NuScale Power Corporation (SMR) Q4 2024 Earnings Report, Transcript and Summary

Good afternoon, and welcome to NuScale's Fourth Quarter and Full Year 2024 Earnings Results Conference Call. Today's call is being recorded. All participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. [Operator Instructions] A replay of today's conference call will be available and accessible on NuScale's website at ir.nuscalepower.com. The web replay will be available for 30 days following the earnings call. At this time, for opening remarks, I would like to turn the call over to Scott Kozak, Director of Investor Relations. Please go ahead, Mr. Kozak.

Thank you, operator. Welcome to NuScale's fourth quarter and full year 2024 earnings results conference call. With us today are John Hopkins, President and Chief Executive Officer; and Ramsey Hamady, Chief Financial Officer. On today's call, NuScale will provide an update on our business and discuss financial results. We will then open the phone lines for questions. This afternoon, we posted a set of supplemental slides on our Investor Relations website. As reflected in the safe harbor statement on Slide 2, the information set forth in the presentation was discussed during the course of our remarks and the subsequent Q&A session includes forward-looking statements, which reflect our current views of existing trends and are subject to a variety of risks and uncertainties. You can find a discussion of our risk factors, which could potentially contribute to such differences in our Form 10-K and subsequent SEC filings. I'll now turn the call over to John Hopkins, NuScale's President and Chief Executive Officer. John?

