Q3 2021 Centrus Energy Corp Earnings Call
[music].
Greetings and welcome to Central Asia Energy third quarter 2021 earnings call.
At this time all participants are in a listen only mode.
A question 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.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Dan Leistikow Vice President Corporate Communications. Thank you you may begin.
Good morning. Thank you all for joining US today's call will cover the results for the third quarter of 2021 ended September 30th today, we have Dan.
Dan <unk>, President and Chief Executive Officer, Philip Strawbridge, Senior Vice President Chief Financial Officer, Chief administrative officer, and Treasurer, as well as John Dorrian controller, and Chief Accounting Officer.
Before turning the call over to Dan Pondimin I'd like to welcome all of our 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 afternoon, 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 Suntrust 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 risk and uncertainty, including assumptions about the future performance of Suntrust. Our actual results may differ materially from those in our forward looking statements additional information concerning factors that could cause actual.
It's 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 accurate only as of today.
November 11th 2011, or I'm, sorry number November 11th 2021, unless otherwise noted.
This call is the property of citrus energy any transcription redistribution retransmission or rebroadcast of this call in any form without the express written consent Suntrust is strictly prohibited.
Thank you for your participation and I'll now turn the call over to Dan caught them.
Thank you Dan and thank you to everyone on the call today I'd like to acknowledge especially today in November 11th are veterans, which are the day that we honor and celebrate but sacrificing contribution they've made to our nation to keep us safe and secure and it's something that all Americans.
We owe a debt of gratitude to all of them are veterans.
All over the country and wherever they may be so godspeed to all I'm pleased to report that Center's energy had a strong and profitable third quarter 2021.
We generated total revenue of $91 $3 million and earned net income of $42 $1 million for the quarter.
Our cash balance as of September 30.
<unk> hundred $71 million, putting us in a strong position as we go forward.
Our leu segment continues to perform very well and deliver strong margins.
This reflects not only success we've had on the sales side, but also the fact that we were able to diversify and extend our supply base and take advantage of historically low enrichment prices a few years ago to walk in affordable enrichment supply through the late 2000 Twenty's.
You may recall at the beginning of 2019, a market based price reset took effect in our largest supply that.
That reduced our costs and significantly improved our margins.
While our costs are lower the uranium enrichment market has been steadily recovering with published price indicators for enrichment rising 63% compared to the low point in August of 2018.
We've been steadily winning new sales to maintain the strength of our long term order book for your in Richmond, which is currently valued.
$1 billion in sales through the end of the decade, including approximately $320 million in deferred revenue and advances from customers.
We have also made good progress in our effort to pioneer production of high assay low enriched uranium or halo.
As we call. It a next generation nuclear fuel that will be needed for most of the advanced reactor designs that are currently under development and May also be used in the existing fleet of reactors.
Under our three year, he leu contracts with the U S Department of energy. We have finished assembling the centrifuges for the Asian plant and construction of the support system is well underway.
We completed two additional milestone this quarter, meaning nine of the 14 milestones in the contract had been completed on or ahead of schedule.
As you May recall in June we secured approval of our license amendment application from the U S Nuclear regulatory commission, making the American centrifuge plant in <unk>, Ohio, The first and only U S enrichment facility licensed by the NRC to produce Halo we.
We are proud to have achieved this critical milestone on the road to the restoration of American nuclear leadership.
While central advantage to keep our own construction work on track without the pandemic as we have previously noted the pandemic has affected some of our.
Which has created significant challenges.
The Covid related challenges include increased delays from vendors and higher cost.
We are working with the department to minimize the impacts and to address these cost increases as we go forward.
We expect that the centrifuge cascade will be completed and ready to begin demonstrating heavy production next year at that point subject to the availability of funding and our offtake agreements.
Our goal is to scale up the plant.
While the initial capacity will be modest and dependent on demand signals potential customers supplied to the facility is large enough to accommodate whatever level of production the market can support.
As we look to the longer term in addition to commercial or requirements for fuel and rich to various levels between 4% and 20% uranium 235 content to support both existing and advanced reactors. There are also a number of U S government requirements for enriched uranium that central is positioned to satisfy.
Long standing U S policy and not look for agreements prohibit the use of foreign uranium enrichment technologies for National security missions.
The last use technology based enrichment plant was built in the 19 fifties and shut down in 2013.
