Q3 2024 Centrus Energy Corp Earnings Call
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Speaker Change: Greetings and welcome to Centers Energy 3rd Quarter 2024 earnings conference call. At this time, all participants are an elicinally mode.
Speaker Change: A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star 0 on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan, Lyce to go. VP Corporate Communications. Thank you, you may begin.
Speaker Change: Good morning. Thank you all for joining us. Today's call will cover the results of the third quarter, 2020, 4, and it's the 10th or 30th. Today we have Amir Vexler, President and Chief Executive Officer, and Kevin Harrow, Chief Financial Officer.
Speaker Change: Before turning the call over to Amir Vexler, I'd like to welcome all of our colors as well as those listening to our webcast.
Speaker Change: This conference call follows our earnings news release, which was issued yesterday. We expect to file our report for the third quarter on Form 10 key later today.
Speaker Change: All of our news releases and SEC findings including our 10K, 10Qs and 8Ks are available on our website. A replay of this call will also be available later this morning on the Center for Observe site.
Speaker Change: I'd like to remind everyone that certain information we may discuss on this call today may be considered forward-looking information and involves risking uncertainty, including assumptions about the future performance of centrist, our actual results may differ materially from those in our forward-looking statements.
Speaker Change: Additional information concerning factors that could cause actual results to material even differ from those in our forward-looking statements. It's contained in our findings where the SEC, including our annual report on Form 10K, as well as quarterly reports on Form 10Q.
Speaker Change: Finally, the forward-looking information provided today is time sensitive and accurate only as of today October 29, 2024. I'm not otherwise noted.
Speaker Change: This call is the property of Central Energy. Any transcription, redistribution, retransmission, or a re-broadcast of this call in any form without the expressed written consent of Central is strictly prohibited. Thank you for your participation and I'll now turn the call over to Amir.
Amir Vexler: Thank you, Dan, and thank you to everyone on the call today of longtime listeners and those of you joining us for the first time.
Amir Vexler: Our industry and centers specifically have a growing sense of momentum.
Amir Vexler: Big Tech companies are making historic investments.
Amir Vexler: Reactors that shut down just a few years ago are set to restart.
Amir Vexler: and as an international conflict drives shocks to energy markets around the world, policy makers have made a multi-building dollar commitment to our domestic nuclear fuel supply chain.
Amir Vexler: A centrist we are proud to be leading the effort to restore America's ability to enrich uranium. Meeting donations need while creating thousands of jobs in the process.
Speaker Change: Turning to our quarterly numbers, we have consistently stressed on these calls that due to the nature of our business, there is a lot of quarter to quarter fluctuation in our results.
Speaker Change: Most of our revenue comes from the LE segment where our customers generally have multi-year contracts to take delivery of a given quantity at a given price each year.
Speaker Change: But they choose which quarter to take Daniel delivery and don't choose the same quarter every year.
Speaker Change: Reven use and margins go up and down the bending on how many deliveries happen to fall into a particular quarter and whether those deliveries come from our higher-trice contracts or our lower-trice contracts.
Speaker Change: and the such will believe our annual results are more indicative of our progress.
Speaker Change: In the 1st quarter of 2024 we achieved 67.7 million in revenue, a gross profit of 8.9 million and a net loss of 5 million.
Speaker Change: That is in line with our internal expectations for the quarter, particularly coming after a big second quarter result.
Speaker Change: Again, this variation is normal for us and it's why we put our focus on annual numbers.
Speaker Change: What's even more important, however, is that trajectory we are on as a company and as an industry.
Speaker Change: As you know, last year's centers began demonstrating production of IAC, Lowen Rich uranium, or Halo and Pike Ten Ohio.
Speaker Change: which is the only license in operating Halo production facility in the Western world.
Speaker Change: I am pleased to report that earlier this month the Department of Energy Selected Sentence for a Parval Award aimed at expanded production of Halo as well as Halo Deconversion, which is the secondary step in the Halo Production process that occurs after enrichment.
Speaker Change: The Halo Production Award covers a 10-year period and has a total contract feeling of 2.7 billion, which is cumulative for all 4-hour days, the department has selected.
Speaker Change: The contract ceiling for the conversion, cumulative is for six awardees is $800 million. The initial selection only guarantees $2 million under each contract, but it makes us eligible for future task quarters of the department.
Speaker Change: which could under plan a significant expansion of our capacity and python.
Speaker Change: The ultimate valor amount associated with these awards and the potential scale of the expansion supported will depend upon task quarters subsequently issued by the U.S. Department of Energy to census under the contract.
