Centrus Energy Corp.
Q1 2018 Earnings Call Transcript

Published: 9 May 2018

[Operator:]

Greetings and welcome to the Centrus Energy First Quarter 2018 Quarterly Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Don Hatcher, Director of Investor Relations. Thank you, Mr. Hatcher, you may begin.

[Don Hatcher:]

Thank you, Delvin. Good morning and thank you for joining us. Today's call will cover the results for the first quarter of 2018 that ended March 31. Here today for the call are Dan Poneman, President and Chief Executive Officer; Marian Davis, Senior Vice President, Chief Financial Officer and Treasurer; and John Dorrian, Controller and Chief Accounting Officer. Before turning the call over to Dan, I'd like to welcome all our callers as well as those who are listening to our webcast. This conference call follows earnings news release issued yesterday afternoon. We expect to file our annual report on Form 10-K, 10-Q this afternoon. All of our news releases and SEC filings, including our 10-K, 10-Qs and 8-Ks are available on our website. A replay of this call will also be available later this morning on the Centrus' website. I'd like to remind everyone that certain of the information that we may discuss on this call today may be considered forward-looking information that involve risk and uncertainty, including assumptions about the future performance of Centrus. Our actual results may differ materially from those in our forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in our forward-looking statements is contained in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. Finally, the forward-looking information provided today is time sensitive and is accurate only as of today, May 09, 2018 unless otherwise noted. This call is the property of Centrus Energy. Any transcription, redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Centrus is strictly prohibited. Thank you for your participation. And now, I'll turn the call over to Dan Poneman.

[Daniel Poneman:]

Greetings and welcome to the Centrus Energy First Quarter 2018 Quarterly Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Don Hatcher, Director of Investor Relations. Thank you, Mr. Hatcher, you may begin.

[Don Hatcher:]

Thank you, Delvin. Good morning and thank you for joining us. Today's call will cover the results for the first quarter of 2018 that ended March 31. Here today for the call are Dan Poneman, President and Chief Executive Officer; Marian Davis, Senior Vice President, Chief Financial Officer and Treasurer; and John Dorrian, Controller and Chief Accounting Officer. Before turning the call over to Dan, I'd like to welcome all our callers as well as those who are listening to our webcast. This conference call follows earnings news release issued yesterday afternoon. We expect to file our annual report on Form 10-K, 10-Q this afternoon. All of our news releases and SEC filings, including our 10-K, 10-Qs and 8-Ks are available on our website. A replay of this call will also be available later this morning on the Centrus' website. I'd like to remind everyone that certain of the information that we may discuss on this call today may be considered forward-looking information that involve risk and uncertainty, including assumptions about the future performance of Centrus. Our actual results may differ materially from those in our forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in our forward-looking statements is contained in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. Finally, the forward-looking information provided today is time sensitive and is accurate only as of today, May 09, 2018 unless otherwise noted. This call is the property of Centrus Energy. Any transcription, redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Centrus is strictly prohibited. Thank you for your participation. And now, I'll turn the call over to Dan Poneman.

[Daniel Poneman:]

