Q2 2024 Centrus Energy Corp Earnings Call
John: Thank you for standing by. My name is John and I will be your conference operator for today. At this time, I would like to welcome everyone to the Centris Energy Second Quarter 2024 Earnings Call. All lines have been placed in mute to prevent any background noise.
Speaker Change: Good morning. Thank you all for joining us. Today's call will cover the results for the second quarter of 2024, ended June 30th. Today we have Amir Vexler, President and Chief Executive Officer, and Kevin Harrill, our Chief Financial Officer.
Speaker Change: Before turning the call over to Amir Vexler, I'd like to welcome all of our callers as well as those listening to our webcast.
Speaker Change: We expect to file our report for the second quarter on Form 10-Q later today. All of our news releases and SEC filings, including our 10-K, 10-Qs, and 8-Ks, are available on our website. A replay of this call will also be available later this morning on the Centrus website.
Speaker Change: Additional information concerning factors that would cause actual results to materially differ from those in our forward-looking statements is contained in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q .
Unknown Speaker: Finally, the forward-looking information provided today is time-sensitive and accurate only as of today, August 7, 2024, unless otherwise noted. This call is the property of Centrus Energy. Any transcription, redistribution, retransmission, or rebroadcast of the call in any form without the expressed written consent of Centrus is strictly prohibited.
Speaker Change: This call is the property of Centrus Energy. Any transcription, redistribution, retransmission, or rebroadcast of the call in any form without the expressed written consent of Centrus is strictly prohibited. Thank you for your participation, and I'll now turn the call over to Amir Vexler.
Unknown Speaker: As always, we remind listeners that our results vary substantially from quarter to quarter due to the timing of customer deliveries, which is why we encourage folks to focus on the annual numbers as opposed to any one quarter. Kevin will discuss this in greater depth shortly. These are competitive solicitations.
Amir Vexler: We had $189 million in revenue and reported $30.6 million in net income for the quarter, driven by a large number of customer deliveries in our LEU business segment.
Speaker Change: We expanded our cash balance to $227 million while strengthening and de-risking our balance sheet by eliminating the majority of our remaining pension obligations.
Speaker Change: Last October , we made history.
Speaker Change: by becoming the first U.S. uranium enrichment company to commence plant operations using U.S. enrichment technology in 70 years. We are continuing to produce high-assay, low-enriched uranium, or HALU, which is urgently needed.
Speaker Change: Our goal is clear, to expand our capacity at our American centrifuge plant in Ohio so that we can meet the full range of commercial and national security requirements for enriched uranium, including not only HALU, but also low enriched uranium for the existing fleet of commercial reactors.
Speaker Change: Government investment is especially justified here given the fact that the government has its own requirements for enriched uranium, including national security missions that explicitly require the use of U.S. origin enrichment technology, a technology only we can provide today.
Speaker Change: In addition, the Department of Energy has issued RFPs designed to jumpstart American production of both LEU and HALUT.
Speaker Change: We submitted our proposals for HALU earlier this year. We are now developing our proposals for the LEURFP, which is due next month.
Speaker Change: and the Bipartisan Government Funding Bill in March 2024. Taken together, they represent the largest federal investment in domestic nuclear fuel production in decades.
Unknown Speaker: There are no guarantees. I have told my team not to take anything for granted. High-tech jobs for American workers. We have also been consistent in our communications with our government partners that waivers are necessary to ensure an uninterrupted supply of fuel to the reactors that millions of Americans rely on every day for power. Working together in partnership between government and business, America can do great things. Rebuilding our domestic uranium enrichment capacity is one of them.
Speaker Change: These are competitive solicitations. There are no guarantees. I have told my team to take nothing for granted. Our job is to put together competitive proposals that highlight our capabilities to bring the best value for the government.
Speaker Change: Our technology is U.S. origin. That is crucially important because under long-standing non-proliferation agreements, only a U.S. origin technology can be used to support national security missions.
Speaker Change: In short, we are uniquely positioned to deliver an all-in-one, made-in-America solution.
Speaker Change: restoring a truly domestic uranium enrichment capability which will strengthen our energy security and our national security while creating family-supporting high-tech jobs for American workers.
Speaker Change: in May 2024.
Speaker Change: Centrus has been clear that we need waivers for the next few years as we complete our Russian supply contracts and to enable us to transition back to our own production.
Speaker Change: We have also been consistent in our communications with our government partners that waivers are necessary to ensure an uninterrupted supply of fuel to the reactors that millions of Americans rely on every day for power.