Speaker Change: In addition to the contract ceiling, the total value of the task quarters will be limited by the availability of appropriations.
Speaker Change: Fortunately, the Halo enrichment in the conversion RFTs as well as a third RFT covering LSU production which is not the estimated word. are backed by more than 3.4 billion that has been appropriated by Congress today.
Speaker Change: We responded to the LUR of PNS-Temble with a proposal to establish large scale production of LUR or higher facility. Alongside what we hope will be expanded, Hiloproduction and then you, Hilody Conversion capability.
Speaker Change: The federal investments we are seeking coupled with private investment and commercial of the domestic investments.
Speaker Change: With form debases for public private partnership aimed at restoring a robust domestic uranium enrichment capacity.
Speaker Change: As a reminder, we are the only publicly traded uranium enrichment company in the world, and the only one with an American technology, American workforce, and American supply chain. All of our competitors that are in this year's rating today are foreign, government-owned entities.
Speaker Change: As another step towards creating a public-private partnership, we have secured accumulated stole of approximately 2 billion in customer commitments to support the employment of our ULEU production capacity and pipeline.
Speaker Change: These agreements are subject to signing final contracts and are contingent upon us securing the necessary public and private investment to build new capacity.
Speaker Change: We believe this reflects a strong appetite for new American Aleukhude option and demonstrates customer confidence and sensors to technical capabilities and commercial competitiveness.
Speaker Change: Our efforts to restore America's nuclear fuel supply chain have taken on added urgency in the last few months. Particularly as a major technology companies turn to nuclear, to power data centers and the AI systems of the future.
Speaker Change: For example, Microsoft recently signed a 20-year power purchase agreement to restart the Reactor and Pennsylvania. And the Department of Energy also finalized the financial package to enable the restart of the Palacade Nuclear Plant and Michigan.
Speaker Change: These represent the forced reactors to ever restart after closing down.
Speaker Change: On October 14, Google announced the partnership with Kyra's power to deploy a fleet of able to build reactors, totaling 500 megawatts.
Speaker Change: Today's later Amazon announced a 500 million investment and a commitment to help deploy four of X-energy's Hayles Shield reactors in Washington State as well as potential reactor projects in Virginia.
Speaker Change: That same date that the Department of Energy made 900 million available to support the performance of small modular reactors. That follows action by TVA, which increased its commitment to 350 million to develop small modular reactors for the clinch Riverside and Tennessee.
Speaker Change: The US military is also looking to nuclear energy for national security. Next year, the Pentagon will begin testing, prototype, a few microreactors at Idaho National Laboratory.
Speaker Change: Meanwhile.
Speaker Change: The US Air Force is looking to host the microreactor in Alaska. The US Army is evaluating this for reactors that two of its bases, and the Navy recently began exploring possible reactor deployment on an underutilized sites in Maryland, Virginia, in North Carolina.
Speaker Change: Given all of this momentum, it's no surprise that in September, 14 of the world's largest banks, including Bank of America, Morgan Stanley and Goldman Sachs committed to support a tripling of nuclear energy capacity by 2050.
Speaker Change: These initiatives to expand nuclear have something in common, they all require fuel.
Speaker Change: With a growth comes from a reactor powered by Helio or Helio for a mix of both. Stentures with world position since our Ohio plant is the only U.S. site license for Helio production and one of only two sites license for Helio.
Speaker Change: I will now turn the call over to Kevin to walk through the numbers.
Kevin Harrow: Thank you, Amir. Good morning, everyone. Our financial results for the quarter remain in line with our internal projections based on custom orders and deliveries.
Kevin Harrow: The third quarter of 2024 reflected more than a 70% decrease in through quantities delivered by a higher sales unit price.
Kevin Harrow: As Amir noted, we believe our annual results provided more accurate reflection of our business due to the nature of our contract cycles.
Kevin Harrow: We generated $0.57 million in revenue, an increase of $6.4 million compared to the same quarter in the prior year.
Kevin Harrow: We generated a net loss of 5 million compared to net income of 8.2 million in a priori.
Kevin Harrow: Our LEU business generated 34.8 million in revenue, decreased to 5.7 million compared to the same quarter in 2023.
Kevin Harrow: reflecting a decrease in the volume of swivel sold, partially offset by an increase in the average price of swivel.
Kevin Harrow: Our cost of sales in LA is you decreased by from 30.4 million in the third quarter of 2023 to 29.6 million in 2024. Due to a decrease in sales volume, partially offset by an increase in average school cost.
Kevin Harrow: We ended the quarter with an LEU gross profit of 5.2 million, compared to 10.1 million in the third quarter of 2023.
