Q1 2025 Centrus Energy Corp Earnings Call
Speaker Change: Good morning ladies and gentlemen, and welcome to the Centrus Energy Q1225 Burden Conference School.
at this time.
Speaker Change: All lines are endless and only move. Following the presentation, we'll conduct a question and answer session.
Operator: If at any time during this call you require me at the C-Sense, please first start zero for the operator This call is being recorded on Thursday May 8, 2025 I will now like to turn the conference or to Neil Nagarajan head of investor relations Please go ahead
Neal Nagarajan: Good morning. Thank you all for joining us. Today's call will cover the results for the first quarter of 2025 and at March 31st.
Speaker Change: Today we have Amir Vexler, President and Chief Executive Officer, and Kevin Harrill, Chief Financial Officer.
Speaker Change: The fortunate to call over to Amir Vexler, I'd like to welcome all of our callers, as well as those listening to our webcasts.
Speaker Change: This conference calls follows our earnings news release issued yesterday. We expect a file I report for the first quarter on Form 10Q later today.
Speaker Change: All of our news releases, and SEC filing, 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 Centrus website.
Speaker Change: I would like to remind everyone that certain information we may discuss of this call today may be considered forward-looking information that involves risk and uncertainty, including assumptions about the future performance of Centrus.
Speaker Change: Our actual results may defer materially from those in our floor looking statements.
Speaker Change: Additional information concerning factors that could cause actual results to materially defer from those in our Florida book statements is contained in our filings with the SEC, including our annual report on form 10K and quarterly reports on form 10Q.
Speaker Change: Finally, the forward-looking information provided today is time-sensitive and accurate only as of today, May 8th, 2025, unless otherwise known it.
Speaker Change: This call is a property of centrist energy, any transcription, redistribution, retransmission, or re-broadcast of the call in any form without the express written consensus centrist is strictly prohibited.
Speaker Change: Thank you for your participation, and I'll turn the call over to Amir Vexler.
Amir Vexler: Thank you Neal, and thank you to everyone on the call today. So it's a long-time listener and the growing number of those joining us for the first time.
This past year, and particularly these recent months, have seen...
Amir Vexler: Centres make remarkable progress, putting us in a strong position moving forward. We are the only company currently enriching uranium with US-owned US origin, enrichment technology backed by an American supply chain and powered by American workers.
Amir Vexler: And we are proud to lead the effort to provide domestic and global customers with another market participant by standing up and restoring America's ability to enrich uranium.
Amir Vexler: Before turning to the Quoters performance, let me quickly address the current market dynamic. While there is ongoing uncertainty in the global trade environment, we continue to receive shipments of enriched uranium from our suppliers, and our operations have not been impacted by tariffs.
Amir Vexler: Furthermore, our centrifuge manufacturing supply chain relies on a growing number of suppliers across the United States.
Amir Vexler: Starting to our quarterly numbers and as previously discussed, it is important to note that there can be significant amount of variability in our quarterly results due to the nature of our business.
Amir Vexler: The majority of a revenue comes from the LEU segment, where our customers generally have multi-year contracts to take delivery of a given quantity at a given price each year. But customers choose which quarter to take the annual delivery, and don't always choose the same quarter every year.
Amir Vexler: Revenues and margins fluctuate depending on how many deliveries happen to fall into a regular quarter and whether those deliveries come from a higher price or lower price contract.
Amir Vexler: And as such, we believe our annual results are moving are more indicative of our progress.
Amir Vexler: We achieved robust financial results in the first quarter 2025, including 73.1 million in revenue, a gross profit of 32.9 million.
and an operating income of $20.5 billion.
Amir Vexler: These results were stronger than the first quarter of 2024 results and while variation is normal for us, the large variation against the previous years results was due in large part to two things.
Amir Vexler: First, as noted on our last earning call, we had a brief interruption in our supply from Danics stemming from the Russian Federation's November 2024 decree that has since been resolved for our pending orders.
Amir Vexler: This caused a fourth quarter shipment to be pushed into the first quarter of 2025, and second, the impact from a non-reoccurring, lower margin contract.
on the first quarter of 2024 results.
Amir Vexler: We ended the first quarter with a strong cash balance of 653 million, putting us in a stronger position to both weather-temporary market turmoil as well as invest in a company's long-term growth.
Speaker Change: The Trump administration is in the process of reviewing the funding activities of all federal agencies to align for the president's priorities.
Speaker Change: We believe that the $3.4 billion that has been appropriated by Congress to jumpstart U.S. nuclear fuel production is consistent with the president's energy dominance agenda.
Speaker Change: We are awaiting the DOE's decision on how they plan to allocate these funds.
to structure the program and to determine the number awardees.
Speaker Change: We are confident in our compelling investment case as the only publicly-traded proven and richer that can meet commercial and national security needs while maximizing the government's return on its investment.
Our goal is to secure sufficient public and private capital.
To Build Our Enrichment Capacity
Speaker Change: And as we await the government's decision, we are pursuing four parallel readiness initiatives to bolster our investment case.
Speaker Change: First, we continue to strengthen our balance sheet to better position us to make the strategic investment if Fender Capacity is part of the vision public-private partnership.
Speaker Change: Recall, we improved our capital position in the fourth quarter by issuing $402.5 million of convertible senior notes.
Speaker Change: In the first quarter of 2025, we used a part of those proceeds to redeem all of our higher yield 8.25% notes for their aggregate principal amount, the further strengths in our balance sheet and prepare Centrus ahead of the government's funding decision.
Kevin will discuss this in more depth a little later.
Speaker Change: Second, in late November of 2024, we launched a $60 million investment with several goals in mind.
Speaker Change: To restart centrifuge manufacturing, manufacturing readiness, and expand the capacity of our
to reveal their supply chain and to complete engineering work.
Speaker Change: This lays the groundwork for the future large-scale deployment of our technology.
Speaker Change: Third, we continue to successfully operate our HALU cascade at our Pike Denner Higher Facility under the Operations Contract to deliver HALU to the DOE origins we need.
Speaker Change: As a reminder, we began Enrichment Operations at the American Center for Future Plan in FIKE-TEMP in 2023, making it the first new US-owned, US Technology Enrichment Plan to Begin Production in nearly 70 years.
Speaker Change: In spite of the supply chain bottleneck to the 5B cylinders,
Speaker Change: A very important goal of our demo program is to demonstrate continuous, successful and safe centrifuge operation.
and we have done so over the past 19 months.
Speaker Change: The successful operation of the Halo Cascade builds upon more than 3.5 million machine hours of successful operations compiled during previous centrifuge testing and technology demonstration for LEU Enrichment.
Speaker Change: Art Technology is delixed, works as designed, and delivers halo on time and on budget.
Speaker Change: Furthermore, the centerpage design can be used to produce LEU, LEU+, ALU, and is uniquely able to meet a range of national security needs.
Speaker Change: Our successful deployment, along with our track record of achieving milestones on or ahead of schedule and under budget, demonstrates that we provide our government with a solid investment case with the available US taxpayer funds.
Speaker Change: And the fourth initiative is that we continue to work with both local and federal government officials to advocate for centrist and the case for keeping American taxpayer dollars in the United States to support American jobs.
Speaker Change: This includes, of course, Chairman Chuck Fleischmann, who represents the district where our manufacturing facility in Oak Ridge, Tennessee is located and shares the house, energy, and water development appropriation subcommittee.
Speaker Change: was instrumental in securing a large portion of the $3.4 billion in funding.
Speaker Change: The chairman's congressional district is a hub for nuclear innovation and he is a strong advocate to ensure companies in the industry are successful.
Speaker Change: And more recently, a bipartisan group of elected leaders from Ohio, Dan Apparel Letters,
Speaker Change: to Energy Secretary Chris Wright, origining into prioritized centrist American-owned, American-made Center for Future Technology, while awarding the funds.
Speaker Change: The first letter came from 11 Ohio Congressional members. The second letter came from Governor Mike DeWine, Lieutenant-Government Jim Tressel, Senator Bernie Moreno, and Senator John Houston.
