NuScale(SMR) - 2023 Q2 - Quarterly Report

Glossary of Terms The glossary defines key terms and abbreviations used in the filing, such as 'Class A common stock', 'DOE', 'Fluor', 'NPM', 'NRC', and 'SMR', to ensure clarity and consistent understanding - The glossary defines key terms and abbreviations used in the filing, such as 'Class A common stock', 'DOE', 'Fluor', 'NPM', 'NRC', and 'SMR', to ensure clarity and consistent understanding[11][12][13][14][15][16][17] Cautionary Note Regarding Forward-Looking Statements This section warns that the report contains forward-looking statements subject to risks and uncertainties, which could cause actual results to differ materially from projections - This section warns that the report contains forward-looking statements subject to risks and uncertainties, which could cause actual results to differ materially from projections[18][19] - Forward-looking statements cover financial and business performance, regulatory approvals for SMRs, market demand, macroeconomic conditions, growth rates, liquidity, litigation, and financial arrangements[21] - Readers are advised against relying on past trends as indicators of future performance, and important factors causing actual results to differ are described in the 'Risk Factors' section of the 2022 Annual Report on Form 10-K[20] Part I - Financial Information Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of NuScale Power Corporation for the periods ended June 30, 2023, and December 31, 2022, including the balance sheet, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies and specific financial line items - The financial statements are unaudited and should be read in conjunction with the 2022 Annual Report on Form 10-K[42] - NuScale Corp is commercializing a modular, scalable 77 MWe light water reactor nuclear power plant (NPM) and is majority-owned by Fluor[39] Condensed Consolidated Balance Sheet | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :------------ | :---------------- | | Total assets | $309,464 | $348,635 | | Cash and cash equivalents | $154,409 | $217,685 | | Short-term investments | $— | $50,000 | | Restricted cash | $60,192 | $26,532 | | Total liabilities | $85,260 | $71,548 | | Warrant liabilities | $23,258 | $29,349 | | Deferred revenue | $23,779 | $856 | | Total Stockholders' Equity | $224,204 | $277,087 | | Accumulated deficit | $(202,577) | $(182,092) | Condensed Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $5,795 | $2,749 | $11,300 | $5,194 | | Cost of sales | $(5,765) | $(1,739) | $(9,181) | $(2,944) | | Gross margin | $30 | $1,010 | $2,119 | $2,250 | | Research and development expenses | $26,932 | $29,506 | $54,502 | $54,369 | | General and administrative expenses | $16,323 | $11,968 | $31,018 | $22,488 | | Loss from operations | $(56,121) | $(52,666) | $(111,593) | $(96,514) | | Sponsored cost share | $16,337 | $25,172 | $34,210 | $45,749 | | Net loss | $(29,734) | $(21,380) | $(65,344) | $(44,753) | | Net Loss Attributable to Class A Common Stockholders | $(9,523) | $(2,593) | $(20,485) | $(2,593) | | Basic and Diluted Loss per Share | $(0.13) | $(0.06) | $(0.29) | $(0.06) | Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric | Balances at Dec 31, 2022 (in thousands) | Balances at June 30, 2023 (in thousands) | | :----------------------------------- | :----------------------- | :----------------------- | | Total Stockholders' Equity | $277,087 | $224,204 | | Additional Paid-in Capital | $296,748 | $312,618 | | Accumulated Deficit | $(182,092) | $(202,577) | | Noncontrolling Interests | $162,408 | $114,140 | - Equity-based compensation expense for the six months ended June 30, 2023, was $8.09 million, up from $2.13 million in the prior year[29] - The conversion of combined interests into Class A common stock and exercise of options/warrants increased Class A common shares outstanding[29] Condensed Consolidated Statements of Cash Flows | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(82,367) | $(64,052) | | Net cash provided by (used in) investing activities | $48,380 | $(1,581) | | Net cash provided by financing activities | $4,371 | $339,362 | | Net change in cash and cash equivalents | $(29,616) | $273,729 | | Cash and cash equivalents, End of period | $214,601 | $350,823 | - Operating cash flow decreased due to growing receivables and cash payments for long-lead materials[130] - Investing activities in 2023 included a $50.0 million sale of short-term investments, while 2022 had only capital expenditures[131] - Financing activities in 2022 included $341.5 