Q4 2022 Centrus Energy Corp Earnings Call
Sure.
Yes.
Yes.
[music].
Greetings and welcome to the <unk> energy fourth quarter year end 2022 earnings call.
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. Please note. This conference is being recorded I will.
Now I'll turn the conference over to your host analyst ago, you may begin.
Good morning, and thank you all for joining US today's call will cover the results for the fourth quarter and full year of 2022 ended December 31 today, we have Dan Palmer, President and Chief Executive Officer, Philip Strawbridge, Chief Financial Officer, and Kevin Harel 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 a webcast of this conference call follows our earnings news release issued yesterday, we expect to file a report for the fourth quarter and full year of 2022 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 the website.
A replay of this call will also be available later this morning on the <unk> website.
I would like to remind everyone that certain information we may discuss on this call maybe considered forward looking information and involves risks and uncertainty including assumptions for the future performance of Suntrust.
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 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.
Finally, the forward looking information provided today.
Im sensitive and accurate only as of today February 22023.
Otherwise noted.
This call is the property of central synergy any transcription redistribution retransmission or rebroadcast of this call in any form without the express written consent of Suntrust is strictly prohibited.
Thank you for your participation and I'll now turn the call over to their importance.
Thank you Dan Thank you to everyone on the call today.
I am pleased to report that centrally delivered a strong fourth quarter finish in 2022.
Whether you measure it by our strong top line annual numbers or.
Or by the long term contracts, we secured to help lay the foundation for the future of our business or by the improving market for nuclear fuel.
1020, <unk> was a very good year for Suntrust.
With annual revenue of $294 million, we achieved net income for the year of $52 million, that's a strong number by any measure.
While it is lower than the 2021 number it's important to keep in mind that 2021, Inc. Included income from a onetime $43 $5 million legal settlement a.
$40 million tax adjustment as well as an increase in the value of our pension assets stock market short.
Centres with enormously successful in 2022, and securing new contracts to sustain and grow our business and our <unk> business segment, we secured a record $270 million in new sales contracts and commitments.
With delivery stretching out through 2030, the sales we made in 2022, we will provide a steady source of revenue and margin for many years to come and importantly, maintaining our long term order book value at $1 billion for the <unk> segment.
We also bid for and won a competitively awarded department of energy contracts that will enable us to begin first of our current production of high assay low enriched uranium or halo by the end of this year and then continue producing in 2024.
This will enable us to finish the work we started under a previous contract signed in 2019 to build a cascade of centrifuges to demonstrate production of Halo and pipe in Ohio.
In 2022, the department elected to move the operational portion of the demonstration into this new competitively awarded contracts that would allow for a much longer period of operations.
The first phase of the new contract is valued at about $60 million, 50% of which will be paid by centers phase.
Phase one requires us to complete construction conduct operational readiness reviews with the nuclear regulatory commission secure NRC approval to begin operations and then produce an initial quantity of 20 kilograms of Halo for the department of energy by the end of this year.
Our cost share contribution and after phase one and phase two we will operate the cascade for a full year at a production rate of about 900 kilograms per year.
We will be compensated in phase II on a cost plus incentive fee basis and that phase is estimated to be approximately $90 million.
Contract also includes options at the department sole discretion and subject to the availability of annual appropriations from Congress for up to nine additional years of Haywood production.
This contract is critical on several levels first.
The Haynesville, we delivered to the department will help support the U S government's efforts to support the demonstration and deployment of a new generation of advanced reactors.
The Department has already made a multibillion dollar commitment to help commercialize those reactors through the advanced reactor demonstration program.
Nine of the 10 reactors the departments selected to support through that program require him.
Our success is critical to their success, obviously, it will be very difficult to sell reactors commercially without a fuel supply as is often said in the industry no fuel no fun.
Thank you.
This contract represents a crucial milestone in the effort to restore America's uranium enrichment capability.
This will be the first new U S owned enrichment plant to begin production in 70 years, the last of America's Cold War era enrichment plant shutdown permanently in 2013.
Leaving us for the last 10 years without a U S technology enrichment capability. We are about to end that street and put America back in the business.
And third while the initial capacity of the plant will be modest the facility itself has room for thousands of centrifuges and the site could accommodate up to $7 million swoop per year in capacity.
The capital requirements are significant and will require a strong public private partnership, but with sufficient funding and off take commitments. Our goal is to scale up to meet the full range of commercial and national security requirements for uranium enrichment, including low enriched uranium as well as heyward.