Speaker Change: Both letters demonstrated the growing groundswell of public support as elected leaders forcefully speak about the importance of investing in an all-American supply chain.
Speaker Change: As the House letter noted, funding our major competitors would amount to handing U.S. taxpayer dollars to foreign state-owned enterprises.
Speaker Change: Commercial Market Demand, and does not incorporate growth accelerators such as data centers, hyper-scalers, or AI.
Speaker Change: And we know that there is a need for enriched uranium for national security purposes.
Speaker Change: We also understand the heightened need for energy security and the independence in this global trade environment.
Furthermore,
Speaker Change: We know there is a potentially large future market for HALU semi from the forthcoming advanced reactor market.
Speaker Change: The DOE recently released supply from its Halo Availability program to five advanced reactor
Speaker Change: At Centrus, we're proud to offer the free market with an American source of enriched uranium with these domestic and international needs. We envision many paths to success.
Speaker Change: Producing LEDU to transition America's existing reactors away from imports, meeting America's critical national security requirements, and fueling the next generation of reactors with
Speaker Change: With that, I will turn the call over to Kevin to walk through the numbers. Kevin?
Kevin: Thank you, Amir. Good morning, everyone. Centrus reported strong financial results in the first quarter including generating 73.1 million in revenue an increase of 29.4 million compared to the same quarter last year.
Kevin: and 27.2 million in net income compared to a net loss of 6.1 million in the same quarter last year.
Kevin: In addition, we reported a positive gross profit of $32.9 million compared to $4.3 million in the same quarter last year.
Kevin: We also utilize the portion of the 402.5 million convertible debt to extinguish our eight-and-a-quarter notes and raise net proceeds of 25.4 million under our ATM program.
Kevin: Our LEU business generated $51.3 million in SWU revenue, which was an increase of $27.7 million compared to the same quarter last year.
Kevin: The increase in swoo revenue was as a result of an increase in both the volume sold and the average price per swoo sold.
Kevin: The LEU cost of sales for SWU decreased from 23.1 million in the first quarter of 2024 to 20.1 million in the current quarter.
Kevin: This was primarily due to a decrease in swoo costs, which was the result of a 48% decrease in the average unit cost of swoo sold, partially offset by an increase in the volume of swoo sold.
Kevin: We ended the quarter with a gross profit of $31.2 million in our LEU segment compared to $0.5 million in the first quarter of 2024.
Kevin: L.A.U. customers generally have multi-year contracts that carry annual purchase commitments, not quarterly commitments.
Kevin: The revenue and gross profit in our LEU business varies based upon the market conditions at the time the customer contract was signed and the cost of inventory at the time of delivery.
Kevin: Technical Solutions generated 21.8 million in revenue, an increase of 1.7 million compared to the first quarter of 2024, and reported 20.1 million and cost the sales, which was an increase of 3.8 million compared to the prior year.
Kevin: Our technical solution segment generated 1.7 million in gross profit which was a slight decrease of 2.1 million versus the first quarter of 2024.
Kevin: The lower margins in the technical solution segment was driven by a delay in obtaining sufficient stored cylinders to complete phase two of the Halo Operation contract.
Kevin: In November 2024, the DOE extended a phase two period of performance through June 30, 2025.
Kevin: Our total company backlog was 3.8 billion as of March 31st, 2025, and extends to 2040. Our LEU segment backlog was approximately 2.8 billion and includes 0.7 billion of future SWU and Uranium deliveries.
Primarily under medium and long-term contracts with fixed commitments [inaudible]
Kevin: and 2.1 billion in contingent LEU sales commitments in support of the potential construction of LEU production capacity at the Pike Dino Hyal Facility.
Kevin: With the first quarter execution of the .8 million agreement with KHMP, we have now entered into Definitized Agreements for 1.7 billion of the total 2.1 billion in contingent LEU sales
Kevin: The contingent LEU sales commitments continue to depend on our ability to secure substantial public and private investment.
Kevin: Our technical solution segment backlog was approximately 0.9 billion and includes funded amounts, unfunded amounts, and unexercised options.
The unexercised options relate to the company's Hable Operation Contract.
Kevin: In addition, the company has continued to undertake initiatives to improve its capital structure.
Kevin: In the first quarter of 2025, we redeemed 100% of the 74.3 million principle of our eight- and a quarter notes originally due in 2027, which resulted in a gain on extinguishment of 11.8 million.
Kevin: Post Redemption, the company's long-term debt on its consolidated balance sheet only includes two and a quarter convertible notes.
Kevin: As noted earlier, in the first quarter of 2025, our ATM program generated an additional 25.4 million in net proceeds.
Kevin: These proceeds and the gross margin contributed to an ending cash balance as of March 31, 2025 of 685.7 million.
which includes $32.7 million of restricted cash.
Kevin: 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.
Kevin: These achievements continue the progress made in 2024 by further strengthening our balance sheet to allow use to pursue the investment in our manufacturing capabilities and the leveraging of investment tax credit opportunities to partially fund these efforts.
The first quarter's accomplishments and initiatives.
Kevin: Continue to better position Centrus to execute on its long-term strategy to pursue adequate public and private funding with the goal of deploying its technology on a larger scale in order to restore America's uranium enrichment capability.
With that, let me turn things back over to Amir.
Thanks, Gavin.
Kevin: I'd like to close by reminding our investors and listeners of the imperative need to both reduce our dependency on foreign nations and to inject more competition into the market to provide customers with more alternatives.
Kevin: Nuclear Energy enjoys resounding by partisan support and this administration appears to be especially bullish on its on its prospect.
Kevin: We are the only company with an American technology and an American workforce using an American supply chain that enriches uranium today.
Kevin: All of the other commercial and richest today are foreign government-owned enterprises and cannot meet our national security needs.
Kevin: It is important to note that in this tariff environment where global supply chains are being decoupled, we are also the only enricher that actually manufacturers are centrifuges in the United States using an ever-growing number of suppliers across multiple states.
Kevin: We are one of two enrichors to hold an NRC license to produce L.E.U. and the only NRC L.E.U. licensee for Hable Production.
Kevin: Our technology is tested improvement. Our centerfuges have continued to safely and successfully operate over the last 19 months.
and have enriched the expected output.
Kevin: And finally, there is a clear demand from the market for another proven commercial enricher to provide more competition on top of our two European competitors.
Kevin: Approximately $2.1 billion of our backlog is in customer contingent LEU sales, commitments to support the deployment of our new production facility and pipeline.
Kevin: and we are seeing growing momentum. We defenetized $800 million of that $2.1 billion in the first quarter.
Thank you.
Kevin: In short, we need the markets, the nations and our taxpayers need with a proven technology and a domestic supply chain.
Kevin: I would like to close by thanking our growing list of investors, panelists, and listeners, without whom none of this would be possible. We look forward to updating you on our progress on our next turning call. With that, we are happy to take questions. Operators?
Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question please per star followed by the number on your touch down phone, you will hear a prompt that your hand has been raised.
Kevin: Should you wish to decline from the polling process, please press star, follow by the number two.
Kevin: If you are using a speakerphone, please lift the handset before pressing any keys.
One moment, please for your first question.
Thank you. Thank you. Thank you.
Thank you.
Speaker Change: Your first question comes from Rob Brown, from Lake Street, Capital, please go ahead.
Rob Brown: Just wanted to kind of get an update on the Department of Energy activity. I know I know you can't sort of predict their steps, but maybe a sense of how the environment is shaping up. I know you get some political support you mentioned, but what sort of the next steps you're looking for out of the DOE at this point?
Rob Brown: Good morning, Rob. Since the question really deals with the environment, there's been a lot of activity just recently.
Rob Brown: The Secretary at Testified on the House is you probably, or may have heard yesterday, he was questioned exactly about that as to how fast can we spend, how fast can we go with some of this fuel awards?
Rob Brown: and the secretaries answer was that they are moving quickly and they are planning to award the 2.7 billion dollars.
Rob Brown: So we feel good about the fact that a lot of these spots have not really been affected but by any of sort of the dull activities out there and the Secretary has seen to confirm that to the subcommittee.
