of 2021.

We saw a total revenue of $62.4 million and posted a net profit of $11.6 million for the second three months of the year.

As always we could not have done this without the hard work and incredible talent of our employees I'm. So proud of all that we've accomplished together, particularly under the unique and ongoing challenges presented by Covid 19.

As noted on previous calls we have been making our customer deliveries without interruption and benefit from the fact that most of our revenue comes from stable long term contracts.

Our leu business continues to perform well and we've been adding new sales commitments since the beginning of the year.

The overall pricing in the led market continues to increase each quarter in both the spot and long term markets showing positive momentum in the uranium enrichment market.

As part of our three year $115 million contract with the United States Department of Energy. We are on track to begin demonstrating production of high assay low enriched uranium or halo by next year.

All of the centrifuges had been assembled construction of the support systems is well underway in June we secured approval of our license amendment application from the U S Nuclear regulatory Commission.

Making the American centrifuge plant and pipe in Ohio, The first and only U S enrichment facility licensed to produce Halo.

This is a major milestone not only for centrists, but for the restoration of American nuclear leadership on the world stage and support of the next generation of advanced nuclear reactors.

While Sentras has managed to keep our own construction work on track throughout the pandemic as we have previously noted the pandemic has affected some of our suppliers, which has created some challenges.

Challenges related to Covid include increased delays from vendors and higher cost. We are working with the department of energy to minimize the impacts and to address these cost increases as we go forward.

As regular listeners of our earnings calls, we will know getting a domestic source of halo enrichment up and running is critical to the future success of advanced reactors in the United States Department of Energy has made a multibillion dollar commitment to these next generation reactors as part of the advanced reactor demonstration.

Ram R <unk> D P.

Which will support the construction of two commercial scale advanced reactors in the next seven years and is helping to advance eight other designs towards commercialization.

That program cannot succeed without Halo since nine of the 10 <unk>.

Reactor designs the department selected for the program, including the two major demonstrations by ex energy in Terrapower are expected to operate on the Halo.

Should note that a number of the advanced reactor developers are reported to be making tremendous progress.

In April it was reported that ex energy signed an Mou with energy northwest and a local public utility district to work on site in building and operating at X 100 advanced nuclear power plant in Richland, Washington.

And then May Terrapower joined with Pacificorp and Governor Mark Gordon to announced that they are working to cite the reactor at a retiring coal plants in Wyoming and last year <unk> developer of the Aurora Micro reactor submitted the first ever combined license application for an advanced non light water reactor to the next.

The nuclear regulatory Commission and Oklahoma also requires halo fuel.

We are thrilled to see these companies moving so quickly to bring their next generation Haywood fueled markets reactors to market.

The initial capacity of our Halo demonstration will be modest however, the facility in Ohio. It is large.

Could accommodate enough centrifuges to meet any level of Haywood demand and we have a modular expansion model. So that we can match our capacity to market demand.

As explained more fully in our quarterly filing our ability to operate and to expand the facility is subject to the availability of additional funding and or offtake agreements.

While we are hopeful about that and believe Halo has a critical role to play in Americas nuclear future. There are no guarantees now for more details on our quarterly financial results I will turn the.

Call over to Philip Philip.

Thank you Dan good morning, everyone.

Dan mentioned for the second quarter of 2021, we had total revenue of $62.4 million and achieved a net profit of $11.6 million.

Revenue from the <unk> segment decreased $18.2 million compared to the same quarter in 2020.

When we had that onetime $32.4 million collection from a customer that was in bankruptcy.

Excluding that settlement in the prior period <unk> revenue increased by $19 million in the second quarter in.

And $26.4 million through the first half of the year compared to the same periods in 2020.

Our cost of sales was $8.1 million higher in the second quarter compared to last year, because we had a higher volume of sales.

The same time, our cost of sales on a per unit basis actually declined.

Excuse me.

Pardon me, excluding the recovery on bankruptcy court claims of $32.4 million in the prior period. The gross profit for smooth sales increased $5.7 million a three year period and 900000 in the six month period due primarily to increases in food sales volume decreases in the average unit costs, partially offset by decrease.

And the average sales price.

Those of you that participated in these calls before know that.

We've said before that our revenues and margins vary a lot from quarter to quarter for the sort of annual performance that matters. The most.