There is a growing bipartisan support for such an approach and real dollars to back it up.
The inflation reduction act includes a $700 million appropriation as a down payment on establishing a domestic supply chain for Hayward.
And in October sources sought notice the department of energy outlined a potential 10 year program to support the construction and operation of Halo enrichment in the United States via government purchases of up to 25 metric tons of Haywood per year.
The sources short notice as a preliminary step not a formal request for proposals and the department would require additional annual appropriations beyond what is contained in the inflation really reduction act to fully implement that program, but it reflects the growing momentum behind establishing domestic hey.
With production.
In light of Russia's invasion of Ukraine, there have been a number of bipartisan bills in Congress to expand the ever beyond Haynesville production to include production of low enriched uranium for the existing reactor fleet as well people now realize that it was a historic mistake for the United States to fall from first.
To last place in the world and uranium enrichment.
Eroding our nations energy security seeding Geo strategic leverage to our adversaries and Brisling, our domestic supply chains diminishing our global influence over nonproliferation and deferring critical efforts to provide for the nation's long term needs to produce tritium for our nuclear Arsenal and naval reactor fuel for.
Our carriers and submarines now.
Now with the time to correct that mistake.
We also face the reality that Russia possesses 46% of the world's enrichment capacity in there is it nearly enough non Russian enrichment to fuel the world's reactors data from the World Nuclear Association shows that global requirements for enrichment outside of Russia totaled 48 million Separative work.
Units are swoop per year, but the total enrichment capacity outside of Russia is only $33 million per year.
If Russian enrichment work fluid from the market the global supply gap would be $15 million through per year, which is roughly equivalent to the entire annual enrichment requirements of the United States.
It is also roughly equivalent to the entire annual enrichment requirements of Europe .
There's no easier fast solution to this problem. The only answer is to start investing through public private partnerships and new domestic capacity.
It will take years to stand up this new capability at industrial scale, but you cannot reverse a multi decadal decline overnight as the old saying goes the best time to plant a tree was 20 years ago.
The second best time is today.
With the only deployment ready U S owned enrichment technology, and an NRC license site that has the infrastructure custom built for centrifuge operation Center is uniquely suited to restore this vital capability for the nation.
We are continuing to engage with industry policymakers nongovernmental organizations and other stakeholders to develop a path forward that would enable us to deploy our made in America technology to produce <unk> for existing reactors and to meet U S National security requirements.
In addition to producing Halo.
I'll now turn the call over to Filip, who will walk you through some of the numbers.
Philip over to you.
Thank you Dan and good morning, everyone.
As discussed before there's considerable variability in our revenue and margins from quarter to quarter last year. For example, the first and third quarters were relatively subdued, but we had a big second quarter and a strong finish in the fourth quarter.
The nature of our businesses that we have strong quarters, and subdue quarters and it's not necessarily the same quarters every year, it's dependent upon our customers.
The Kansas City Chiefs fan.
Can't pass up the opportunity pointed out.
They don't award deal of BARDA Trophy until all.
Four quarters of employee.
It doesn't matter, whose quarterback went off the field in the second quarter.
Or whether you're trailing after the third quarter all that matters is the scoreboard says at the end of the game by.
By the same token what.
Matters for <unk> annual performance not quarterly performance, so even though it was a very strong fourth quarter for us.
That's what's more important is that it was a very strong year.
In fact, our business improved year over year.
So I'm going to focus on annual numbers initially I'll start with yellow segment, which involves the sale of enriched uranium to major utilities.
We primarily sell the enrichment component, which is measured in separative work units first route but we also have some sales with natural brand component of enriched uranium.
In this segment, we actually increase their profit margin versus 2021 and generated $235 6 million in revenue.
Cost of sales was $105 million for the year <unk>.
Resulting in a gross profit of 136 for the for the segment for 2022.
This compared to $186 1 million in revenue and 73 million gross profit in 2021 for that segment.
This is an improvement of about $57 6 million and gross profit for the segment.
And as Dan pointed out we secured a record $270 million in new sales contracts and commitments in our <unk> segment last year, helping to maintain our long term order book at about $1 billion.
[noise] interest interest technical solutions segment.
We're putting your technical and manufacturing capabilities to work, including a contract with the department of energy to build and demonstrate tailored production as well as a variety of other contract work for public and private sector customers.
In this segment.
We generated $58 2 million in revenue against cost of sales was <unk> 79 for the year.