Rob Brown: So, from our view, we are seeing a lot of activity as well. I feel there is a lot of momentum moving forward in awarding the funds.
Rob Brown: Okay, great. And then it seems like the Russian shipment activity is continuing.
Rob Brown: Where is that at in terms of the process? Do they still need to get kind of order by order agreements or is that sort of open now to shipments under a normal course?
Rob Brown: As far as I know, nothing has changed since the last time we spoke about this, they require specific shipment authorizations from the Russian authorities.
Thank you for watching. Thank you.
really
Speaker Change: So far they have been able to conduct their normal course of business and get the authorization obviously we cannot speak or speculate on behalf of what the authorities are going to do but I can report that so far their process has not impeded any of the commitments they have to us.
Okay, thank you, I'll turn it over [inaudible]
Thank you, Rob.
Speaker Change: Thank you. Your next question comes from Ryan Pfingst, from B. Ryling. Please go ahead.
Hey guys, thanks for taking my questions.
Speaker Change: Amir, you mentioned that you're the only licensee for Halo's production.
Speaker Change: I'm curious of another entity wanted to pursue that license. How long would that take them and what potential roadblocks would they face from a national security or other standpoint?
Ryan: Good morning, good morning, Ryan. That actually is a good question particularly now in the environment that there's a lot of new companies and a lot of entities.
Speaker Change: I guess, saying they have a technology or they have waist to enrich but they do not have any foot parental license, the facility or any brick and mortar.
Speaker Change: That is, in my view, a major obstacle, that is a process that takes years and is a process that requires tens of millions of dollars to actually get an NRC license now.
Speaker Change: If you are applying for a LEU license, that would be a category 3 facility, a higher enrichment like Halo would be like the category 2 facility, which is what we have and is quite a bit more strict and stringent around security aspects of it.
Speaker Change: and so this short and simple is for somebody that does not have a facility and will have to greenfield it.
Speaker Change: Assuming they have a technology because that opens up an entirely different conversation. Assuming they have a technology but no facility, no license, my estimate, we're talking about years and tens of millions of dollars at the minimum.
Speaker Change: Appreciate that. And to give Segway into my second question. In the past, you've stated that the first full-scale Hayloo Cascade could be brought online within 42 months of securing funding, wondering if you have an update to that timeframe as we likely get closer to the kickoff there.
Good question, Ryan.
Speaker Change: The update is, I would not change any of the estimates we've provided before in the estimate that you just quoted. As you know, and as we've reported previously, we have announced a $60 million supply chain investment.
Speaker Change: and I can report to you that ACO, that's our facility.
Speaker Change: as we prepare for future construction and operation of the enrichment facility. So I will not change the estimate, but I will say that we are doing quite a bit of work to make sure that that is a solid number and that we stay true to it.
Thank you. Appreciate the detail. I'll turn it back.
Thank you.
Speaker Change: Thank you. Your next question comes from Joseph Reagor, from Roth's capital. Please go ahead.
Joseph Rieger: Hey guys, Graz on a strong start to the year and thanks for taking my questions.
Murdam.
Joseph Rieger: So, I guess two things first, just kind of following up on some of the prior questions. So, I guess on the Q4 announcement, you guys specifically said that you'd received at that time 3, I think it was licenses for exports from 10x.
And with this update, you just kind of said that...
Joseph Rieger: You've been able to continue businesses normal. Should we expect that like going forward from here there won't be like additional number based updates of how many shipments you know got licenses for export instead it will just be you're able to do business unless we're told otherwise. Good boys.
Joseph Rieger: Yeah, I think we would stick to the general terms of communication as opposed to updating shipment specific information and obviously provide a little bit more detail just to give color to it but from a communication we will keep the general.
Okay. Yeah, it's fine. You're fine.
Yeah, and then the second item is, Ryan Pfingst,
for Kevin. So I noticed on the balance sheet that Inventory and Odinventory both jumped.
Joseph Rieger: Significantly from Q4 to Q1, and I know that there tends to be some increase in Q1 but it was a bit more than normal, was there anything in particular driving that?
Joseph Rieger: When those are in route and in transit, those have quite a significant value to them, which includes both the swoo and the UF6. So that can drive up the overall total value that is reflected and you'll typically see and it's reflected on the press release and offset in the liability section.
Joseph Rieger: and so that's reflected in inventories of the customers and suppliers and so that would be one of the primary drivers that we have seen that.
Okay.
Speaker Change: Is it something where it is indicative of near-term potential deliveries for you guys, or is it when you get it you get it and you make your deliveries on?
Some unrelated schedule.
Speaker Change: Yes, that's a great question. I think it is indicative of a near-term delivery. That's not always going to be the case, or always going to be true, but it is a signal that we do have deliveries that are coming up as we've talked about in the past.
Speaker Change: The Russian deliveries are typically for the most part just in time type shipments.
Okay, thanks, it's helpful, I'll turn it over.
Thanks, Joe. Thank you.
Thank you.
Speaker Change: Your next question comes from the primary from city. Please go ahead
Speaker Change: Hi, good morning. It's Ted on Perfect. We're taking the questions. I wanted to ask about tariffs. Could you give us any insight into how that may be playing into your discussions with customers about their future of orders? That impacted any timing.
Speaker Change: of when they choose to contract. And then on the supply chain, can you just remind us how much of the domestic, central, huge manufacturing is exposed to imports or just any color there would be super helpful.
Speaker Change: Great question Vex, so today we have not really seen any impacts from the current tariffs and that have been enacted. We have seen no disruption or supply chain due to tariffs.
Speaker Change: Just to serve you as a reminder, and I think it answers your second question are-
Speaker Change: Are European competitors supply chain 100% foreign based while our supply chain is made up of a growing number of our suppliers across numerous US states, so it's fully domesticated.
Speaker Change: So, naturally, we have less of an exposure to the impact of tariffs on our supply chain than our European competitors who manufacture their machines in Europe .
Speaker Change: So, I hope I answered your question. I think the first part of your question, we've customers into it. I hope I answered that as well.
Speaker Change: Yes, that was helpful. Thank you. And I have a follow-up question in terms of the task orders that will be issued.
Could you just remind us what are the various?
Speaker Change: Permutations that those could take in terms of cost sharing or various other formats that the DOE might look to. And are you operating under assumption for any one of those particular two to come out?
Thank you.
Thank you.
Speaker Change: That is a complex question that I am not sure that I can really answer because...
What the way I understood your question is, would...
Speaker Change: Would the task orders rely on cost sharing or any other type of contracting mechanism? The answer is it would be impossible for us to predict at this point. I'd rather really not speculate at this point.
Speaker Change: So we stand ready to see what the DOE is going to come out with and we will be prepared to answer in the best possible way.
Robert, thank you.
Thank you.
Eric Stein: Thank you. Your next question comes from Eric Stein from Karek Helen. Please go ahead. Everyone, great to chat this morning.
Eric Stein: Good morning. Good morning. Good morning. So, kind of following up on an earlier question and I completely realized this may be impossible to answer but I'll give it a shot. Kevin, I know you talked about the Russian deliveries, those are the shipments that those are more just in time but as we think about 2025. . . . . . .
I mean, it's their ...
Eric Stein: Is there anything that we should think about in terms of timing of swoo and uranium sails?
Eric Stein: It certainly doesn't look like in the past, there's really any rhyme or reason or seasonality to it, so maybe just any details just to get us all kind of thinking about things if there is a way that that can be described.
Speaker Change: Now, thanks for the question. I mean, as you are aware, we don't provide financial guidance. So there's nothing significant or material at this time that we feel would be appropriate to bring up. I think the only thing that I might note is that.
Speaker Change: You know our customers are utilities reactors that you know what ultimately they're looking for is reloads for.
Speaker Change: Their locations, which are typically between 18 and 24 months. And so that really is the driver from a timing perspective as to how the revenues and the school revenues materialize from a future perspective. So that I think to a certain extent gives you a sense of how our business works and when we would expect to see the revenue materializing, but we couldn't get into any more details just for the fact that we don't provide any future earnings guidance.
Yep, no, understood.