For the first time since 1945, the United States lacks any domestic enrichment.
Ability that can be used.
Gary.
For now the only way to meet those requirements is to draw down the country's finite stockpile of highly enriched uranium leftover from the cold war, but ultimately a new domestic technology enrichment capability will be needed.
Sensors is a T 100, centrifuge is the only deployment ready technology that can meet these requirements today.
And I said this was another strong quarter for sensors as measured not only by our revenue and profit, but also by the steady progress we are making toward resuming our status as an in richer and pioneering a new market for advanced nuclear fuels now for more details on our quarterly financial results.
I will turn the call over to Philip Hello.
Thank you Dan good morning, everyone.
And as Dan mentioned for the third quarter of 2021, we had total revenue of $91 3 million and achieved a net profit of $42 1 million.
Revenue in the current quarter included $43 5 million related to a settlement of the company's claims for reimbursement for certain pension and post retirement benefits incurred in connection with the past cost Reimbursable contract.
But the Korchman GDP.
Revenue from the <unk> segment increased $13 3 million compared to the same quarter in 2020, our cost of sales was $4 1 million higher in the third quarter compared to last year, largely reflecting increases in <unk> sales volume, partially offset by decreases in the average unit cost.
Gross profit for the <unk> segment increased $9 2 million in the three month period.
$10 6 million in the nine month period, primarily due to increases in smooth sales volume and decreases in the average swoop unit costs, partially offset by decreases in the average through sales price.
Those of you participated in these calls before know that we have said our revenues and margins vary a lot from quarter to quarter, but at the annual performance that matters. The most in our <unk> segment, which represents the majority of our revenue our customers typically have multiyear contracts that include an annual purchase obligation, but not a quarterly.
Purchase obligations.
The customer decides what month take their annual purchase commitments and that's in that quarter that we record the revenue for the customer's contract some quarters look worse, because we have fewer deliveries, while others look better because we have more deliveries and.
Another source of variations in fact that some contracts were signed when prices were high or higher than they are today and others were signed when prices were lower quarter can look better or worse, depending upon the price points.
Of that particular contract that we're delivering for the quarter.
Our technical solutions segment.
Revenue increased by $44 4 million in the third quarter of 2021.
As compared to the same period in 2020.
As I mentioned previously revenue in the third quarter of 2021 included a onetime payment of $43 $5 million related to a settlement of the <unk> client claims for reimbursement for certain pension and postretirement benefit costs incurred in connection with the past cost reimbursable contracts.
Costs for the sale of this segment.
Increased $3 3 million and three months ended September 32021, compared to corresponding period in 2020.
Largely reflecting the increase in contract work performed.
Now I'm going to talk a little bit about our SG&A cost our total SG&A increased $2 3 million in the three months ended September 30th.
Which is mostly the result of two point or.
Pardon me, which is mostly the result of a $2 2 million increase in incentive based compensation expense as a result of our higher stock price.
However for the nine month period, ending in September 30th SG&A decreased by 600000 compared to the corresponding period in 2020.
Consulting costs increased 300000 for the quarter.
<unk> decreased $3 3 million for the nine month period.
As far as cash we ended the quarter with a strong balance of $171 million, putting us in a good position going forward.
One subsequent item of note that occurred after the quarter was in October we launched a tender offer to purchase the remaining shares of our preferred.
This was initiated to continue our efforts to clean up the balance sheet that tender offer does not close until November 18, So we won't be providing any further detail until after that close.
Ill turn the call back over to Dan.
Thank you Bill.
Before we get to your questions I'd like to speak to the broader picture when it comes to deployment.
Generation of carbon free nuclear power plants.
Prominent feature in that picture with the 2020 launch by the U S Department of energy of the advanced reactor demonstration program and that program. The department selected 10th after designed for funding <unk>.
One of those 10 designs are expected to require a halo.
Putting the two multi billion dollar multi year awards to ex energy and Terra power to support construction of commercial scale payload fuel reactors by 2027.
On August 10th the U S Senate approved a one trillion dollar infrastructure package on a strong bipartisan vote.
69% to 30 that legislation, which was approved in the house late last Friday and will likely be signed into law by president, but in the near future provide a $2 5 billion dollar appropriation over four years to the advanced reactor demonstration program, providing critical funding add momentum to the two large.
