Centrus Energy Corp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Centrus supplies nuclear fuel components through its LEU segment and provides engineering, manufacturing, and enrichment services through Technical Solutions. Results are unaudited and quarterly performance may not indicate full-year results.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $43.7 million | $66.9 million |
| Gross profit / margin | $4.3 million / 9.8% | $23.0 million / 34.4% |
| Operating income (loss) | $(10.6) million | $8.3 million |
| Net income (loss) | $(6.1) million | $7.2 million |
| Basic and diluted EPS | $(0.38) | $0.49 / $0.47 |
| Operating cash flow | $5.3 million | $(9.7) million |
| Capital expenditures | $1.5 million | $0.3 million |
LEU revenue fell 60% to $23.6 million as SWU volume sold declined 53% and average selling price declined 14%. LEU gross profit dropped to $0.5 million from $23.9 million, reflecting delivery timing, contract mix, and lower average margin per SWU. Technical Solutions revenue rose 148% to $20.1 million and gross profit improved to $3.8 million from a $0.9 million loss, primarily following the HALEU contract’s transition to Phase 2. Advanced technology costs increased 68% to $5.7 million; SG&A declined 21% to $8.1 million.
Operating cash flow turned positive, driven in part by customer collections and working-capital movements. Cash and cash equivalents were $209.3 million at quarter-end, versus $201.2 million at December 31, 2023. Restricted cash was included in deposits for financial assurance; the cash-flow statement reports total cash, equivalents, and restricted cash of $241.9 million. Working capital was $201.3 million, down from $214.3 million.
Total debt carrying value was $92.6 million, including $74.3 million principal and accrued future interest obligations. The 8.25% Notes mature in February 2027. Centrus paid $3.1 million of interest classified as debt financing activity during the quarter. Stockholders’ equity was $33.8 million.
Material changes and business developments
- Total revenue declined 35% year over year, while gross profit declined 81%; the higher Technical Solutions contribution did not offset the LEU segment’s weaker results.
- Centrus raised $7.1 million net through its at-the-market stock offering, issuing 176,628 Class A shares. The filing reports 15,281,474 Class A shares outstanding at March 31, 2024.
- Backlog was approximately $2.0 billion at March 31, extending to 2033. Remaining performance obligations were $1.0 billion, including approximately $1.0 billion for LEU and $58 million for Technical Solutions. Backlog includes unfunded amounts and options, and is not equivalent to funded revenue.
- SWU spot prices were reported at $166 per SWU at March 31, up 7% since the start of 2024. The filing notes that realized contract prices can lag market indicators.
Outlook, risks, and contingencies
- No 2024 results guidance: Centrus withdrew from providing 2024 operating-results guidance, citing market uncertainty and disruption.
- HALEU production constraints: DOE cylinder supply-chain delays mean Centrus no longer expects to deliver the Phase 2 target of 900 kg of HALEU UF6 by November 2024. Cumulative deliveries were approximately 135 kg. DOE is contractually responsible for providing the cylinders; Centrus is assisting with procurement. Phase 2’s estimated target fee was $7.5 million, subject to a $6.9 million minimum fee.
- DOE funding: The HALEU contract’s expected Phase 2 value is approximately $90 million, subject to congressional appropriations. DOE was obligated for approximately $73.9 million of an estimated $125.9 million transaction price for Phase 1, Phase 2, and additional work; Centrus had received $55.2 million in aggregate payments through quarter-end. Further funding and future production options are not assured.
- Russian supply and legislation: Centrus said well over half of LEU expected for customer delivery through 2027 was sourced under the TENEX contract, and alternative sources were insufficient to replace it. As of the filing, the Russian uranium import ban had passed the Senate and was awaiting presidential action; waivers may be available, but timing and approval are uncertain. Sanctions, transport permissions, payment restrictions, or TENEX delivery disruptions could materially affect supply and customer obligations.
- Market and funding risks: LEU market pricing, customer delivery timing, supplier dependence, government appropriations, and uncertain commercial HALEU demand may cause significant fluctuations in results and liquidity. Centrus anticipated approximately $5.5 million in capital expenditures over the next 12 months and stated that it expected adequate liquidity for at least 12 months from the report date.
- Legal matters: DOE asserted approximately $9.6 million of potential responsibility for Joppa power plant decommissioning costs; Centrus had not formed an opinion on the claim, could not estimate potential liability, and recorded no accrual. Several Portsmouth-related environmental and personal-injury cases remain pending; Centrus asserts regulatory compliance and potential DOE indemnification. The company said it did not believe the legal matters would have a material adverse effect, but outcomes are uncertain.
Important facts for investors to verify
- Whether the Russian uranium import ban was enacted, whether Centrus obtained timely waivers, and whether TENEX deliveries and transportation continued.
- DOE’s schedule for supplying 5B cylinders, actual HALEU production and deliveries, and the contract’s funding and fee outcomes.
- LEU customer delivery timing, realized SWU prices and margins, and the ability to fulfill contracts using available non-Russian supply.
- The funded versus unfunded composition and cancellation terms of the $2.0 billion backlog, and the timing of cash conversion.
- Liquidity needs, restricted-cash availability, share issuance and dilution, and repayment capacity for the 2027 notes.
- Developments in the DOE $9.6 million claim and Portsmouth litigation, including any indemnification decisions or changes in recorded contingencies.