Thank you, Don, and thank you to everyone joining us on the call today. Centrus is off to a strong start this year. Let me start with key numbers. Our revenues for the quarter were $35.7 million. We [indiscernible] with U.S. Department of Energy that is entitled in court for yours, that settlement were $24 million revolved which resulted in our recognizing $9.5 million in our quarterly levels. Our consolidating in credit cost throughout the organization which will be 10% reduction in our SG&A expenses compared to the first quarter of last year. Most importantly, we remained on track to meet our guidance for revenue and cash balance for full-year and we reiterate that guidance today. That said, we've recorded a $25 million net loss for the quarter. Marian will go into more detail. But as we've noted in past earnings calls, a significant portion of the ups and downs throughout the year, reflect the timing of one certain customer's take delivery and the pricing under those particular contracts. At the same time, we are continuing a long term effort to expand and diversify our business and I'm pleased to report that we have made some important progress in that effort. We'll talk for some time about our vision to grow the Company's existing fuel business and to expand into new areas of the industry, utilizing the incredible talent we have assembled technology and manufacturing center in Tennessee. Let me report on a couple of exciting developments in this regard. For example, last week we made an important addition to our long term supplier of LEU fuel for our utility customers around the world when we announced the long term contract with fresh nuclear fuel supplier Orano. This new contracts substantially diversified our basis supply and give us more options to meet the meet the needs of our current and future customers. Most importantly, it will allow us to expand our sales in years ahead. Together with our existing suppliers access to other inventories held around the world and our own existing inventory, this new supply solidify Centrus' position as the world's most diversified supplier of nuclear fuel. In addition, on March 28, we announced a contract with X-energy. That only exist a new customer is it a new type a customer for us, it's pioneer reactor technology in fuel company. Over the next several years, we will work together with X-energy to design and prototype, fuel fabrication facility for a promising new kind of fuel called TRISO and inherently safe nuclear fuel power that can power many of the new reactor designs under development including X-energy's AC100 reactor. Our team at Oak Ridge, Tennessee will support this average shortly shoulder with X-energy's fuel design staff in our technology and manufacturing center with a long term intention of the plant commercial fuel fabrication facility in the mid-2020s. Our business development team is currently working to secure additional contract with other customers who needs this type of advanced engineering design and manufacturing work which our Oak Ridge team can deliver and I report to sharing more detail as those efforts come to full vision. To fuel these new advanced reactors, the world will need a source of high - assays, low-enriched uranium fuel or HALEU, since no commercial facility can produce that kind of fuel today. Along these lines, our team in Oak Ridge also continuous to work on advancing U.S. uranium enrichment technology for future energy and national security applications. They are actively testing and improving the world's most productive enrichment technology for future use in restoring the country's enrichment capability. In short, we are building momentum for our long term effort to grow and diversify our business. We will continue to report to our shareholders as detail other efforts progressed in the months ahead. Now I'd like to turn the call over to Marian, for more details on the quarter's financials.

[Marian Davis:]

Thank you, Dan, and good morning, everyone on the call. Our results this quarter were in line with our expectation. Our revenue for $35.7 million that is an increase compared to the same quarter last year although as you know our revenues tend to vary significantly from quarter-to-quarter based on the timing of when we make our deliveries. The vast majority of our customers are multi-year contracts with annual purchase commitments, which is why we focus on our annual guidance rather than on any one quarter. We are reiterating our annual guidance and so anticipate that more than half of our revenues will come in the fourth quarter this year due to the timing of customer orders in the LEU segment. Market prices for SWU and uranium have declined significantly in the past few years. That means that new sales were tend to have a lower price point than the average of our order book. However, we also benefit from some lower prices when we buy our supply. Every time we make a delivery at SWU or uranium, we realize revenue based on the pricing of that contract, but our cost of sales based on a long term rolling average of all our supply sources. We had a growth loss of $5.6 million in the first quarter which reflects the pricing in the particular contract. Advanced Technology license and decommissioning crop which consists of American Centrifuge expenses that are outside of the Company's contract with the Oak Ridge National Laboratory increased $1.6 million for the quarter. The DND work at Piketon is essentially complete and those costs are now being charged to expend rather than the accrued D&D liability. Facility costs have also increased slightly at the site as we transition staff to other locations and have to allocate more overhead to the advanced technology line. SG&A expenses were down for the quarter $1.2 million or 10%. We expect to continue seeing any saving in future quarters as our efforts to realigning our costs with our current business realize continued savings. For the bottom line, we've recorded a net loss of $25 million for the quarter. In the same quarter of 2017, we had a net income of $7.6 million, although that quarter included a onetime gain of $33.6 million on the early extinguishment of debt. We expect to end 2018 with a cash balance of $100 million to $125 million. I want to remind listeners that the increased use of cash during the year is primarily a function of the expected timing of supply purchases, as well as an increase in net cash payment for postretirement benefit. As always with guidance is subject to the factors described in the outlook section of our SEC filing, specifically the annual report on Form 10-K filed in March and the 10-Q we will file later today. With that, I'll turn the call back over to Dan.

[Daniel Poneman:]

Thank you, Marian. Let me conclude today by saying that everyone at Centrus is working hard to deliver values to customers and to continue to be a trusted partner to the nuclear industry around the world. Whether that is fueling world's 450 nuclear reactors to provide clean, reliable power today for developing fuel manufacturing infrastructure for the next generation of reactors, Centrus is well positioned to support the growth of this vital energy resource at a time when the world needs it more than ever. Thank you for your support of our mission and our efforts to ensure the United States continues to be a leader in this industry. Operator, we'd be happy to take any questions at this time.

[Operator:]

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. There appear to be no questions at this time, I'd like to turn the floor back over to management for closing comments.

[Don Hatcher:]

Since there are no questions at this time, this will conclude Centrus' First Quarter 2018 Investor Call. I want to extend a thank you all our investors and we look forward to speaking with you again in the future.

[Operator:]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.