<unk> reactor projects on their road to successful construction and deployment. This investment is a clear sign of the growing and widespread support in this country for the advanced nuclear industry and the role nuclear will play in the fight against the emissions and climate change and other major developments since our last call occurred in October.
When the United States Air Force announced plans to deploy a micro reactor by 2027 selecting <unk> Air Force base in Alaska as the site and outlined a detailed timetable for the procurement the Air Force plan to issue a draft request for proposal or RFP. This fall and a final.
RFP in February with the goal being to select the vendor by late 2020 to begin construction in 2025 and enter commercial operations in 2027 if.
If the average is successful lead to a larger scale deployment of micro reactors at other military installations and potentially contribute to a large demand for hayward.
This is in addition to a separate adverse way called project Pele, which is being funded by the Pentagon and strategic capabilities office and aims to build a prototype hemant fueled mobile micro reactor within three or four years.
The upshot of all of this is that there is growing consensus involving industry government.
Non governmental organizations academia and other stakeholders about the importance of deploying a domestic source of payroll and a growing sense of urgency and achieving that goal. We intend to provide the solution that our industry, our nation and our climate all need and operator, we would be happy to entertain any questions at this time.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If.
If you'd like to ask a question you May press star one on your telephone keypad.
Formation tunnel indicate your line is in the question queue you.
You May press Star two if you would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your question.
Good morning.
Good morning first question is on the kind of the pricing trends in the market around are around your uranium and Sue maybe just give some color on how that's impacting your.
Your business and driving some of the market activity in terms of placing orders.
Well as you know Rob or our business on the enrichment side is a different business than the specific trading in the underlying uranium commodity and our contracts are typically let on a very long term basis with a lot of advanced notice. So it's not.
Directly tied 0.1 0.2 is you know kind of the nature of the enrichment.
Is that it's typically the customer.
Customers are utilities that provide the uranium so they are the ones who are facing that aspect of the market.
Third point. However, there is obviously kind of an algorithm theres a relationship as utilities make their decisions on.
Their own fueling requirements because there is some substitution effect.
Between uranium enrichment and obviously as uranium goes up in price, it's more attractive to use less of it which makes it <unk> more separative work et cetera, et cetera, It's a highly complex algorithm and one that.
It does not really affect our day to day activities.
But overall when you kind of look on a secular basis over time.
Rising.
Rising.
Market in natural uranium as part of a broader trend that I mentioned in my remarks of a growing recognition of the not only the importance of it.
A growing set of investments in advanced nuclear a lot of interest in that.
Extending the life of the current fleet a lot of interest in investing in new reactors not only in this country, but really quite robust interest on the international scene as well. So it's sorry, it's a slightly longer answer, but its kind of complex relationship.
Our next question comes from the line of Joseph Reagor with Roth Capital Partners. Please proceed with your question.
Good morning, guys. Thanks for taking the questions. Good morning, good morning.
So.
I guess my most important question would be.
I know you guys don't give guidance.
Quantitative guidance, but any qualitative commentary you can give us on expectations for next year based on what you know the annual.
Requirements are for deliveries.
Well I.
I would say I'll give a top line thing.
We expect.
Modest increasing in revenues and relatively steady margins, but beyond that.
Philip I don't know what more you wish to add.
Yes, Joe as you know we did give some guidance last year and we gave guidance for 'twenty one 'twenty two.
And so that guidance from our perspective still holds true and that guidance is really attributable to the <unk> segment.
And what we said was just what Dan said, we expect that revenue increased slightly.
Year to year and that margins would hold approximately the same.
So.
We still think there's good as Dan mentioned early on we've had good sales. So we've seen as the market is still very good.
So we will.
Get that guidance.
That excludes onetime items right.
That's correct that's correct.
Yes.
As a reminder, ladies and gentlemen, it is star one to ask a question.
Our next question comes from the line of Stephens. Your next Gen Garro with Stifel. Please proceed with your question.
Thanks, Good morning, gentlemen.
Greg.
Jimmy Steve I'm curious.
From a big picture perspective, when we look at U S electricity generation, we all hear how bad.
Hydrocarbons are.
Necessary, but bad right now how do you think how do you think nuclear evolves over over the next decade say I mean, just from a from a big picture perspective, any thoughts you could share on kind of the.
