Centrus Energy Corp. (NYSE MKT:LEU) Q1 2020 Earnings Conference Call - Final Transcript

May 12, 2020 • 08:30 am ET

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Centrus Energy Corp. (NYSE MKT:LEU) Q1 2020 Earnings Conference Call - Final Transcript

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Executive
Dan Poneman

of our revenue is tied to stable long-term contracts with large entities like electrical utilities and the US Government. We've not had any interruptions in our nuclear fuel deliveries to our customers in the United States or around the world.

And we expect that we'll continue to make those deliveries as planned in the months and years ahead. In the first quarter, Centrus reported $45 million in total revenue and net income of $11.3 million, that's a significant improvement over the first quarter of 2019, when we saw a net loss of $20.9 million. As always, however, I want to caution that our revenues and results tend to vary considerably from quarter-to-quarter because our customers have annual purchase commitments, not quarterly commitments and they can take delivery at whatever point in the year they choose.

Some quarters have more deliveries than others, some have fewer. And given market dynamics, most choose to take those deliveries late in the year. Another big variable is the price. As you will recall, prices declined 75% between 2010 and 2018. Since they hit their low point in August 2018, they have subsequently increased by about 30%. Spot sales are infrequent in the nuclear fuel market. So most of our sales revenues in that segment are tied to long-term contracts that were signed over the last several years at differing points along the price curve.

So, quarters when you happen to be delivering on a higher-priced contract can look better than when you're delivering on the lower-priced contracts, which is why it is the full year performance that really matters most. Having said that, our positive net income number during the first quarter reflects the fact that we've lowered our overhead, lowered our debt, and lowered our enrichment supply costs.

Those lower supply cost on a per unit basis are principally the result of the price reset provision and our largest supply contract, which took effect last year along with other steps we've taken to obtain low-cost supply from other sources in the current price environment. We ended the quarter maintaining a long-term order book in our LEU segment valued at approximately $1 billion, which includes approximately $300 million in deferred revenue. The US Department of Commerce is seeking a significant extension of the Russian suspension agreement, potentially extending limits on imports of Russian nuclear fuel past the scheduled expiration of those limits at the end of this year.

We are engaging with the US government, industry stakeholders and others to urge that any potential extension includes sufficient quarter to allow all existing US contracts with Russian suppliers of enriched uranium, including our own supply contract to be fully implemented. Turning to our Technical Solutions segment. We have continued to execute well on our three-year $115 million contract with the US Department of Energy to deploy a cascade of our AC-100M machines to demonstrate production of high-assay low enriched uranium, which we call HALEU.

To date, we have not experienced delays as a result of