Centrus Energy Corp. Price & Performance (LEU)

Good morning. Thank you all for joining us. Today's call will cover the results for the fourth quarter twenty twenty four ended December 31. Today, we have Amir Wexler, President and Chief Executive Officer and Kevin Harrell, Chief Financial Officer. I'd like to welcome all of our callers as well as all of those listening to our webcast. This conference call follows our earnings news release issued yesterday. We expect to file a report for the fourth quarter and full year on Form 10 ks later today. All of our news releases and SEC filings including our 10 ks, 10 Qs and eight Ks are available on our website. A replay of this call will also be available later this morning on the Centra's website. I would like to remind everyone that certain information we may discuss on this [indiscernible] may be considered forward looking information that involves risks and uncertainties. Including assumptions about the future performance of Centrus Centrus. Our actual results may differ materially from those in our forward looking statements. Additional information concerning factors that could cause actual results to materially differ from those in our forward looking statements is contained in our filings with the SEC including our annual report on Form 10 ks, and quarterly reports on Form 10 Q. Finally, the forward looking information provided today is time sensitive and accurate only as of today, February 7, 2025, unless otherwise noted.

This call is the property of Centrus Energy. Any transcription, redistribution, retransmission or rebroadcast of the call in any form without the expressed written consent of Centrus is strictly prohibited. Thank you for your participation. And I'll now turn the call over to 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. I'd like to quickly welcome Neil to the team as our new Head of Investor Relations. Neil brings a wealth of experience to this role and his hiring is another example of us continuing to build out our core function at a pivotal time. I would like to also thank Dan for his previous service in this role and for his continued support of Centrus' corporate communications effort going forward. This is another year of success for Centrus Energy Centrus we made significant progress across all fronts and continued our efforts to restore America's ability to enrich uranium to meet the nation's energy and security needs while creating thousands of jobs in the process. As previously announced, this year, we already won a DOE contract award for HALO deconversion won a DOE contract award for HALO in Richmond, continue to successfully enrich HALO under the operations contract signed long term contingent LOU sales commitments and grew the company backlog to $3,700,000,000 through 02/1940 and delevered our balance sheet through strategic initiatives associated with our pension This past quarter, we continued on this progress by winning a DOE contract award for LU enrichment, further strengthening our capital position by issuing $4.00 $2,500,000 of convertible senior notes, accelerating centrifuge manufacturing preparation while derisking our American only supply chain to strengthen our first mover advantage and delivering to the Department of Energy a total of five forty five kilograms of HALO to date in Phase two of the operations contract.

Outside of our accomplishments, we saw many industry dynamics continue to shift in our favor as I will discuss shortly. But first, let me dive into the quarters and annual results.

Starting with our annual results, recall that the majority of our revenue is derived from the LU segment where customers generally have multiyear contracts to take delivery of a given quantity at a given price each year. As we have previously stated, our customers choose which quarter to take their annual deliveries and don't choose the same quarter every year. For the full year 2024, we achieved $442,000,000 in revenue, a gross profit of 111,500,000.0 and an operating income of $48,000,000 We have continued to deliver strong revenue growth and solid margin in our LEU segment even as we worked through a number of trade actions. We have secured waivers from the U. S. Department of Energy allowing all of our planned imports in 2024 and 2025. We are working through the 2026 and 2027 waiver process with the department. Meanwhile, in November, the Russian government revoked the general license that our supplier Tenx had for exporting material from Russia to The United States. And now requires specific license for each shipment. We have been informed that Tenex has received three specific licenses to date to export ALU to satisfy our pending orders. We will use the majority of this ALU to satisfy pending orders to a single customer on a delayed basis.

Tenex has informed us of its plan to seek additional export licenses to meet its delivery obligations under the Tenx supply contract for our pending and future orders. We are in close communications with Tenx as well with our customers whose orders may be impacted to mitigate any potential future disruptions or delays. Turning to our operations, let me first discuss three These are designed to jump start American production of both low enriched uranium or LEU and high assay low enriched uranium or HALO. In October, we won contract awards for HALO enrichment and HALO B conversion. And then in December, we won a contract award the LA RFP, which will provide funding to restart American LAU enrichment reducing U. S. Dependence on foreign state owned sources of enriched uranium. As a reminder, these contracts were awarded as IDIQs indefinite delivery, indefinite quantity. Essentially meaning that we are eligible to compete for future task orders under each Centrus. The next step in the process will be for the DOE to issue task orders under each contract. The ultimate dollar value of our contract and the scale of the expansion they could support will depend on what task orders for each we will compete and hopefully win.

