Centrus Energy (LEU) - 2024 Q3 - Quarterly Report

Geopolitical and Supply Chain Risks - Risks related to the war in Ukraine and geopolitical conflicts, including potential sanctions or bans impacting the company's ability to obtain, deliver, or sell LEU under the TENEX Supply Contract[12] - Risks related to laws banning imports of Russian LEU into the United States, including the Import Ban Act, and transactions with Rosatom or its subsidiaries[12] - Risks related to the company's dependence on suppliers like TENEX and Orano, and potential negative impacts on liquidity due to supply chain disruptions[14] - Risks related to increasing quantities of LEU being imported into the U.S. from China, impacting future sales and financing for enrichment capacity expansion[14] Government Funding and Contract Risks - Risks related to government funding or demand for HALEU for government or commercial uses, and uncertainties around funding for American Centrifuge technology[14] - Risks related to DOE not issuing task orders under HALEU or Deconversion contracts, or not providing adequate funding for the company's expansion plans[15][16] - The HALEU Operation Contract has a base value of approximately $150 million, with Phase 1 completed and Phase 2 expected to produce 900 kilograms of HALEU UF6 annually[44] - The DOE modified the HALEU Operation Contract to include an additional$6.2 million for infrastructure and facility repairs[46] Financial Performance and Liquidity - Total revenue for the nine months ended September 30, 2024, was $290.4 million, compared to$216.6 million in the same period in 2023, representing a 34.1% increase[25] - Net income for the nine months ended September 30, 2024, was $19.5 million, compared to$28.1 million in the same period in 2023, a decrease of 30.6%[25] - Gross profit for the nine months ended September 30, 2024, was $49.7 million, compared to$62.3 million in the same period in 2023, a decrease of 20.2%[25] - Cash and cash equivalents decreased to $194.3 million as of September 30, 2024, from$201.2 million as of December 31, 2023, a decrease of 3.4%[24] - Cash used in operating activities for the nine months ended September 30, 2024, was $20.9 million, compared to$8.8 million in the same period in 2023, indicating a significant increase in cash outflow[27] - Capital expenditures for the nine months ended September 30, 2024, were $3.4 million, compared to$1.1 million in the same period in 2023, showing a 209% increase[27] - Cash provided by financing activities for the nine months ended September 30, 2024, was $17.4 million, compared to$13.9 million in the same period in 2023, reflecting a 25.2% increase[27] Legal and Regulatory Risks - Risks related to legal proceedings, government investigations, and potential claims or litigation arising from past activities at operational sites[21] - The Company is assessing DOE's claim of approximately 9.6 million related to the Joppa Power Plant D&D costs[103] - The Company believes that any liability from legal proceedings should be indemnified under the Price-Anderson Act[105][106][107][109] Pension and Postretirement Benefits - Risks related to the company's long-term liabilities, including unfunded pension plan obligations and postretirement health and life benefit obligations[17] - Net periodic benefit costs for defined benefit pension plans were 0.4 million for the three months ended September 30, 2024, compared to $(1.0) million for the same period in 2023[69] - Net periodic benefit costs for the postretirement health and life benefit plan were$1.1 million for the three months ended September 30, 2024, unchanged from the same period in 2023[70] - The company's defined benefit obligations for its pension plans was $527.3 million at December 31, 2022, with$30.6 million related to a specific plan, resulting in a net actuarial gain of $0.9 million for the three and nine months ended September 30, 2023[71] - The company transferred$186.5 million of pension plan obligations to an insurer, funded by $171.4 million of pension plan assets, resulting in a transfer of liabilities for approximately 1,400 participants and recording$28.6 million in income in Q4 2023[72] - In Q2 2024, the company transferred $234 million of pension plan obligations to an insurer, funded by$224 million of pension plan assets, affecting over 1,000 participants[73] - In Q3 2024, the company transferred $15.4 million of pension plan assets and related obligations, affecting over 400 participants, resulting in net actuarial gains of$0.2 million and $16.8 million for the three and nine months ended September 30, 2024[74][75] Revenue and Segment Performance - Revenue from SWU and uranium sales in the United States for the three months ended September 30, 2024, was$16.9 million, compared to $34.8 million in foreign markets[37] - Total revenue from SWU and uranium sales for the nine months ended September 30, 2024, was$228.0 million, compared to $186.9 million for the same period in 