Centrus Energy Corp (LEU) 2018 Q1 法說會逐字稿

Greetings, and welcome to the Centrus Energy First Quarter 2018 Quarterly Earnings Call. (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.

Thank you, Devin. Good morning, and thank you for joining us. Today's call will cover the results for the first quarter 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 the -- turning the call over to Dan, I'd like to welcome all our callers as well as those listening to our webcast. This conference call follows our earnings news release issued yesterday afternoon. We expect to file our quarterly 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 involves risk and uncertainty, including assumptions about the future performance of Centrus. Our actual results may differ materially from those in our forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in our forward-looking statements is contained in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q.

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.

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 some numbers. Our revenues for the quarter were $35.7 million. We resolved a fee dispute with the U.S. Department of Energy that has been tied up in court for years, a settlement worth $24 million overall, which resulted in our recognizing $9.5 million in our quarterly revenues. By consolidating and cutting costs throughout the organization, we achieved a 10% reduction in our SG&A expenses compared to the first quarter last year.

Most importantly, we remain on track to meet our guidance for revenue and cash balance for the full year, and we reiterate that guidance today. That said, we 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 when certain customers take delivery and the pricing under those particular contracts. At the same time, we're continuing our 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've talked 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 at our 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 supply of LEU fuel for our utility customers around the world when we announced a long-term contract with the French nuclear fuel supplier, Orano. This new contract substantially diversifies our base of supply and gives us more options to meet the needs of our current and future customers. Most importantly, it will allow us to expand our sales in the years ahead. Together with our existing suppliers, access to other inventories held around the world and our own existing inventory, this new supply solidifies Centrus' position as the world's most diversified supplier of nuclear fuel.

In addition, on March 28, we announced a contract with X-energy. Not only is this a new customer, it is a new type of customer for us, a pioneering reactor technology and fuel company.

Over the next several years, we will work together with X-energy to design and prototype a fuel fabrication facility for a promising new kind of fuel called TRISO, an inherently safe nuclear fuel pellet that can power many of the new reactor designs under development including X-energy's Xe-100 reactor. Our team in Oak Ridge, Tennessee will support this effort shoulder to shoulder with X-energy's fuel design staff at our Technology and Manufacturing Center with a long-term intention of deploying a commercial fuel fabrication facility in the mid-2020s.

Our business development team is currently working to secure additional contracts with other customers who need this type of event engineering, design and manufacturing work, which our Oak Ridge team can deliver and I look forward to sharing more details, as those efforts come to fruition.

To fuel these new advanced reactors, the world will need a source of high-assay, 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 continues 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 and restoring the country's enrichment capability.

In short, we're building momentum for our long-term effort to grow and diversify our business. We will continue to report to our shareholders as these and other efforts progress in the months ahead. Now I'd like to turn the call over to Marian, who has more details on the quarter's financials.

Thank you, Dan, and good morning to everyone on the call. Our results this quarter were in line with our expectations. Our revenues were $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 on multiyear 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 still 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 will tend to have a lower price point than the average of our order book, however, we also benefit from lower prices when we buy our supply. Every time we make a delivery of SWU or uranium, we realize revenue based on the pricing of that contract, but our cost of sales is based on the long-term rolling average of all our supply sources. We had a gross loss of $5.6 million in the first quarter, which reflects the pricing in the particular contract.

Advanced technology license and decommissioning cost, which consists of American Centrifuge expenses that are outside of the company's contracts with the Oak Ridge National Laboratory, increased $1.6 million for the quarter. The D&D work at Piketon is substantially complete, and those costs are now being charged to expense rather than the accrued D&D liability.

Facility costs have also increased slightly at the site, as we transitioned 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 these savings in future quarters, as our efforts to realign our costs with our current business realize continued savings.

For the bottom line, we 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, this guidance is subject to the factors described in the outlook section of our SEC filings, specifically the annual report on Form 10-K filed in March and the 10-Q we will file later today.

With that, I will turn the call back over to Dan.

Thank you, Marian. Let me conclude today by saying that everyone at Centrus is working hard to deliver value for customers and to continue to be a trusted partner to the nuclear industry around the world. Whether that is fueling the world's 450 nuclear reactors to provide clean, reliable power today or developing a fuel and manufacturing infrastructure for the next generation of reactors, Centrus is well positioned to support the growth of this vital energy source 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 Instructions) There appear to be no questions at this time. I'd like to turn the floor back over to management for closing comments.

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

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