<unk> and a loss of $12 7 million for the segment in 2022.
Note that this includes a one time loss accrual of $21 3 million for.
For the cost share associated with the Halo operations contract and we've talked about that were awarded from the U S Department of energy.
This compares to gross profit for the segment of $41 5 million in 2021, when we benefited from a $43 5 million.
One time settlement.
The pension and post retirement costs incurred in connection with the.
Cost reimbursable contract and formed a fortunate.
If you eliminate those onetime adjustments the Cts segment had a $8 6 million gain in 2022 versus $2 million loss in 2021.
SG&A expenses were $33 9 million and $36 million for the year ending December 31, 2022, and 2021, respectively. So a decrease of $2 1 million.
That's a reduction of almost 6% during the year when the economy as a whole saw six 5% annual inflation.
I recognize that the comparison for 2022 and 2021 is compensated however, when you eliminate the onetime adjustments our business improved year over year, we generated gross profit of $117 9 million on revenue of $293 8 million and net income of $52 2 million.
We are in a strong financial position going forward with an overall cash balance of $212 4 million, which includes $32 5 million of restricted cash for financial assurance.
We won a long term halo contract positions us well for the future and we have an <unk> order book value through 2000 $31 billion as.
As of December 30, <unk> with that let me turn it back over to Dan.
Thank you Philip.
I spoke a moment ago about the need for public private partnership to develop domestic enrichment.
Before we get to your questions. Let me just say a few words about the rationale for government involvement in this and why I believe the idea is gaining traction.
First it is important to remember that the idea of government involvement and enrichment is not new in fact every enrichment plant that has ever been built anywhere in the world has been built with government ownership and government financing.
Today, 100% of the worlds enrichment plant belong to state owned corporations controlled by foreign governments.
Second.
Our new domestic enrichment capability would advance America's vital interest in ways that are not measured or reflected in the market price of enrichment not only when it strengthened our energy security and climate goals, but it would also fill a critical holes in our national security supply chain for example, the.
The entire U S fleet of aircraft carriers and submarines, which are a linchpin of U S power projection and deterrence are powered by fuel we stopped producing $19 92.
We also need domestically produced early you to produce tritium to maintain the readiness of the nuclear Arsenal that defends our homeland and allies by deterring our adversaries. These.
These missions require the use of a domestic enrichment technology pursuant to long standing nonproliferation agreements. The department of Defense is also developing micro reactors that if deployed at scale would create significant additional requirements for domestically produced hey, Luke So the case really.
Boils down to common sense, the United States will need a homegrown enrichment capability.
Support our national security requirements.
The need may not be imminent, but it is large and in evitable. Meanwhile.
The world faces climate catastrophe, right now and a critical chokepoint to maintaining and expanding our fleet of nuclear reactors, providing clean energy is a robust diverse capability to produce enriched uranium fuel as rapidly as possible.
Rather than stove pipe our efforts doesn't it make sense to have an all in one solution that can meet national security requirements and commercial requirements at the same time.
An integrated approach to America's needs would reduce the burden that will ultimately fall on taxpayers for national security enrichment, while de risking private sector investment in commercial enrichment by backstopping them with investment investments and enrichment capabilities needed for our nation's nuclear deterrent.
Isn't rocket science, its history, and the 19 fifties, President Eisenhower and Admiral Hyman Rickover leverage the U S government's investment in enrichment to support National security in order to provide an assured source of fuel for the first generation of commercial nuclear reactors reactors that were based on those does.
<unk> for the U S Navy.
That ecosystem between the commercial nuclear industry and our National Security establishment has kept our nation safe and strong for nearly seven decades, we should learn from the vision and the determination of those great American leaders in building the same kind of public private partnership today needed to advance our.
Our energy climate and National security objectives.
<unk> is well positioned to play our part.
We have the only deployment ready U S origin enrichment technology.
We have the only site in the nation license for Haley production.
And we're also license for <unk> production.
We have the buildings and the infrastructure in place and I'm proud of our talented workforce many of whose parents and even grandparents helped build our nation's deterrent.
As dedicated and as passionate as I am about restoring this essential capability to our nation's critical infrastructure as I said earlier with sufficient funding and financing that could come through a robust public and private partnership we can scale up to whatever level of production is required.
Ill, creating thousands of families supporting jobs in the process.
And with that we will now take your questions operator.
Thank you at this time, we will be conducting a question and answer session. If.
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 you would like to remove your question from the queue.