In our <unk> segment, which represents the majority of revenue our customers typically have multiyear contracts that include an annual purchase obligation.

But not a quarterly purchase obligation the customer decides what month to take their annual purchase commitments.

And it's in that quarter that we record the revenue for the customer's contract some quarters worst because we have fewer deliveries, while others look better because we have more deliveries.

Another source of variation of the fact that some contracts were signed when prices were high.

We are higher than they are today and others were signed when prices were lower so a quarter can look better or worse, depending upon the price points of that particular contract that we're delivering in the quarter.

On our technical solutions segment revenue increased $4.9 million in the second quarter of 2021 as compared to the same period in 2020 due to the increased work performed on the Halo contract and a separate contract we have with <unk> energy.

Cost of sales for this segment increased $5.3 million in the three months ended June 32021, compared to the corresponding period in 2020, largely reflecting the increase in contract.

<unk>.

Now I'd like to talk a little bit about our SG&A cost our total SG&A decreased $2.6 million in the three months ended June 30 decreased $2.9 million in the six months period ending in June.

Compared to the corresponding periods in 2020.

We have continued to cut consulting costs seeing decreases of $2.6 million for the quarter.

And $3.6 million for the six months period compensation expenses increased 200000 for the quarter and other SG&A expenses increased by a net of 200000.

We'll continue to look for opportunities to reduce our SG&A costs as we have over the last several years.

First cash we ended the quarter with a balance of $176 million, putting us in a strong position going forward I'm going to turn the call back over to Dan.

Okay.

Thank you Philip.

Before we get to your questions. Let me step back for a moment so that we can see the forest through the trees.

The great Hockey player Wayne Gretzky famously said, you skate to where the puck is going not to where it's been.

As the last few months have shown us from devastating floods in Germany to the wildfires and the northwest United States and in Southern Europe extreme weather events are becoming more common more intense and more dangerous.

The real world effects of climate change are becoming more evident and more immediate.

Government leaders from presidents and Prime ministers to mayors and governors are faced with increasing pressure to act and to act aggressively.

Global electricity demand is expected to roughly double over the next 30 years, but to avoid the worst consequences of climate change we need to achieve net <unk> emissions in the electricity sector in that same timeframe.

In other words, a 100% increase in generation and.

And a 100% decrease in emissions.

Wind and solar are clearly part of the answer and I've always believed we should deploy it.

As much as we can ever where we can as fast as we can.

But it is equally clear that intermittent renewables are not enough on their own.

We need to back them up with firm flexible dispatch of coal zero carbon generation, which nuclear power is uniquely suited to provide.

Maintaining our existing nuclear reactors and deploying the new advanced reactor designs is indispensable to filling the gap in fact.

Many of the new reactors like the ones ex energy and Terra power and <unk> are working to deploy are designed with the ability to ramp their electricity production up and down.

They can compensate for intermittency of renewables to help make a zero carbon electricity grid more achievable affordable and reliable.

Decarbonising electricity is the first step in any serious plans to confront climate change and as the pressure mounts on world leaders in the demand for zero carbon nuclear should continue to grow.

Here in the United States Congress and the administration have made a commitment to support advanced nuclear power, but there.

That effort stability.

Hey, Lou domestically filling that glaring hole in Americas nuclear fuel supply chain will become even more urgent in the next few years, we are skating hard in that direction. So that we will be in a position to take the puck into minute. Once again I want to thank all of you for joining the call and more importantly for the trust.

Confidence that you've placed in centers, we look forward to continuing to build value for you before the U S nuclear industry and for the country operator, we'd be happy to entertain any questions at this time.

Thank you if you would like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.

And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please limit yourself to one question and re queue for additional questions.

Our first question is from Rob Brown with Lake Street Capital markets. Please proceed.

Good morning.

Good morning, Rob.

I just wanted to dig into a little bit into the <unk> or sorry, the <unk> pricing trends.

Uh huh.

You said, it's increased every quarter, how do you see that kind of going in the near term and what sort of driving that price increase at this point.

Great question, Rob. Thanks, So since then the market bottomed in August.

2018, we've seen about a 50% increase.

That's been driven by.

A couple of factors.

There's a lot of uncertainty in the market that was created by the trade action involving the so called Russian suspension agreement.