These three contracts are in aggregate backed by more than $3,400,000,000 in congressional that were approved as part of the Inflation Reduction Act in 2022 and the bipartisan government funding bill in March 2024. Taken together, they represent the largest federal investment in domestic nuclear fuel production in decades. [indiscernible] We made a strong case to the government to receive robust funding under these future task orders. Stentrus is uniquely positioned to deliver a made in America solution that uses an American only supply chain and manufacturing to support American jobs. We are the only American company with a a proven enrichment technology and an NRC license to enrich uranium up to just under 20% for HALO, and one of two companies with an NRC license to enrich LEU. Restoring a truly domestic uranium enrichment capability will strengthen our energy security and our national security while creating family supporting high-tech jobs for American workers. The argument for choosing Centrus is further strengthened by the fact that the federal government needs a U. S. Origin enrichment technology for national security mission and we have the only deployment ready technology capable of meeting those [indiscernible] That's crucially important. Because commercial enrichment facilities using four enrichment technology cannot be used to support U. S. National security mission.

In fact, in late twenty twenty four, the National Nuclear Security Administration or NNSA issued a Request for Information or RFI for an AC-one hundred centrifuge machine design deployment demonstration at the Piketon, Ohio facility to support an NSA defense mission requirements for enriched uranium. We believe that our technology will put The U. S. In a position to decouple its Zentris offers a proven American technology that would keep jobs in America to support both commercial and national security We agree with what the U. S. Government has said all along that this needs to be a public private partnership to be viable. European governments fund their state owned enriches. We need our American government to in turn back an American alternative. And we are ready to help support this push. As Kevin will discuss shortly, we have begun to lay the groundwork ahead of task orders being issued. In the fourth quarter, we significantly strengthened our balance sheet by closing of over $400,000,000 of convertible notes. This move facilitated our ability to begin investing in our future. And in late November, we announced an approximately $60,000,000 investment to resume centrifuge manufacturing activities and expand our manufacturing capacity at our Oak Ridge facility over the next eighteen months.

This investment serves to derisk Zentrissa's supply chain while reinforcing our first mover advantage in domestic centrifuge production by kickstarting the process ahead of government task orders being issued. Nuclear power already accounts for nearly 20% of twenty twenty three U. S. Electricity production. And all of the required enriched uranium for U. S. Nuclear reactors currently comes from foreign state owned entities. There is a large existing addressable market for Centrus to penetrate. With Congress's enriched uranium ban, we know that the 25% of enriched uranium that is currently imported from Russia will need to be replaced starting in 2028. We continue to hear about mothballed reactors coming back online. From Palisade in Michigan and Duane Arnold in Iowa to most recently Sanity Cooper's announcement that it is seeking buyers to complete the project at South Carolina's V. C. Sulburn Nuclear Station. [indiscernible] also know that utilities are considering operating many of their existing reactor fleets to avoid potentially costly newbuilds over the near term. And then there is international opportunities. These include markets that continue to ramp up reactors or otherwise are considering nuclear energy. Such as in Europe and in Japan. Then there's additional opportunities that could further accelerate nuclear's growth.

In the second half of twenty twenty four, we heard a number of big tech companies announcing historic and unprecedented investments in nuclear energy. But we cannot just rest on the prospect of this large and growing energy market as well as nuclear growing share of the market. Productability is built off of customers. To date, we have secured a cumulative total of approximately $2,000,000,000 in customer contingent LEU sales commitments to support deployment of our new LEU production capacity in Piketon. This is a clear sign from utilities that they need to secure more supply and that the market demands more competition. So they are turning to Centrus Energy. We are very excited of our about our company's future prospects and look forward to building on our momentum. We have begun laying the groundwork ahead of the government's anticipated task orders for which we plan to compete and look forward to sharing more with you on upcoming calls. With that, I will turn call over to Kevin to walk through the numbers. Thank you, Amir. Good morning, everyone.

Centrus reported another exceptional year of accomplishments exhibited by a year over year increase to revenue of nearly 40%. In addition, the company has undertaken several initiatives to improve its significant capital raises in the debt and equity markets strengthening our cash position, SG and A optimization efforts yielding identifiable cost reductions, investment in our manufacturing capabilities accelerate our time to deployment for our own plant production and finally leveraging investment tax credit opportunities to partially fund these efforts. In 2024, we generated $42,000,000 in revenue, an increase of $121,800,000 compared to 2023 and generated $73,200,000 in net income compared to $84,400,000 last year.