Speaker Change: We are pleased with the OE's approach to the process and this outcome, which reflects a shared understanding between government and industry that new capacity won't come online for several years and avoid the near-term disruption that would harm our American customers.
Speaker Change: We have also requested a waiver covering imports for our international customers that have their enriched uranium fabricated into fuel in the United States and re-exported. And longer term, we plan to request a waiver covering imports in 2026 and 2027 that we have not yet committed to customers.
Speaker Change: The reality is that Russia accounts for 44% of the world's enrichment capacity today, and U.S. utilities relied on Russian-origin enrichment for more than a quarter of their needs last year.
Speaker Change: That's why these waivers are so important during this transition period, not just for Centrus, but for the industry and the country, as we work to scale up domestic enrichment capacity over the next few years.
Speaker Change: Working together in partnership between government and business, America can do great things. Rebuilding our domestic uranium enrichment capacity is one of them. Centrus stands ready to lead that effort. With that, I'm going to turn things over to Kevin.
Kevin Harrill: Thank you, Amir. Good morning, everyone. Our financial results for the quarter remain in line with our internal projections based on customer orders and deliveries.
Kevin Harrill: The second quarter of 2024 reflected a more than 30% increase in school quantities delivered, albeit at slightly lower margins than those of the prior year.
Unknown Speaker: This was due to several deliveries in the second quarter of 2023 that were favorably priced but did not replicate in the current quarter as their fuel needs are anticipated in future quarters, an increase of $90.6 million in revenue and $17.9 million in net income. On a consolidated basis, our gross profit was $36.5 million, an increase from $28 million in the prior year when combined with the previous fourth quarter 2023 annualization.
Kevin Harrill: Our LEU business generated $169.6 million in revenue, an increase of $82 million compared to the same quarter in 2023, reflecting increases in both the volume of SWU sold as well as the average price of SWU sold.
Kevin Harrill: Our technical solutions segment also generated $3.5 million in gross profit, which was an improvement of $2.3 million versus the second quarter of 2023.
Kevin Harrill: Technical solutions for the second quarter of 2024 generated $19.4 million in revenue, an increase of $8.6 million compared to the second quarter of 2023, and reported $15.9 million in cost of sales, which was an increase of $2.3 million compared to the prior year.
Kevin Harrill: Our results on a year-over-year basis reflected the transition of the HALU operation contract from a cost-share model under Phase 1 to a cost-plus-incentive model under Phase 2.
Kevin Harrill: In the second quarter of 2024, we continue to raise funds under our ATM offering and raise $12.2 million, or $19.3 million a year to date, net of related expenses.
Kevin Harrill: These proceeds and the gross margin generated in the second quarter contributed to our ending net cash balance of $227 million and a restricted cash balance of $32.6 million for a total of $259.6 million of cash and restricted cash.
Kevin Harrill: Our strong cast position continues to facilitate execution of our contractual obligations and investment in the strategic initiatives of our future.
Kevin Harrill: The annuitization will transfer the administration and benefit payments responsibilities for more than 1,000 beneficiaries and result in the recognition of $16.6 million remeasurement gain in our second quarter Statement of Operations.
Kevin Harrill: When combined with the previous fourth quarter 2023 annuitization, the company's pension plan obligations have been reduced by approximately $420 million, which represents 90% of the obligation in the prior year.
Kevin Harrill: This covers approximately 2,400 beneficiaries.
Kevin Harrill: These transactions have significantly de-risked the company's balance sheet with a reduction in both current and future liabilities.
Kevin Harrill: Thanks, Kevin. One final point I'd like to make. Obviously, over the last few months, the U.S. political cycle has been tumultuous in the run-up to the election.
Kevin Harrill: No one knows what will happen in November or what the political landscape will be next year.
Speaker Change: The good news for the nuclear industry, and for Centris in particular, is that there is a broad consensus in both parties about the need to reclaim and advance American leadership in nuclear energy and nuclear fuel production.
Unknown Speaker: Our work on the HALU Cascade was launched during the Trump administration and then extended under the Biden administration. The Advanced Reactor Demonstration Program, which is funding the deployment of two HALU-fueled next-generation reactors and advancing eight other innovative reactor designs, was also launched by the Trump administration with bipartisan congressional support and then received a major infusion of funding under the Bipartisan Infrastructure Law signed by President Biden.
Speaker Change: Our work on the HALU Cascade.