Anticipates using speaker equipment, it may be necessary to pick up your handset before pressing just darkies and one moment. Please while what you call for questions.
Our first question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your questions.
Good morning.
Thank you for all the <unk> era.
Just wanted to get a sense of.
Kind of the Doa support I think the 900 kilogram phase two project I think you said there was one year that you've got a commitment for a maybe help us understand kind of how the the the follow on your options take place.
And then kind of how does that dovetail into the new proposed efforts for additional offtake.
Agreements to support the industry.
Yes, great question Rob.
So there are in the demonstration.
Phase that we've completed.
The machines as you probably saw on our reasonable beliefs are up and we've done initial testing now.
In the new operations contract and as you suggested Thats got three phases. The first phase, which is 50 50 cost share.
It will be contributing $30 million.
We'll just produced 20 kilograms and as soon as we finish that first phase we will immediately pivot into phase II that will run about a year and under that one will produce about 900 kilograms. After that the department has at its discretion.
Three three year option periods.
And we estimate those would run at about $90 million per year and as we indicated in the.
Earlier comments, it's only that first phase that 20 kilograms. That's cost shared after that we shipped to a cost plus incentive fee.
Graham So those extension periods also would be subject to the availability of appropriated funds. So those operating three year chunks and so the whole thing if they exercise every option and theirs.
No no way to know in advance whether that would happen or not but maximum length of that contract would be on the order of 10 years right.
How does that relate to the <unk>.
New efforts you alluded to well as we also indicated in the remarks, there was a sources so.
Sources sought notice issued industry date was held.
And there is an expectation that there will be a draft.
Request for proposals coming out that would.
Address the increased need and in fact, the requirements of the energy Policy Act of 2020 to support the advanced reactor development program and U S advanced reactor development overall so.
The indications are that that could.
Be on the order of up to 25 metric tons of Haywood per year, but of course, we don't know and we won't know until the draft. RFP is issued then if it has not come out yet, but we're looking forward to it.
Okay, great. Thank you and then I just wanted to get more detail on the kind of the cost share accounting you took the full cost share accounting hit in Q4 is that right and so now it'll be sort of zero gross margin business going forward is that.
If he can.
Yes, that's right that's right Rob.
Go ahead.
Yeah, Rob So that's you hit on there in the fourth quarter, we talked about thinking that 'twenty one three.
Million dollar.
Accrual if you will.
And then it's zero profit for them throughout the first phase if you will.
Yes.
And our next question comes from the line of Joseph Reagor with Roth. Please.
Please proceed with your question.
Hey, Dan and Phil.
Thanks for taking the questions.
Hey, Joe Good morning, Joe.
So.
I guess first on the order book.
It's.
I believe the number you gave was $1 billion is that like a rounded number or is that roughly the current number and then.
How does the shape of that look through 2030, I know you can't give specifics, but just in general.
Outlook.
Yeah, So that's a rounded up.
Go ahead Philip.
Sorry about that yeah, that's rounded number.
That's a round number Joe, but essentially it's been very stable because we've talked about before.
In terms of the way it's laid out we haven't talked about that but it's kind of like any backlog curve in other words.
In the near term, we have more visibility and then it kind of it.
<unk> believes that if you will through 2030 and kind of have a natural curve. So.
Again, it's a strong order book.
Does provide us visibility.
Visibility to near term there doesn't have longer term.
Okay fair enough.
And then.
I think back to last year.
Kind of given a let's call it of.
Broad guide that <unk> sales would be up 2022 and 2021.
Two parts to this one did sales come roughly in line with expectations above below what you were thinking a year ago and then how do you look at 2023 compared to 2022.
Yes.
So the first part you know.
What we gave was guidance and you'll recall, we gave the guidance back in 2020.
And that was the specific guidance was that for the <unk> segment that we saw that the margin would be about the same.
In 'twenty, one and 'twenty, two but but that the revenue would increase and so that that was exactly what happened right. When you look back at the 'twenty, one and 'twenty two we've not elected to give guidance for 'twenty three yet so I apologize, but we just haven't done it.
Today.
And as a reminder, if anyone has any questions you May press star one on your telephone keypad to join the question and execute.
Yeah.
Okay.
And it looks like we have reached the end of the question and answer session and I will now turn the call back over to Dan just to go for closing remarks.
Thank you operator, this will conclude our investor calls for 2022 as always I want to use.
Thank you to our listeners online and our investors.