And the resolution of that agreement restore confidence in the market that that's that's the factor secondly.

The trend up until August 2018 reflected a couple of dominant factors number one obviously beginning March 2011, with the Fukushima disaster, you had Japan, taking 54 reactors offline, Germany immediately taken eight reactors offline a lot of reactors.

Demand.

Being postponed and so forth. So you had a very substantial decline of demand at the same time there were still expansion plans on enrichment that were going on and so that combination of reduced demand and increased supply. Obviously, you had a depressive effect on prices.

But as the price continued.

To decline.

The reactor operators, we're continuing to work down inventories and they were not pressed because of those high inventories to go back to market ultimately and the incentives were obviously not to buy too soon because you might miss a better cheaper deal later once that <unk>.

Inflection point was hit.

In 2018 as reactor utilities needed to get their fuel now your incentive structure switches because as the market starts to rise.

You have less instead.

Incentive to wait because you might have to pay a higher price later on so that demand actually came to market.

More quickly and then as I said the inventories were getting worked down.

In addition, you know theres been.

Just continued interest in the potential growth of nuclear which I talked about some of my prepared remarks, and so that combination of factors.

Has led to <unk>.

Continued rising of prices now just to be complete there are.

Also other factors that.

Could in time have a depressive effect. So if for example reactors continued to close prematurely in the United States of America that would dampen demand and dampen demand would.

Obviously have a dampening effect on the continuation of the existing price curve.

As gently rising.

Okay, great. Thank you and then.

And then maybe just you mentioned a little bit about the the site.

How is the contract activity going and are you seeing utilities.

Yeah.

Decisions on timing of orders at this point and where is that at this point.

You gapped out a bit did you did you say worthy to signing orders.

I just wanted to get a sense of the order activity from utilities that you are seeing yeah. So as I said, Rob a few minutes ago.

We signed significant amounts herself in recent months, we reported a $100 million of new sales. So we are seeing utilities coming to market and I would say kind of in the normal course that period that that I told you about before where utility we're basically withholding demand from the market.

As the price was falling that has ended and again I'd.

I'd like to emphasize the impact of the clarity to the market that the resolution of the Russian suspension agreement extension brought to bear was a very important factor in encouraging utilities to come to market.

Cloud of uncertainty was a was a problem and having removed that that has I think given utilities' greater com.

Confidence to sign new contracts.

Our next question is from Joseph Reagor with Roth Capital Partners. Please proceed.

Good morning, guys. Thanks for taking my questions.

Joe.

So.

First on on the L U S segment and.

The sales this quarter I guess, we're a bit above what the market expectations were.

Is this solely timing or did you pick up any additional sales beyond what your annual expectation was at the beginning of the year.

Robert It's just it's timing.

Was timing.

Okay I just wanted to.

Helps for future modeling stuff and then on.

On the technical services segment.

There's been a some.

Mall gross loss there the first two quarters. This year you know I think the expectation is worth it that'd be hugely profitable, but is there anything you guys can do too.

Swing that to a profit in this coming quarters.

And Phil May want to supplement this but this we view this segment as critical to the future of the company. We're right now in a pivot point for the entire U S nuclear industry.

And as we said both under the advanced reactor development program and in other projects such as our as the Oclaro Aurora reactor Theres, just a lot of firm at an activity in the industry as.

That demand picks up.

As commitments become.

The stronger and clear both.

Government sources of demand in the U S government has its own very important demand for Ah hey, with fuel as well as the prospect of demand coming from this next generation of reactors.

That would be the driving force in the demand signal that would help us bring cts into profitability. Our objective we've had a huge milestone.

Joe in terms of the June 11th approval by the NRC of the only Cailloux license in other words, our ability the NRC license to go to up to 20% enrichment that gives us an enormous advantage, we're going to start producing modest quantities early next year and we view that.

As they critical steppingstone to an expansion of the plant and once we move into an expansion phase that's when we are.

Looking for a more profitable results out of the Cts segment, but I don't know Philip wants to add to that.

Yes, Joe I mean, as you know.

We haven't given guidance and technical solutions and the reason is just what Dan said I mean, it's really our investment for the future. So I'll.

I'll say this.

Nuclear industry, particularly that segment moves rather slowly so.

But we.

