Greetings, and welcome to the Centrus Energy's Second Quarter 2022 Earnings Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Leistikow, Vice President, Corporate Communications for Centrus. Thank you, Dan. You may begin.

Good morning and thank you all for joining us. Today's call will cover the results for the second quarter of 2022 ended June 30. Today, we have Dan Poneman, President and Chief Executive Officer; and Kevin Harrill, Controller and Chief Accounting Officer; our Chief Financial Officer, Philip Strawbridge, had a scheduling conflict that prevented him from being on today's call, but he will be available for follow-up calls next week. Dan and Kevin will be taking questions following their prepared remarks. Before turning the call over to Dan Poneman, I'd like to welcome all of our callers as well as those listening to our webcast. This conference call follows our earnings news release issued yesterday. We expect to file our report for the second quarter of 2022 on Form 10-Q later today. All of our news releases and SEC filings, including our 10-K, 10-Qs and 8-Ks are available on our website. A replay of this call will also be available later this morning on the Centrus website. I would like to remind everyone that certain of the information we may discuss on this call today may be considered forward-looking information that involves risk and uncertainty, including assumptions about the future performance of Centrus. Our actual results may differ materially from those in our forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in our forward-looking statements is contained in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. Finally, the forward-looking information provided today is trans [indiscernible] and accurate only as of today, August 5 2022, unless otherwise noted. This call is the property of Centrus Energy. Any transcription, redistribution, retransmission or rebroadcast of the call in any form without the expressed written consent of Centrus is strictly prohibited. Thank you for your participation. And I'll now turn the call over to Dan Poneman.

Thank you, Dan, and thank you to everyone on the call today. We are happy to report another strong and productive quarter for Centrus. The numbers speak for themselves. $99.1 million in revenue, $60.9 million in gross profit and $37.4 million in net income. We always remind listeners on these calls that a normal feature of our business is that revenues and margins vary widely from quarter-to-quarter based on the timing of deliveries, and that is the annual performance that matters most. But I do think that it's fair to say that these numbers are another example of the continued resilience of our business even in the face of challenges like the pandemic and the changes in the global nuclear fuel market brought about by Russia's invasion of Ukraine. We are continuing to deliver to fuel our customers need and the results our investors expect. I am enormously proud of our team for the work they are doing to navigate a sometimes difficult environment and to help our company grow for the long term. Along those lines, our sales team has been putting up strong numbers. In the first two quarters of the year, we made deliveries of SWU, separate work units and Uranium totaling about $103 million, but we also secured new sales contracts and commitments worth about $135 million. As a result, the total value of our order book has increased over the course of the year and now stands around $1 billion. As I said, the numbers can speak for themselves, but numbers alone don't tell the whole story. The Ukraine invasion brought energy security issues into sharp focus. And while much of the discussion has been around natural gas, Russia is much more dominant when it comes to nuclear fuel with 46% of the world's uranium…

Thank you, Dan. Good morning, everyone. As Dan mentioned and as we regularly discussed on these calls, there is considerable variability in our revenue and margins throughout the year. The first quarter of this year was relatively subdued, but in the second quarter, we had several LEU deliveries. Our focus is not on what happens in any 1 quarter, but what happens over the course of the year and how that compares to prior years. Again, there are two factors at play here. Most of our revenue in the LEU business comes from multiyear sales contracts we have with major utilities. Under those contracts, customers typically have an annual purchase obligation not a quarterly obligation. The customer chooses which quarter to take their delivery, and we book the revenue in that same quarter. For example, in the first two quarters of the year, Centrus secured more than $135 million in new sales contracts and commitments. These sales include deliveries of SWU and uranium from 2022 through 2026. And those revenues will be recognized in whatever quarter and year they are delivering. Secondly, the prices in our sales contracts vary significantly based upon when they were signed. Published price indicators for enrichment peaked around $165 per SWU pre-Fukushima declined to below $40 by late 2018. And then began a slow but steady rise to around $60 per SWU prior to the Ukraine invasion. Since then, published price indicators have risen to $87 per SWU in the spot market and above $130 in the long-term market. We had contracts in our order book that were signed up and down that price area. Our quarterly revenue will therefore vary depending on both delivery volume and whether those deliveries were on higher-priced contracts or lower-priced contracts. For the three months ended June 30, our…

Thank you, Kevin. Before we get to your questions, let me just take a step back to talk about the broader landscape and the changes in the world and our industry that we have witnessed in recent months. There is no doubt that the Ukraine invasion has upended expectations in the global nuclear fuel market and caused government as well as industry leaders focus on their vulnerable supply chains. Since the end of the year, spot prices for SWU have increased more than 50% and long-term prices have doubled. That means we have opportunities to make new sales at much higher prices than we could have just a few months ago. The realization that prices are rapidly increasing has also prompted a number of utilities to accelerate their contracting activity as they work to secure long-term fuel supplies before prices go up still further. At the same time, the overall outlook for nuclear is stronger than it has been in years. More and more countries are embracing the need for nuclear energy as a pathway to reduce carbon emissions and to provide greater energy security particularly as prices for natural gas are spiking. Natural gas prices in the United States have roughly doubled from a year ago. Wholesale natural gas prices for advanced deliveries in the Netherlands which is often used as the benchmark for pricing in the European Union surged to more than €210 per megawatt hour in late July. That's more than 10 times the average price between 2010 and 2020. Governments in Europe have either doubled down on the nuclear program, reverse decisions to retire plants or revive long dormant plants to require new reactors. Even the German government is reconsidering its earlier decision to shut down the remaining three nuclear power plants by the end of…

Thank you. [Operator Instructions] Our first question comes from the line of Rob Brown with Lake Street Capital. Please proceed with your question.