2023[37] - Revenue from the LEU segment for the nine months ended September 30, 2024, was$228.0 million, compared to $186.9 million in the same period in 2023[111] - Revenue from the Technical Solutions segment for the nine months ended September 30, 2024, was$62.4 million, compared to $29.7 million in the same period in 2023[111] - Gross profit for the LEU segment for the nine months ended September 30, 2024, was$38.7 million, compared to $60.8 million in the same period in 2023[111] - Gross profit for the Technical Solutions segment for the nine months ended September 30, 2024, was$11.0 million, compared to $1.5 million in the same period in 2023[111] - One customer in the LEU segment represented$34.8 million of revenue in the three months ended September 30, 2024[113] - Four customers in the LEU segment represented $69.3 million,$42.3 million, $35.4 million, and$30.2 million of revenue in the nine months ended September 30, 2024[113] - One customer in the Technical Solutions segment represented $21.6 million and$60.3 million of revenue in the three and nine months ended September 30, 2024, respectively[113] Inventory and Asset Management - Inventories decreased to $190.7 million as of September 30, 2024, from$306.4 million as of December 31, 2023, a decrease of 37.8%[24] - The Company borrowed UF valued at $22.5 million in March 2023, recorded to inventory based on estimated fair market value[59] - Inventories, net increased to$222.1 million as of December 31, 2023, from $189.9 million as of September 30, 2024[58] - Intangible assets decreased to$32.2 million as of September 30, 2024, from $39.4 million as of December 31, 2023[61] Debt and Equity - Long-term debt decreased to$83.5 million as of September 30, 2024, from $89.6 million as of December 31, 2023, a decrease of 6.8$89.6 million as of December 31, 2023, from $83.5 million as of September 30, 2024[63] - The carrying value of 8.25$89.6 million as of September 30, 2024, from $95.7 million as of December 31, 2023[67] - Total stockholders' equity increased to$76.4 million as of September 30, 2024, from $32.3 million as of December 31, 2023, an increase of 136.5$24.0 million, compared to $23.2 million in the same period in 2023[27][30] - The company sold 115,661 and 567,491 shares of Class A Common Stock in Q3 and nine months ended September 30, 2024, respectively, generating$4.6 million and $24.5 million in proceeds[83] Tax and Compensation - The company released$7.7 million of the valuation allowance against federal net deferred taxes in Q3 2023 due to increased forecasted future income in the LEU segment[78] - The company withheld $1.9 million of shares in Q1 2023 and$0.1 million in Q1 2024 to fund tax withholding obligations under its stock-based compensation plan[92][93] - Stock-based compensation for the nine months ended September 30, 2024, was $1.1 million, compared to$2.0 million in the same period in 2023, reflecting a 45% decrease[27] Competitive and Industry Risks - Risks related to the competitive environment for the company's products and services, including potential changes in the nuclear energy industry[20] - The Orano Supply Agreement provides flexibility to adjust purchase volumes, with annual minimums and maximums in fixed amounts that vary year by year[99] Cybersecurity Risks - Risks related to cybersecurity incidents that may impact the company's business operations and ability to perform under government contracts[16] Customer Concentration - One customer in the LEU segment represented $34.8 million of revenue in the three months ended September 30, 2024[113] - Four customers in the LEU segment represented$69.3 million, $42.3 million,$35.4 million, and $30.2 million of revenue in the nine months ended September 30, 2024[113] - One customer in the Technical Solutions segment represented$21.6 million and $60.3 million of revenue in the three and nine months ended September 30, 2024, respectively[113] Remaining Performance Obligations - The company's remaining performance obligations as of September 30, 2024, were$0.8 billion, extending to 2030[49] Tax Benefits and Agreements - The company entered into a Sixth Amendment to the Section 382 Rights Agreement on May 28, 2024, to preserve the long-term value of its NOL carry-forwards and other tax benefits[87][89] Financial Assurance and Deposits - Total deposits for financial assurance increased to $32.4 million as of December 31, 2023, compared to$30.0 million as of September 30, 2024[55] Net Income and Earnings Per Share - Net income (loss) per share for Q3 2024 was $(0.30) (basic) and$(0.30) (diluted), while for the nine months ended September 30, 2024, it was $1.21 (basic) and$1.20 (diluted)[81] Accounts Receivable and Deferred Revenue - Accounts receivable as of September 30, 2024, were $19.1 million, down from$49.4 million as of December 31, 2023[39] - Deferred revenue for the current period as of September 30, 2024, was $189.8 million, a decrease of$62.6 million from December 31, 2023[40]