Thank you, Scott, and good afternoon everyone. Reflecting on 2024, our journey has been dynamic and rewarding and I'm delighted by our achievements. We have significantly bolstered our financial standing, advanced the commercialization of our pioneering small modular reactor technology and laid the groundwork for sustainable long-term value creation. Shortly, Ramsey will provide insights into our financials. I'd like to start with key business updates. As illustrated on Slide 3, we are witnessing good progress of RoPower. As you may recall, RoPower plans to develop a 6-module SMR power plant with a 462 megawatt of installed capacity on the site of a decommissioned coal-fired power plant in Doicești. NuScale is committed to supporting Romania's energy security and decarbonization initiatives. We are diligently progressing our responsibilities for RoPower Phase 2 Front-End Engineering and Design. This floor led FEED Phase 2 provides meaningful revenue and cash flow for NuScale. Moving on to Slide 4. It's essential to emphasize that NuScale stands as the sole near-term deployable SMR currently available. In contrast, other recently announced SMR projects in the U.S. are focused on demonstration plans. Following construction these demonstration plans will have to operate for a minimum of four years prior to the U.S. Nuclear Regulatory Commission, NRC, providing regulatory approval, which is required for commercial operation. NuScale has committed over $2 billion to develop and license our unique SMR technology, which has received Design Certification from the Nuclear Regulatory Commission. No other advanced reactor SMR design has submitted a standard design approval application, or SDA, to the NRC at this point. And these efforts remain years away from approval compared to our established timeline. ENTRA1 Energy plants powered by NuScale technology are primed for immediate commercial development. We are also making headway on the technology review of our up-rated SDA application with the NRC aiming to increase power output per module from our previously NRC licensed 50 megawatt electric to 77 megawatt electric. This review is set to conclude by mid-2025. Our design upgrade is founded on the same rigorous safety principles and technical features already authenticated by the NRC in 2020. We believe that the 77 megawatt electric NuScale power module will cater to a broader spectrum of customers while enhancing economic efficiency. Now let's turn our attention to manufacturing. NuScale is clearly leading the industry in this critical element of commercialization. Our supply chain partner and strategic investor, Doosan Interability, has continued to make progress advancing the first six NuScale power modules, the only NRC approved SMRs in production. More recently this past quarter, in coordination with Doosan and our development partner ENTRA1 Energy, advanced discussions with prospective customers seeking 12 module configurations led us to long lead material items for an additional six modules. NuScale has 12 modules in production, a testament to the confidence we have in our customer pipeline and our commitment to 2030 delivery. We are advancing certain activities in manufacturing licensing to get ahead of potential bottlenecks and commercial deployable schedules. For example, global manufacturer, Alleima, recently received an order to supply steam generator tubes for NuScale small module reactors. On Slide 5 there are images associated with our manufacturing progress. This includes the production of large forgings in the maturing of our control rod drive mechanism design. Key lessons from our manufacturing readiness work are incorporated into design to save time during production work and support deployment during shortening delivery schedules significantly. Coupled with our ENTRA1 development partnership, NuScale’s SMR technology is poised to move the exploding demand for clean energy across multiple sectors. Ss illustrated on Slide 6, near-term energy demand in the U.S. is expected to grow at levels we haven't seen in decades. A recent IHS Energy forecast anticipates a six times increase in growth for electricity demand in the next 20 years versus the growth of the prior 20 years. This significantly accelerated rate of electricity consumption in the coming decades will fundamentally change the landscape of power production. The projected growth spans various sectors and is driven by the reshoring of manufacturing and electrification of many industries, including oil and gas and chemicals. However, the primary driver is a 24x7 load required by artificial intelligence data centers. According to a December 2024 U.S. Department of Energy report, data centers may triple their energy use in the next three years alone. Under that forecast, data centers could account for as much as 12% of the nation's electricity consumption by 2028. The world's largest technology companies are driving this need. Microsoft [indiscernible] would spend approximately $80 billion in its 2025 fiscal year to build data centers for its booming artificial intelligence business. In addition, in December, Meta announced that it is seeking up to 4 gigawatts of new nuclear power to help meet the company's AI and sustainability objectives. It's worth emphasizing that this is not about peaking demand. Data centers have both high capacity demand and high energy demand. So the challenges is multifaceted. Significant new energy resources are needed, both to produce enough power when usage is at its highest and to support sustained heavy levels of energy consumption over a long duration. Yet as seen on Slide 7, the megawatts currently coming online in the U.S. are mainly intermittent sources and short duration battery storage. Looking more closely at 2025, planned capacity additions for three major U.S. grid operators include very limited dispatchable generation. Coupled with reality of additional fossil fuel retirements, it is clear where nuclear and SMRs in particular, can be a major game changer. We see massive opportunity to provide baseload clean energy. You cannot run a full-time grid on part-time power. It is important to bear in mind that existing utilities are challenged to divert needless load from existing customers in an area where more energy is necessary to fortify the U.S. electricity grid, power economic growth and bolster America's global competitiveness, the need for new nuclear is a reality. And entities throughout our economy are taking notice. As we discussed in the past few slides, the demand for nuclear has never been more pronounced. As viewed on Slide 8, NuScale has seen increased interest across the board from a variety of potential off-takers for different use cases. On the data center side, our commercialization partner, ENTRA1, is leading discussions with America's leading hyperscalers at the most senior levels and conversations are focused on powering AI. These events understand how attractive our site boundary, Emergency Planning Zone is enabling us to locate close to the end user. They also appreciate our off-grid capabilities. Critically, given the speed for which they need power, prospective customers recognize that NuScale is years ahead of other proposed SMR technologies and they are attracted to ENTRA1 energy's commercial model, which is structured to provide financial flexibility and mitigate deployment risk. Notably, conversations with hyperscalers are also driving increased engagement from the utilities that currently power them. Importantly, ENTRA1 provides utilities to commercial consumers with a solution to get SMR generated energy offtake without the need to capitalize, own or operate a nuclear energy power plant. Switching gears for a minute, even as we drive our commercial initiatives, NuScale has not stopped innovating. As an example, our Chief Technology Officer and Co-Founder, Dr. Jose Reyes, recently published a white paper illustrated why NuScale is well positioned to benefit from the January 2025 Department of Treasury, final regulations meant to boost domestic production of clean hydrogen fuel through tax credits. As noted on Slide 9, this credit is worth up to $3 per kilogram of hydrogen production for those that can qualify, for example, by using NuScale. For over a decade, we have been exploring new hydrogen technologies with industrial partners in National Labs that integrate a NuScale plant with high-temperature and high-pressure steam electrolyzers, with the end goal of decarbonizing this important sector. Before I turn the call over to Ramsey, I want to touch on a few factors that we view as positive for NuScale. First, while Advanced Nuclear has long enjoyed bipartisan support, we are pleased by the new administration’s enthusiasm and sense of urgency for new nuclear. Recently confirmed, Energy Secretary Chris Wright has a deep understanding of the nuclear sector, committing that he wants to make it easier to research, invest and build small module reactors. In addition, a few weeks ago, President Trump established the National Energy Dominance Council, led by Secretary of Interior Burgum and Energy Secretary Wright. Within 100-day time frame, the Council advised on how best to improve processes for permitting, production, generation, transportation and export all forms of American energy. This will also include actions that each agency can take to increase energy production. Importantly, the executive order specifically prioritizes bringing small mod reactors online. This effort is a strong step towards securing our energy future and ensuring the U.S. has the resources to meet demands that AI will place on our grid. Second, as we discussed at length, our competitive strengths, whether it’s industrial electrification, process heat or the rapidly escalating demand for the data economy, the reliable clean energy produced by NuScale’s SMR technology plays a critical part in the energy solution of the future. Moreover, we are not burdened by the additional hurdles faced by non-light water reactor SMR technologies, so called Generation IV SMR technologies require high-assay low-enriched uranium fuel or HALEU. Today there is no supply chain for HALEU. This fuel is not commercially available and production efforts are impeded by national security concerns. Given global diplomatic efforts to prevent proliferation in the absence of substantive recent investment, many experts believe HALEU technologies could be a decade, if not more away from commercialization. Lastly, I cannot end without emphasizing the incredible interest and demand for the technological and safety benefits of NuScale’s SMR. Potential customers understand and appreciate what sets NuScale apart, including our partnership with ENTRA1 Energy. I’m proud of where we are and I’m looking forward to updating you on our progress over the course of 2025. Now over to Ramsay for the financial update.