Kevin Harrow: Our technical solution segment also generated 3.7 million in gross profit, which was an improvement of 2.5 million versus the third quarter of 2020.
Kevin Harrow: On a consolidated basis, our gross profit was 8.9 million, a slight decrease from 11.3 million in the past year.
Kevin Harrow: Technical Solutions generated 22.9 million in Cordy the revenue and embrace a 12.1 million compared to the third quarter of 2023.
Kevin Harrow: and reported 19.2 million in cost of sales, which was an increase of 5.6 million compared to the prior year.
Kevin Harrow: A results on a year over year basis reflect transition of the Hable operation contract from a cost-share model under phase one to a cost-plus incentive model under phase two.
Speaker Change: At Amir previously mentioned, as another step towards creating a public private partnership.
Speaker Change: We have secured a cumulative total approximately two billion in customer commitment to support deployment of new LEU production capacity and pike done, which boasts the company's total backlog.
Speaker Change: As in September 30, 2024, the company has a total backlog which extends to 24, of 3.8 billion.
Speaker Change: Our LEU segment back-log is approximately 2.8 billion as of September 30, 2024.
Speaker Change: and includes futures flu and uranium dual livers, primarily under medium and long-term contracts, with fixed commitments, as well as the $2 billion in contingent LSU sales commitments, subject to entering into definitive agreements.
Speaker Change: and support of a potential construction of the LEU production capacity at the Pike Dino Hyrule facility.
Speaker Change: The contingent LW sales commitments also depend on our ability to secure a substantial public and private investment.
Speaker Change: Moving on to our technical solutions segment, our backlog, which is approximately 0.9 billion as of September 30, 2024, includes funded amounts, unfunded amounts, and un-exercised options.
Speaker Change: The options relate to the company's Halo Operation Contract.
Speaker Change: In the third quarter of 2024, we continued to leverage RITM program, raising an additional 4.5 million proceeds, bringing our total year-end proceeds that have related expenses to 23.8 million.
Speaker Change: These proceeds.
Speaker Change: and Gross Margin, generated in third quarter.
Speaker Change: Contribulate.
Speaker Change: to our ending task for balance.
Speaker Change: of 194.3 million.
Speaker Change: and a restricted cast balance of 32.6 million.
Speaker Change: for a total of 226.9-millimeter cash and restricted cash.
Speaker Change: Maintaining a strong cast position continues to facilitate execution of our near-term contractual obligations, as well as strategic investments in our long-term future.
Speaker Change: We continue to deliver the financials through strategic initiatives associated with our pension plans.
Speaker Change: In the third quarter of 2024, we have further reduced our pension plan obligations by 21 million.
Speaker Change: As of September 30, 2024, we have 29 million remains in these pension plan obligations and currently at a funding level in access of 110%.
Speaker Change: The company will continue to evaluate oxygen reduced to further strengthen its balance sheet position as part of a multi-year effort to better position the company to continue expanding and rich-machate abilities without compromising the balance sheet.
Speaker Change: These initiatives are a part of a broad strategy to optimize a cost structure, adequately manage our risks, and place ourselves in a position to execute on our vision to restore America's ability to enrich uranium at scale.
Speaker Change: With that, let me turn things back over to Amir.
Amir Vexler: Thanks, Kevin. I'd like to close with a final thought about how we see our role in America's nuclear.
Amir Vexler: The Unsupply Chain and what sets us apart from our competitors as we seek to build on our recent RST wins and hope to secure a large share of this. We point for a billion in Congress to set aside for domestic nuclear fuel production.
Amir Vexler: Nothing is guaranteed in this competition, but we believe we have a strong case to make.
Amir Vexler: We are the only company with an American technology and an American workforce using an American supply chain that enriches uranium today.
Amir Vexler: All of the other active and witchers today are foreign, government owned enterprises.
Amir Vexler: We are also the only enricher that actually many factors or centrifuges in the United States.
Amir Vexler: In September, we held the briefing for policymakers on Capitol Hill and unveiled our domestic manufacturing supply chain, which includes 14 major suppliers. Every one of them and American company employing American workers.
Amir Vexler: The only other available operational centrifuges technology is the European design. It is exclusively manufactured in the Netherlands.
Amir Vexler: Importing those machines to the US does not change the fact that the supply chain, and virtually all of the manufacturing to other overseas.
Amir Vexler: Moreover, the terms of their agreement allowing for the import of European centrifuge technology prohibit American's access to their centrifuge technology. So even the installation has to be overseen by workers shipped in from Europe.