We reported a gross profit of 111,500,000.0 compared to $112,100,000 in the prior year. Our LEU business generated $349,900,000 in revenue. An increase of $80,900,000 compared to 2023, driven by our growth in uranium and SWU revenue. [indiscernible] growth in SWU revenue was a result of a higher average price of SWU sold partially offset by lower volume sold. The growth in uranium revenue was driven by increases in both the volume and average price uranium sold. Furthermore, rising uranium commodity prices contributed largely to the year over year margin improve Our cost of sales in LEU increased from $163,900,000 in 2023 to $256,000,000 in 2024, due to an increase in average SWU and uranium cost. SWU costs increased primarily as a result of 67% increase in the average unit cost of SOU sold. Of the $256,000,000 in cost of sales, 25% is attributable to the release of cost related to previously deferred sales which incorporate the higher SWU price at the time of the deferral. Excluding the impact of these deferred sales deliveries, the average unit cost of Swoosholt would have only increased 27%. As I mentioned, reason for the increase in uranium sales also drove similar increases in uranium costs.

We ended the year with a gross profit of $93,900,000 in our LEU segment compared to $105,100,000 in 2023.

Our Technical Solutions segment also generated $17,600,000 in gross profit, which was an improvement of $10,600,000 over the prior year. As previously noted, on a consolidated basis, our gross profit was $111,500,000 compared to a gross profit of 112,100,000.0 the prior year. Technical Solutions generated $92,100,000 in revenue an increase of $40,900,000 compared to 2023.

And a reported $74,500,000 in cost of sales, an increase of $30,300,000 compared to the prior year. Our results on a year over year basis reflect the transition of the Halo operation contract from Phase one which was a cost share arrangement to Phase two which is a cost plus incentive fee arrangement. Our total company backlog was $3,700,000,000 as of year end. And extends to 02/1940. Our LEU segment backlog was approximately $2,800,000,000 and includes $800,000,000 of future SWU and uranium deliveries. Primarily under medium and long term contracts with fixed commitments and $2,000,000,000 in contingent LEU sales commitments in support of potential construction of LEU production capacity at the Piketon, Ohio facility. During the first quarter, entered into definitive agreements for $800,000,000 of the total $2,000,000,000 in contingent LEU sales commitments. The contingent public and private investment. Our Technical Solutions segment backlog was approximately $900,000,000 and includes funded amounts, unfunded amounts, and unexercised options The unexercised options relate to the company's HALO operation contract. [indiscernible] As Amir noted, in the fourth quarter, we issued $402,500,000 of 2.25% convertible senior notes, total net proceeds of $388,700,000 The proceeds from the offering deliver added liquidity to execute our strategic plans including our announcement for a $60,000,000 investment for the resumption of centrifuge manufacturing activities, and expansion of manufacturing capacity at our Oak Ridge, Tennessee facility, that we announced in November 2024.

We will also consider other strategic uses of these funds, including the possible retirement of our higher interest notes bearing 8.25% coupon, have a principal value of $74,300,000 The issuance of the convertible notes follows the progress made in 2024 on further de risking our balance sheet by reducing dollars dollars As of the end of the year, we have $26,000,000 remaining in these pension plan [indiscernible] with a funding level in excess of 118%. This will have ongoing savings realized through elimination of annual costs associated with the plan's administration asset management fees, regulatory requirements as well as the funding shortfall at the beginning of the year which the company was ultimately responsible. Our continued positive operating results coupled with the successful close of the convertible debt transaction, and the reduction of our pension plan obligations, contributed to an ending unrestricted cash balance of $671,000,000 Maintaining and growing a strong cash position continues to be a key in facilitating execution of our near term contractual obligations as well as strategic investments in our long term future. [indiscernible] company is also engaged in exploring opportunities investment tax credits. To this end, Centra submitted an application in October 2024 for a clean energy manufacturing and recycling project In January of twenty twenty five, we received notification that we were approved for our request for $62,400,000 in credit allocations for the manufacturing facility in Oak Ridge, predicated on meeting certain requirements, including future investment in eligible property.