Speaker Change: was launched during the Trump administration and then extended under the Biden administration. The Advanced Reactor Demonstration Program, which is funding the deployment of two HALU-fueled next-generation reactors and advancing eight other innovative reactor designs,
Speaker Change: And as I mentioned earlier, this spring, Republicans and Democrats in Congress work together to enact a multi-billion dollar investment.
Speaker Change: In the end, having a reliable, affordable, emissions-free source of energy that can meet our nation's needs 24 hours a day, 7 days a week, 365 days a year is something that appeals to people across ideological spectrum.
Speaker Change: We look forward to working with policymakers in both parties in the years ahead to restore America's status as a global leader in nuclear fuel production.
Speaker Change: We are committed to living up to the faith you have placed in us and delivering the results you expect and deserve. We are happy to take questions at this time. Operator?
Unknown Speaker: Thank you. Ladies and gentlemen, we will now begin our question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin our question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again.
Speaker Change: If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. As a reminder,
Speaker Change: Thank you. Your first question comes from the line of Rob Brown from Lake Street Capital Markets. Please go ahead.
Rob Brown: Good morning.
Rob Brown: Just wanted to talk a little bit about the RFPs that you alluded or talked about.
Unknown Speaker: What's the timing, I guess, the HALU's been submitted, and the LEU is still being worked on, and plans to be submitted, but give us a sense of how the timelines of those play out, and are they sort of independent?
Rob Brown: What's the timing, I guess, the HALU's been submitted and the LEU is still being worked on and plans to be submitted, but give us a sense on how the timelines of those play out and are they interrelated or are they sort of independent efforts?
Speaker Change: And, you know, there's very little information from the Department of Energy exactly how and when those are going to be awarded. We can definitely guess and speculate, but we don't actually know.
Unknown Speaker: There's very little information from the Department of Energy about exactly how and when government awards are going to be awarded. We can definitely guess and speculate, but we don't actually know. And although the timing of the government awards is up to the government, we really are ready to go.
Speaker Change: So I hope I'm answering your question but those obviously as we always stated those are those are critical and we view the LEU part as being critically important to us as well.
Unknown Speaker: Okay, great. Thank you.
Speaker Change: Okay, great, thank you. And then on the ban and the waiver situation, it sounds like you got waivers for a couple years, and I think you said you got a deferred waiver for the out years. Is that a process where you will then see where you're at and ask for waivers again, or how does that process work?
Unknown Speaker: And then on the ban and the waiver situation, it sounds like you got waivers for a couple of years. And I think you said you got a deferred waiver for the next years. Is that a process where you will then... See where you're at and ask for waivers again, or how do you do that?
Speaker Change: Yes, so just for background, our first waiver request application went on May 27th, and on July 18th, the DOE issued the company a waiver that allows us to import LEU from Russia for the deliveries that we already committed.
Speaker Change: On June 7th, we filed a second waiver request application to allow for importation of LEU from Russia for processing and re-export to the company's foreign customers and at this point we're waiting on DOE's determination.
Speaker Change: So, to answer more specifically your question, the company really plans to file a third waiver request application to allow for importation of LEU from Russia in 2026 and 2027 for use in the U.S. that we have not really yet committed to customers.
Unknown Speaker: So, yes, we do have intentions to...
Unknown Speaker: Among ourselves and the other two enrichers, we are the only ones that are currently enriching and have proven technology. There are several Western Richers, but we are fairly uniquely positioned specifically for this bid and our own.
Speaker Change: and Dan Leistikow. Thank you.
Speaker Change: And so I think that positions us fairly uniquely, as I mentioned earlier on the webinar.
Speaker Change: on the earnings call, the fact that our technology could be used for commercial and for national security provides a very unique value to us.
Speaker Change: to the United States of America.
Speaker Change: and so
Speaker Change: That's helpful. And then, Kevin.
Kevin Harrill: You mentioned that the second quarter was sort of in line with company expectations. Clearly, the...
Kevin Harrill: Swoo Revenue was very, very strong. Was there...
Speaker Change: Any pull through there? And so should we think about sort of your inline comment as inline for the year, but obviously the business is a little bit lumpy here and therefore third quarter, fourth quarter could fall off or have we seen?
Speaker Change: Yes, that's a great question. What I was referencing in the earlier comments was that it was in line both on a quarter and on an annual basis.
Speaker Change: from a revenue perspective. So we don't expect that to the point of your question that we would have any fall-off in future quarters based upon how strong the quarter was. We were always expecting it to come out the way it was.
Unknown Speaker: Alex, one other thing.