Thank you, John, and hello everyone. Our financial results are available in our filings, so my focus will be on explaining major line items. As seen on Slide 10, I’ll start by discussing our financial results. All figures following are for Q4 2024 unless I state otherwise. NuScale’s cash position grew substantially during the period ending the fourth quarter with cash, cash equivalents and short-term investments of $446.7 million compared to $125.4 million at the end of 2023. NuScale significantly improved liquidity position provides a strong foundation for continued development and our push towards commercialization of our industry-leading NRC approved technology. In Q4 2024, NuScale issued a mandatory redemption of warrants, trigging conversions among warrant holders, which generated proceeds of $205.3 million in the quarter or total cash proceeds of $227.7 million since issuance. In addition to buttressing our balance sheet, the elimination of warrants greatly reduces earnings volatility by eliminating the non-cash impact of those derivative liabilities on our income statement. NuScale's cash position at the year end 2024 provides the company with significant resources and time to achieve our goals. We will utilize these resources to support commercialization activities such as further development of our supply chain and bolstering manufacturing preparedness, including ordering long lead materials related to the production of our first 12 modules. We will also continue to nurture and mature our research development efforts to support the next generation of NuScale innovation. For the fourth quarter ended December 31, 2024 NuScale reported revenue of $34.2 million and a net loss of $180.3 million. Revenue in the quarter is driven by payments for activities in support of RoPower’s development of their power plant and the loss includes non-cash expense of $170 million related to the increase in fair value warrants. During the same period the prior year, the company reported revenue of $4.6 million and net loss at $56.4 million, which included non-cash income of $6.5 million related to our warrants. For the full year 2024, NuScale’s revenue was $37 million and a net loss was $348.4 million with $223 million of that loss relating to accounting treatment once again within the fair value of the warrants. Q4 2024 operating expenses were $43 million compared to $71.8 million in the year earlier period. The year-over-year reduction in quarterly operating expenses of $28.8 million reflects management efforts to reduce costs and operate more efficiently as we transition from an R&D focused organization to one focused on commercialization. Furthermore, on average, quarterly operating expenses decreased from $69.9 million in 2023 to $42.7 million in 2024, generating an annualized savings of more than $108.6 million. That decrease in burn rate is significant. It has a meaningful impact on cash management. During the fourth quarter of 2024, we also reduced our operating loss to $11.9 million compared to an operating loss of $71.1 million in the fourth quarter of 2023. Looking ahead, NuScale is well positioned to accelerate growth in 2025 with module production commercialization with ENTRA1 Energy. We have built a strong foundation for growth based on world class technology, a powerful global supply chain and a strong competitive position. I will conclude my remarks with a brief overview of our capitalization table seen on Slide 11. With that, I’d like to thank you again for joining today and for your continued support of NuScale. We’ll now take questions. Operator?

Thank you. [Operator Instructions] We’ll go first to George Gianarikas, Canaccord Genuity.

Hi, everyone. Thank you for taking my questions. Maybe if you could just go into a little bit of detail around any potential bottlenecks you’re seeing in putting pen to paper and signing an agreement with a large data center company in the U.S.? Thank you.