The importance of it relative to other renewables I mean, obviously its low carbon but what are you. What are your what are your thoughts on those fronts.
Well, it's a great question and it's an interesting relationship and its an evolving relationship so look.
If you look historically, our coal for decades provided one half of the electricity.
In the United States.
20% came from nuclear by 20% from natural gas and the other 10% really mainly from hydro and in more recent years, obviously wind and solar have been coming on strong.
The.
Whole secular decline of the coal industry has now and the rise of natural gas.
Obviously script called down to I think about 20%.
And nuclear even though the capacity additions have.
<unk> really slowed down continues to contribute about one fifth of the overall mix.
Why because even as our wind and solar build up their capacity factors are just not at all in the same ballpark as nuclear which the industry has worked very hard to get capacity factors in excess of 90% so that 20%.
Figure, even though the installed capacity has shrunk as a overall share has held strong because of the basically 724 contribution it makes it oh by the way more than half of the carbon free.
Power of the country comes from that nuclear segment, which relates to the other part of your question.
So.
As wind and this has been written up extensively in the analytic literature.
Which we could point you to but when wind and solar need to have.
Firm dispatch will power to maximize their contributions and to optimize it precisely because a they are intermittent you don't you don't get it solar when Sun Shining you don't get a.
Wind power when the wind's not blowing and by the way, we're not talking about bridging two or three hours or maybe not even a couple of days you are talking about seasonal shifts.
And so in other words two to backstop.
That power you need you need firm dispatch will power and nuclear is the only significant.
Carbon free way to do that because.
There are a lot of people who have been talking about the possibility of batteries batteries are just not there yet in terms of the level of capacity that's required and the price point quite frankly so.
Some academic literature, you'll find that if you want if you wanted to actually substitute.
<unk>.
All batteries in renewables and try to get the job done that way you would need I think six to eight weeks of battery storage and we have only 43 minutes collectively in the nation. So so nuclear.
<unk> is a very good complement to.
Knowable, and that's a trend that youre seeing and by the way.
People are leaning into that if you have been reading about the natrium reactor being developed.
Developed by Terrapower.
Have an ability to basically while they are running $7 24 for those hours of the day that the grid does not need that power. They can heat up salt and that salt is actually a form of energy storage that can itself backstop the deployment of more renewables. So again.
And I don't mean to be too long winded, but the bottom line is I think what youre seeing is secular trend is growing recognition that nuclear has really an indispensable role to play as a complement to renewables and in the overall effort to decarbonize the power sector very ambitious goal the president's set forth to Decarbonize all power.
Generation by 2035 and of course everyone's trying to get to net zero by 2050, and whether you ask.
The analysts at the International Energy agency or the scientists at the Intergovernmental panel on climate change how to get to net zero all agree that you need a significant expansion of nuclear energy.
Our next question comes from the line of Joseph Reagor with Roth Capital Partners. Please proceed with your question.
Hey, guys.
Question, Joe on the Okay.
Counting treatment for this.
One time settlement so.
I'm just trying to understand you guys treated as revenue, but it seems like it flowed through the cash flow statement as if it was a noncash item. So just any additional commentary you can give us as to how that worked exactly did you guys ever actually physically get the cash or is it just is it a noncash item.
Or did you have to apply it to pension or exactly how does that work.
Yes, Joe I'll jump in here.
The settlement the way, it's structured was that it was for specifically the pension and postretirement benefits and so the government said that we had to apply those.
Directly so it is we did get the cash, but we turned around and put it straight into the pension plan.
So the and then we set up a trust for the post retirement plan piece, but but the bottom line is that's why you don't really see the cash. So you can look at it as a non cash type of event that said if you think about it from a long term perspective. This is positive right because we're paying down those were putting additional.
Money into the assets right.
Associated with the pension plan.
Which ultimately means that we would have it's going to reduce the amount of cash would you ever have to put in.
So it's a long term positive, but youre exactly right.
The cash doesn't.
That answer your question Jeff.
Right.
As a reminder, ladies and gentlemen, it is star one to ask a question.
There are no further questions in the queue I would like to hand, the call back to management for closing remarks.
Thank you operator, this will conclude our investor call for the third quarter of 2021 as always we want to extend our thanks to our listeners online and those who called in and we look forward to speaking with you again next quarter. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Yeah.