Speaker Change: European-owned enrichers are great companies owned by our government.
Speaker Change: But now is the time to reduce our dependency on foreign nations and bring to market additional supply from new suppliers.
Speaker Change: And when it comes to US$$$ with the priority should be to invest in an American company using American technology built by American workers.
Speaker Change: This is a once in a generation opportunity to reclaim US leadership and our nation cannot afford to squander it. Let me close by thanking our investors without whom none of this would be possible.
Speaker Change: I appreciate you coming to this journey with us. We intend to deliver strong results for you for our employees and for our nation.
Speaker Change: We're happy to take questions at this time. Operator?
Speaker Change: Thank you, the floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tunnel indicate your line isn't the question cue.
Speaker Change: If you would like to remove your question from the Q, please press start 2 on your telephone keypad. We do ask that you please limit yourself to one question and one follow up and then thank you for any additional questions.
Speaker Change: Today's first question is coming from Rob Brown of Lake Street Capital. Please go ahead.
Rob Brown: Good morning, congratulations to all of you, Margaret.
Margaret: Thank you. Thanks, Bob.
Rob Brown: I just wanted to follow up on the Haley selection and kind of next steps and I'll you laid out a fair amount of information, but how do you see the next steps and what's the timing for getting the next contracts in place potentially?
Speaker Change: I'll start with your last question first. Unfortunately, we do not know the timing. It's the discretion of the Department of Energy.
Speaker Change: Right now everybody got selected for IDAQ Awards, which we've total up to $2 million, and after which we'll be waiting for specific task quarters. So that would be the next step.
Speaker Change: The amount that we'll be allocated to these task quarters at the timing is really unknown at this point, Rob. I mean, obviously we're hoping it will be sooner than later. There's a lot of work to be done, and I think everybody is motivated to make it sooner than later, but we really have no fuel for when that may happen.
Speaker Change: and then, which is bigger picture, is all of these new demand.
Speaker Change: and the source of command and the vehicle is a incremental power source. How does that change the market for you and how do you view the overall market development? I guess it's particularly a bit of a behavior, but how do you view that happening now and as things accelerated there from your prior views?
Speaker Change: We view all of this very favorably, obviously this.
Speaker Change: Strengthens our business case, that strengthens our value proposition, and more importantly, it strengthens our unique positioning of the market. Now what do I mean by that?
Speaker Change: Regardless of what's going to be built, whether it's SMR, advanced reactors or some of the...
Speaker Change: Monkfold Reactor is going to be restarted. All of them would need enrichment, whether it's LE or A-Loo and we mentioned many times before, it matters that enrichment capacity is fairly limited and there's only foreign richest out there.
Speaker Change: Um...
Speaker Change: Two of them are Chinese and Russians. There are three including centers that are Western and one US with one US technology which is centers.
Speaker Change: So, regardless of the build or the restart of reactors, all the demands will be funneled through the same number of enrichers. And that creates a much stronger and reinforcement of our business case.
Speaker Change: Committeeing Offtake to power, I think that is critical for the flow of investments through the rest of the supply chain.
Speaker Change: and the other one is the same.
Speaker Change: Okay great, thank you, I'll turn it over.
Speaker Change: Once again, that is Star One. If you would like to register a question at this time, the next question is coming from Joseph Rager of Rock Capital Partners. Please go ahead.
Joseph Rager: Hey Amir and Kevin, thanks for taking the questions.
Joseph Rager: hub
Joseph Rager: is the first one on the contract, just to confirm I think Kevin kind of touched on this bit. The two that you were just awarded.
Joseph Rager: Those would likely be in the fixed or the cost share structure versus the current Halo contract that's the cost plus is that correct?
Speaker Change: Thanks for the question, Joe. I think at this point, you know, the way that the IDICU instrument has been designed is that it leaves flexibility for the Department of Energy to award these and a multitude of contract types, fixed price, cost reimburseible.
Speaker Change: and the CAUSTER, even TNM is one of the eligible contract types. We believe as they forward this, and we're going to see it in the form of something akin.
Speaker Change: Two, a fixed price or cost reimbursement, I think those are likely those types of contracts that would be most applicable for a build-out of this nature. But I think this is ultimately going to be at the discretion of the Department of Energy S2, how they actually issue the individual task orders and they could do it through, like I said, a multitude of mechanisms.
Speaker Change: and then...
Speaker Change: Looking at kind of margins here today, they've been quite a bit lower for the LEU segment compared to last year and I know you guys had a timing of contracts and we all know that but
Speaker Change: There seems to be if you look back over the last couple of years.