We think that we've got good opportunities as Dan said.

As a reminder, this star one on your telephone keypad, if he would like to ask a question. Our next question is from Andrew Ginsburg with R. W. <unk>.

Please proceed.

Good morning, guys. Thanks for taking my questions.

Sure.

So just.

To get a little bit more clarity around the Halo centrifuges, and you mentioned, having a modest capacity is that it is the Max capacity that right now that one metric ton.

That's been discussed for the demonstration period.

And if so do you guys have.

Any kind of expectations on capex requirements to scale that out as any of the demand for Halo continues to grow.

So there's two parts there.

And the first part is yes, I mean that that one out to you is is the coal.

Wanted to.

In terms of the Capex I won't I won't talk numbers per se unless a Philip may want to say.

Something but I would say.

The good news about <unk>.

Our overall project design is that we can expand we can expand in a modular fashion since as Philip said, a few minutes ago.

The actual quantum of the upcoming demand remains uncertain and there's a lot of optimism, but there's also uncertainty and there is a time that will pass between now and the actual bringing to market of that new capacity. So the good news for US is that we can expand the enrichment cascades in a modular fashion to match the projections of the <unk>.

Man, but that also means that the predictions for the capex are going to be modular and so there's not a like a fixed number that we can share with you at this time.

Philip do you want to expand that.

That's right.

Because of the uncertainty we want to make sure that we do it properly.

We have reached the end of our question and answer session I would like to turn it back to Dan for closing comments.

Thank you operator, this will conclude our investor call for the second quarter of 2021.

I want to thank them.

All of our listeners online investors, who called in and we look forward to talking to you again next quarter.

Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

[music].

They just set a model.

[music].

Yeah.

[music].

Yeah.

[music].

Greetings and welcome to Suntrust's Energy's second quarter 'twenty 'twenty one earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.

Now I'll turn the conference over to Dan Leistikow, Vice President Corporate Communications. Thank you you may begin.

Good morning. Thank you all for joining US today's cover on today's call will cover the results for the second quarter of 2021 ended June 30th today.

We have Dan <unk>, President and Chief Executive Officer, Philip Strawbridge, Senior Vice President Chief Financial Officer, Chief administrative officer, and Treasurer, and John Dorrian Controller, and Chief Accounting Officer before turning the call over to Dan 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 quarterly report on form 10-Q Tomorrow, all of our news releases and SEC filings, including our 10-K 10-Q and eight Ks are available on our website. A replay of this call will also be available later this morning on <unk> website.

Our actual results may differ materially from those in our forward looking statements.

Information concerning factors that could cause actual results to materially differ from those in our forward looking statements.

And in our filings with the SEC, including our annual report on form 10-K quarterly reports on form 10-Q.

The forward looking information provided today is time sensitive and accurate only as of today August 12, 2021, unless otherwise noticed.

This call is the property in central synergy any transcription redistribution retransmission or rebroadcast of coal in any form without the express written consent centrist is strictly prohibited.

You for your participation and I'll now turn the call over to Dan Palmer.

Thank you Dan and thank you to everyone on the call today.

I am pleased to report that after returning to profitability in 2020 centers to energy is continuing that trend and had a strong and profitable second quarter of 2021.

We saw a total revenue of $62.4 million and posted a net profit of $11.6 million for the second three months of the year.

As always we could not have done this without the hard work and incredible talent of our employees I am so proud of all that we've accomplished together, particularly under the unique and ongoing challenges presented by Covid 19.

As noted on previous calls we have been making our customer deliveries without interruption and benefit from the fact that most of our revenue comes from stable long term contracts.

Our leu business continues to perform well and we've been adding new sales commitments since the beginning of the year.

Overall pricing in the <unk> market continues to increase each quarter in both the spot and long term markets showing positive momentum in the uranium enrichment market.

As part of our three year $115 million contract with the United States Department of Energy. We are on track to begin demonstrating production of high assay low enriched uranium or halo by next year.

All of the centrifuges had been assembled construction of the support systems is well underway and in June we secured approval of our license amendment application from the U S Nuclear regulatory Commission.

Making the American centrifuge plant and piping, Ohio, the first and only U S enrichment facility licensed to produce Halo.