[music].
Greetings and welcome to Central Asia Energy third quarter 2021 earnings call.
At this time all participants are in a listen only mode.
A question 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.
Mind you. This conference is being recorded it is now my pleasure to introduce your host Dan Leistikow Vice President Corporate Communications. Thank you you may begin.
Well good morning. Thank you all for joining US today's call will cover the results for the third quarter of 2021 ended September 30th but today, we have Dan.
Dan Paterson, President and Chief Executive Officer, Philip Strawbridge, Senior Vice President and Chief Financial Officer, Chief administrative officer, and Treasurer, as well as John Dorrian controller, and Chief Accounting Officer.
Before turning the call over to Dan <unk> I'd like to welcome all of our 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 afternoon, 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 <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 risk and uncertainty, including assumptions about the future performance of Suntrust. Our actual results may differ materially from those in our forward looking statements additional information concerning factors that could cause actual.
It's 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 accurate only as of today.
November 11th 2011, or I'm, sorry number November 11th 2021, unless otherwise noted.
This call is the property of citrus energy any transcription redistribution retransmission or rebroadcast of this call in any form without the expressed written consent Suntrust is strictly prohibited.
Thank you for your participation and I will now turn the call over to Dan Kaufman.
Thank you Dan and thank you to everyone on the call today I'd like to acknowledge especially today in November 11th are veterans, which is a day that we honor and celebrate the sacrificing contribution they've made to our nation to keep us safe and secure and it's something that all Americans.
<unk> Oh, a debt of gratitude to all of them are veterans.
All over the country and wherever they may be so godspeed Chihuahua I am pleased to report that centers energy had a strong and profitable third quarter of 2021.
We generated total revenue of $91 $3 million and earned net income of $42 1 million for the quarter.
Our cash balance as of September 30 was one.
<unk> hundred $71 million, putting us in a strong position as we go forward.
Our leu segment continues to perform very well and deliver strong margins.
This reflects not only success we've had on the sales side, but also the fact that we were able to diversify and extend our supply base and take advantage of historically low enrichment prices a few years ago to lock in affordable enrichment supply through the late 2000 Twenty's.
You may recall at the beginning of 2019, a market based price reset took effect in our largest supply that.
And that reduced our costs and significantly improved our margins.
While our costs are lower the uranium enrichment market has been steadily recovering with published price indicators for enrichment rising 63% compared to the low point in August of 2018.
We've been steadily winning new sales to maintain the strength of our long term order book for uranium enrichment, which is currently valued.
$1 billion in sales through the end of the decade.
<unk> approximately $320 million in deferred revenue and advances from customers.
We have also made good progress in our effort to pioneer production of high assay low enriched uranium or halo.
As we call. It a next generation nuclear fuel that will be needed for most of the advanced reactor designs that are currently under development and May also be used in the existing fleet of reactors.
Under our three year <unk> contract with the U S Department of energy. We have finished assembling the centrifuges for exploration plant and construction of the support systems is well underway.
We completed two additional milestone this quarter, meaning nine of the 14 milestones and the contract has been completed on or ahead of schedule.
As you May recall in June we secured approval of our license amendment application from the U S Nuclear regulatory commission, making the American centrifuge plant in place in Ohio, The first and only U S enrichment facility licensed by the NRC to produce Halo we.
We are proud to have achieved this critical milestone on the road to the restoration of American nuclear leadership.
While centrally managed to keep our own construction work on track without the pandemic as we have previously noted the pandemic has affected some of our.
<unk>, which has created significant challenges.
The Covid related challenges include increased delays from vendors and higher costs.
We are working with the department to minimize the impacts and to address these cost increases as we go forward.
We expect that the centrifuge cascade will be completed and ready to begin demonstrating heavy production next year at that point subject to the availability of funding and our offtake agreements.
Our goal is to scale up the plant.
The initial capacity will be modest and dependent on demand signals from potential customers. The parking facility is large enough to accommodate whatever level of production the market can support.
As we look to the longer term in addition to commercial or requirements for fuel and Richardson various levels between 4% and 20% uranium 235 content to support both existing and advanced reactors. There are also a number of U S government requirements foreign rich geraniums et cetera is positioned to satisfy.
Long standing U S policy and not look for agreements prohibit the use of foreign uranium enrichment technologies for National security missions.
