NuScale Power Corporation — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Financial statements are unaudited. NuScale commercializes small modular nuclear reactors (SMRs). Its May 2, 2022 merger with Spring Valley was accounted for as a reverse recapitalization; results continue NuScale LLC’s historical operations, while the transaction materially changed cash, equity, and the reporting structure.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $2.749 million | $0.372 million | $5.194 million | $1.036 million |
| Gross margin | $1.010 million (36.7%) | $0.127 million (34.1%) | $2.250 million (43.3%) | $0.385 million (37.2%) |
| Operating loss | $52.666 million | $40.946 million | $96.514 million | $77.405 million |
| Net loss | $21.380 million | $24.679 million | $44.753 million | $47.345 million |
| Net loss attributable to Class A holders; EPS | $2.593 million; $(0.06) | Not presented | $2.593 million; $(0.06) | Not presented |
Q2 revenue primarily reflected CFPP engineering, procurement and construction development agreement work and nuclear technology consulting. Research and development expense was $28.628 million in Q2 and $53.008 million for the half year; general and administrative expense was $15.443 million and $25.963 million, respectively. DOE cost-share reimbursements were $25.177 million in Q2 and $45.639 million for the half year. The Q2 Class A loss per share covers the post-merger period beginning May 3; pre-merger loss-per-unit information was not presented.
- Cash and liquidity: Cash and cash equivalents were $350.823 million at June 30, versus $77.094 million at year-end 2021. Current assets were $373.494 million and current liabilities $30.439 million.
- Cash flows, six months: Operating cash used was $64.052 million, investing cash used was $1.581 million, and financing cash provided was $339.362 million; cash increased by $273.729 million.
- Debt and other liabilities: No debt remained at June 30; Fluor’s $14.181 million convertible loan was converted into equity in April. Warrant liabilities were $41.412 million. Total liabilities were $75.493 million.
Changes versus prior period and unusual items
- Revenue rose from a small base, but operating expenses increased: Q2 R&D rose by $7.728 million and G&A by $4.550 million year over year. Management attributed increases chiefly to standard plant design work, higher headcount and compensation.
- Operating loss widened despite higher revenue and DOE reimbursement. Net loss was lower than the prior-year quarter, partly reflecting a $6.120 million change in warrant fair value recognized after the merger; warrants are remeasured each reporting period, which may cause earnings volatility.
- Transaction financing generated $341.462 million of net cash proceeds as presented in the cash-flow statement. The transaction included $235 million of PIPE funding and trust cash, offset by transaction costs. The merger also brought 20.4 million warrants, classified as liabilities.
- Fluor-related activity for the six months included $9.172 million of expenses and $3.517 million of revenue. At June 30, NuScale owed Fluor $3.524 million in accounts payable and $2.765 million as a noncurrent liability.
- A $1.540 million cash payment related to CEO unit appreciation rights resulted in $1.490 million of equity-based compensation expense.
Outlook, risks and contingencies
- Management expects operating losses and negative operating cash flow to continue and potentially increase before commercialization. It believes current cash can fund R&D and operating needs for several years, but says additional funding may be needed; projected customer-sourced income is not assured. No formal financial guidance is provided.
- Management describes module delivery to a client site as potentially as early as 2027. The UAMPS Carbon Free Power Project is targeted for commercial operation in 2029, with remaining modules in 2030; the Romanian project is expected to be operable in 2028. These are plans, not guaranteed outcomes.
- The NRC had issued a Standard Design Approval for the existing design. On July 29, 2022, after quarter-end, it directed staff to issue a final rule certifying the design; effectiveness depends on publication in the Federal Register. NuScale still planned to seek approval for a higher-output 77 MWe design, potentially in 2024.
- The filing says NuScale had not yet entered into a binding customer contract to deliver NPMs. Initial deployment depends on binding supply and EPC agreements, customer approvals, financing, and successful construction and operation. Delays, cost competitiveness, supply-chain constraints, regulatory approvals, and nuclear safety perceptions are significant risks.
- Under the UAMPS development cost reimbursement agreement, NuScale may have to refund development costs if specified conditions are not met. The stated maximum at the current project stage is $57 million; UAMPS net development costs were $13.024 million. A $15 million letter of credit was collateralized by a demand deposit account. Management said it was complying with and expected to remain compliant with performance criteria.
- The company’s Up-C structure includes a tax receivable agreement requiring payment of 85% of certain realized tax savings to legacy equityholders after qualifying exchanges. No exchanges had occurred and no TRA liability was recorded at quarter-end; future payments could be substantial, and specified events can accelerate obligations.
- Fluor holds majority voting control. The filing highlights potential dilution and share-price pressure from registered resale shares, options and warrants. It also reports prior Spring Valley material weaknesses involving complex equity instruments and EPS presentation; management said remediation measures were implemented and those weaknesses were remediated, and disclosure controls were effective at June 30.
Important facts for investors to verify
- Whether UAMPS and Fluor execute binding agreements and whether CFPP cost, licensing, and deployment milestones remain achievable.
- Timing and outcome of NRC certification publication and approval of the proposed 77 MWe design, plus site and foreign-country approvals.
- Cash burn, DOE cost-share funding and appropriations, customer receipts, and the assumptions behind management’s “several years” liquidity assessment.
- Potential reimbursement exposure under the UAMPS agreement, including the applicable cap and letter-of-credit collateral requirements as project stages change.
- Potential dilution and market overhang from registered resale shares, legacy-unit exchanges, options, warrants, and the related warrant-liability valuation swings.
- Fluor-related transactions, control arrangements, and any future tax receivable agreement payments or accelerated obligations.