This is a major milestone not only for certain interests for the restoration of American nuclear leadership on the world stage and support of the next generation of advanced nuclear reactors.

While <unk> has managed to keep our own construction work on track throughout the pandemic as we have previously noted the pandemic has affected some of our suppliers, which has created some challenges.

Challenges related to Covid include increased delays from vendors and higher costs, we're working with the department of energy to minimize the impacts and to address these cost increases as we go forward.

As regular listeners of our earnings Charles will know getting a domestic source of Halo enrichment up and running is critical to the future success of advanced reactors in the United States Department of Energy has made a multibillion dollar commitment to these next generation reactors as part of the advanced reactor demonstration.

Ram or <unk>.

Which will support the construction of two commercial scale advanced reactors in the next seven years and is helping to advance eight other designs towards commercialization.

That program cannot succeed without Halo.

Nine of the 10.

Reactor designs the departments selected for the program, including the two major demonstrations by ex energy and Terra power are expected to operate on Halo.

I should note that a number of the advanced reactor developers are reported to be making tremendous progress.

In April it was reported that ex energy signed an Mou with energy northwest and a local public utility district to work on citing building in the operating and actually 100 advanced nuclear power plant in Richland, Washington.

And then May Terrapower joined with Pacificorp and Governor Mark Gordon two announced that they are working to cite the reactor at a retiring coal plant in Wyoming and last year <unk> developer of the Aurora Micro reactor submitted the first ever combined license application for an advanced non light water reactor to the next.

The nuclear regulatory Commission and also requires halo fuel.

We are thrilled to see these companies moving so quickly to bring their next generation Halo fueled markets reactors to market.

The initial capacity of our Halo demonstration will be modest however, the facility in Ohio. It is large.

Could accommodate enough centrifuges to meet any level of Haywood demand and we have a modular expansion model. So that we can match our capacity to market demand.

As explained more fully in our quarterly filings our ability to operate and to expand the facility is subject to the availability of additional funding and or off take agreements.

Call over to Philip Philip.

Thank you Dan good morning, everyone.

Dan mentioned for the second quarter of 2021, we had total revenue of $62.4 million and achieved a net profit of $11.6 million.

Revenue from the <unk> segment decreased $18.2 million compared to the same quarter in 2020.

When we had that onetime $32.4 million collection from a customer that was in bankruptcy.

Excluding that settlement in the prior period <unk> revenue increased by $19 million in the second quarter in.

And $26.4 million for the first half of the year compared to the same periods in 2020.

Our cost of sales was $8.1 million higher in the second quarter compared to last year, because we had a higher volume of sales.

Same time, our cost of sales on a per unit basis actually declined.

Excuse me pardon me exclude.

Excluding the recovery on bankruptcy court claims of $32.4 million in the prior periods. The gross profit for smooth sales increased $5.7 million a three year period and 900000 in the six month period due primarily to increases in food sales volume decreases in the average unit costs, partially offset by decreases in the <unk>.

Average sales price.

Those of you to participate in these calls before know that we've said before that our revenues and margins vary a lot from quarter to quarter, but it's our annual performance that matters. The most.

In our <unk> segment, which represents the majority of revenue our customers typically have multiyear contracts that include an annual purchase obligation.

But not a quarterly purchase obligations the customer decides what month to take their annual purchase commitment and its in that quarter that we record the revenue per the customer's contract some quarters worse, because we have fewer deliveries, while others look better because we have more deliveries.

Another source of variation of the fact that some contracts were signed when prices were high.

We're higher than they are today and others were signed when prices were lower so a quarter can look better or worse, depending upon the price points of that particular contract that we're delivering in the quarter.

On our technical solutions segment revenue increased $4.9 million in the second quarter of 2021 as compared to the same period in 2020 due to the increased work performed under Halo contract and a separate contract we have with <unk> energy.

Cost of sales for this segment increased $5.3 million in the three months ended June 32021, compared to the corresponding period in 2020, largely reflecting the increase in contract work performed.

Now I'd like to talk a little bit about our SG&A costs. Our total SG&A decreased $2.6 million in the three months ended June 30, and decreased $2.9 million in the six months period ending on June.

Compared to the corresponding periods in 2020.

We have continued to cut consulting costs seeing decreases of $2.6 million for the quarter.