The last use technology based enrichment plant was built in the 19 fifties and shut down in 2013.
For the first time since $19 45, the United States lacks any domestic enrichment.
<unk> ability that can be used.
Alrighty.
For now the only way to meet those requirements is to draw down the country's finite stockpile of highly enriched uranium leftover from the cold war, but ultimately a new domestic technology enrichment capability will be needed.
<unk> 8100, centrifuge is the only deployment ready technology that can meet these requirements today.
As I said this was another strong quarter for centers as measured not only by our revenue and profit, but also by the steady progress we are making toward resuming our status as an in richer and pioneering a little market for advanced nuclear fuels now for more details on our quarterly financial results.
I will turn the call over to Philip Hello.
Thank you Dan good morning, everyone.
And as Dan mentioned for the third quarter of 2021, we had total revenue of $91 3 million and achieved a net profit of $42 1 million.
Revenue in the current quarter included $43 $5 million related to a settlement of the company's claims for reimbursement for certain pension and post retirement benefits incurred in connection with the past cost Reimbursable contract.
A form of the <unk> GDP.
Revenue from the <unk> segment increased $13 3 million compared to the same quarter in 2020, our cost of sales was $4 1 million higher in the third quarter compared to last year, largely reflecting increases in <unk> sales volume, partially offset by decreases in the average unit cost.
Gross profit for the <unk> segment increased $9 $2 million in the three month period, and $10 6 million in the nine month period, primarily due to increases in smooth sales volume and decreases in the average smooth unit costs, partially offset by decreases in the average through sales price.
Those of you participated in these calls before know that we have said our revenues and margins vary a lot from quarter to quarter, but at the annual performance that matters. The most in our <unk> segment, which represents the majority of our revenue our customers typically have multiyear contracts that include an annual purchase obligation does not a quarter.
Early purchase obligation the.
The customer decides what month take their annual purchase commitment and thats in that quarter that we record the revenue for the customer's contract some quarters.
Worse, because we have fewer deliveries, while others look better because we have more deliveries.
Other sources variations. The fact that some contracts were signed when prices were high or.
Our higher than they are today and others were signed when prices were lower quarter can look better or worse, depending upon the price points of.
Of that particular contract that we're delivering for the quarter.
Our technical solutions segment.
Revenue increased by $44 4 million in the third quarter of 2021.
As compared to the same period in 2020.
And as I mentioned previously revenue in the third quarter of 2021 included a one time payment of $43 $5 million related to a settlement of the <unk> client claims for reimbursement for certain pension and postretirement benefit costs incurred in connection with the past cost reimbursable contracts.
Costs for the sale of this segment.
Increased $3 3 million and three months ended September 32021, compared to corresponding period in 2020.
Largely reflecting the increase in contract work performed.
Now I'm going to talk a little bit about our SG&A cost our total SG&A increased $2 $3 million in the three months ended September 30.
Which is mostly the result of two point pardon.
Pardon me, which is mostly the result of a $2 2 million increase in incentive based compensation expense as a result of our higher stock price. However.
However for the nine months period, ending in September 30th SG&A decreased by 600000 compared to the corresponding period in 2020 and.
Consulting costs increased 300000 for the quarter.
<unk> decreased $3 3 million for the nine months period.
As far as cash we ended the quarter with a strong balance of $171 million, putting us in a good position going forward.
One subsequent item of note that occurred after the quarter was in October we launched a tender offer to purchase the remaining shares of our preferred.
This was initiated to continue our efforts to clean up the balance sheet that tender offer does not close until November 18th So we won't be providing any further detail until after that close.
Ill turn the call back over to Dan.
Thank you Bill.
Before we get to your questions I'd like to speak to the broader picture when it comes to the deployment of the next generation of carbon free nuclear power plants, a prominent feature in that picture with the 2020 launch by the U S Department of energy of the advanced reactor demonstration program and that program. The department selected 10.
Designed for funding nine of those 10 designs are expected to require a halo, including the two multibillion dollar multiyear awards, two ex energy and Terra power to support construction of commercial scale Hayward field reactors by 2027.
On August 10th the U S. Senate approved a one trillion dollar infrastructure package on a strong bipartisan vote of 69% to 30 <unk>.
