Centrus Energy (LEU) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and management's discussion and analysis for Centrus Energy Corp Item 1. Financial Statements This section presents Centrus Energy Corp.'s unaudited consolidated financial statements for Q2 2025 and 2024, including balance sheets, income statements, cash flows, and equity statements Consolidated Balance Sheets Total assets increased to $1.31 billion by June 30, 2025, driven by cash and inventories, while equity more than doubled to $359.1 million Consolidated Balance Sheet Highlights (in millions) | Financial Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $833.0 | $671.4 | | Inventories | $320.5 | $161.6 | | Total current assets | $1,250.6 | $1,015.2 | | Total assets | $1,314.8 | $1,093.4 | | Liabilities & Equity | | | | Total current liabilities | $482.2 | $346.8 | | Long-term debt | $390.0 | $472.5 | | Total liabilities | $955.7 | $932.0 | | Total stockholders' equity | $359.1 | $161.4 | Consolidated Statements of Operations and Comprehensive Income Net income significantly increased to $56.1 million for the six months ended June 30, 2025, despite a slight revenue decrease, due to higher gross profit Statement of Operations Summary (in millions, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $154.5 | $189.0 | $227.6 | $232.7 | | Gross profit | $53.9 | $36.5 | $86.8 | $40.8 | | Operating income | $33.5 | $21.1 | $54.0 | $10.5 | | Net income | $28.9 | $30.6 | $56.1 | $24.5 | | Diluted EPS | $1.59 | $1.89 | $3.22 | $1.52 | Consolidated Statements of Cash Flows Operating cash flow significantly improved to $89.3 million for the first six months of 2025, contributing to a $143.0 million increase in cash and equivalents Cash Flow Summary for Six Months Ended June 30 (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $89.3 | $12.3 | | Cash used in investing activities | ($5.7) | ($2.4) | | Cash provided by financing activities | $59.6 | $16.0 | | Increase in cash, cash equivalents and restricted cash | $143.0 | $25.8 | Notes to Consolidated Financial Statements Detailed notes cover accounting policies, revenue recognition, debt, commitments, and segment performance, including HALEU contract updates and TENEX supply risks - The HALEU Operation Contract with the DOE was amended to extend Phase 2 performance to June 30, 2025, and the DOE exercised the first one-year option (Option 1a) for Phase 3, extending the performance period to June 30, 2026, with a funded value of $108.0 million[47] - Total remaining performance obligations were $0.7 billion as of June 30, 2025, down from $0.8 billion at year-end 2024, with the LEU segment accounting for approximately $0.6 billion of this backlog, extending to 2030[51][52] - In March 2025, the company redeemed all of its outstanding 8.25% Notes ($74.3 million principal) and recorded a gain of $11.8 million on the extinguishment of this debt[63] - The company is exposed to significant supply risk with its TENEX contract due to the war in Ukraine, the U.S. Import Ban Act, and a Russian Decree that could restrict exports, as TENEX is a major supplier of SWU to the company[97][151][152] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, market conditions, and strategic initiatives, highlighting improved gross profit, HALEU contract progress, and strengthened liquidity Overview Centrus's LEU and Technical Solutions segments are focused on domestic uranium enrichment, with HALEU contract progress and recent financing activities strengthening its position - On June 25, 2025, Centrus announced it had produced and delivered the 900 kilograms of HALEU required under Phase 2 of its DOE contract, and the DOE subsequently exercised the first one-year option (Option 1a) for Phase 3, extending the contract to June 30, 2026, with a funded value of $108.0 million[129] - Centrus was selected as an awardee for all three of the DOE's recent RFPs for HALEU production, HALEU deconversion, and LEU production under an IDIQ structure, positioning it to compete for future task orders to expand domestic nuclear fuel supply[131][132] - The company is investing approximately $60 million over 18 months to expand its centrifuge manufacturing capacity in Oak Ridge, Tennessee, to support potential large-scale enrichment expansion in Piketon, Ohio[136] Market Conditions and Outlook The nuclear market faces uncertainty from the U.S. Import Ban Act and a Russian Decree, creating significant supply chain risks for Centrus's TENEX contract - The "Prohibiting Russian Uranium Imports Act" (Import Ban Act), enacted in May 2024, bans Russian LEU imports into the U.S. starting August 11, 2024; the company received a waiver for committed deliveries in 2024 and 2025, but the status for 2026 and 2027 remains uncertain[151] - A Russian Decree passed in November 2024 requires TENEX to obtain a specific export license for each LEU shipment to the U.S. through 2025, creating uncertainty about the timeliness and certainty of future supply[152] - A U.S. Department of Commerce investigation under Section 232 was initiated in April 2025 to assess if uranium imports threaten national security, which could result in new tariffs or trade restrictions that would increase costs[154] Results of Operations Despite a slight revenue decrease, total gross profit surged 113% to $86.8 million for H1 2025, driven by the LEU segment, leading to a 129% increase in net income Segment Performance for Six Months Ended June 30 (in millions) | Segment | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | | LEU | Revenue | $177.0 | $193.2 | (8)% | | | Gross Profit | $81.9 | $33.5 | 144% | | Technical Solutions | Revenue | $50.6 | $39.5 | 28% | | | Gross Profit | $4.9 | $7.3 | (33)% | | Total | Revenue | $227.6 | $232.7 | (2)% | | | Gross Profit | $86.8 | $40.8 | 113% | - The LEU segment's revenue decrease in H1 2025 was driven by no uranium sales ($29.9 million in H1 2024) and a 12% decrease in SWU volume, partially offset by a 24% increase in the average SWU price[188] - The increase in total net income for H1 2025 to $56.1 million (from $24.5 million in H1 2024) was primarily driven by a $46.0 million increase in gross profit and an $11.8 million gain on debt extinguishment[210] Liquidity and Capital Resources Cash and cash equivalents reached $833.0 million by June 30, 2025, bolstered by strong operating cash flow and financing activities, ensuring adequate liquidity - As of June 30, 2025, the company had a cash and cash equivalents balance of $833.0 million, with adequate liquidity anticipated for at least the next 12 months[211] - In H1 2025, the company generated $89.3 million in cash from operations, compared to $12.3 million in H1 2024[227][228] - The company completed its At The Market (ATM) stock offering, raising total net proceeds of $140.1 million in the first six months of 2025[239] - The company was granted a $62.4 million tax credit allocation under the Qualifying Advanced Energy Project Credit (§48C) program for its Oak Ridge manufacturing facility expansion, which it expects to monetize via transfer[221][222] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risks have occurred since the last annual report - There have been no material changes to the company's market risks since the 2024 Annual Report on Form 10-K[250] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[252] - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[253] PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, other information, and a list of exhibits filed with the Form 10-Q Item 1. Legal Proceedings Information on legal proceedings, including lawsuits related to the Portsmouth Gaseous Diffusion Plant, is detailed in Note 11 of the financial statements - Information on legal proceedings is detailed in Note 11, Commitments and Contingencies, within the financial statements[256] Item 1A. Risk Factors No material changes to the company's risk factors have been reported since the 2024 Annual Report on Form 10-K - There have been no material changes to the Risk Factors described in the company's 2024 Annual Report on Form 10-K[257] Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or executive officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the reported quarter[258] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including DOE agreement modifications, TENEX letter agreements, and CEO/CFO certifications - Exhibits filed include several modifications to the agreement with the U.S. Department of Energy, letter agreements with TENEX, and required CEO/CFO certifications[261]