Greetings, and welcome to the Centrus Energy Third Quarter 2023 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. Thank you, Dan. You may begin.

Good morning. Thank you all for joining us. Today's call will cover the results for the third quarter of 2023 ended September 30. Today, we have Dan Poneman, President and Chief Executive Officer; and Kevin Harrill, Chief Financial Officer. 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 follows our earnings news release yesterday. We expect to file our report for the third quarter of 2023 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 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 time-sensitive and accurate only as of today, November 8, 2023, 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. This was another great quarter for Centrus. While we always remind investors that our business runs on a year-to-year basis, not fairly represented by quarterly results, we were nevertheless pleased to deliver $8.2 million in profit to our shareholders this quarter. This time, the big news, however, is measured neither on a quarterly, not even on an annual basis, but rather on a scale of threescore-and-ten. Why so? Because a few weeks ago, Centrus inaugurated the first new U.S.-owned U.S. technology uranium enrichment plant to start production in nearly 70 years. As we speak, Centrus is now producing High-Assay, Low-Enriched Uranium or HALEU right here in the United States, in Piketon, Ohio to be specific using parts, we manufactured in Oak Ridge, Tennessee, with an American workforce, rebuilding America's domestic nuclear supply chain. That is a historic accomplishment. Last month, we were pleased to host so many people who care about America's energy future and national security who came to Piketon to participate in the launch of this 16-centrifuge demonstration cascade. Our speakers included leaders from government, labor and industry, Senators Sherrod Brown and Rob Portman, Congressman Chuck Fleischmann, Deputy Secretary of Energy, David Turk, DOE Assistant Secretary for Nuclear Energy, Katy Huff, North America's Building Trades Union's President, Sean McGarvey, National Association of Manufacturers President and CEO, Jay Timmons and Pike County Commissioner, Tony Montgomery. Representatives from advanced reactor companies, utilities, nongovernmental organizations and local community organizations all participated. So did our brothers and sisters from the United Steelworkers, International Brotherhood of Electrical Workers, the buildings trades and the pipe-fitters, all came to witness America taking an essential step to restoring the global leadership in nuclear fuels that we once enjoyed and should never have lost. Building…

Thank you, Dan. Good morning, everyone. It's great to be speaking with you. As Dan just reminded us, our financial results vary from quarter-to-quarter based upon timing of contracted deliveries. Most of our LEU contracts are multiyear arrangements in which customers have annual purchase obligations, but can choose which quarter to take delivery. We book the revenue and cost of sales in the quarter when deliveries are made, which can vary throughout the year, but tends to even out on an annual basis. For the third quarter, we recognized total revenue of $51.3 million, which was an increase from $33.2 million in the same quarter last year. At the segment level, the LEU business had revenue of $40.5 million on cost of sales of $30.4 million, earning a gross profit of $10.1 million for the segment. Our Technical Solutions segment, which includes our HALEU contract with the DOE, generated $10.8 million of revenue on cost of sales of $9.6 million, for a segment profit of approximately $1.2 million. As Dan mentioned, we achieved $8.2 million in net income for the quarter compared to a loss in the prior year of $6.1 million. At quarter end, we had $183.3 million of cash on our balance sheet, providing us with liquidity to invest strategically in our future and manage our working capital obligations. Our LEU order book remains strong with backlog of approximately $1 billion through 2030. Our Technical Solutions segment, which, as I mentioned, includes our HALEU contract, represents additional revenue and earnings upside as we look ahead. Lastly, we recently took a crucial step to derisk and strengthen our balance sheet. On October 12, the company reached an agreement to purchase a group annuity contract that will cover approximately 1,400 retirees and settles more than 40% of our outstanding pension…

Thank you, Kevin. This has indeed been a momentous year for nuclear energy. And as we turn the corner and head into 2024, we're more excited than ever about the trends we're seeing, not only in technology and government, but also in the investment community. Growing investor interest in sustainability and in creating significant new employment opportunities in clean energy is finding its way to the nuclear sector, and will contribute to better capitalized companies across the nuclear energy value chain. We are proud to have long-standing partnerships with reactor developers and utilities, and are building new relationships with a growing number of data centers and industrial companies that need to obtain vastly increasing amounts of clean and reliable energy to generate electricity and drive industrial processes. At every level of government and across academia and nongovernmental organizations, we see increasing levels of institutional support for the reemergence of the American nuclear industry to support our national energy, climate and national security objectives. The efforts of many different companies from component manufacturers and developers, to utilities and the investors financing these projects are establishing the foundation and ecosystem for a thriving advanced nuclear industry, where Centrus can play a pivotal role. While no one can say with certainty which nuclear reactor technologies will end up being deployed at greater scale, Centrus stands ready to supply all of them as they come to market. As we consistently emphasized, this tremendous investor support will require further public private partnership. Recent developments prove that both the administration and Congress agree with that. Just last month, the House of Representatives included a $2.4 billion investment in domestic uranium enrichment as part of the Energy and Water Appropriations bill, and the White House included $2.2 billion for enrichment in its most recent supplemental funding request. And over the summer, the Senate voted 96 to 3 to authorize a major nuclear fuel security program. The Senate also included enrichment funding as a priority in their energy and water appropriations bill. All of us can be encouraged by the bipartisan support and momentum behind these proposals, and hope that Congress and the administration will move quickly to get them over the finish line. Of course, none of this would be possible without our amazing employees and without our investors who are supporting us in this important work. Sincere thanks to each and every one of you. Finally, I'd like to offer heartfelt thanks to all of our veterans who courageously served to protect the great way of life in our United States. We have come a long way in the last few years, but I truly believe the best is yet to come. And with that, we'll take your questions. Operator?