Speaker Change: Thanks for having us.
Speaker Change: Your next question comes from the line of Joseph Reagor from Carat Capital Partners. Please go ahead.
Unknown Speaker: Hey, Amir, Kevin, and team. Thanks for taking the questions and congrats on a strong quarter. Last year they were 208.
Joseph Reagor: I did have a kind of a follow-on to the previous question, so...
Joseph Reagor: I think at some point, you guys.
Joseph Reagor: Suggested that, you know, because the price of Sue was up, then, you know, the total for the year might be up slightly, but the, you know, contract volume isn't materially changing from year to year, and it would.
Speaker Change: We'll continue to have this lumpiness.
Speaker Change: Has anything changed entry year this year that would suggest the total sales for this year will be higher than your original expectation?
Speaker Change: Strong performance that's largely you know reflective of stronger pricing and we did have some some
Unknown Speaker: Some deliveries move into the second quarter that we were always expecting that, you know, may not, that wouldn't be pushed out in our quarters. And again, you have to go back to the nature of our business, which is very cyclical. So you're not necessarily seeing the same customer deliveries in an annual cycle. It's all based upon the utilities' needs, and their reload schedules are usually on an 18 to 24 month basis.
Speaker Change: Some deliveries move into the second quarter that we were always expecting that, you know, may not, that wouldn't have pushed out in in our quarters. And again, you have to go back to the nature of our business is very cyclical. So you're not seeing necessarily the same customer deliveries in an annual cycle. It's all based upon the utilities needs. And there's reload schedules are usually on an 18 to 24 month basis. So
Unknown Speaker: So, to answer your question, you know, this falls in line with our expectations that we forecasted at the commencement of the year. The 1 thing that I would note with regard to the technical solutions segment is that that is going to be stronger in the current year based upon the switchover from phase 1 to phase 2. And as a reminder, phase 1 was a cost share arrangement; we had a 50-50 distribution between the government and centrist as it relates to that cost contribution, and the current year under phase 2, we have a contract that goes up to 90 million for the phase 2 cycle, which commenced last year in mid November, and we'll realize higher revenues on that for the remainder of the year compared to the prior year.
Speaker Change: to answer your question, you know, this falls in line with our expectations that we forecasted at the commencement of the year. The one thing that I would note with regards to the technical solutions segment is that that is going to be stronger in the current year based upon the switchover from Phase 1 and Phase 2. And as a reminder, Phase 1 was a cost share arrangement.
Speaker Change: which we had a 50-50
Speaker Change: distribution between the government and and Centrus as it relates to that cost contribution and the current year under phase two we have a contract that goes up to 90 million for the phase two cycle which commenced the last year in mid November and will realize higher revenues on that.
Unknown Speaker: Sort of. And I realize that it's looking, you know, a little deeper into the margins. So gross margin for the LEU segment last year was about 39%. This year, or is that simply, to your point, timing of contracts, and how should we think about margins the rest of this year and next year?
Speaker Change: Is that simply, to your point, timing of contracts, and how should we think about margins the rest of this year and next year?
Speaker Change: Is this a sign that margins are starting to get weaker as some of the better contracts have rolled off or is this just timing?
Unknown Speaker: Different contracts delivering at different profit margins. The one thing that I would note that I think may be illuminating is that, you know, in my earlier comments, I mentioned that the higher margins in the prior year were largely due to a delivery to one of our customers that was a pretty big slug of SWU. That didn't happen in the current year, largely due to the timing of when they take their deliveries, and we expect that to be coming about in the future.
Speaker Change: Different contracts delivering at different profit margins. The one thing that I would note that I think may be illuminative is that, you know, in my earlier comments, I mentioned
Unknown Speaker: And those margins that we realized in the past for that specific delivery will be replicated at the point in time where they take delivery. Just, you know, they don't take delivery on a 12-month cycle, which is why you didn't see the mirror image of what we experienced last year.
Speaker Change: the timing of when they take their deliveries, and we expect that to be coming about in the future. And those margins that we realized in the past for that specific delivery will be replicated at the point in time where they take delivery, just, you know, they don't take delivery in a 12-month cycle, which is why you didn't see the...
Speaker Change: the mirror image of what we experienced last year.
Speaker Change: Okay, thanks. I'll get back in queue.
Speaker Change: Thank you, operator. This will conclude our investor call for the second quarter of 2024. As always, I want to extend a thank you to our listeners online and those who called in. We look forward to speaking with you again next quarter.
Speaker Change: Thank you for watching!