Called in we look forward to speaking with you again next quarter.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
[music].
Yeah.
[music].
Yes.
[music].
Okay.
Yeah.
[music].
[music].
Greetings and welcome to the <unk> energy fourth quarter year end 2022 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. Please note. This conference is being recorded I'll now turn the conference over to your host.
And Lisa you may begin.
Good morning, and thank you all for joining US today's call will cover the results for the fourth quarter and full year of 2022 ended December 31 today, we have Dan Palmer, President and Chief Executive Officer, Philip Strawbridge, Chief Financial Officer, and Kevin Harel 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 of this conference call follows our earnings news release issued yesterday, we expect to file a report for the fourth quarter and full year of 2022 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 the website.
This call will also be available later this morning on the <unk> website I.
I would like to remind everyone that certain information we may discuss on this call maybe considered forward looking information and involves risks and uncertainty including assumptions for 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 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.
Orderly reports on Form 10-Q.
Finally, the forward looking information provided today with time sensitive and accurate only as of today February 22023, unless otherwise noted.
This call is the property of Central center, any transcription redistribution retransmission or rebroadcast of this call in any form without the express written consent of Suntrust is strictly prohibited.
Thank you for your participation and I will now turn the call over to Dan.
Thank you Dan.
Thank you to everyone on the call today.
I am pleased to report that centrally delivered a strong fourth quarter finish in 2022.
Whether you measure it by our strong top line annual numbers or.
Or by the long term contracts, we secured to help lay the foundation for the future of our business or by the improving market for nuclear fuel.
1022 was a very good year for Suntrust.
With annual revenue of $294 million, we achieved net income for the year of $52 million.
That's a strong number by any measure.
While it is lower than the 2021 number it's important to keep in mind that 2021, Inc. Included income from a one time $43 $5 million legal settlement, a $40 million tax adjustment as well as an increase in the value of our pension assets as the stock market soared.
Texas was enormously successful in 2022, and securing new contracts to sustain and grow our business and our <unk> business segment, we secured a record $270 million in new sales contracts and commitments.
With delivery stretching out through 2030, the sales we made in 2022 will provide a steady source of revenue and margin for many years to come and importantly maintains our long term order book value at $1 billion for the <unk> segment.
We also bid for and won a competitively awarded department of energy contract that will enable us to begin first of a kind production of high assay low enriched uranium or halo by the end of this year and then continue producing in 2020 for.
This will enable us to finish the work we started under a previous contract signed in 2019 to building Cascade of centrifuges to demonstrate production of Halo and pipe in Ohio.
In 2022, the department elected to move the operational portion of the demonstration into this new competitively awarded contract that would allow for a much longer period of operations.
The first phase of the new contract is valued at about $60 million, 50% of which will be paid by centers phase.
Phase one requires us to complete construction conduct operational readiness reviews with the nuclear regulatory commission secure NRC approval to begin operations and then produce an initial quantity of 20 kilograms of Halo for the department of energy by the end of this year.
Our cost share contribution and after phase one and phase two we will operate the cascade for a full year at a production rate of about 900 kilograms per year.
We will be compensated in phase II on a cost plus incentive fee basis and that phase is estimated to be approximately $90 million.
Contract also includes options at the department sole discretion at subject to the availability of annual appropriations from Congress for up to nine additional years of Haywood production.
This contract is critical on several levels first.
The Haynesville, we delivered to the department will help support the U S government's efforts to support the demonstration and deployment of a new generation of advanced reactors.
The Department has already made a multibillion dollar commitment to help commercialize those reactors through the advanced reactor demonstration program.
Nine of the 10 reactors the department selected to support through that program required him.
Our success is critical to their success, obviously, it will be very difficult to sell reactors commercially without a fuel supply as is often said in the industry no fuel no fun.
Thank you.
This contract represents a crucial milestone in the effort to restore America's uranium enrichment capability.
This will be the first new U S owned enrichment plant to begin production in 70 years, the last of America's Cold War era enrichment plant shutdown permanently in 2013.
Leaving us for the last 10 years without a U S technology enrichment capability. We are about to end that street and put America back in the business.
And third while the initial capacity of the plant will be modest the facility itself has room for thousands of centrifuges and the site could accommodate up to $7 million per year in capacity.
The capital requirements are significant and will require a strong public private partnership, but with sufficient funding and off take commitments. Our goal is to scale up to meet the full range of commercial and national security requirements for uranium enrichment, including low enriched uranium as well as heyward.