Good morning.

Good morning, Rob.

I just want to follow up on your comment about the new sales activity -- how much is the SWU pricing driving that? And sort of what's the pipeline of activity that's still yet to convert? Or is it a lot pulled forward? How is that -- how sort of the rest of the activity out there?

Well, I think, Rob, you have to kind of look in the broad suite of history when as we experienced from 2011 to about August 2018, prices going down, just put yourself in the shoes of a fuel buyer. Why buy today if it will be cheaper tomorrow. And so now that you see the curve having kinked and now moving up. There's really two things. Number one and they're related, obviously. Number one, there is an advantage of buying sooner if it's going to be cheaper, right? And then secondly, because of all of the uncertainty in the supply scenarios, there's just a pure, frankly, straight energy security aspect of this. So people are trying to lock in long-term supplies, it's very important to operate a reaction with a very clear line of sight to your supply chain. So I think those are the factors that are in play. I don't know if that fully answers your question.

That's great. Very helpful. And then just following up on some of your comments about the legislative efforts to increase U.S. supply. I know there's a lot of things happening. How is your sort of view on when these pieces need to start to fall in place and how long it takes to get the supply online once the decisions start to get made?

Well, it would take quite a fine prognosticator to predict the timing of actions of the U.S. Congress on the one hand. On the other hand, I read news reports this morning very promising ones about this mansionsumer legislation, possibly passing over the weekend. Indications I have seen, Rob, and the last person to speak on behalf of the Congress. But I think Speaker Pelosi [ph] would bring folks back promptly to have this addressed. We've seen a lot of support, anticipatory support on the House side. So our hope is that very, very soon indeed, you would have a fully enacted bill that the President would sign in just a very short while from now. And as I've mentioned in my remarks, that's really a game changer right, because it's got $700 million in it for HALEU, and that's exactly the kind of market signal that we've been looking for. It's both -- it's both the market signal, but also it's a very significant investment, right? So beyond that, there's the normal appropriations process, which is always complex, but especially so in an election year. We've been very encouraged to see the administration, which more than doubled its request for the coming fiscal year compared to last one. And then the house mark was even higher. The administration requested at $95 million, and the house put in $100 million. And industry large including the Nuclear Energy Institute have been actually urging $300 million, all with the same, frankly, view in mind of it's really time to get off the time, we're making significant huge investments really in these advanced reactors that ex energy and TerraPower are building under the advanced reactor development program and an absolutely imperative they got to fuel supply. And so I think it's quite logical, but it's also gratifying to see that people have sort of recognized that. And so I do expect you're going to see a continuing effort, Rob, in the Congress and the appropriation cycle is what it is, whether we'll see another continuing resolution and whether they get past the November elections would take some TV commentator not me to help you out.

Thank you. Our next question comes from the line of. Please proceed with your question. Joseph Reagor with Roth Capital Partners

Hey Dan and team thanks for taking the questions.

Hey Joe.

So on the $135 million of new contracts; I realize you can't give us a year-by-year on it. But any additional color as far as how that breaks down across the six years? Is it roughly even? Is it back-half weighted? Is it front-half weighted?

Yes. Joe, I don't think we really go into that kind of thing in public disclosure space. So I think we just kind of do the global numbers and then they will roll out in the successive quarters as they roll out.

Okay. Second thing, on the HALEU contract that you're competing for, can you kind of give us a little background on what the space looks like as far as the other competition, you guys are the only ones with a HALEU license right now. So like is this really an open competition? Or is it more a matter of the government has to say it is and you guys are really the only party in town.

Well, Joe, it's hard enough to speak on my own behalf, and I'm sure I'm not going to speak on behalf of other companies. But to the second part of your question, it's a real competition. I mean, the department has been out there. They had an Industry Day. It's real. And we're taking it very, very seriously indeed. These RFIs, if you've had any exposure to them are extraordinarily detailed and work intensive things. They -- I think, would make you proud as an American to see the hard work that goes into even preparing the RFI itself. And so to be responsive to very thoughtfully and thoroughly compared RFI is a massive undertaking, and we're taking it very seriously. We feel good about our capabilities. We feel good about what we bring to the table, but we are taking nothing for granted, and we're focused on the cycle laser beam.

Thank you.[Operator Instructions] There appear to be no further questions at this time. I'd like to turn the floor back over to management for closing comments.

Thank you, operator. This will conclude our investor call for the second quarter of 2022. As always, I want to extend a thank you to our listeners online and investors who called in. And we look forward to speaking with you again next quarter.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.