And $3.6 million for the six months period compensation expenses increased 200000 for the quarter and other SG&A.

<unk> increased by a net of 200000.

We will continue to look for opportunities to reduce our SG&A costs as we have over the last several years.

Cash we ended the quarter with a balance of $176 million, putting us in a strong position going forward.

Ill turn the call back over to Dan.

Okay.

Thank you Philip.

Before we get to your questions. Let me step back for a moment so that we can see the forest through the trees.

The great Hockey player Wayne Gretzky famously said, you skate to where the puck is going not to where it's been.

As the last few months have shown us from devastating floods in Germany to the wildfires and the northwest United States and in Southern Europe.

Stream weather events are becoming more common more intense and more dangerous.

The real world effects of climate change are becoming more evident and more immediate.

Government leaders from President and Prime ministers to mayors and governors are faced with increasing pressure to act and to act aggressively.

Global electricity demand is expected to roughly double over the next 30 years, but to avoid the worst consequences of climate change we need to achieve net zero emissions in the electricity sector in that same timeframe.

In other words, a 100% increase in generation.

And a 100% decrease in emissions.

Wind and solar are clearly part of the answer and I've always believed we should deploy it.

As much as we can ever where we can as fast as we can.

But it is equally clear that intermittent renewables are not enough on their own.

We need to back them up with firm flexible dispatch of coal zero carbon generation, which nuclear power is uniquely suited to provide.

Maintaining our existing nuclear reactors and deploying the new advanced reactor designs is indispensable to filling the gap in fact, many of the new reactors like the ones ex energy and Terra power and <unk> are working to deploy are designed with the ability to ramp their electricity production up and down they can compensate for the interim.

And C of renewables to help make a zero carbon electricity grid more achievable affordable and reliable.

Decarbonising electricity is the first step in any serious plans to confront climate change and as the pressure mounts on world leaders the demand for zero carbon nuclear should continue to grow here.

Here in the United States Congress and the administration have made a commitment to support advanced nuclear power, but there.

That effort cannot succeed without the ability to produce halo domestically filling that glaring hole in Americas nuclear fuel supply chain will become even more urgent in the next few years, we are skating hard in that direction. So that we will be in a position to take the park into the net once again I want to thank all of you for joining the call.

And more importantly for the trust and confidence that you've placed in centers, we look forward to continuing to build value for you before the U S nuclear industry and for the country operator, we'd be happy to entertain any questions at this time.

Thank you if you would like to ask a question. Please press star one on your telephone keypad.

Information tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Please limit yourself to one question and re queue for additional questions.

Our first question is from Rob Brown with Lake Street Capital markets. Please proceed.

Good morning.

Good morning, Rob.

I just wanted to dig into a little bit into the <unk>, sorry, the <unk> pricing trends.

You said, it's increased every quarter, how do you see that kind of going in the near term and what sort of driving that price increase at this point.

Great question, Rob. Thanks, So since then the market bottomed in August two.

2018, we've seen about a 50% increase.

That's been driven by a couple of factors.

There is a lot of uncertainty in the market that was created by the trade action involving the so called Russian suspension agreement.

And the resolution of that agreement restore confidence in the market.

That's a factor secondly.

Demand being postponed and so forth. So you had a very substantial decline of demand at the same time there were still expansion plans on enrichment that were going on and so that combination of reduced demand and increased supply. Obviously, you had a depressive effect on prices.

But as the price continued.

To decline.

Inflection point was hit.

In 2018.

As a reactor utilities needed to get their fuel now your incentive structure switches because as the market starts to rise.

Less.

Incentive to wait because you might have to pay a higher price later on so so that demand actually came to market.

More quickly and then as I said the inventories were getting worked down in.

In addition, you know theres been.

Just continued interest in the potential growth of nuclear which I talked about in some of my prepared remarks, and so that combination of factors.

Has led to <unk>.

Continued rising prices now just to be complete there are.

Also other factors that that.

Could in time have a depressive effect.

So if for example reactors continued to close prematurely in the United States of America that would dampen demand and dampened demand would.

Obviously have a dampening effect on the continuation of the existing price curve.

Which is generally rising.

Okay, great. Thank you and then.

And then maybe just you mentioned a little bit about the the site.

How is the contract activity going and are you seeing utilities.