Speaker Change: Just thought part of the way through the year, but I totally get it. It's very difficult to, uh, yeah.
to call, especially not given any guidance, so…
Speaker Change: All right. Well, obviously, you've got the three contracts you're waiting on the IDIQs. You've talked about that whole process, but I'm correct me if I'm wrong, but you've also got an opportunity NS, N, N, S, A opportunity that is separate. So maybe just talk about that, you know, the opportunity from a national security perspective, confidence, next steps, etc.
Speaker Change: I don't know that I can add anything to what's been publicly available out there from the end of this day.
just from a big picture perspective.
Speaker Change: Our technology is unobligated that is able to serve national security purposes.
Speaker Change: It's deployment ready, it really is the only technology that is operating right now, that is able to meet our national security needs.
Speaker Change: I will not venture into predicting how and when the NSA may do what I'll be very careful not to comment on it but I will only say that we...
Speaker Change: We stand by and we take note of development and we stand ready to serve.
Got it, thank you.
Thank you.
Speaker Change: Thank you. Your next question comes from Samuel Joshua from H.C. Wainwright. Please go ahead.
Hey, good morning, Amir, Kevin. Thanks a thing, my questions.
Speaker Change: Let's slightly know one's question, but can you explain the dynamics of the 48% decrease in [inaudible]
that resulted in a nice margin for you, this quarter.
Speaker Change: Around 48%.
Speaker Change: Just wanted to understand was it volume related or was that some other dynamics playing into that.
Speaker Change: Yes, so I appreciate that question.
Speaker Change: So.
Speaker Change: Juxtaposing the revenue versus the cost I might answer this in two different ways. We did have fourth quarter deliveries that were delayed due to the Russian Federation permitting a license process that that pushed increased volume into the first quarter, which significantly impacted our margin realization for the quarter, I think where youre going with it is as it relates to <unk>.
Speaker Change: <unk>.
Speaker Change: For those transactions, we used to average costing based upon our accounting practices. So it is really based upon our purchases and sales and how that manifest through our system from an average costing perspective.
Speaker Change: It creates.
Speaker Change: Creates.
Speaker Change: What the ultimate cost is that we take to the bottom line.
Speaker Change: What I would say in addition to that is when you look at it year over year.
Speaker Change: So I would say quarter over quarter on the annual basis, we did see better gross profits and this was primarily due to the fact that last year as we noted in our remarks earlier that we had a.
Speaker Change: Low margin shipments from the prior year that impacted both our net income.
Speaker Change: Last year as well as our margin realization and that was not replicated in the current year and the shipments that were deferred and delayed from December into Q1 had a more positive margin realization.
Speaker Change: Taking into account everything sort of that I just noted before.
Speaker Change: What was that.
Speaker Change: To answer your question.
Speaker Change: Yes, no that was good color just wanted to make sure that.
Speaker Change: Thanks, a lot.
Speaker Change: Second question is on the.
Speaker Change: The <unk> b cylinder.
Speaker Change: What that does mean one of the other day.
Speaker Change: But is there an update on that.
Speaker Change: Yes.
Speaker Change: I think the last time, we reported that we have.
Speaker Change: Steady flow and fulfillment of our five b requirement.
Speaker Change: And.
Speaker Change: That statement is still correct. There is no impact to our production from five <unk> cylinder.
Speaker Change: Sourcing.
Speaker Change: Got it and then just one last one.
Denny: Denny can you speak I think the previous caller asked about this about the speed at which.
Speaker Change: Competitive.
Speaker Change: And richer might emerge.
Speaker Change: But.
Speaker Change: Can you give us the lay of the land.
Speaker Change: What.
Speaker Change: Which companies do you see as the emerging competitors I think the E.
Speaker Change: Also in the process of doing some more contracts soybeans.
Speaker Change: Okay.
Speaker Change: So let me repeat the question. Your question is what is the competitive landscape when it comes to Halo production in the United States.
Speaker Change: Yes.
Speaker Change: So as you know part of the Doe.
Speaker Change: Award scope is for Halo enrichment here in the United States.
Speaker Change: From a competitive view.
Speaker Change: We really are the only facility that has a cap two license, which allows you to enrich up to <unk>.
Speaker Change: 1970, 5% to enrich halo.
Speaker Change: LLS has a facility in new Mexico.
Speaker Change: I have not checked lately what their license status is but I know that they are not producing halo and I don't think they are license to produce halo either.
Speaker Change: And so I would not venture to guess if they want to get into that business well will it take for them to to to amend licenses or make modifications to their system I do not know I would only point to.
Speaker Change: The public statements that they have announced that they are working on halo in the United Kingdom and the United States.
Speaker Change: So.
Speaker Change: If anybody else wants to get into this game. So for example, I think Colorado has made some announcements.
Speaker Change: Maybe not specific behavior with just generally they made announcements about.
Speaker Change: Our site selection.
Speaker Change: I'll reference you back to the comment that I made about our greenfield licensing in general.
Speaker Change: It is something that takes years and tens of millions of dollars.
Speaker Change: Where we have a significant first mover advantage on.
Speaker Change: Other than those two competitors.
Speaker Change: I'm, assuming there would be others in the competitive landscape. So.
Speaker Change: Laser enrichment GLA I think made recent announcements, we typically don't comment on competition, but.
Speaker Change: You're more than welcome to read the general announcements I think that.
Speaker Change: We.
Speaker Change: We are enriching we are a facility that has equipment and license I believe that we have a definite advantage.
Speaker Change: Just as a reminder, as well the centrifuge technology is the only proven and viable technology to address the growing demand for enriched uranium is at least in the short term in the midterm as we see it.
Speaker Change: As the market has been responding to.
Speaker Change: Yes.
Speaker Change: I was hoping it was a comprehensive.
Speaker Change: Yes.
Speaker Change: Absolutely because one of the ones I wanted to bring out because that.
Speaker Change: You have the.
Speaker Change: On the license fee of the centrifuge technology in the U S.
Speaker Change: Was wondering if in the other.
Speaker Change: Producer Mike.
Speaker Change: Required to license that technology from you or will they be using.
Speaker Change: Totally different technology.
Speaker Change: Understand centrifuges the best.
Speaker Change: More surplus.
Speaker Change: But right now.
Speaker Change: Yes, correct.
Speaker Change: I would not venture to speculate on competition beyond some of the established competitors that I mentioned.
Speaker Change: Thanks, a lot for taking my questions.
Speaker Change: Thanks Neil.
Speaker Change: Thank you.
Neal Nagarajan: There are no further questions at this time I will now turn the call over to Neal <unk>. Please go ahead.
Speaker Change: Thank you operator, this will conclude our investor call for the first quarter of 2020 as always I want to extend a thank you to our listeners online and our analysts who duck call then.
Neal Nagarajan: We look forward to speaking with you again next quarter.
Neal Nagarajan: Okay.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: [music].
Speaker Change: [music].
Speaker Change: [music].
Speaker Change: Good morning, ladies and gentlemen, and welcome to this interest energy Q1, 2025 earnings conference call at this time.
Speaker Change: I'm sorry in listen only mode. Following the presentation, we will conduct a question and answer session.
Speaker Change: If at any time during these calls you require them you have to see sense. Please press star zero for the operator.
Speaker Change: This call is being recorded on Thursday may eight 2025.
Neal Nagarajan: I'd like to turn the conference over to Neal <unk> head of Investor Relations. Please go ahead.
Speaker Change: Good morning. Thank you all for joining US today's call will cover the results for the first quarter of 2025 and at March 31 today.
Amir Betzler: Today, we have Amir Betzler, President and Chief Executive Officer, and Kevan Herold, Chief Financial Officer.
Speaker Change: Turning the call over to Amir of Exler I'd like to welcome all of our callers as well as those listening to our webcast.
Speaker Change: This conference call follows our earnings news release issued yesterday, we expect to file a report for the first quarter on Form 10-Q later today.
Speaker Change: All of our news releases and SEC filings, including our 10-K 10, Qs and eight Ks are available on our website. A replay of this call will also be available later this morning on the centers web site.