That legislation, which was approved in the house late last Friday, and will likely be signed into law by president, but in the near future provides a $2 5 billion appropriation over four years to the advanced reactor demonstration program, providing critical funding add momentum to the two large demonstration reactor projects.
On the road to successful construction and deployment. This investment is a clear sign of the growing and widespread support in this country for the advanced nuclear industry and the role nuclear will play in the fight against the emissions and climate change and.
In other major developments since our last call occurred in October when the United States Air Force announced plans to deploy a micro reactor by 2027 selecting <unk> Air Force base in Alaska as the site and outlined a detailed timetable for the procurement the Air Force plan to issue a draft request for proposal.
RFP this fall and a final RFP in February with the goal being to select a vendor by late 2020 to begin construction in 2025 and enter commercial operations in 2027.
If the average is successfully lead to a larger scale deployment of micro reactors at other military installations and potentially contribute to a large demand for hayward.
This is in addition to a separate way called project Pele, which is being funded by the pentagon's strategic capabilities office and aim to build a prototype hemant fueled mobile micro reactor within three years or four years.
The upshot of all of this is that there is growing consensus involving industry government.
Non governmental organizations academia and other stakeholders about the importance of deploying a domestic source of payroll and a growing sense of urgency and achieving that goal. We intend to provide the solution that our industry, our nation and our climate all need and operator, we would be happy to entertain any questions at this time.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad.
[noise] formation tunnel indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your question.
Good morning.
Good morning first question is on the kind of the pricing trends in the market around round uranium and through maybe give some color on how that's impacting you.
Your business and driving the market activity in terms of placing orders.
Well as you know Rob R. R.
Our business on the enrichment side is a different business than the specific trading in the underlying uranium commodity and our contracts are typically let on a very long term basis with a lot of advanced notice. So it's not.
Directly tied 0.1 0.2 is kind of the nature of the enrichment business.
Is that it's typically the.
Customers are utilities that provide the uranium so they are the ones who are facing that aspect of the market.
Third point. However, there is obviously kind of an algorithm theres a relationship as utilities make their decisions on.
Their own fueling requirements because there is some substitution effect.
Between uranium enrichment and obviously as uranium goes up in price, it's more attractive to use less of it which makes it <unk> more separative work et cetera, et cetera, It's a highly complex algorithm and one that.
It does not really affect our day to day activities.
But overall when you kind of look on a secular basis over time.
<unk>.
Rising market in natural uranium as part of a broader trend that I mentioned in my remarks of growing recognition of the not only the importance of it.
A growing set of investments in advanced nuclear a lot of interest in.
Extending the life of the current fleet a lot of interest in investing in new reactors not only in this country that are really quite robust interest on the international scene as well. So it's sorry, it's a slightly longer answer, but its kind of complex relationship.
Our next question comes from the line of Joseph Reagor with Roth Capital Partners. Please proceed with your question.
Good morning, guys. Thanks for taking the questions. Good morning, good morning.
So.
I guess my most important question would be.
I know you guys don't give guidance.
Quantitative guidance, but any qualitative commentary you can give us on expectations for next year based on what you know the annual.
Requirements are for deliveries.
Well.
I would say I'll give a top line thing.
We expect.
A modest increase in revenues and relatively steady margins, but beyond that.
Philip I don't know what more you wish to add yes.
Yes, Joe as you know we did give some guidance last year and we gave guidance for 'twenty one 'twenty two.
And so that guidance from our perspective still holds true and that guidance is really attributable to the <unk> segment.
And what we said was just what Dan said, we expect that revenue increased slightly year.
Year to year and that margins would hold approximately the same.
So.
We still think Thats good as Dan mentioned early on we've had good sales. So we see it as the market is still very good.
So we will.
Get that guidance.
That excludes onetime items right.
That's correct that's correct.
Yes.
As a reminder, ladies and gentlemen, it is star one to ask a question.
Our next question comes from the line of Stephens Your Nextgen Garro with Stifel. Please proceed with your question.
Thanks, Good morning, gentlemen.
Greg.
I'm curious sort of from a big picture perspective, when we look at U S. Electricity generation, we all hear how bad.
Youre carbons our.
Necessary, but bad right now how do you think how do you think nuclear evolves over over the next decades.
From a big picture perspective, any thoughts you could share on kind of the.
