NuScale Power Corporation — Q3 2023 Form 10-Q
Business context and reporting period. This unaudited filing covers the quarter and nine months ended September 30, 2023. NuScale is commercializing small modular nuclear reactors and related services; it has not yet generated meaningful commercial revenue. The NRC certified its 12-module, 50 MWe design in January 2023. The NRC accepted its application for review of a six-module, 77 MWe design in July; management expected review and approval to take approximately 21 months.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $6.95 million | $3.17 million | $18.25 million | $8.37 million |
| Gross margin | $1.01 million (14.5%) | $1.42 million (44.9%) | $3.13 million (17.1%) | $3.67 million (43.9%) |
| Operating loss | $92.92 million | $66.10 million | $204.51 million | $162.61 million |
| Net loss | $58.33 million | $49.63 million | $123.67 million | $94.38 million |
| Net loss attributable to Class A holders | $19.12 million | $10.71 million | $39.61 million | $13.30 million |
| Class A loss per share | $0.26 | $0.23 | $0.55 | $0.30 |
Revenue growth reflected CFPP project work and nuclear technology consulting. Cost of sales rose faster than revenue, reducing gross margin. Research and development expense included a $34.5 million charge for expected reimbursement of CFPP development costs. Sponsored cost share was $20.8 million for Q3 and $55.0 million for the nine-month period, down from $64.2 million in the comparable 2022 period. The Q3 warrant-liability fair-value change increased reported earnings by $11.1 million; the nine-month gain was $17.2 million.
At September 30, cash and cash equivalents were $117.5 million, compared with $217.7 million at year-end 2022. Restricted cash was $79.2 million, collateralizing $77.6 million of letters of credit. Total cash, cash equivalents and restricted cash was $196.6 million. The company reported no debt. Current assets were $159.2 million and current liabilities $81.5 million. Accumulated deficit was $221.7 million.
Operating cash use was $110.0 million for the first nine months, versus $104.7 million a year earlier. Investing activities provided $48.3 million, largely from the sale of $50.0 million in short-term investments. Financing provided $14.1 million, primarily from stock issuance and option exercises. The company sold 1.39 million Class A shares through its ATM program for net proceeds of $7.9 million; $141.7 million remained available under the $150 million program.
Material changes and notable items
- After quarter-end, NuScale and CFPP LLC agreed to terminate the Development Cost Reimbursement Agreement and Long Lead Material Agreement because the Carbon Free Power Project could not attract sufficient committed subscribers. A subsequent settlement agreement provides for a $49.769 million payment, subject to adjustment, and management estimated another $11 million to $16 million in Q4 termination, wind-down and demobilization expense.
- The balance sheet included a $34.5 million CFPP liability and $30.8 million of long-lead materials work in process at September 30. NuScale said it expects approximately $24.3 million of restricted cash to be released in the near term, with the final amount dependent on settlement accounting.
- Management said it expects operating losses and negative operating cash flow to continue during development. It believes available resources are sufficient for the next 12 months, but noted costs are uncertain, customer-sourced income is not assured, and DOE funding depends on appropriations. Meaningful revenue is not expected until commercialization.
- Fluor, NuScale’s majority owner, accounted for 76% of Q3 revenue and 77% of nine-month revenue. The company incurred $28.0 million of Fluor-related expenses and earned $14.1 million of Fluor-related revenue during the first nine months.
Risks, contingencies and governance
The CFPP settlement is significant and may adversely affect financial condition and commercialization prospects. NuScale noted that the long-lead materials may be worth less than their reimbursement cost, may require additional payments to DOE to obtain free of liens, and may not be usable for another project. A lawsuit by purported former NuScale LLC members seeks declaratory relief and damages relating to merger-related operating agreement amendments. The court recommended denying NuScale’s motion to dismiss; the company objected, says a loss is not probable, and recorded no liability.
The filing added risks related to short-selling strategies and share dilution. NuScale reported that a short-seller report published October 19, 2023 was followed by a stock-price decline from $5.04 on October 18 to $3.07 on October 30. Potential dilution includes the ATM program, exchangeable Class B units and outstanding options and warrants. Management reported effective disclosure controls as of September 30.
Most important facts for investors to verify
- Final CFPP settlement amount, additional wind-down costs, timing of restricted-cash release and disposition or value of long-lead materials.
- Cash burn and funding runway relative to management’s 12-month liquidity assessment, including the availability and timing of DOE and customer funding.
- Progress and timing of NRC review for the 77 MWe design and evidence of customer commitments following the CFPP project’s termination.
- Revenue concentration and related-party transactions involving Fluor, plus potential dilution from the ATM program, equity exchanges, options and warrants.
- Developments in the former-unit-holder litigation and the potential market impact of short-selling activity and share sales.