CENTRUS ENERGY CORP Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Contract Awards: Won DOE contracts for HALEU enrichment, HALEU deconversion, and LEU RFP, with aggregate backing of over $3.4 billion in congressional appropriations from the Inflation Reduction Act and bipartisan funding bill.
• Balance Sheet: Issued $402.5 million of 2.25% convertible senior notes, providing liquidity for strategic initiatives. Invested $60 million to resume centrifuge manufacturing and expand capacity at Oak Ridge facility.
• Backlog: Total company backlog was $3.7 billion as of year-end 2024, extending to 2040. LEU segment backlog was ~$2.8 billion, including $0.8 billion future SWU/uranium deliveries and $2 billion in contingent LEU sales commitments. Technical Solutions segment backlog was ~$0.9 billion.
• Market Dynamics: Nuclear power accounts for nearly 20% of 2023 U.S. electricity production, with need to replace foreign-enriched uranium starting 2028. Utilities are restarting reactors and considering operating existing fleets; international opportunities in Europe, Japan, etc., also exist.

Segment Performance

• LEU Segment: For full year 2024, revenue was $349.9 million, an increase of $80.9 million compared to 2023. Gross profit was $93.9 million, down from $105.1 million in 2023. This segment contributed the majority of the company's revenue.
• Technical Solutions Segment: Generated $17.6 million in gross profit, an improvement of $10.6 million over the prior year. Revenue was $92.1 million, an increase of $40.9 million compared to 2023.

Guidance

• Issued $402.5 million convertible notes to support strategic plans, including the $60 million investment in centrifuge manufacturing.
• Anticipates competing for DOE task orders and is preparing for government funding to support domestic uranium enrichment production.
• Plans to leverage investment tax credits, with $62.4 million approved for the Oak Ridge manufacturing facility pending certain requirements.

Risks

• TENEX Licensing: Russian government revoked general license for TENEX, requiring specific licenses for each LEU shipment to the U.S. While TENEX has received some specific licenses, potential disruptions or delays in deliveries to customers remain a concern.
• Supply Chain: De-risking the American-only supply chain is ongoing, and ensuring smooth centrifuge manufacturing and deployment to meet government task orders poses risks if not executed efficiently.

Question and Answer

Q: Follow-up on DOE contracts task orders and timing A: Amir Vexler stated they can't speculate on timing but noted awards are moving forward and next steps involve specific task orders from the DOE.

Q: $60 million investment for centrifuge manufacturing A: Amir Vexler said the investment is for readiness to react to task orders, and Kevin Harrill mentioned it helps de-risk the supply chain and reinforce first-mover advantage in domestic centrifuge production.

Q: TENEX licenses and uranium sales in Q4 A: Amir Vexler said TENEX has received some specific licenses for LEU shipments, and uranium sales in Q4 were due to favorable market opportunities with UF6 prices at historic highs.

Q: Investment tax credit and 42-month timeline A: Kevin Harrill explained the tax credit conditions and timeline, with Amir Vexler clarifying the 42-month timeline assumption for centrifuge deployment, emphasizing preparation for government task orders within that timeframe