Speaker Change: www.uncn.org www.uncn.org
Speaker Change: and David Walsh. Thank you. Thank you. Thank you. Thank you. Thank you.
Speaker Change: www.uncn.org www.uncn.org
Speaker Change: Thank you for watching!
Speaker Change: Amir Vexler, Unknown Shareholder, Amir Vexler, Unknown Shareholder, Amir Vexler, Unknown Shareholder, Amir Vexler, Unknown Shareholder, Amir Vexler, Unknown Shareholder, Amir Vexler,
John: Amir Vexler, Unknown Shareholder, Amir Vexler, Unknown Shareholder, Amir Vexler, Unknown Shareholder, Amir Vexler, Unknown Shareholder, Amir Vexler, Unknown Shareholder, Amir Vexler, Unknown Shareholder, Amir Vexler, Unknown Shareholder, Amir Vexler, Unknown Shareholder, Thank you for standing by. My name is John, and At this time, I would like to welcome everyone to the Centris Energy second quarter 2024 earnings call.
Speaker Change: Thank you for watching!
Unknown Speaker: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Dan Lysakow. Please go ahead.
John: Thank you for standing by. My name is John and I will be your conference operator for today.
John: All eyes have been placed on me to prevent any background noise.
Speaker Change: Good morning. Thank you all for joining us. Today's call will cover the results for the second quarter of 2024, ended June 30th. Today we have Amir Vexler, President and Chief Executive Officer, and Kevin Harrill, our Chief Financial Officer.
Speaker Change: Before turning the call over to Amir Vexler, I'd like to welcome all of our callers as well as those listening to our webcast.
Unknown Speaker: This conference call follows our earnings news release issued yesterday afternoon. We expect to file our report for the second quarter on Form 10-Q later today. All of our news releases and SEC filings, including our 10-K, 10-Qs, and 8-Ks, are available on our website. A replay of this call will also be available later this morning on the Centrus website.
Speaker Change: We expect to file our report for the second quarter on Form 10-Q later today. All of our news releases and SEC filings, including our 10-K, 10-Qs, and 8-Ks, are available on our website. A replay of this call will also be available later this morning on the Centris website.
Unknown Speaker: I would like to remind everyone that certain information we may discuss on this call today can be considered forward-looking information that involves risk and uncertainty, including assumptions about the future performance of Centrus. 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 and quarterly reports on Form 10-Q.
Speaker Change: Additional information concerning factors that would cause actual results to materially differ from those in our forward-looking statements is contained in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q .
Unknown Speaker: We had $189 million in revenue and reported $30.6 million in net income for the quarter, driven by a large number of customer deliveries in our LEU business sector. Kevin will discuss this in greater depth shortly. The global uranium enrichment market is dominated by state-owned enterprises, which is why U.S. government support for domestic enrichment technology through public-private partnership is so critical. We submitted our proposals for HALU earlier this year. We are now developing our proposals for the LEU RFP, which is due next month.
Speaker Change: We had $189 million in revenue and reported $30.6 million in net income for the quarter, driven by a large number of customer deliveries in our LEU business segment.
Speaker Change: Kevin will discuss this in greater depth shortly.
Kevin Harrill: Last October , we made history by becoming the first U.S. uranium enrichment company to commence plant operations using U.S. enrichment technology in 70 years. We are continuing to produce high-assay, low-enriched uranium, or HALU, which is urgently needed.
Speaker Change: to fuel the next generation reactors. The modest quantity of halo we can produce today is the foundation for the Department of Energy.
Speaker Change: Our goal is clear, to expand our capacity at our American centrifuge plant in Ohio so that we can meet the full range of commercial and national security requirements for enriched uranium, including not only HALU, but also low enriched uranium for the existing fleet of commercial reactors.
Speaker Change: The global uranium enrichment market is dominated by state-owned enterprises, which is why U.S. government support for domestic enrichment technology through public-private partnership is so critical.
Speaker Change: Government investment is especially justified here given the fact that the government has its own requirements for enriched uranium, including national security missions that explicitly require the use of U.S. origin enrichment technology, a technology only we can provide today.
Speaker Change: While the build-out of a scaled enrichment facility will require new investment as well as the support of the U.S. government, in the past few months alone we have seen strong signals that give us confidence in our strategic plans.
Speaker Change: Last quarter we announced $900 million in LEU purchase commitments from commercial customers contingent on our ability to secure financing necessary to build the new enrichment capacity.