[Operator Instructions]. Our first question comes from the line of Rob Brown with Lake Street Capital.

You gave a good overview of some of the activities happening for support in the various government bodies. But I just want to get a sense of how soon those things need to happen for you to kind of continue your work. Or are you -- do you have the pieces in place to kind of continue to produce HALEU until those other pieces kind of come in, in terms of getting supply going?

Great question, as always. So we have the resources we need to continue under the top contract, right? Which is the -- and we're very excited, as I'm sure you saw yesterday, we finished Phase 1. We delivered 20 kilograms promised to the Department of Energy. Now we will be moving over to Phase 2. That's 900 kilograms in the coming year, and we have no reason to doubt that there will be continuing funding for that, even under the continuing resolutions that were passed being negotiated earlier, we had what they call anomalies to support that continued funding stream because everybody, both sides of the aisle, realize that's important. The larger question, obviously, implicit in your question is what happens to all these requests? It's really quite astonishing when you look back in recent years. It had seen that there was a certain reluctance or a lack of focus, I don't know how to describe it, but it doesn't matter because it's over. You have the House of Representatives, I believe, literally the first bill they passed under the new speaker was the Energy and Water Appropriations which, as I'm sure you know, contains $2.4 billion for enrichment over 3 years. You had the President submitting a request to the Congress for $2.2 billion to support enrichment in his latest supplemental request. You already had, had at the committee level on the Senate side, $800 million in that market. So these are really strong indications that I think the money is going to be forthcoming. Now the timing, obviously, it's a very unusual time in the U.S. Congress. There are a number of things that could or could not happen in terms of continuing resolutions, supplemental appropriations getting passed, full bills and so forth. Obviously, we're working every angle and we're following it all closely. But I would say the supplemental is a real opportunity to see important resources move and as is the real budgeting process. When those happen I think is a much larger question than any one executive could answer. But when it does happen, that money would be signed by the President through appropriations, go to DOE and then go out through the typical, I presume, through the typical request for proposal process. So that I figure would be some number of months. But in the meantime, we are continuing, Rob, to engage with investors and so forth to look at ways to raise the capital to expand our plant.

Okay. And then on the MOUs with TerraPower and Oklo, what are the sort of next steps there in terms of what they need? And do you have sort of the capacity in place to fulfill their needs at this point, with that initial DOE demonstration? Or would you need to kind of scale that to meet their needs by 2030? I know that's a few years away, but just want to get a sense of how that lays out.

Yes, I'll answer your second question first, we would need to scale up, right? And I won't say -- not appropriate to say exactly who needs what quantities. But we will be -- 2 points if I may. We will be making 900 kilograms per year, and I think every ambition out there would suggest that there's going to need to be a lot more. I mean the DOE itself has put out a number of seeking on the order of 25 metric tons a year. So I don't think anyone thinks this one cascade is enough. The second thing is, as I'm sure you know, the output of the cascade is the property of the U.S. Department of Energy. So it will be up to them to decide who among many aspirants would be getting the output from our initial demonstration cascade. In terms of what's going on, we have very active and robust dialogue going on with both Oklo and TerraPower, and, in fact, with other companies as well, as you might imagine, that are not at the same level of maturity perhaps, and very earnest discussions talking about rate and pace and quantity of requirements and what it's going to take in terms of investment to get there. And of course, everybody is looking at a combination of both public and private sources.

Great. Congrats on all the projects.

Thanks. Thank you, Rob.

Our next question comes from the line of Joseph Reagor with ROTH.

So I guess, first thing, and I'm sure this would be in the queue, but just for clarity today, the tax gain in the quarter, what was the driver there?

Yes. I'll turn that one over to Kevin.