There is a growing bipartisan support for such an approach and real dollars to back it up.
The inflation reduction act included a $700 million appropriation as a down payment on establishing a domestic supply chain for halo.
And in October sources sought notice the department of energy outlined a potential 10 year program to support the construction and operation of Halo enrichment in the United States via government purchases of up to 25 metric tons of Hayley per year.
The sources notice as a preliminary step not a formal request for proposals and the department would require additional annual appropriations beyond what is contained in the inflation reduction act to fully implement that program, but it reflects the growing momentum behind establishing domestic here.
With production.
In light of Russia's invasion of Ukraine, there have been a number of bipartisan proposal in Congress to expand the effort beyond Haynesville production to include production of low enriched uranium for the existing reactor fleet as well people now realize that it was a historic mistake for the United States defaults from first.
To last place in the world and uranium enrichment.
Eroding our nations energy security seeding Geo strategic leverage to our adversaries and Brooklyn are domestic supply chains diminishing our global influence over nonproliferation and deferring critical efforts to provide for the nation's long term needs to produce tritium for our nuclear Arsenal and naval reactor fuel for.
Our carriers and submarines now.
Now is the time to correct that mistake.
We also face the reality that Russia possesses 46% of the world's enrichment capacity in there isn't nearly enough non Russian enrichment to fuel the world's reactors data from the World Nuclear Association shows that global requirements for enrichment outside of Russia totaled 48 million Separative work.
Units are through per year, but the total enrichment capacity outside of Russia is only $33 million per year.
If Russian enrichment work fluid from the market the global supply gap would be $15 million through per year, which is roughly equivalent to the entire annual enrichment requirements of the United States.
It is also roughly equivalent to the entire annual enrichment requirements of Europe .
There is no easier fast solution to this problem. The only answer is to start investing through public private partnerships and new domestic capacity at <unk>.
We will take years to stand up this new capability at industrial scale, but you cannot reverse a multi decadal client overnight as the old saying goes the best time to plant a tree was 20 years ago.
The second best time is today.
With the only deployment ready U S owned enrichment technology, and an NRC license site that has the infrastructure custom built for centrifuge operation Center is uniquely suited to restore this vital capability for the nation.
We are continuing to engage with industry policymakers nongovernmental organizations and other stakeholders to develop a path forward that would enable us to deploy our made in America technology to produce <unk> for existing reactors and to meet U S National security requirements.
In addition to producing Halo.
I will now turn the call over to Filip, who will walk you through some of the numbers. Thanks Phillip over to you.
Thank you Dan good morning, everyone.
As discussed before there is considerable variability in our revenue and margins from quarter to quarter last year. For example, the first and third quarters were relatively subdued, but we had a big second quarter and a strong finish in the fourth quarter.
Nature of our businesses that we have strong quarters, and subdue quarters and it's not necessarily the same quarters every year, it's dependent upon our customers.
As the Kansas City Chiefs fan I can't pass up the opportunity to point out that they don't award the Lombardi Trophy until all.
Four quarters are in play.
It doesn't matter, whose quarterback went off the field in the second quarter.
Or whether you are trailing after the third quarter all that matters is the scoreboard says at the end of the game by.
By the same token what.
Matters for centrist as annual performance quarterly performance, so even though it was a very strong fourth quarter for us.
That's what's more important is that it was a very strong year.
In fact, our business improved year over year.
So I'm going to focus on annual numbers initially I'll start with yellow segment, which involves the sale of enriched uranium to major utilities.
We primarily sell the enrichment component, which is measured in separative work units or swoop, but we also have some sales of natural uranium component of enriched uranium.
In this segment, we actually increased our profit margin versus 2021 and generated $235 6 million in revenue.
Cost of sales was $105 million for the year, resulting in a gross profit of 136.
For the segment for 2022.
This compared to $186 1 million in revenue and 73 million gross profit in 2021 for that segment.
This is an improvement of about $57 6 million in gross profit for the segment.
And as Dan pointed out we secured a record $270 million in new sales contracts and commitments in our <unk> segment last year, helping to maintain our long term order book at about $1 billion.
Yeah.
It's interesting technical solutions segment, we're putting your technical and manufacturing capabilities to work, including a contract with the department of energy to build and demonstrate halo production as well as a variety of other contract work for public and private sector customers.
This segment.
We generated $58 $2 million in revenue against cost of sales was <unk> 79 for the year.
Results in a loss of $12 7 million per segment in 2022.