Speaker Change: I would like to remind everyone that certain information we may discuss on this call today may be considered forward looking information that involves risks and uncertainty, including assumptions about the future performance et cetera.
Speaker Change: 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 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: Finally, the forward looking information provided today is time sensitive and accurate only as of today may.
Speaker Change: 2025, unless otherwise noted.
Speaker Change: This call is the property of centers energy any transcription redistribution retransmission or rebroadcast of the call in any form without the express written consent etcetera is strictly prohibited.
Speaker Change: Thank you for your participation and I will now turn the call over to Amir expert.
Amir: Thank you Neil and thank you to everyone on the call today, both longtime listeners and the growing number of those joining us for the first time.
Speaker Change: This past year and particularly these recent months have seen.
Speaker Change: <unk> made remarkable progress putting us in a strong position moving forward. We are the only company currently enriching uranium with U S owned U S origin enrichment technology backed by an American supply chain and powered by American workers.
Speaker Change: And we are proud to lead the effort to provide domestic and global customers with another market participant.
Speaker Change: Lending up and restoring America's ability to enrich uranium.
Speaker Change: Before turning to the quarter's performance, let me quickly address the current market dynamic.
Speaker Change: While there is ongoing uncertainty in the global trade environment would continue to receive shipments of enriched uranium from our suppliers and our operations have not been impacted by tariffs.
Speaker Change: Furthermore, our centrifuge manufacturing supply chain relies on a growing number of suppliers across the United States.
Speaker Change: Turning to our quarterly numbers and as previously discussed it is important to note that there can be significant amount of variability in our quarterly results due to the nature of our business.
Speaker Change: The majority of our revenue comes from the <unk> segment, where our customers generally have multiyear contracts to take delivery of a given quantity at a given price each year.
Speaker Change: But customers choose which quarter to take the annual delivery and don't always choose the same quarter every year Rev.
Speaker Change: Revenues and margins fluctuate depending on how many deliveries happened to fall into a particular quarter and whether those deliveries come from our higher priced or lower priced contracts.
Speaker Change: And as such we believe our annual results are moving are more indicative of our progress.
Speaker Change: We achieved robust financial results in the first quarter 2025 <unk>.
Speaker Change: Including <unk>.
Speaker Change: $73 1 million in revenue a gross profit of $32 9 million.
Speaker Change: And an operating income of $25 million.
Speaker Change: These results were stronger than the first quarter of 2024 results and while their aviation is normal for us the large variation against the previous year's results was due in large part to two things.
Speaker Change: First as noted on our last earning call. We had a brief interruption in our supply authentic stemming from the Russian Federation is November 2024 decree that has since been resolved for our pending orders.
Speaker Change: This caused a fourth quarter shipments to be pushed into the first quarter of 2025.
Speaker Change: And second the impact from the nonrecurring.
Speaker Change: The lower margin contract.
Speaker Change: On the first quarter of 2024 results.
Speaker Change: We ended the first quarter with a strong cash balance of $653 million, putting us in a stronger position to both weather temporary market turmoil as well as invest in the Companys long term growth.
Speaker Change: The Trump administration is in the process of reviewing the funding activities of all federal agencies to align to the President's priorities. We believe that the $3 4 billion that has been appropriated by Congress to Jumpstart U S. Nuclear fuel production is consistent with the president.
Speaker Change: Energy dominance agenda.
Speaker Change: We are awaiting the decision on how they plan to allocate these funds the.
Speaker Change: The structure of the program and to determine the number of all these.
Speaker Change: We are confident in our compelling investment case is the only publicly traded proven and richer that can meet commercial and national security needs, while maximizing the governments return on this investment.
Speaker Change: Our goal is to secure sufficient public and private capital.
Speaker Change: To build our enrichment capacity.
Speaker Change: And as we await the government's decision we are pursuing for parallel readiness initiatives to bolster our investment case.
Speaker Change: <unk>.
Speaker Change: We continued to strengthen our balance sheet to better position us to make the strategic investments to expand our capacity as part of the envision public private partnership.
Speaker Change: <unk>, we improved our capital position in the fourth quarter by issuing $400 million to $5 million of convertible senior notes.
Speaker Change: In the first quarter of 2025, we used a part of those proceeds to redeem all of our higher yield eight in the quarter percent notes for their aggregate principle amount to further strengthen our balance sheet and put their centers ahead of the government's funding decision.
Speaker Change: Kevin will kevan will discuss this in more depth a little later.
Speaker Change: Second in late November of 2024, we launched a $60 million investment with several goals in mind.
Speaker Change: To restart centrifuge manufacturing manufacturing readiness and expand the capacity of our centrifuge manufacturing facility in Oak Ridge, Tennessee.
Speaker Change: To rebuild our supply chain and to complete engineering work.
Speaker Change: This lays the groundwork for the future large scale deployment of our technology.
Speaker Change: The investment serves to de risked centrist as domestic supply chain, while reinforcing reinforcing our first mover advantage and domestic centrifuge production by Kickstarting. The process ahead of a government funding decision.
Speaker Change: Third we continue to successfully operate our halo cascade at our <unk>, Ohio facility under the operations contract to deliver a halo that the Doe urgently needs. As a reminder, we began enrichment operations at the American centrifuge plant in <unk> in 2023, making it the.
Speaker Change: First new U S O U S technology enrichment plan to begin production in nearly 70 years.
Speaker Change: Through March 31, we have achieved cumulative deliveries to the department of energy of approximately 670 kilograms of payloads.
Speaker Change: Spite of the supply chain bottleneck to the five <unk> cylinders.
Speaker Change: A very important goal of our demo program is to demonstrate continuous successful and safe centrifuge operations.
Speaker Change: And we have done so over the past 19 months the.
Speaker Change: The successful operation of the Halo Cascade builds upon more than $3 5 million machine hours of successful operations compiled during previous centrifuge testing the technology demonstration or <unk> enrichment.
Speaker Change: Our technology is the risks works as designed and delivers halo on time and on budget.
Speaker Change: Furthermore, the centrifuge design can be used to produce <unk> <unk>, plus <unk> and is uniquely able to meet a range of national security needs.
Speaker Change: Our successful deployment, along with our track record of achieving milestones on or ahead of schedule and under budget demonstrates that we provide our government with a solid investment case for the available U S taxpayer funds.
Speaker Change: And the fourth initiative is that we continue to work with both local and federal government efficient officials to advocate for centers in the case for keeping American taxpayer dollars in the United States to support American jobs. This.
Speaker Change: This includes first chairman Chuck Fleishman, who represents the district, where our manufacturing facility in Oak Ridge, Tennessee is located and chairs the house energy and water development and appropriation Subcommittee was instrumental in securing a large portion of the $3 $4 billion in funding.
Speaker Change: The chairman's congressional district, as a hub for nuclear innovation and he has a strong advocate to ensure companies in.
Speaker Change: In this industry are successful.
Speaker Change: And more recently, a bipartisan group of elected leaders from Ohio than apparel letters.
Speaker Change: Energy Secretary, Chris Wright urging them to prioritize Centricity American owned American made centrifuge technology, while awarding the funds.
Speaker Change: The first letter came from 11, Ohio Congressional members. The second letter came from Governor Mike Dewine with denim government, Jim Tressel, Senator Bernie Marino and Senator John Houston, both letters demonstrated.
Speaker Change: The growing ground swell of public support is elected leaders.
Speaker Change: <unk> fully speak about the importance of investing in an all American supply chain.
Speaker Change: As the house letter noted funding our major competitors would amount to handing U S taxpayer dollars to foreign state owned enterprises.
Speaker Change: Our efforts to restore America's nuclear fuel supply chain have gained added urgency recently, we have already discussed the large and growing existing market for commercial <unk>, both domestically and abroad. It is important to note that.
Speaker Change: Our business case is based on current.
Speaker Change: Commercial market demand and does not incorporate growth accelerators, such as data centers high.
Speaker Change: <unk> or AI.
Speaker Change: And we know that there is a need for enriched uranium for national security purposes.
Speaker Change: We also understand the heightened need for energy security and independence and this global trade environment.
Speaker Change: Furthermore.