million from the Merger Transaction, which was not present in 2023[37][132] Notes to the Unaudited Condensed Consolidated Financial Statements 1. Nature of Business - NuScale Power Corporation commercializes a modular, scalable 77 MWe light water reactor nuclear power plant (NPM) design, with exclusive rights from Oregon State University[39] - The company is majority-owned by Fluor[39] - A reverse recapitalization merger with Spring Valley was completed in May 2022, with NuScale LLC treated as the accounting acquirer[40][41] - The Transaction resulted in NuScale LLC receiving $341.5 million in cash and assuming $47.5 million in Warrant liabilities[41] 2. Summary of Significant Accounting Policies - The unaudited interim financial statements rely on estimates and should be read with the 2022 Annual Report on Form 10-K[42][43] - NuScale Corp consolidates NuScale LLC as a variable interest entity, including all its assets and liabilities, except for NuScale Corp Warrants and certain prepaid insurance[44] - Reclassifications were made in 2022 for Interest income (expense), R&D expenses, G&A expenses, and Other expenses to conform to current year presentation[46][47] - Warrants are classified as liabilities at fair value and re-measured each reporting period, with changes recognized in the statements of operations[50] - Sponsored cost share agreements with entities like DOE, USTDA, and CFPP LLC reimburse the Company for specific R&D activities[51] | Source | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | DOE | $7,193 | $25,172 | $19,547 | $45,634 | | USTDA | $6,882 | $— | $9,297 | $115 | | CFPP LLC | $2,165 | $— | $5,104 | $— | 3. Noncontrolling Interests and Loss Per Share - Legacy NuScale Equityholders hold indirect economic interests in NuScale LLC as noncontrolling interests (NCI)[55] | Metric | As of and for the three months ended June 30, 2023 | As of and for the six months ended June 30, 2023 | | :----------------------------------- | :------------------------------------------------- | :----------------------------------------------- | | NuScale Corp Class A common stock (End of period) | 32.4 % | 32.4 % | | NuScale LLC Class B Units (NCI) (End of period) | 67.6 % | 67.6 % | - Basic and diluted loss per share for Class A common stock was $(0.13) for the three months and $(0.29) for the six months ended June 30, 2023[64] - Class B common stock carries voting rights but no economic rights, thus not included in loss per share calculations[63] 4. Warrant Liabilities | Warrant Type | June 30, 2023 | December 31, 2022 | | :------------- | :------------ | :---------------- | | Public Warrants | 9,558,701 | 9,558,703 | | Private Placement Warrants | 8,900,000 | 8,900,000 | - Warrants are exercisable for whole shares and expire five years from the Transaction date[66] - The Company may redeem outstanding Warrants if Class A common stock price equals or exceeds $18.00 per share (at $0.01 per Warrant) or $10.00 per share (at $0.10 per Warrant, with cashless exercise option)[66][68] - Private Placement Warrants are non-redeemable if held by initial purchasers or permitted transferees, but otherwise follow Public Warrant redemption terms[69] 5. Fair Value Measurement - Fair value measurements are categorized into a three-level hierarchy: Level 1 (active market quoted prices), Level 2 (similar instruments in active markets or observable model inputs), and Level 3 (unobservable inputs)[70][71] - Public Warrants are classified as Level 1, and Private Placement Warrants are classified as Level 2 for fair value measurement[75] | Warrant Type | Level 1 (June 30, 2023) (in thousands) | Level 2 (June 30, 2023) (in thousands) | Total (June 30, 2023) (in thousands) | Level 1 (Dec 31, 2022) (in thousands) | Level 2 (Dec 31, 2022) (in thousands) | Total (Dec 31, 2022) (in thousands) | | :----------------------- | :---------------------- | :---------------------- | :-------------------- | :--------------------- | :--------------------- | :--------------------- | | Public Warrants | $12,044 | $— | $12,044 | $15,198 | $— | $15,198 | | Private Placement Warrants | $— | $11,214 | $11,214 | $— | $14,151 | $14,151 | | Total Warrant Liabilities | $12,044 | $11,214 | $23,258 | $15,198 | $14,151 | $29,349 | 6. Accounts and Other Receivables - Accounts and other receivables primarily consist of reimbursement requests from DOE awards, interest receivable, and commercial accounts receivable[77] - Interest receivable was $556 thousand at June 30, 2023, down from $1,021 thousand at December 31, 2022[77] - All receivables