I should note that this includes a one time loss accrual of $21 3 million.
For the cost share associated with the Halo operations contract that we've talked about that were awarded from the U S Department of energy.
This compares to gross profit for the segment of $41 5 million in 2021, when we benefited from a $43 5 million.
One time settlement.
The pension and post retirement costs incurred in connection with the payers.
Cost reimbursable contract and formed a fortunate.
If you eliminate those onetime adjustments the Cts segment had a $8 6 million gain in 2022 versus $2 million loss in 2021.
SG&A expenses were $33 9 million and $36 million for the year ending December 31, 2022, and 2021, respectively. So a decrease of $2 1 million.
Now Thats a reduction of almost 6% during the year when the economy as a whole saw six 5% annual inflation.
I recognize that the comparison for 2022 and 2021 is complicated however, when you eliminate the onetime adjustments our business improved year over year, we generated gross profit of $117 9 million on revenue of $293 8 million and net income of $52 2 million.
We are in a strong financial position going forward with an overall cash balance of $212 4 million, which includes $32 5 million of restricted cash for financial assurance.
We won a long term halo contract positions us well for the future and we have an <unk> order book value through 2000 $31 billion.
As of December 31, with that let me turn it back over to Dan.
Thank you Philip.
I spoke a moment ago about the need for public private partnership to develop domestic enrichment.
Before we get to your questions. Let me just say a few words about the rationale for government involvement in this and why I believe the idea is gaining traction.
First it's important to remember that the idea of government involvement and enrichment is not new in fact every enrichment plant that has ever been built.
Where in the World has been built with government ownership and government financing today, 100% of the worlds enrichment plant belongs to state owned corporations controlled by foreign governments.
Second.
Our new domestic enrichment capability would advance America's vital interest in ways that are not measured or reflected in the market price of enrichment that only when it strengthened our energy security and climate goals, but it would also fill a critical holes in our national security supply chain for example, the.
The entire U S fleet of aircraft carriers and submarines, which are a linchpin of U S power projection and deterrence are powered by fuel, we stopped producing and $19 92.
We also need domestically produced early you to produce tritium to maintain the readiness of the nuclear Arsenal that defends our homeland and allies by deterring our adversaries. These.
These missions require the use of a domestic enrichment technology pursuant to long standing nonproliferation agreements. The department of Defense is also developing micro reactors that if deployed at scale would create significant additional requirements for domestically produced payload.
The case really boils down to common sense.
Added states will need a homegrown enrichment capability to support our national security requirements.
The need may not be imminent, but it is large and in evitable. Meanwhile.
The world faces climate catastrophe, right now and a critical chokepoint to maintaining and expanding our fleet of nuclear reactors, providing clean energy is a robust diverse capability to produce enriched uranium fuel as rapidly as possible.
Rather than stove pipe our efforts doesn't it make sense to have.
And all in one solution that can meet national security requirements and commercial requirements at the same time.
And integrated approach to America's needs would reduce the burden that will ultimately fall on taxpayers for national security enrichment, while de risking private sector investment in commercial enrichment by Backstopping them with investment investments and enrichment capabilities needed for our nation's nuclear deterrent. This isn't rocket science.
Its history, and the 19 fifties, President Eisenhower and Admiral Heinrich over leverage the U S government investment in enrichment to support National security in order to provide an assured source of fuel for the first generation of commercial nuclear reactors reactors that were based on those designed for the U S.
Navy.
That ecosystem between the commercial nuclear industry and our National Security establishment has kept the nation safe and strong for nearly seven decades, we should learn from the vision and the determination of those great American leaders in building the same kind of public private partnership today needed to advance our.
Our energy climate and National security objectives.
<unk> is well positioned to play our part.
We have the only deployment ready U S origin enrichment technology.
We have the only site in the nation license for Haley production.
And we're also a license for <unk> production.
We have the buildings and the infrastructure in place and I am proud of our talented workforce many of whose parents and even grandparents helped build our nation's deterrent.
As dedicated and as passionate as I am about restoring this essential capability to our nation's critical infrastructure as I said earlier with sufficient funding and financing that could come through a robust public and private partnerships. We can scale up to whatever level of production is required.
While creating thousands of family supporting jobs in the process.
And with that we will now take your questions operator.
Thank you at this time, we will be conducting a question and answer session. If.
If you would like to ask a question. Please press star one on your telephone keypad.
Recent tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing just argues.