Speaker Change: We know there is a potentially large future market for halo stemming from the forthcoming advanced reactive market.
Speaker Change: The Doe recently released supply from the Taylor availability program to five advanced reactor developers.
Speaker Change: At Centrists, we're proud to offer the free market with an American source of enriched uranium for these domestic and international needs. We envision many paths to success producing led the transition Americas existing reactors away from imports.
Speaker Change: Meeting Americas critical National security requirements and fueling the next generation of reactors with table.
Kevin: With that I will turn the call over to Kevin to walk through the numbers Kevin.
Kevin: Thank you Amir good morning, everyone centers reported strong financial results in the first quarter, including generating $73 1 million in revenue an increase of $29 4 million compared to the same quarter last year.
Kevin: And $27 2 million and net income compared to a net loss of $6 1 million in the same quarter last year.
Kevin: In addition, we reported a positive gross profit of $32 9 million compared to $4 3 million in the same quarter last year.
Kevin: We also utilized a portion of the $402 5 million convertible debt to extinguish our eight and a quarter notes and raised net proceeds of $25 4 million under our ATM program.
Kevin: Our <unk> business generated $51 $3 million in <unk> revenue, which was an increase of $27 7 million compared to the same quarter last year.
Kevin: The increase in <unk> revenue was as a result of an increase in both the volume sold and the average price per SKU sold.
Kevin: The <unk> cost of sales for <unk> decreased from $23 1 million in the first quarter of 2024 to $20 1 million in the current quarter.
Kevin: This was primarily due to a decrease in swap costs, which was the result of a 48% decrease in the average unit cost of <unk> sold partially offset by an increase in the volume of social.
Kevin: We ended the quarter with a gross profit of $31 2 million and our <unk> segment compared to $5 million in the first quarter of 2024.
Kevin: <unk> customers generally have multiyear contracts that Terry annual purchase commitments not quarterly commitments the revenue and gross profit in our <unk> business varies based upon the market conditions at the time, the customer contract with signs and cost of inventory at the time of delivery.
Kevin: Technical solutions generated $21 8 million in revenue an increase of $1 7 million compared to the first quarter of 2024 and reported 21 billion and cost of sales, which was an increase of $3 8 million compared to the prior year.
Kevin: Our technical solutions segment generated $1 7 million in gross profit, which was a slight decrease of $2 1 million versus the first quarter of 2024.
Kevin: The lower margins in the technical solutions segment was driven by a delay in obtaining sufficient storage cylinders to complete phase II of the Halo operation contract.
Kevin: In November 2020 for the deal we extended the phase II period of performance through June 32025.
Kevin: Our total company backlog was $3 8 billion as of March 31, 2025 and extends to 2040 are led segment backlog was approximately $2 8 billion and includes <unk> 7 billion of future <unk> and uranium deliveries, primarily under medium and long term contracts with fixed <unk>.
Kevin: <unk> and.
Kevin: And $2 $1 billion in contingent <unk> sales commitments in support of the potential construction of La <unk> production capacity at the Pike and Ohio facility.
Kevin: With our first quarter execution of the <unk> 8 million agreement with <unk>. We have now entered into definitive agreements for $1 7 billion of the total $2 1 billion in contingent <unk> sales commitments.
Kevin: The contingent <unk> sales commitments continue to depend on our ability to secure substantial public and private investment.
Kevin: Our technical solutions segment backlog was approximately <unk> 9 billion and includes funded amounts unfunded amounts and unexercised options.
Kevin: The unexercised options relate to the company's Halo operation contract.
Kevin: In addition, the company has continued to undertake initiatives to improve its capital structure.
Kevin: In the first quarter of 2025, we redeemed 100% of the $74 3 million principle of our eight and a quarter notes originally due in 2027, which resulted in a gain on extinguishment of $11 8 million.
Kevin: Post redemption, the company's long term debt on our consolidated balance sheet only includes the two in a quarter convertible notes.
Kevin: As noted earlier in the first quarter of 2025, our ATM program generated an additional $25 4 million in net proceeds.
Kevin: These proceeds in the gross margin contributed to an ending cash balance as of March 31, 2025 of $685 7 million, which includes $32 7 million of restricted cash.
Kevin: Maintaining a strong cash position continues to facilitate the execution of our near term contractual obligations as well as strategic investments in our long term future.
Kevin: These achievements continue the progress made in 2024 by further strengthening our balance sheet to allow us to pursue the investment.
Kevin: And our manufacturing capabilities and the leveraging of investment tax credit opportunities to partially fund these efforts.
Kevin: The first quarter's accomplishments and initiatives continue to better position centrists to execute on its long term strategy to pursue adequate public and private funding.
Kevin: With the goal of deploying its technology on a larger scale in order to restore America's uranium enrichment capability.
Amir: With that let me turn things back over to Amir.
Amir: Thanks, Kevin.
Speaker Change: I'd like to close by reminding our investors and listeners of the imperative need to both reduce our dependency on foreign nations and to inject more competition into the market to provide customers with more alternatives.
Speaker Change: Nuclear energy enjoys a resounding bipartisan support in this administration appears to be especially bullish on this on its prospects.
Speaker Change: Are the only company with an American technology in an American workforce, using an American supply chain that enriches uranium to date.
Speaker Change: All of the other commercial and Richard today, a foreign government owned enterprises and it did not meet our national security needs. It.
Speaker Change: It is important to note that in this tariff environment, where global supply chains are being decoupled.
Speaker Change: We are also the only and Richard that's actually manufacturers, our centrifuges in the United States using an ever growing number of suppliers across multiple states.
Speaker Change: We are one of two and Richard to hold an NRC license to produce <unk> and the only NRC license fee for Haynesville production.
Speaker Change: Our technology is tested and proven our centrifuges have continued to safely and successfully operated over the last 19 months.
Speaker Change: And have enrich the expected output.
Speaker Change: And finally, there is a clear demand from the market for another proven commercial then Richard to provide more competition on top of our two European competitors.
Speaker Change: Approximately $2 $1 billion of our backlog is in the Merck contingent <unk> sales commitments.
Speaker Change: Commitments to support the deployment of our new production facility in pipeline.
Speaker Change: And we are seeing growing momentum, we definitively is $800 million of that $2 1 billion in the first quarter.
Speaker Change: In short.
Speaker Change: We meet the market the nations and our taxpayers needs with a proven technology and a domestic supply chain.
Speaker Change: I would like to close by thanking our growing list of investors analysts and listeners without whom none of this would be possible. We look forward to updating you on our progress on our next earnings call with that we're happy to take questions operator.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question. Please press star followed by then.
Speaker Change: On your Touchtone phone.
Speaker Change: You will hear upfront that Johan has been raised.
Speaker Change: Should you wish to the claim from the polling process. Please press star followed by the number too.
Speaker Change: If you are you seeing a speaker phone please lift the handset before pressing any cues.
Speaker Change: One moment. Please for your first question.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Your first question comes from Rob Brown from Lake Street Capital. Please go ahead.
Rob Brown: Just wanted to kind of get an update on the department of energy activity I know I know you can't sort of predict there there are steps but.
Rob Brown: Maybe a sense of how the environment is shaping up I know you've got some political support you mentioned, but.
Rob Brown: What's sort of the next steps youre looking for out of the <unk> at this point.
Rob Brown: Hi, good morning, Rob.
Speaker Change: So since the question really deals with the environment, there's been a lot of activity just recently.
Speaker Change: The secretary of testified on the house as you probably all may have heard yesterday.
Speaker Change: It was question exactly above that is too.
Speaker Change: How fast can we spend how fast can we go with some of the fuel awards.
Speaker Change: And the Secretary's answer was that they are moving quickly and they are planning to award the $2 7 billion.
Speaker Change: So.
Speaker Change: We feel good about the fact that a lot of these thoughts have not really been affected but by any of sort of the dol activities out there in the secretariat seem to confirm that.
Speaker Change: The subcommittee.
Speaker Change: So just from our view, we are seeing a lot of activity as well.
Speaker Change: Our field there was a lot of momentum moving forward in awarding the funds.