Speaker Change: We submitted our proposals for HALU earlier this year, and we are now developing our proposals for the LEURFP, which is due next month.
Speaker Change: and the Bipartisan Government Funding Bill in March 2024. Taken together, they represent the largest federal investment in domestic nuclear fuel production in decades.
Speaker Change: These are competitive solicitations. There are no guarantees. I have told my team to take nothing for granted.
Unknown Speaker: Our job is to put together competitive proposals that highlight our capabilities to bring the best value for the government. We are the only American-owned enrichment company, restoring a truly domestic uranium enrichment capability which will strengthen our energy security and our national security while creating family support. If we are successful, we will play a pivotal role in enabling the United States to transition away from depending on foreign supplies of enrichment. And there's no time to waste.
Speaker Change: We have a strong case to make.
Speaker Change: We are the only American-owned enrichment company.
Speaker Change: We are the only technology that will fully rely on and utilize an American supply chain.
Speaker Change: We manufacture our centrifuges in the U.S.
Speaker Change: Our technology is U.S. origin.
Speaker Change: That is crucially important because under long-standing non-proliferation agreements, only a U.S. origin technology can be used to support national security missions.
Speaker Change: In short, we are uniquely positioned to deliver an all-in-one, made-in-America solution, restoring a truly domestic uranium enrichment capability which will strengthen our energy security and our national security while creating family-supporting energy efficiency.
Unknown Speaker: In May 2024, the president signed into law the ban on the imports of enriched uranium from Russia. Centrus has been clear that we need waivers for the next few years as we complete our Russian supply contracts and to enable us to transition back to our own production. Last month, the Department of Energy granted Centrus a waiver covering our importations for US customers in 2024 and 2025 while deferring a decision on 2026 and 2027.
Speaker Change: And there's no time to waste. In May 2024, the President signed into law the ban on the imports of enriched uranium from Russia.
Speaker Change: which is set to take effect on August 11, 2024. However, lawmakers recognize the reality that the transition is going to take some time. So the law authorizes the Department of Energy to issue waivers through 2027.
Centris: Centrus has been clear that we need waivers for the next few years as we complete our Russian supply contracts and to enable us to transition back to our own production.
Speaker Change: Last month, the Department of Energy granted Centrus a waiver covering our importations for U.S. customers in 2024 and 2025, while deferring a decision on 2026 and 2027.
Speaker Change: The reality is that Russia accounts for 44% of the world's enrichment capacity today, and U.S. utilities relied on Russian-origin enrichment for more than a quarter of their needs last year.
Speaker Change: That's why these waivers are so important during this transition period, not just for centrists, but for the industry and the country, as we work to scale up domestic enrichment capacity over the next few years.
Unknown Speaker: The second quarter of 2024 reflected a more than 30% increase in school quantities delivered, albeit at slightly lower margins than those of the prior year. As Amir noted earlier, for the second quarter of 2024, we generated $189 million in revenue and $30.6 million in net income, an increase of $90.6 million in revenue and $17.9 million in net income. Our LEU business generated $169.6 million in revenue, an increase of $82 million compared to the same quarter in 2023.
Speaker Change: The second quarter of 2024 reflected a more than 30% increase in school quantities delivered, albeit at slightly lower margins than those of the prior year.
Speaker Change: This was due to several deliveries in the second quarter of 2023 that were favorably priced, but did not replicate in the current quarter as their fuel needs are anticipated in future quarters.
Speaker Change: Our LEU business generated $169.6 million in revenue, an increase of $82 million compared to the same quarter in 2023, reflecting increases in both the volume of SWU sold, as well as the average price of SWU sold.
Speaker Change: Our cost of sales in LEU increased from $60.8 million in the second quarter of 2023 to $136.6 million in 2024, again reflecting the increase in sales volume, as well as an increase in average unit cost as we sold.
Speaker Change: We ended the quarter with an LEU growth profit of $33 million, compared to $26.8 million in the second quarter of 2023.
Unknown Speaker: Our technical solution segment also generated $3.5 million in gross profit, which was an improvement of $2.3 million versus the second quarter of 2023. These proceeds and the gross margin generated in the second quarter contributed to our ending net cash balance of $227 million and a restricted cash balance of $32.6 million for a total of $259.6 million of cash and restricted cash. On May 28, 2024, we entered into an agreement to purchase a group annuity contract for approximately $224 million to transfer approximately $234 million of our pension plan obligations to an insurer. These transactions have significantly de-risked the company's balance sheet with a reduction in both current and future liability.