One moment, please while we pull for questions.
Our first question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your questions.
Good morning, Dan.
Thank you for all the good morning, Rob Hey, Rob.
Just wanted to get a sense of.
Kind of the Doa support I think the.
900 kilogram phase II project I think you said there was one year that <unk> got a commitment for maybe help us understand kind of how the follow on your options take place.
And then kind of how does that dovetail into the new new kind of proposed efforts for additional offtake agreement.
Agreements to support the industry.
Yes, great question Rob.
So there are in the demonstration.
Phase that we've completed.
Yes, the machines as you probably saw on our reasonable beliefs are up and we've done initial testing now we are in.
In the new operations contract and as you suggested Thats got three phases. The first phase, which is this 50 50 cost share.
We will be contributing $30 million.
We'll just produced 20 kilograms and as soon as we finish that first phase we will immediately pivoted into phase II that will run about a year and under that one will produce about 900 kilograms. After that the department has at its discretion.
Three three year option periods.
And we estimate those would run at about $90 million per year and as we indicated in the.
Earlier comments, it's only that first phase that 20 kilograms. That's cost shared after that we ship to a cost plus incentive fee program. So those extension periods also would be subject to the availability of appropriated funds. So those operated three year chunks and so if the whole thing if they are.
Besides every option and theirs.
No no way to know in advance whether that would happen or not but maximum length of that contract would be on the order of 10 years right.
How does that relate to the <unk>.
New efforts you alluded to well as we also indicated in the remarks, there was a sources so.
Sources sought notice issued industry date withheld.
And there is an expectation that there will be a draft.
Request for proposals coming out that would.
Address the increased need and in fact, the requirements of the energy Policy Act of 2020 to support the advanced reactor development program and use advanced reactor development overall so.
The indications are that that could.
Be on the order of up to 25 metric tons of Haywood per year, but of course, we don't know and we won't know until the draft RFP is issued.
It has not come out yet, but we're looking forward to it.
Okay, great. Thank you and then I just wanted to get more detail on the kind of the cost share accounting you took the full cost share accounting hit in Q4 is that right and so now it will be sort of zero gross margin business going forward is that helpful.
Yes, that's right that's right Rob.
Go ahead.
Yeah, Rob So thats <unk>.
Got it.
In the fourth quarter, we talked about thinking that 'twenty one three.
$1 million.
Accrual if you will.
And then and then it is zero profit for them throughout the <unk>.
First phase if you will.
Yes.
And our next question comes from the line of Joseph Reagor with Roth.
Please proceed with your question.
Hey, Dan and Phil.
For taking the questions.
Hey, Joe Good morning, Joe.
Good morning so.
I guess first on the order book.
I believe the number you gave was $1 billion.
Is that like a rounded number or is that roughly the current number and then.
How does the shape of that look through 2030, I know you can't give specifics, but just in general.
Outlook.
Yes, so whenever that's a rounded up.
Go ahead Philip.
Sorry about that yeah, that's rounded number.
That's a round number Joe, but essentially it's been very stable because we've talked about before.
In terms of the way it's laid out we haven't talked about that but it's kind of like any backlog curve in other words in the near term we have more visibility and then it kind of bleeds.
Believes job if you will through 2030 and kind of a natural curve. So.
Again, it's a strong order book that does provide us visibility.
Better visibility to near term there doesn't have longer term.
Okay Fair.
Fair enough.
And then.
If I think back to last year.
Kind of given a let's call it.
Broad guide that <unk> sales would be up 2022 on 2021.
Two parts one did sales come roughly in line with expectations above below what you were thinking a year ago and then how do you look at 2023 compared to 2022.
So the first part.
What we gave was guidance and Youll recall, we gave the guidance back in 2020.
And that was the specific guidance was that for the <unk> segment that we saw that the margin would be about the same.
In 'twenty, one and 'twenty two but.
The revenue increase and so.
That was exactly what happened right. When you look back at the 'twenty, one and 'twenty two we've not elected to give guidance for 'twenty three yet so I apologize, but we just haven't done it.
Hey.
And as a reminder, if anyone has any questions you May press star one on your telephone keypad to join the question and execute.
Okay.
Yeah.
Okay.
And it looks like we have reached the end of the question and answer session and I will now turn the call back over to Dan just to go for closing remarks.
Thank you operator, this will conclude our investor calls our 2022 as always I want to extend a thank you to our listeners online and our investors who called in and we look forward to speaking with you again next quarter.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.