are considered fully collectible due to their nature (U.S. federal government or federal projects), and no allowance has been recorded[78] 7. Property, Plant and Equipment | Category | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :---------------------- | :------------ | :---------------- | | Furniture and fixtures | $145 | $173 | | Office and computer equipment | $7,926 | $7,393 | | Software | $13,899 | $13,864 | | Operations equipment | $1,165 | $347 | | Leasehold improvements | $2,281 | $2,312 | | Total | $25,416 | $24,089 | | Less: Accumulated depreciation | $(20,276) | $(19,431) | | Add: Assets under development | $97 | $112 | | Net property, plant and equipment | $5,237 | $4,770 | 8. Long-Term Contract Work In Process - Capitalized $23.9 million in long-term contract work in process as of June 30, 2023, for long-lead materials for NPM fabrication under a contract with CFPP LLC[80][82] - The Company is considered the principal under ASC 606 for this contract, with one performance obligation to be satisfied upon material receipt at the fabricator's facility[82] - Billed CFPP LLC $23.7 million, recorded as deferred revenue, related to this contract[82] 9. Employee Benefits - The Company sponsors a 401(k) Plan, matching employee contributions up to 5% of compensation[83] | Period | 2023 (in thousands) | 2022 (in thousands) | | :---------------------- | :----- | :----- | | Three months ended June 30 | $691 | $495 | | Six months ended June 30 | $1,442 | $1,167 | 10. Income Taxes - The effective tax rate was 0% for the three and six months ended June 30, 2023, primarily due to losses allocated to noncontrolling interests and a full valuation allowance against deferred tax assets[85][87] - No income tax expense was recorded for the periods[86] - The Inflation Reduction Act (IRA) did not result in any material adjustment to the income tax provision for the periods[89] 11. Equity-Based Compensation | Period | 2023 (in thousands) | 2022 (in thousands) | | :---------------------- | :----- | :----- | | Three months ended June 30 | $4,453 | $1,111 | | Six months ended June 30 | $8,090 | $2,132 | - For the six months ended June 30, 2023, $3.36 million was included in G&A expense and $4.73 million in Other expense[92] - The share pool automatically increased by 8,972,128 Class A common shares on January 1, 2023[93] - Granted 126,158 RSU awards to directors and 1,835,016 RSUs to employees during the six months ended June 30, 2023[95] 12. Related Party Transactions | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Expenses incurred from Fluor | $8,479 | $5,571 | $17,205 | $9,172 | | Revenue earned from Fluor | $4,756 | $1,956 | $8,770 | $3,517 | - Fluor accounted for 82% of total revenue for the three months ended June 30, 2023, and 78% for the six months ended June 30, 2023[97] - As of June 30, 2023, the Company owed Fluor $11.8 million (accounts payable) and Fluor owed the Company $4.7 million (accounts receivable)[96] 13. Commitments and Contingencies - A lawsuit filed by purported NuScale LLC members regarding operating agreement amendments had a motion to dismiss denied on August 3, 2023; no liability recorded as loss is not probable[99] - Under the DCRA with CFPP LLC, the Company may be obligated to reimburse UAMPS up to $15.3 million ($11.2 million for DCRA + $4.1 million for separate agreement) if performance criteria are not met[101][133] - $60.2 million in restricted cash collateralizes $59.0 million in letters of credit for potential DCRA reimbursements[102][104][134][136] - An Economic Competitiveness Test (ECT) in December 2022 showed the LCOE exceeded the $58.00/MWh price target, but UAMPS members opted to continue the project; another ECT is scheduled for year-end 2023 with a new price target of $89.00/MWh[103][104][135][136] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on NuScale Power Corporation's financial condition and results of operations for the three and six months ended June 30, 2023. It covers the company's mission, progress in SMR commercialization, financial performance, liquidity, and capital resources, highlighting increased revenue but also widening operating losses and negative cash flows as the company advances towards commercialization - NuScale's mission is to provide scalable advanced nuclear technology (SMRs) for electricity, heat, and clean water[107] - The company's SMR, the NuScale Power Module (NPM), offers enhanced safety, improved affordability, and flexibility for diverse applications[108] - The NRC certified NuScale's 12-unit 50 MWe SMR