You know, maybe making decisions on timing of orders at this point and where is that at this point.

You gapped out a bit did you did you say worthy to signing orders.

I just wanted to get a sense of the order activity from utilities that you are seeing.

So as I said, Rob a few minutes ago.

Signed significant amounts yourself in recent months, we reported a $100 million of new sales. So we are seeing utilities coming to market and I would say kind of in the normal course that period that that I told you about before where utility we're basically withholding demand from the market.

Price was falling that has ended and again.

To emphasize the impact of the clarity to the market that the resolution of the Russian suspension agreement extension brought to bear was a very important factor in encouraging utilities to come to market that that cloud of uncertainty was a was a problem and having removed that that has.

I think given utilities' greater.

Confidence to sign new contracts.

Our next question is from Joseph Reagor with Roth Capital Partners. Please proceed.

Good morning, guys. Thanks for taking my questions.

Okay. So.

First on the L U S segment and.

The sales this quarter I guess, we're a bit above what the market expectations were.

Is this solely timing or did you pick up any additional sales beyond what your annual expectation was at the beginning of the year.

Rob It's just timing.

Timing.

Okay I just wanted to add.

For future modeling and then.

On the technical services segment.

Theres been a.

Small gross loss there the first two quarters. This year you know.

I think the expectation is worth it that'd be hugely profitable, but is there anything you guys can do too.

Swing that to a profit in this coming quarters.

And Phil May want to supplement this but this we view this segment as critical to the future of the company. We're right now in a pivot point for the entire U S nuclear industry.

And as we said both under the advanced reactor development program in other projects such as a <unk>.

As the Oclaro Aurora reactor Theres, just a lot of affirmative and activity in the industry as.

That demand picks up.

As commitments become.

The stronger and clear both.

Government sources and demand in the U S government has its own very important demand for.

Hey, with fuel as well as the prospect of demand coming from this next generation of reactors.

That would be the driving force in the demand signal that would help the spring Cts to profitability. Our objective we've had a huge milestone.

Joe in terms of the June 11th approval by the NRC of the only Cailloux license and other was our ability the NRC license to go to up to 20% enrichment that gives us an enormous advantage, we're going to start producing modest quantities early next year and we view that.

As the critical stepping stone to an expansion of the plant and once we move into an expansion phase that's when we are.

Looking for a more profitable results out of the Cts segment, but I don't know Philip wants to add to that.

Yes, Joe.

As you know, we haven't given guidance and technical solutions and the reason is just what Dan said I mean, it's really our investment for the future. So I'll.

I'll say this.

Nuclear industry, particularly that segment moves rather slowly so.

But what we.

We think that we've got good opportunities as Dan said.

As a reminder, this star one on your telephone keypad, if he would like to ask a question. Our next question is from Andrew Ginsburg with R. W.

Please proceed.

Good morning, guys. Thanks for taking my questions.

Sure.

So just.

To get a little bit more clarity around the Halo centrifuges and you mentioned, having a modest capacity is that is the Max capacity that right now that one metric ton on that that's been discussed for the demonstration period.

And if so do you guys have.

Any kind of expectations on capex requirements to scale that out as any of the demand for Halo continues to grow.

So there's two parts there.

The first part is yes, I mean that that one out to you is is the coal.

Wanted to.

In terms of the Capex I won't I won't talk numbers per se unless the Philip may want to say.

Something but I would say.

The good news about <unk>.

Our overall project design is that we can expand we can expand in a modular fashion since as Philip said, a few minutes ago.

The actual quantum of the upcoming demand remains uncertain and there's a lot of optimism, but there's also uncertainty and there's time that will pass between now and the actual bringing to market of that new capacity. So the good news for US is that we can expand the enrichment cascades in a modular fashion to match the projections of the day.

Man, but that also means that the predictions for the capex are going to be modular and so there's not a like a fixed number that we can share with you at this time.

Philip you want to expand that that's right.

Because of the uncertainty we want to make sure that we do it properly.

We have reached the end of our question and answer session I would like to turn it back to Dan for closing comments.

Well. Thank you operator, this will conclude our investor call for the second quarter of 2021.

I want to thank.

All of our listeners online investors, who called in and we look forward to talking to you again next quarter.

Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Q2 2021 Centrus Energy Corp Earnings Call

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