Yes. This is John. I don’t know necessarily I’d say bottleneck as it is just the complexity of putting these projects together. As we stated, NuScale is the provider of power modules. ENTRA1 will be the owner. We were in discussions with operators, we’re in discussions with other contractors who are willing to build and we continue to build out our supply chain. So it’s – and we are also in discussions obviously with those funding mechanisms who want to participate in this. So it’s not necessarily bottleneck as I said George, it is just the complexity of putting the deals together. But I will say, as I commented we’ve just ordered an additional six modules. So we’re very confident that we’re getting closer to landing or closing some of these deals.

Thank you. And maybe just as one follow up. Ramsey, can you give us a little more detail around the parameters or conditions met that allowed you to recognize the revenue in the fourth quarter? Thank you.

Sure, George. I think – yeah, there’s two components of the contract. One was delivery of services and the other was our work advancing towards delivery of service or delivery of an item. So we encountered revenue recognition in the form of two contracts. They based along both those lines. One was in relation to licensing some technology and one was in relation to doing some self-contract around the EPC work.

[Operator Instructions] Next up is Marc Bianchi, TD Cowen.

Hey guys, this is Esteban Albarracin for Marc here. So you guys mentioned, yeah, the Doosan forging of the 12 reactors. I imagine six of those are intended for the Romania plant and these additional six, those aren’t yet booked by another unannounced customers, right? I think if I’m kind of getting this correctly, you’re trying to really use that to front load more of the long lead sort of items to try and compress the operation time line of a plant for a potential customer. Is that right?

Yes. What we're doing is we feel and discussions we're having with prospective customers currently. And you're right, these long lead items. If you're not in order or placed orders by now it's years away because they take that long for them to manufacture. So we're feeling very confident that in place these additional six. And by the way, for those first six, it's really a first mover. We're progressing very well with RoPower, as we've commented before. We're in the front-end engineering and design things are progressing well. They go for their final investment decision fourth quarter of 2025. And as I stated before, but we're also in discussion with other customers that are looking also to be near-term deployable.

Esteban, if I can clarify one item that you mentioned. So NuScale is not manufacturing reactors we are manufacturing long-lead materials in relation to 12 scale power modules, just to make the distinction that these are the long-read materials, which we're manufacturing. And you're right, they are for 12 modules today. And to clarify, they're not for a particular customer. Therefore, the first customer that as we want to buy these modules. We believe it in our best interest, our customers' best interest to engage on the forgings for additional sticks in addition to the six that we already had in production and just push forward with these 12 long-read materials or long-lead materials are ready at 12 modules.

Got it. Got it. Then my other one is, so the revenue from the RoPower FEED study, is that expected to stay around this level until the study is complete later in the year? Or should we expect a deferring cadence throughout the year?

I think there's some front loading to the revenue, Esteban, but we'll continue to see revenue in relation to some of the subcontract work on EPC throughout this year. Fairly careful and not providing guidance on future revenues. We tend not to do that yet.

Perfect. And if I could just squeeze one more. So on the U.S., the $800 million grant that's out there for Gen 3 reactors, is there any update you guys can give us there. You guys had a competitor that announced a few weeks ago a task force to try and push for the award. Is NuScale working for something similar to get that grind or any other developments that you guys can touch upon?

Yes. This is John. We're trying to ascertain – in fact, I've got meetings this week with the Department of Energy to get more clarity around that particular award. So as it looks right now, we're not really sure if we want to participate at this point or not. I'll ask Clayton. Clayton has been close to this. He's our Commercial Officer. Clayton, do you have anything to add on that particular award?

We’re – as you said, we're evaluating it. I think we're cautious. We're not quite sure where that's going to land and how it's going to be distributed. But we're looking at it, and we're in discussions with ENTRA1 and some of our offtake partners to determine whether we want to pursue that specifically.

Perfect. Thank you guys so much.

You bet.

The next question is Ryan Pfingst, B. Riley.

Hey guys, thanks for taking my questions. As a follow-up to one of the first questions, just for your conversations with data center or other customers, could you just walk us through some of the items that you and ENTRA1 need to work through with prospective customers before being in a position to announce a project?

Yes. It's predominantly around the negotiation and finalization of long-term power purchase agreements. The ENTRA1 model, and the reason these customers appreciate this model is because, as I stated, during the call that ENTRA1, they will look to build on, transfer or build on, operate. We probably will not operate or sell. We'll utilize a company like AEP or someone else. But the power purchase agreements are what we're in discussions about right now.