All of the announced initiatives and investments are a part of a broad strategy to continue to optimize our cost structure, adequately manage our risks, and better position ourselves to execute on our vision to restore America's ability to enrich uranium at scale. With that, let me turn things back over to Amir. Thanks, Kevin.

I'd like to close by taking a moment to discuss the new administration. There is a long record of bipartisan support when it comes to nuclear power And last year, both parties came together to approve a historic investment in domestic nuclear fuel production. Nuclear has and continues to enjoy resounding bipartisan support. That said, the new administration is seen through Secretary of Energy, Chris Wright's confirmation testimony, appears to be particularly bullish about the need to restore American owned production of enriched uranium. We've heard incoming official talk about protecting and growing American jobs to support economic growth. We've heard about the importance of energy security. And we've heard about the importance of national security. We're also the only enricher that actually many In September, we held a briefing for policymakers on Capitol Hill and unveiled our domestic manufacturing supply chain, which includes 14 major suppliers. Every one of them an American company employing American workers in at least 13 states. Our project presents a perfect opportunity for President to deliver a major win in his efforts to restore American manufacturing As I've previously noted, this is a once in a generation opportunity leadership and our nation cannot afford to squander it.

We are excited by what is to come in 2025 and our continued evolution towards reclaiming America's rightful place in the enrichment market. To service both the domestic market as well as for global customers. With that, we would like to open the lines to take questions. [indiscernible] Thank you. The floor is now open for questions. Today's first question is coming from Rob Brown of Lake Street Capital. Please go ahead.

Good morning. [indiscernible] Thank you. I just wanted to follow-up on the wins on the [indiscernible] three Centrus. Could you give a sense of sort of the next steps in the task orders and sort of what needs to or how does the decision making process goes to getting those task orders issued and maybe a sense on the thinking on timing? That's a good question, Rob.

Honestly, I would not speculate on timing. I mean, we know that there is movement. Obviously, awards have been given. So they're moving forward. Just I would not guess anything on timing. I think it would be too hazardous to say that But as I said, we are encouraged in that there is forward movement.

And your first question was if there's any other color we can add to what's been already announced, I believe I'm paraphrasing.

Just sort of the next steps that go into the process.

Yes. So the next steps would be specific task orders that the department would issue. To the awardees. And again, we really have no insight into those and the timing. [indiscernible] And then you did talk about a $60,000,000 investment to get your jump start things. Could you give us color on kind of what goes into that and where that puts you in terms of position to to really react to the tax orders as they come through, if they come through?

Yes. So really all of these things are connected We want to make sure that we hit the ground running as fast and as hard as we can when those come out.

So that allows us to do a lot of our prep work and I would call that readiness investment in our readiness I don't know, Kevin, if you want to add anything else, but that sort of is the high level.

Yes. No, I think that's right. And the important element of what we're trying to accomplish and we've talked about this to the public is, as we move forward with regards to deployment of our initial cascades, there is some additional time that's going to be required associated with our supply chain and standing that up for distribution and production. And so this money is basically are being invested in order for us to start the processing and continue what we perceive as our first mover advantage in regards to to many of the things that we're trying to accomplish in bringing enrichment back to The United States to a domestic owned company. Great. Thank you. I'll turn it over.

The next question is coming from Joseph Fragore of ROTH Capital Partners. Please go ahead.

Hey guys, thanks for taking the questions.

So first thing on the 10x wins, obviously congrats on getting some positive news there.

I know you're not going to give specific numbers around it, but In the overall context of things, three specific licenses out of Is it 5,100, 1,000? Like order of magnitude even if it's an arm wave rather than a specific number? Yes, we can't get into those types of details, Joe.

What we are and have disclosed as a part of our reporting is that the the Russian decree that came down the pike in late last year specifically put a pause for 10X, the provider, in regards to their ability to provide distribution of the enriched uranium outside of of Russia exporting into The United States. And so we have seen good traction with regards to several of our individual deliveries and shipments, but those as it was crafted under the Russian decree are on a case by case basis on a shipment by shipment basis. So, right now, like I said, we seen positive traction over our first three shipments, but we can't speak and speculate what's going to transpire in the future.

Okay. Fair enough. I had to ask.

Then the second question [indiscernible] [indiscernible] the uranium sales, in Q4, they were abnormally high. This is usually this is like tail uranium rate [indiscernible] did you guys sell any uranium inventory that drove that $73,000,000 of revenue? In reaction to what occurred in November.