Speaker Change: Our technical solutions segment also generated $3.5 million in gross profit, which was an improvement of $2.3 million versus the second quarter of 2023.
Speaker Change: On a consolidated basis, our gross profit was $36.5 million, an increase from $28 million in the prior year.
Speaker Change: This covers approximately 2,400 beneficiaries.
Speaker Change: These transactions have significantly de-risked the company's balance sheet with a reduction in both current and future liabilities.
Unknown Speaker: Thanks, Kevin. One final point I'd like to make: obviously, over the last few months, the US political cycle has been tumultuous in the run-up to the election. Our work on the HALU cascade was launched during the Trump administration and then extended under the Biden administration. The Advanced Reactor Demonstration Program, which is funding the deployment of two HALU-fueled next-generation reactors and advancing eight other innovative reactor designs, was also launched by the Trump administration with bipartisan congressional support and then received a major infusion of funding under the bipartisan infrastructure law signed by President Biden.
Speaker Change: Thanks Kevin. One final point I'd like to make. Obviously, over the last few months, the U.S. political cycle has been tumultuous in the run-up to the election.
Speaker Change: No one knows what will happen in November or what the political landscape will be next year.
Speaker Change: Our work on the HALU Cascade.
Speaker Change: was launched during the Trump administration and then expanded under the Biden administration. The Advanced Reactor Demonstration Program, which is funding the deployment of two HaloFuel next-generation reactors and advancing eight other innovative reactor designs.
Speaker Change: was also launched by the Trump administration with bipartisan congressional support and then received a major infusion of funding under the bipartisan infrastructure law signed by President Biden.
Speaker Change: In the end, having a reliable, affordable, emissions-free source of energy that can meet our nation's needs 24 hours a day, 7 days a week, 365 days a year is something that appeals to people across ideological spectrum.
Speaker Change: We look forward to working with policymakers in both parties in the years ahead to restore America's status as a global leader in nuclear fuel production.
Speaker Change: Let me close by thanking all of our investors who have joined us today on this call. None of this would be possible without your support. We are committed to living up to the faith you have placed in us and delivering the results you expect and deserve. We are happy to take questions at this time.
Speaker Change: If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. As a reminder,
Speaker Change: We will have to pause for a moment to compile the Q&A roster.
Speaker Change: While we wait for questions, I am happy to share that the Centrus Board of Directors appointed Ms. Stephanie O'Sullivan to our board yesterday.
Speaker Change: Her wealth of experience and knowledge in the national security and cyber security arena, among others, will be invaluable for our future success. She joins our new board member, Ray Rothrock, who was elected during the June shareholder meeting.
Speaker Change: We look forward to working with them during this exciting period of the nuclear industry in our company.
Speaker Change: Thank you. Your first question comes from the line of Rob Brown from Lake Street Capital Markets. Please go ahead.
Rob Brown: Good morning.
Rob Brown: Good morning.
Rob Brown: Just wanted to talk a little bit about the RFPs that you alluded or talked about.
Speaker Change: What's the timing, I guess, the HALU's been submitted and the LEU is still being worked on and plans to be submitted, but give us a sense on how the timelines of those play out and are they interrelated or are they sort of independent efforts?
Speaker Change: Alright, so let's talk about your question about timing first. So as you know, we submitted two of the RFPs and the third LEU RFP is due a month from now in September .
Speaker Change: And, you know, there's very little information from the Department of Energy exactly how and when those are going to be awarded. We can definitely guess and speculate, but we don't actually know.
Unknown Speaker: So I hope I'm answering your question. But those, obviously, as we have always stated, those are critical. And we view the LEU part as being critically important to us as well.
Rob Brown: Thank you.
Rob Brown: So I hope I'm answering your question but those obviously as we always stated those are those are critical and we view the LEU part as being critically important to us as well.
Rob Brown: As we always said, this kind of a project will require a public-private partnership, and although the timing of the government award is up to the government, we really are ready to go.
Speaker Change: okay great thank you and then and then on the
Speaker Change: The ban and the waiver situation, it sounds like you got waivers for a couple of years, and I think you said you got a deferred waiver for the out years. Is that a process where you will then, you know...
Rob Brown: See where you're at and ask for waivers again, or how does that process work?
Speaker Change: Yeah, so just for background, our first waiver request application went on May 27th and on July 18th the DOE issued the company a waiver that allows us to import LEU from Russia for the deliveries that we already committed.