Yes. Thanks for the question, Joe. It was -- as we have a normal process that we go through on a quarterly basis to reevaluate our forecast and the individual drivers underneath that, which includes pricing from market-backed metrics. And so as we went through there and reviewed the published indices, we had noted we had a reduction in the costs, which prompted us to have increased income in the next few years, which resulted in the release of the tax and so that was the main driver of what transpired. So we'll continue to reevaluate that on a quarterly basis and may have updates in the future as we continue to evaluate that, especially at year-end.

Okay. That's helpful. And then as you guys ramp up HALEU production, since this isn't exactly the most common ramp-up out there, what are the challenges, bottlenecks, things like that, that you guys might face? Or is it just as simple as you have it up and running and now it will run? And any thoughts on potential impact of rising uranium prices on the HALEU facility.

Yes. Okay, another great question. So let me break it into pieces. So I'll start with what we have. We've got a site, we've got a license, we've got not only a talented but fairly dedicated workforce. We have a technology. It has been known, but now it's openly to the world, demonstrated it's functioning. We're producing HALEU today, right? So all of that is there. The key issue in scaling up, of course, is going to be supply chain, right? We have decades of experience working with a series of suppliers. We've actually changed our philosophy from the earlier phase of, students of history will remember our big project a dozen years ago, we had literally hundreds of suppliers. We've now turned for a lot of reasons, efficiency and, frankly, our own internal capabilities to source increasing amounts of the parts of the machines to our own technical manufacturing facility center in Oak Ridge, Tennessee. And so I think we've got a much smarter supply chain that we're building out, but we're going to need to build that thing out. And of course, in a market in which the zeitgeist for nuclear continues to be very bullish, it's a very competitive market out there. We are incredibly proud of the talented personnel that we've got. But if we have the good fortune to build out at the rate that I think people who care about climate change and national security wish, it's going to be a challenge to continue to recruit, retain that kind of human talent, which is so important to these facilities. So if we're very, very successful we're going to be working -- and I'm optimistic about it, but you ask where the pinch points could come, we're going to have to really focus on developing…

Our next question comes from the line of Alex Rygiel with B. Riley Securities.

Dan, a lot of great information there, and a very nice quarter. So thank you. Just to better understand the transition to Phase 2, can you talk about, number one, what approvals or direction you need from the DOE to transition into Phase 2 and when that might start?

Yes. We finished Phase 1, we made the delivery just yesterday, and we are expecting to move very smoothly in communications with DOE into Phase 2. But I don't know if Kevin wants to offer anything more technical than that?

I don't think I would add anything outside of the fact that with our completion of Phase 1, we're moving into Phase 2. And from a regulatory perspective, we're evaluating what the possession limits are to ensure that we're in compliance with those and we'll continue to work with the relevant organizations to make sure that we're aligned.

That's super helpful. And then as it relates to SEU, what's your visibility on the fourth quarter here now that we're 5 or 6 weeks into the fourth quarter? And how do you see delivery of SEU units developing in this fourth quarter and into 2024?

Kevin?

Yes, I'll probably feel that. So Alex, like a lot of companies, we don't provide forward guidance. I know we're into the quarter, but as we've noted in recent years, our revenues can vary significantly from quarter-to-quarter, depending on timing. So we're working diligently to ensure that we're delivering for the fourth quarter and think we will continue the process of ensuring that we have strong results for the annual cycle.

Excellent. And then, Dan, maybe you could just touch upon the pipeline of additional opportunities or MOUs, like TerraPower and Oklo?

Yes. Well, again, a lot of these are still under confidentiality. But I would just say, basically, if you look at the terrain out there, Alex, 9 of the 10 advanced reactor development program winners in the DOE program require High-Assay Low-Enriched Uranium fuel. We -- obviously, our desire is to supply everyone, right? And there are those who are not in that program, who are also candidates as well, and that, for example, includes Oklo, which has done a lot of exciting work and back on the NRC regulatory process. And I think you can't forget the fact there's a quite robust set of activities going over in the Department of Defense with the Project Pele and so forth and increasing interest for energy resilience requirements of our military bases and so forth that will need reliable power that you do not want to be vulnerable to disruption and so forth. There's been a lot of ferment in a good way about the possibility of deployment of small and micronuclear reactors in that direction. We are monitoring each and all of these sources. And of course, there are international opportunities as well, and you've started to see important marketing of advanced reactors happening internationally. I might note the X-energy deal that's going on with OPG. There's a lot of interest in Canada in small and even micro reactors for the very remote communities that are now isolated and dependent on diesel or for the oil sands we're trying to have very ambitious decarbonization targets, which will be assisted in being met if they can at least use nuclear power and not diesel, for example, to develop the oil sands up there. So we're looking everywhere and very excited. If you look at the, last thing I'll say, just kind…

There are no further questions at this time. I'd like to turn the floor back over to Dan Leistikow for closing comments.

Thank you, operator. That will conclude our call. Thanks as always to our investors who joined online and by phone today. We'll talk to 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.