Or is this just taking advantage of the opportunity in the market?

This is taking advantage of an opportunity in the market. Obviously, UF6 is at historic levels, upwards of $300 a kilogram. So this was a [indiscernible] and reflect and recognize a key spot sale for us in that December timeframe that helped buoy the results of the annual cycle.

Okay.

Turn it over and jump back in queue. Thanks, Joe. Thank you. The next question is coming from Ryan Fink with B. Riley Securities. Please go ahead.

Guys. Thanks for taking my questions. First, regarding the $60,000,000 investment made in November, or announced in November, is it fair to say that that officially kick starts the forty two month timeline you've spoken about to bring on the first commercial cascade?

Yes, that is an accurate characterization. And then maybe just following up on the last question, fourth quarter results strength was driven by the price of SWU and uranium prices and just wondering was there anything else there that drove that strength that we could see in 2025, I know you don't give guidance, but could you maybe talk about your expectations for 2025 maybe directionally compared to 2024? Yes. No, as you noted, Ryan, we don't provide earnings guidance. So it's a little difficult to go into the details as to whether certain transactions will be replicated in future periods. What I can say is, we definitely are very opportunistic especially on the uranium side. And so when you look at our financial statements and our balance sheet, we do still have a sizable amount of inventory left. And specifically that which is helpful for us as it relates to monetizing some of the transactions in a rising market on the UF6 side. Is really being in a position to sell those from a spot sell perspective. [indiscernible] the economical climate and the commodity pricing and if opportunities come up, I still think we do have obviously dry power on the balance sheet that we have reflected but couldn't go into any more details on that.

Great.

Appreciate it. I'll turn it back.

The next question is a follow-up coming from Joseph Reagor of ROTH Capital. Please go ahead.

Guys. Just had one more. Noticed in the release some talk about investment tax credit and that if you guys spend $200,000,000 something, you get $60,000,000 something back.

What does it take to trigger all that?

And then and over like what period of time? And then how would that work from an account standpoint, Yes. So from a timing perspective, we would have to put this in those few conditions. But ultimately, the timeframe in which we could capture costs that we'd be able to realize are approximately four years.

And this is all stipulated within the 48 cap C legislation or I should say the IRC. Which basically touches upon that you need to meet certain and then put the property into into its useful life thereafter. And the period of time in which we can actually bear cost is a subsequent two years thereafter the initial two year timeframe. And so when you look at how we'll be able to realize this and monetize this, we can actually go out and what's been established by the government is a marketplace that we can sell into and monetize these. So these won't be necessarily subordinate to the NOLs. And when you look at what we're trying to accomplish on on a global basis, this will support the initial investment that we have that starts at forty two month clock, obviously conditional upon the funding that will come out of the government that will continue the process of of incremental investment that we'll be able to go about our own. And did I cover all your questions, Joe? Or did I miss anything?

I think that covers the gist of it. And then if I could just one follow-up to the previous caller's question about the forty two months. When would you guys need the task assignment to be given by in order to maintain the forty two month timeframe now that you've kind of started the clock?

Let me just maybe clarify what Kevin said and Kevin step in and clarify my clarification if needed.

We are making an investment to improve cycle time to get a jump start on the process which we have sufficient confidence in that it's forthcoming. I will officially stick to the forty two months and I would not make any more aggressive assumptions than that just from a conservative standpoint.

Obviously, we want the process to start as quickly as possible and that's when the start That's when the clock starts. Now again, we're doing a lot of work and we're spending money to make sure that we improve cycle time and we position ourselves in the best possible spot.

But officially, let's make the assumption of forty two months of this And let's not assume Anything more aggressive than that? [indiscernible] Yes, I was just going to add to that. With our November announcement, we start the process of as I mentioned earlier in the call, derisking the supply chain, putting us in a position where we start to to equip the facility in Oak Ridge at a level that's going enable us to be in a state where we can operate at higher production levels. But all of this will be predicated on government monies. So the $60,000,000 is a jump start for us to start this, but Okay. I think that clarifies that it was a little confusing before. Thanks guys. Yes, sorry about that. I hope Brian is still on line and listen Thank you. Ladies and gentlemen, at this time, I would like to turn the floor back over Mr. Nagarajan for closing comments.

Thank you, Donna. This concludes our investor call for the and year end '24 I'd like to thank all of our listeners and the analysts who called in, and we look forward to speaking with you again next quarter.