Unknown Speaker: On June 7th, we filed a second waiver request application to allow for the importation of LEU from Russia for processing and re-export to the company's foreign customers. And at this point, we're waiting on DOE's determination. So to answer more specifically your question, the company really plans to file a third waiver request application to allow for importation of LEU from Russia in 2026 and 2027 for use in the U.S., but we have not really yet committed to customizing.
Rob Brown: to our customers in 2024 and 2025.
Rob Brown: On June 7th, we filed a second waiver request application to allow for importation of LEU from Russia for processing and re-export to the company's foreign customers and at this point we're waiting on DOE's determination.
Rob Brown: So to answer more specifically your question, the company really plans to file a third waiver request application to allow for importation of LEU from Russia in 2026 and 2027 for use in the U.S. that we have not really yet committed to customers.
Rob Brown: So yes, we do have intentions to...
Rob Brown: to file a third waiver request to the DOE.
Alex Rygiel: Your next question comes from the line of Alex Rygiel from V. Reilly. Please go ahead.
Rob Brown: Okay, great. Thank you. I'll turn it over.
Speaker Change: Your next question comes from the line of Alex Rygiel from V. Riley. Please go ahead.
Alex Rygiel: Thank you very much gentlemen. Could you talk a little bit about the competitive environment for the multiple bids that have been submitted as well as for the planned bid for Lew?
Unknown Speaker: Okay, yeah, good question. And so I think that positions us fairly uniquely, as I mentioned earlier in the earnings call, the fact that our technology could be used for commercial purposes and for national security provides very unique value.
Speaker Change: Okay, yeah, good question.
Speaker Change: We, very simply put, Centrus is not the only enricher. However, we are the only U.S. technology, U.S. owned company in the running.
Speaker Change: Thank you.
Speaker Change: Among ourselves and the other two enrichers, we are the only ones that are currently enriching and have proven technology.
Speaker Change: And so I think that positions us fairly uniquely, as I mentioned earlier on the webinar.
Speaker Change: on the earnings call, the fact that our technology could be used for commercial and for national security provides a very unique value to us.
Speaker Change: to the United States of America.
Speaker Change: and so
Speaker Change: There are several Western Richers, but we are fairly uniquely positioned specifically for this bid in our view.
Unknown Speaker: You mentioned that the second quarter was sort of in line with company expectations. Clearly, the...
Speaker Change: That's helpful. And then, Kevin.
Kevin Harrill: You mentioned that the second quarter was sort of in line with company expectations.
Kevin Harrill: higher level of demand in the third quarter too because of these waivers, how should we think about all that?
Kevin Harrill: from a revenue perspective. So we don't expect that to the point of your question that we would have any fall-off in future quarters based upon how strong the quarter was. We were always expecting it to come out the way it was.
Kevin Harrill: Alex, one other thing I wanted to mention to your earlier question,
Speaker Change: Obviously, I was more focused on the answering your LEU one, but just to mention, I mean, Haley is a big part of this bid, and we, again, we're very uniquely positioned, and that we're the only ones that are currently enriching.
Kevin Harrill: not only enriching the only ones that have the license here in the U.S. or in the western world to be able to do that, so I think that makes us fairly unique.
Speaker Change: Thank you very much.
Unknown Speaker: Hey, Amir, Kevin, and team. Thanks for taking the questions and congratulations on a strong quarter. I do have a kind of follow-on to the previous question.
Kevin Harrill: I do have kind of a follow-on to the previous question.
Speaker Change: So far, year-to-date, SWOO sales were about 163-ish million. Last year, they were 208.
Unknown Speaker: Limited and what kind of guide you guys can give. Looking, you know, deeper margins. So gross margin for the LEU segment last year was about 39%. This year, Is this a sign that margins are starting to get weaker as some of the better contracts have rolled off, or is this just timing?
Speaker Change: Is that simply, to your point, timing of contracts, and how should we think about margins the rest of this year and next year?
Speaker Change: the timing of when they take their deliveries, and we expect that to be coming about in the future. And those margins that we realized in the past for that specific delivery will be replicated at the point in time where they take delivery, just, you know, they don't take delivery in a 12-month cycle, which is why you didn't see the...
Speaker Change: Okay, thanks. I'll get back in queue.
Speaker Change: And that does conclude our Q&A session. I would like to turn the floor back over to Mr. Dan Leistikow for closing remarks.
Speaker Change: Thank you, operator. This will conclude our investor call for the second quarter of 2024. As always, I want to extend a thank you to our listeners online and those who called in. We look forward to speaking with you again next quarter.