design in January 2023 and accepted the SDA Application for the 6-unit 77 MWe NPM design for formal review in July 2023, with approval expected in about 24 months[109][110] - The Merger with Spring Valley in May 2022 was treated as a reverse recapitalization, with NuScale LLC as the accounting acquirer, receiving $341.5 million cash and assuming $47.5 million warrant liabilities[111][112][113] Overview - NuScale's mission is to commercialize its scalable 77 MWe light water reactor nuclear power plant (NPM) for carbon-free energy[107][108] - The NRC certified NuScale's 12-unit 50 MWe SMR design in January 2023[109] - The NRC accepted the SDA Application for NuScale's 6-unit 77 MWe NPM design for formal review in July 2023, with approval expected in approximately 24 months[110] Results of Operations | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $5,795 | $2,749 | $11,300 | $5,194 | | Cost of sales | $(5,765) | $(1,739) | $(9,181) | $(2,944) | | Gross margin | $30 | $1,010 | $2,119 | $2,250 | | Research and development expenses | $26,932 | $29,506 | $54,502 | $54,369 | | General and administrative expenses | $16,323 | $11,968 | $31,018 | $22,488 | | Other expenses | $12,896 | $12,202 | $28,192 | $21,907 | | Loss from operations | $(56,121) | $(52,666) | $(111,593) | $(96,514) | | Sponsored cost share | $16,337 | $25,172 | $34,210 | $45,749 | | Loss before income taxes | $(29,734) | $(21,380) | $(65,344) | $(44,753) | Comparison of the Three Months Ended June 30, 2023 and 2022 - Revenue increased by $3.0 million, primarily from CFPP EPCDA and nuclear technologies consulting services[115] - R&D expenses decreased by $2.6 million, mainly due to a $6.7 million reduction in DOE award compensation costs, partially offset by higher USTDA and subrecipient compensation and professional fees[116] - G&A expenses increased by $4.4 million, driven by $2.3 million in compensation costs (due to headcount increase) and $1.9 million in advertising and marketing[117] - Sponsored cost share decreased by $8.8 million, primarily due to an $18.0 million reduction in DOE funding, partially offset by increases from USTDA and subrecipient projects[118] Comparison of the Six Months Ended June 30, 2023 and 2022 - Revenue increased by $6.1 million, primarily from CFPP EPCDA and nuclear technologies consulting services[119] - G&A expenses increased by $8.5 million, driven by $3.1 million in compensation costs (headcount), $1.1 million in equity-based compensation, $2.8 million in advertising/marketing, $1.0 million in insurance, and $0.5 million in professional/IT fees[120][121] - Other expenses increased due to higher headcount and $4.5 million in equity-based compensation, along with increased software and hardware expenses[122] - Sponsored cost share decreased by $11.5 million, primarily due to a $26.0 million reduction in DOE funding, partially offset by increases from USTDA and subrecipient projects[123] Liquidity and Capital Resources - Cash and cash equivalents decreased to $154.4 million at June 30, 2023, from $217.7 million at December 31, 2022[125] - The company has incurred significant operating losses and negative operating cash flow, with an accumulated deficit of $202.6 million as of June 30, 2023[126] - Management expects operating losses and negative cash flows to increase as commercialization efforts advance[126] - The company does not expect meaningful revenue until NPM commercialization and may require additional funding despite believing current funds are sufficient for the next twelve months[127][128] Liquidity - Cash and cash equivalents decreased to $154.4 million as of June 30, 2023, from $217.7 million at December 31, 2022[125] - The company has an accumulated deficit of $202.6 million as of June 30, 2023, and expects operating losses and negative cash flows to increase[126] - Meaningful revenue is not expected until NPM commercialization, and while current funds are believed sufficient for the next twelve months, additional financing may be required[127][128] Comparison of Cash Flows for the Six Months Ended June 30, 2023 and 2022 | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(82,367) | $(64,052) | | Net cash provided by (used in) investing activities | $48,380 | $(1,581) | | Net cash provided by financing activities | $4,371 | $339,362 | | Net (decrease) increase in cash and cash equivalents | $(29,616) | $273,729 | - Operating cash flow decreased due to growing receivables and cash payments for long-lead materials[130] - Investing activities in 2023 included a $50.0 million sale