Speaker Change: Okay great.
Speaker Change: And then it seems like the Russian shipment activity is continuing.
Speaker Change: Where is that at in terms of process do they still need to get.
Speaker Change: Kind of quarter by order.
Speaker Change: Agreements or is that sort of open now.
Speaker Change: Shipments under our normal course.
Speaker Change: As far as I know nothing has changed since the last time, we spoke about this they require specific shipment authorizations from the Russian authorities.
Speaker Change: Really.
Speaker Change: So far they have been able to conduct their normal course of business and get the authorization, obviously, we cannot speak or speculate on behalf of what the authorities are going to do but I can report that so far the process has not impeded.
Any of the commitments they have to us.
Speaker Change: Okay. Thank you I'll turn it over.
Rob Brown: Thank you Rob.
Speaker Change: Thank you. Your next question comes from Brian <unk> from B Riley. Please go ahead.
Brian: Hey, guys. Thanks for taking my questions.
Speaker Change: Amir you mentioned.
Speaker Change: On a licensee for <unk> production.
Speaker Change: Curious if another entity wanted to pursue that license, how long would that take them and what potential roadblocks wood base case from a national security or other standpoint.
Brian: Good morning, Good morning, Brian.
Speaker Change: That actually is a good question, particularly now in the environment that there is.
Speaker Change: A lot of new companies and a lot of entities.
Speaker Change: Again, saying they have a technology or to have ways to enrich.
Speaker Change: They do not have any footprint to license the facility or any brick and mortar.
Speaker Change: That is a in my view a major obstacle.
Speaker Change: That is a process that takes years and it is a process that requires tens of millions of dollars to actually get an NRC license now if you are applying for a <unk> license thats eight would be a category three facility a higher enrichment like halo would be likely a category two.
Speaker Change: <unk>, which is what we have and is quite a bit more strict and stringent around security aspects of it.
Speaker Change: And so this short and simple as for somebody that does not have a facility and we will have to greenfield at <unk>.
Speaker Change: Assuming they have the technology because that opens up an entirely different conversation.
Speaker Change: Assuming they have the technology, but no facility no license my estimate we're talking about years and tens of millions of dollars at the minimum.
Speaker Change: I appreciate that and to get Segway into my second question.
Speaker Change: In the past you've stated that the first full scale hailand cascade could be brought online within 42 months out securing funding wondering if you have an update to that timeframe as we likely get closer to the kick off there.
Speaker Change: Okay.
Speaker Change: Good question Ryan.
Speaker Change: Okay.
Speaker Change: The update is I would not change any of the estimates we provided before in the estimate that you just quoted.
Speaker Change: As you know and as we've reported previously we have announced a $60 million supply chain investment and I can report to you that ACO that's our facility.
Speaker Change: Is actively expanding the supply chain, making building improvements qualifying parts production in finalizing the engineering design basis, as we prepare for future construction and operation of the enrichment facility. So I will not change the estimate but I will say that we are doing quite a bit of work to make sure that that is a solid number.
Speaker Change: And that.
Speaker Change: We stay true to it.
Speaker Change: Thanks, I appreciate the detail I'll turn it back.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question comes from Joseph Reagor from Roth Capital. Please go ahead.
Speaker Change: Yes.
Joseph Reagor: Hey, guys. Congrats on a strong start to the year and thanks for taking my questions.
Speaker Change: Good morning.
Speaker Change: So I guess two things first just kind of following up on some of the prior questions.
Speaker Change: I guess on the Q4 announcement you guys. Specifically you said that you had received at that time three I think it was licenses for exports from from Tenex.
Speaker Change: Sure.
Speaker Change: And with this update you just kind of said that.
Speaker Change: Have you been able to continue business as normal.
Speaker Change: Should we expect that like going forward from here there won't be like additional number based updates of how many shipments.
Speaker Change: <unk> got licenses for export instead, it will just be youre able to do business unless we're told otherwise.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: I think we would stick to the general terms of communication as opposed to updating shipments specific information.
Speaker Change: And obviously.
Speaker Change: Provide a little bit more detail just to give color to it but.
Speaker Change: From a communication, we will keep the general.
Speaker Change: Okay, that's fine.
Speaker Change: Yes.
Speaker Change: And then the second item is.
Speaker Change: For Kevin.
Speaker Change: I noticed on the balance sheet inventory and owed inventory both jumped significantly.
Speaker Change: Significantly from Q4 to Q1.
Speaker Change: And I know that tends to be.
Speaker Change: Some increase in Q1, but it was a bit more than normal was there anything in particular driving that.
Speaker Change: The only thing that I would say that was the primary drivers of that is as we've talked about before we do.
Speaker Change: <unk> transport.
Speaker Change: Inventory.
Speaker Change: Product from St Petersburg, Russia into the states.
Speaker Change: Those are in routes and in transit those have quite a significant value to them, which includes both the <unk> six so that can drive up the overall total value that that is reflected in youll typically see.
Speaker Change: And it's reflected in the press release, an offset in the liability section and so that's reflected as inventories owed to customers and suppliers and so that would be one of the primary drivers that we that we have seen that.
Speaker Change: Okay.
Speaker Change: Is it something where.
Speaker Change: This is indicated of of near term potential deliveries for you guys or is it when you get it you get it and you make your deliveries on.
Speaker Change: Some unrelated schedule.
Speaker Change: Yes, that's a great question I think it is indicative of a near term delivery, that's not always going to be the case are always going to be true, but it is a signal that we do have deliveries that are coming up is as we've talked about in the past.
Speaker Change: The Russia and deliveries are typically for the most part just in time type.
Speaker Change: Type shipments.
Speaker Change: Okay. Thanks.
Speaker Change: Thanks, that's helpful I'll turn it over.
Speaker Change: Thanks, Joe Thank you.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Your next question comes from Vikram <unk> from Citi. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: Thanks for taking the questions.
Speaker Change: I wanted to ask about tariffs.
Speaker Change: Could you give us any insight into how that may be playing into your discussions with customers about their future orders has that impacted any timing.
Speaker Change: When they choose to contract and then.
Speaker Change: On the supply chain could you just remind us how much of the domestic centrifuge manufacturing, it's exposed to imports or just any color there would be super helpful.
Speaker Change: Okay.
Speaker Change: Great Great question VIX. So to date, we have not really seen any impact from the current tariffs and.
Speaker Change: <unk> been enacted we have seen no disruption in our supply chain due to tariffs.
Just to serve you as a reminder, and I think it answers your second question, our our European competitor supply chain, 100%.
Speaker Change: Foreign based while our supply chain is made up of a growing number of our suppliers across numerous USA. So it's fully domesticated.
Speaker Change: Naturally we have less of an exposure to the impact of tariffs on our supply chain and our European competitors, who manufacture their machines in Europe.
Speaker Change: So I hope I answered your question.
Speaker Change: The first part of your question.
Speaker Change: We have customers into it I hope I answer that as well.
Speaker Change: Yes.
Speaker Change: That was helpful. Thank you.
Speaker Change: And I have a follow up question.
Speaker Change: In terms of the task orders that will be issued.
Speaker Change: Could you just remind us what are the various.
Speaker Change: Permutations that those could take.
Speaker Change: The cost sharing or.
Speaker Change: Another format.
Speaker Change: We might look to.
Speaker Change: And are you operating under the assumption.
Speaker Change: For any one of those particular too.
Speaker Change: To check them out.
Speaker Change:
Speaker Change: That is a complex question that I am not sure that I can really answer because.
Speaker Change: The way I understood. Your question is is would would the task quarters rely on cost sharing or any other type of contracting mechanism.
Speaker Change: The answer is it would be impossible for us to predict at this point I'd, rather really not speculate at this point.
Speaker Change: So we stand ready to see what the dose is going to come out with <unk> and we will be prepared to answer and the best possible way.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question comes from Eric Stine from Craig Hallum. Please go ahead.
Eric Stine: Hi, everyone great to chat this morning.
Eric Stine: Good morning, Good morning, guys. Good morning, so kind of following up on an earlier question and I are completely realized anticipate be impossible to answer, but I'll give it a shot.