Speaker Change: The even years tend to be rolling down the odd years tend to be rolling down. Is that a reflection of some of those really high margin contracts that you had a few years back or starting a roll off the books and that the newer contracts are being signed?
Speaker Change: are somewhat lower margin, so good margin but lower.
Speaker Change: I think that's somewhat of an actress statement. We have entered into contracts up and down the school curve since 2011.
Speaker Change: This quarter, as you can tell from where our deferred revenue balance landed at, that the majority of our revenues in this quarter were related.
Speaker Change: to the contracts that we had already in our deferred revenue balances.
Speaker Change: and what we see is that with margins in the current year that
Speaker Change: Some of what the profits that you're seeing is from some of the contracts that we signed during the point in time where the market was at its lowest, but it is key to to remind everybody on the call that we right now have about 900 million in backlog related to our broker-trader business and many of those contracts were signed at a point in time and where we were at a point within the commodity price incurred. So we anticipate that we will still see solid margins on a go-forward basis, but certainly as Amir noted at the onset of the call, the way the contracts are crafted and when deliveries are taken will will will will will will.
Speaker Change: Be the determined and as to how the margins look and when the slippers actually occur.
Speaker Change: Okay, thanks, I'll turn it over.
Speaker Change: Thank you. The next question is coming from Ryan Vexler. Please go ahead.
Speaker Change: Hey, good morning guys. For the new contingent LLU sales commitments, could you share anything about those customers, those potential customers, whether it's customer type or maybe you know, geographically where they're located?
Speaker Change: We did come out with a public announcement that we had an agreement with KTMP, which is one of the largest
Speaker Change: Obviously, operating new cleary utilities in the world. It was a great honor to be selected and to be able to to finalize that contingent agreement.
Speaker Change: Beyond that, most of our agreements, as you know covered on the disclosure, we're unable to reveal the identities of those customers.
Speaker Change: But by the nature of what we're talking here, LU, you could be safe to survive that it would be for reactors that you will enrich uranium obviously in.
Speaker Change: and so these are old.
Speaker Change: These are all utilities that are operating and require early use of power their reactors.
Speaker Change: So this is a present market, this is existing market, this is market that can be satisfied now with the buildup of our LEU capability in our facility for which we're licensed already.
Speaker Change: So hope that answers the question right.
Speaker Change: and just to confirm Amir, so with that announcement, it's a temporary, you have 1.8 billion in contingent cells today, 2 billion. So that's still as imply in additional 200 million correct.
Amir Vexler: Correct, I think the mountain is right on. Looking at the camera.
Speaker Change: Got it. Appreciate that. And then I guess for my second question, just to confirm it, if and as you've built out LSU production alongside Halo production.
Speaker Change: at Pikeden. Does that affect the expected timeline at all for the first cascade of Halo or do you expect to bring the full timeline in 42 months or so, you know, dependent on receiving appropriate funding?
Speaker Change: The End
Speaker Change: That is a good question.
Speaker Change: Probably want to get back to you on this one, just to make sure I answer that thoughtfully and have the proper backing from our team. Just my initially reaction is...
Speaker Change: It was defend on the timing, I guess what you're asking is if everything aligns.
Speaker Change: Both from the Halo and LSU side is done in the change, anything in some of the earlier projections we provide around 42 months. I'm kind of reading that that's your question. If that's what it is, then yes, certainly we want you back beyond that.
Speaker Change: Great, appreciate it, I'll turn it back.
Speaker Change: Thank you. At this time, I would like to turn it back over. Actually, I'm sorry we do have another question. Is coming from Joe Joseph Freakler of Roth Capital, please proceed with your follow-up.
Joseph Freakler: Hey guys this had one follow up after effect on the current Halo contract that's cost plus
Joseph Freakler: Are you guys expecting that contract to continue next year or is that so up for a new
Speaker Change: Yeah, thanks for the question, Joe.
Speaker Change: That that contract currently expires in November and we are in regards to phase two and we have three three year option periods within phase three and we're currently working with the DOE to extend that contract.
Speaker Change: after the period of performance in November. And I should note that.
Speaker Change: It was aligned with the delivery schedule that we had back in November, and so the formal contract ends on 1231-2024. But we have a, the one-year period heads in December.
Speaker Change: Thank you. At this time, I would like to turn the floor back over to Mr. Leska for closing comments.
Mr. Leska: Thank you, operator. This concludes our investor call for the third quarter of 2024. As always, I want to thank our listeners on line and those who called in. We look forward to speaking with you again next quarter.
Speaker Change: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log-off-to-bebcast at this time and enjoy the rest of your day.
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