of short-term investments[131] - Financing activities in 2022 included $341.5 million from the Transaction, which was not present in 2023[132] Capital Resources - Under the DCRA with CFPP LLC, the Company may be obligated to reimburse UAMPS up to $15.3 million ($11.2 million for DCRA + $4.1 million for separate agreement) if performance criteria are not met[133] - $60.2 million in restricted cash collateralizes $59.0 million in letters of credit for potential DCRA reimbursements[134][136] - An ECT failure occurred in December 2022 (LCOE exceeded $58.00/MWh target), but UAMPS members chose to continue the project; another ECT is scheduled for year-end 2023 with a new price target of $89.00/MWh[135][136] Recent Accounting Pronouncements - Management believes that no new accounting guidance issued but not yet effective will have a material impact on the Company's current financial statements[138] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the Company's market risk disclosures from those presented in its 2022 Annual Report on Form 10-K - No material changes in market risk disclosures since the 2022 Annual Report on Form 10-K[139] Item 4. Controls and Procedures As of June 30, 2023, management, including the principal executive and financial officers, concluded that the Company's disclosure controls and procedures were effective. These controls are designed to ensure timely recording, processing, summarizing, and reporting of information required in Exchange Act reports - Disclosure controls and procedures were effective as of June 30, 2023[140] - Controls are designed to ensure timely and accurate reporting of information in Exchange Act reports[141] Part II - Other Information Item 1. Legal Proceedings The Company is involved in a legal proceeding where thirteen purported members of NuScale LLC filed a lawsuit alleging breach of contract related to amendments to the operating agreement during the Merger. A motion to dismiss was denied on August 3, 2023. Management does not believe a loss is probable and has not recorded any liability - A lawsuit was filed by purported NuScale LLC members alleging breach of contract related to operating agreement amendments during the Merger[144] - NuScale LLC's motion to dismiss the complaint was denied on August 3, 2023[144] - Management does not believe it is probable that a loss will be incurred and has not recorded any liability[144] Item 1A. Risk Factors There have been no material changes to the Company's risk factors as disclosed in its 2022 Annual Report on Form 10-K - No material changes to risk factors since the 2022 Annual Report on Form 10-K[145] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is marked "Not applicable," indicating no unregistered sales of equity securities or use of proceeds to report for the period - Not applicable[146] Item 3. Defaults Upon Senior Securities This item is marked "Not applicable," indicating no defaults upon senior securities to report for the period - Not applicable[146] Item 4. Mine Safety Disclosures This item is marked "Not applicable," indicating no mine safety disclosures to report for the period - Not applicable[146] Item 5. Other Information This section details Rule 10b5-1 Trading Plans. In May 2023, employees, including officers, were offered to instruct agents to sell Class A common stock to cover tax withholding from RSU vesting. The Company's general counsel, Robert Temple, adopted a 10b5-1 plan in April 2023 for 63,360 RSUs, while Julie Adelman, Senior Director of Accounting, terminated her plan in April 2023 - Employees, including officers, were offered to use "sell-to-cover" transactions for RSU tax withholding, some under Rule 10b5-1 trading arrangements[146] - General Counsel Robert Temple adopted a 10b5-1 plan on April 25, 2023, for 63,360 RSUs[147] - Senior Director of Accounting Julie Adelman terminated her 10b5-1 plan on April 11, 2023[147] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Certificate of Incorporation, Bylaws, Warrant Certificate, Warrant Agreement, CEO and CFO certifications (31.1, 31.2, 32.1, 32.2), and XBRL interactive data files - Includes Certificate of Incorporation, Bylaws, Warrant Certificate, Warrant Agreement, CEO/CFO certifications, and XBRL interactive data files[149] Signatures The report is signed by John Hopkins, Chief Executive Officer, and Julie Adelman, Senior Director of Accounting, on August 9, 2023, certifying its submission - The report was signed by John Hopkins (CEO) and Julie Adelman (Senior Director, Accounting) on August 9, 2023[151]