Speaker Change: Kevin I know you've talked about the Russian deliveries those are the shipments that those are more just in time, but as we think about 2025.
Speaker Change: Is there is there anything that we should think about in terms of timing of <unk> and uranium sales.
Speaker Change: It certainly doesn't look like in the past there is really any rhyme or reason or seasonality to it.
Speaker Change: So maybe just any any details just to get us all kind of thinking about things. If there is a way that that can be described.
Speaker Change: No. Thanks for the question I mean as you are aware, we don't provide financial guidance. So there's nothing.
Speaker Change: Significant or material at this time that we feel would be appropriate to bring up I think the only thing that I might note is that.
Speaker Change: Our customers are utilities.
Speaker Change: Our reactors.
Speaker Change: What ultimately they're looking for is reloads for their locations, which are typically between 18 and 24 months and so that really is the driver from a timing perspective as to how the revenues and the school revenues materialize from a future perspective, so that I think to a certain extent gives you a sense of.
Speaker Change: How our business works and when we would expect to see the revenue materializing, but we couldnt get into any more details just for the fact that we don't provide any future earnings guidance, yes.
Speaker Change: Yes, no understood.
Speaker Change: Just thought part of the way through the year, but I totally get it it's very difficult to.
Speaker Change: Especially not given any guidance so.
Speaker Change: Alright, well, obviously, you've got the three contracts youre waiting on the IDI cues, you've talked about that whole process, but.
Speaker Change: Correct me, if I'm wrong, but you've also got an opportunity to NSS and S. A opportunity that is separate.
Speaker Change: So maybe just talk about that the opportunity from a national security perspective confidence next steps et cetera.
Speaker Change: I don't know that I can add anything to what's been publicly available out there.
Speaker Change: From the NSA.
Speaker Change: Just from a big picture perspective.
Speaker Change: Our technology is.
Speaker Change: On the obligated that is able to serve national security purposes.
Speaker Change: It is deployment ready and really is the only technology that is operating right now that is able to meet our national security needs.
Speaker Change: I will not venture into predicting what how and when the NSA.
Speaker Change: May do what.
Speaker Change: Be very careful not to comment on it but.
Speaker Change: I'll only say that we.
Speaker Change: We stand by and we take note of development and we stand ready to serve.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Your next question comes from Sameer Joshi from H C. Wainwright. Please go ahead.
Speaker Change: Hey, good morning, Amit.
Speaker Change: Thanks for taking my questions.
Speaker Change: Good morning.
Speaker Change: Leading ones question, but can you explain the dynamics there.
Speaker Change: 48%.
Speaker Change: In <unk> costs.
Speaker Change: That resulted in nice margins. So you had this quarter.
Speaker Change: I'm, sorry, I didn't catch that question would you mind repeating that one more time.
So the swap costs were lower.
Speaker Change: Cost of <unk> was lower by around 48%.
Speaker Change: Just wanted to understand was it volume related or was that some other dynamics playing into that.
Speaker Change: Yes, so I appreciate that question.
Speaker Change: And so.
Speaker Change: Juxtaposing the revenue versus the cost I might answer this in two different ways. We did have fourth quarter deliveries that were delayed due to the Russian Federation permitting at license process that that pushed increased volume into the first quarter.
Speaker Change: Which significantly impacted our margin realization for the quarter, I think where youre going with it is as it relates to cost.
Speaker Change: For those transactions, we used to average costing based upon our accounting practices. So it's really based upon our purchases and sales and how that manifest through our system from an average costing perspective.
Speaker Change: That.
Speaker Change: Creates.
Speaker Change: What the ultimate cost is that we take to the bottom line.
Speaker Change: I think what I would say in addition to that is when you look at it year over year.
Speaker Change: So it should say quarter over quarter on the annual basis, we did see better gross profits and this was primarily due to the fact that last year as we noted in our remarks earlier that we had a.
Speaker Change: Low margin shipments from the prior year that impacted both our net income.
Speaker Change: Last year as well as our margin realization and that was not replicated in the current year and the shipments that were deferred and delayed from December into Q1 had a more positive margin realization.
Speaker Change: Taking into account everything sort of that I just noted before.
Does that answer your question.
Speaker Change: Yes, no that was good color just wanted to make sure that we understood that thanks a lot.
Speaker Change: Second question is on the.
Speaker Change: Quite the cylinder.
Speaker Change: What is the status of new automobiles or believe but is there an update on that.
Speaker Change: Yes.
Speaker Change: I think last time, we reported that we have.
Speaker Change: Steady flow and fulfillment of our five b requirement.
Speaker Change: And.
Speaker Change: That statement is still correct that there is no impact to our production from five <unk> cylinder.
Speaker Change: Sourcing.
Speaker Change: Got it and then just one last one.
Speaker Change: Can you speak I think the previous caller asked about this.
Speaker Change: About the speed at which.
Speaker Change: Competitive.
Speaker Change: And richer might emerge.
Speaker Change: But.
Speaker Change: Can you give us the lay of the land.
Speaker Change: What.
Speaker Change: Which companies you see.
Speaker Change: As the emerging competitors I think the deal.
Speaker Change: Also in the process of getting some more contracts.
Speaker Change: Okay.
Speaker Change: So let me repeat the question. Your question is what is the competitive landscape when it comes to Hey look production in the United States.
Speaker Change: Yes.
Speaker Change: So as you know part of the Doe.
Speaker Change: Award scope is for Halo enrichment here in the United States.
Speaker Change: From a competitive view.
Speaker Change: We really are the only facility that has a cap two license, which allows you to enrich up to $19, 75% to enrich halo.
Speaker Change: The lease has a facility in new Mexico.
I have not checked lately what their license status is but I know that they are not producing halo and I don't think they are license to produce table either.
Speaker Change: And so I would not venture to guess if they want to get into that business well will it take for them to to to amend licenses or make modifications to their system I do not know I'll only point to.
The public statements that they have announced that they're working on halo in the United Kingdom and the United States.
Speaker Change: So.
Speaker Change: If anybody else wants to get into this game. So for example, I think Colorado has made some announcements.
Speaker Change: Maybe not specific behavior with just generally they made announcements about.
Speaker Change: Our site selection.
Speaker Change: I'll reference you back to the comment that I made about our greenfield licensing in general.
Speaker Change: That is something that takes years and tens of millions of dollars.
Speaker Change: Where we have a significant first mover advantage on.
Speaker Change: Other than those two competitors.
Speaker Change: I'm, assuming there would be others in the competitive landscape. So.
Speaker Change: Laser enrichment GLA I think made recent announcements, we typically don't comment on competition, but.
Speaker Change: You're more than welcome to read the general announcements I think that.
Speaker Change: I mean, we are enriching we are a facility that has equipment that license I believe that we have a definite advantage.
Speaker Change: Just as a reminder, as well the <unk> technology is the only proven and viable technology to address the growing demand for enriched uranium.
Speaker Change: Least in the short term and the midterm as we see it in.
Speaker Change: The market has been responding to them.
Speaker Change: Yes, I hope that what I was hoping it was a comprehensive real quick.
Speaker Change: Absolutely because one of the ones I wanted to bring out because that you have.
Speaker Change: On the licensee of the centrifuge technology in the U S and I was wondering if in your other a loop.
Speaker Change: A producer there Mike.
Speaker Change: Required to license that technology from you or will they be using something totally different technology.
Speaker Change: I do understand centrifuges the best.
Speaker Change: More surplus.
Speaker Change: But right now.
Speaker Change: Yes, correct.
Speaker Change: I would not venture to <unk>.
Speaker Change: Speculate on competition beyond some of the established competitors that I mentioned.
Speaker Change: Thanks, a lot for taking my questions.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: No further questions at this time I will now turn the call over to Neal <unk>. Please go ahead.
Speaker Change: Thank you operator, this will conclude our investor call for the first quarter of 2020 as always on what they've said that thank you to our listeners online and our analysts who duck call.
Speaker Change: We look forward to speaking with you again next quarter.
Speaker Change: Yes.
Speaker Change: Ladies and.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.