Got it. Thanks, John. And then can you just remind us what the next steps are for the RoPower project and what milestones we should be looking for in 2025?

Yes. It's – as I said, we are a subcontractor to Fluor Corporation. I'm in discussions. In fact, I'm meeting with the CEO of Nuclearelectrica in two weeks at CERA, the Energy Conference in Houston. So right now, we take a lead from Fluor, and we continue to support them in this project in the Romanian government moving this thing forward. So for what we know right now, all indications are that and as what we see, it's progressing well. We'll wait after this fourth quarter 2025, the government will determine or Nuclearelectrica will determine if they're going to go forward with the final phase, which is the major production of the plant itself.

Understood. Thanks for that.

Next up is Eric Stine, Craig-Hallum.

Hi John. Hi Ramsey.

Hey.

Hey. So maybe just on the upgrade, I mean, obviously, it sounds like quite confident and you've stuck with that mid-2025 date for some time. Just wondering, can you detail kind of the steps that are left? Or is it just getting through the process? And then I'm just wondering, you mentioned the pipeline and clearly a strong testament and your confidence there with the six more modules, a long lead time materials. I mean customers waiting for this? Is this something that, with that in hand, that potentially speeds up the process of securing that first customer? How should we think about that?

Yes. Actually, the power operator 77 is progressing well. We pretty much have completed all the technical requirements for the NRC. Now it's a matter of just going through the process administratively. I am myself and a few others, we're meeting with the NRC this week, including mostly with the commissioners but also with the David Wright, who is also the Chairman of the NRC. And we're disclose. I mean I'm hopeful that we're ahead of schedule. We're on schedule. And once we get finalization of that 77 megawatts, we're all to the races. And like right now, we're near-term deployable, we can be building currently. That's why we've order these long lead items in anticipation of what's going to come. On the pipeline, Clayton, do you have anything to add?

I think the key issue is that having these LOMs in order certainly helps us expedite the first project and getting into the pipe. So we're trying to focus on early deployment and expedition of the project. So this will certainly help us in that first 12-month plan.

Got it. Very helpful. And then maybe last one. Just you mentioned, obviously, this huge demand for nuclear power. But there's also balancing that with taking that power from existing off-takers. So are you seeing any change to the view of traditional nuclear and restart plants that are out there? I mean we all know the handful of names that are out there, but whether it's additional plants that maybe have been mothballed for longer or expansions? I mean, is there anything out there that would indicate that, that has the potential to help this? Or do you really view that this is SMRs and SMRs alone that can really add to this?

Yes, I don't know how many plants that could actually restart. We've heard of the ones, Three Mile Island, et cetera. I really do believe, it's the small module reactor play going forward. It's because I just don't know of many that could actually do a typical large gigawatt size restart.

All right, thank you.

Clayton, you have another view of that? I mean, you're close to it.

No, I think you're correct. I mean there really is not many. There's not that many more plants that can come out of the restart program. And clearly, they're looking at extensions of some of the units, but that's still taking time. But yes, I mean we're at a point now where additional plants are going to have to be put on the grid. And, based on when we look at the technologies, clearly the SMRs I think are going to be a strong component of that mix and we're ready to do that and support it. And we look forward to being first out of the gates and get there.

And we comment about Doosan frequently. In fact, we just had meetings with them this week. But we're also in discussions with other suppliers, strategic suppliers that, we've noted earlier. IHI out of Japan, Doosan, GS Energy. And we continue to build out that. We announced with Almeida [ph] that we're in other areas other than just forging. So these things are complex and that supply chain and those strategic partners are critical for our success and we continue to build upon that.

Okay, thank you.

And that does conclude our question-and-answer session. I would like to hand the call back to NuScale’s CEO, John Hopkins for any additional or closing remarks.

Yes, thank you operator. We truly are a first mover in this space. We're poised to commercialize and deliver clean energy of scale. We believe NuScale technology is essential in meeting world's energy needs. And again, as I stated before, we are the leader poised to deliver safe scale, reliable carbon free power. And we want to thank you for your interest in NuScale and looking forward to future calls. Thank you. Operator?

Thank you, sir. Once again, that does conclude today's conference. Thank you all for your participation. You may now disconnect.