Importance of it relative to other renewables.
Its low carbon but what are you what are your what are your thoughts on those fronts.
Well, it's a great question and it's an interesting relationship and its an evolving relationship so look.
If you look historically.
Uh huh.
Cold for decades provided one half of the electricity.
States.
About 20% came from nuclear by 20% from natural gas and the other 10% really mainly from hydro in more recent years, obviously wyndham.
Wind and solar have been coming on strong.
The.
Whole secular decline of the coal industry has now and the rise of natural gas.
It has obviously squeeze called down to I think about 20%.
And nuclear even though the capacity additions have really slowed down continues to contribute about one fifth of the overall mix.
Why because even as wind and solar build up their capacity factors are just not at all in the same ballpark as nuclear which the industry has worked very hard to get capacity factors in excess of 90% so that 20%.
Figure, even though the installed capacity has shrunk as overall share has held strong because of the basically 724 contribution it makes it oh by the way more than half of the carbon free.
Power of the country comes from that nuclear segment, which relates to the other part of your question.
So.
As wind and this has been written up extensively in the analytic literature.
Which we could point you to but when wind and solar need to have.
Firm dispatch will power to maximize their contributions and to optimize it precisely because a they are intermittent you don't you don't get at solar and SUNS not shining you don't get wins.
<unk> and the wins that Boeing and by the way, we're not talking about bridging two or three hours or maybe not even a couple of days you are talking about seasonal shifts.
And so in other words too to backstop.
That power you need you need firm dispatch will power and nuclear is the only significant.
Carbon free way to do that because.
There are a lot of people who have been talking about the profitability of batteries batteries are just not there yet in terms of the level of capacity that's required and the price point quite frankly so.
Some academic literature, you'll find that if you wanted to actually substitute.
Yes.
All batteries in renewables and try to get the job done that way you would need I think six to eight weeks of battery storage and we have only 43 minutes collectively in the nation. So so nuclear.
<unk> is a very good complement to.
Knowable and Thats, a trend that youre seeing and by the way.
People are leaning into that if you have been reading about the natrium reactor being developed.
Developed by Terrapower.
Have an ability to basically while they are running $7 24 for those hours of the day that the grid does not need that power. They can heat up salt and that salt is acts.
A form of energy storage that can itself backstop the deployment of more renewables. So.
Again, I don't mean to be too long winded, but the bottom line is I think what youre seeing is secular trend is growing recognition that nuclear has really an indispensable role to play as a complement to renewables and in the overall effort to decarbonize. The power sector very ambitious goal the president set forth to Decarbonize all power.
Generation by 2035 and of course everyone's trying to get to net zero by by 2050, and whether you ask.
The analysts at the International Energy agency or the scientists at the Intergovernmental panel on climate change.
Get to net zero.
All agree that you need a significant expansion of nuclear energy.
Our next question comes from the line of Joseph Reagor with Roth Capital Partners. Please proceed with your question.
Hey, guys.
A question on the U K.
Owning treatment for this.
One time settlement so.
I'm just trying to understand you guys treated as revenue, but it seems like it flowed through the cash flow statement as if it was a noncash item. So just any additional commentary you can give us.
As to how that worked exactly did you guys ever actually physically get the cash or is it just is it a noncash item or.
Or did you have to apply it to pension or exactly how does that work.
Yes, Joe I'll jump in here.
The settlement the way, it's structured was that it was for specifically the pension and post retirement benefits and so the government said that we had to apply those.
Directly so it is we did get the cash, but we turned around and put it straight into the pension plan.
So.
And then when you set up a trust for the post retirement plan piece, but but the bottom line is that's why you don't really see the cash. So you can look at it as a non cash type of event.
That said.
If you think about it from a long term perspective. This is positive right because we're paying down those.
We're putting additional money into the assets right.
With the pension plan, which ultimately means that we would have.
Got to reduce the amount of casualty ever have to put in.
The long term positive, but youre exactly right.
The cash is it.
That answer your question Jeff.
Okay.
As a reminder, ladies and gentlemen, it is star one to ask a question.
There are no further questions in the queue I would like to hand, the call back to management for closing remarks.
Thank you operator, this will conclude our investor call for the third quarter of 2021 as always we want to extend our thanks to our listeners online and those who called in and we look forward to speaking with you again next quarter. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.