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spk04: Thank you, Operator.
spk01: Welcome to NuScale's fourth quarter and full year 2023 earnings results conference call. With us today are John Hopkins, President and Chief Executive Officer, and Ramsey Amity, Chief Financial Officer. On today's call, NuScale will provide an update on its 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 statements on slide two, the information set forth in the presentation and discussed during the course of our remarks in 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 FCC filings on Form 10-K for our fiscal year 2023 and in our prior FCC filings. I'll now turn the call over to John Hopkins, NuScale's President and Chief Executive Officer. John?
spk02: Thank you, Scott, and good afternoon, everyone. First, I'd like to thank our shareholders for their continued support and belief in the future success of NuScale. I also want to recognize our global strategic partners who have invested significant time and capital into our advanced design, supply chain, and delivery capabilities. In addition, I'd like to express how incredibly proud I am of each and every NuScale employee for their dedication, fortitude, and commitment to our values and mission. Together, I believe we have the capacity to improve and advance global power production to meet the future energy demands of our communities and businesses with clean, safe, and highly innovative small-module reactor nuclear technology. When Dr. Jose Reyes, NuScale's founder and chief technology officer, started his pioneering work developing SMR technology, few could have anticipated the growth in demand for sustainable baseload, 24-7 carbon-free energy driven by power usage amongst data centers and AI, major industrial projects, transportation, and utility customers. Today, as seen on slide three, We have invested more than 1.8 billion to develop the Sole Small Margin Reactor, or SMR, nuclear technology approved by the U.S. Nuclear Regulatory Commission, or NRC. No other technology developer, as we know, even has a design certification application under review. And this process requires several years and many hundreds of millions of dollars of investment. Looking ahead, our principal objective at NuScale is on transitioning from R&D to the commercialization of our proprietary technology. In this effort, we have engaged with our commercial partner, InterOne Energy, to build a diverse global pipeline and deploy NuScale SMR-enabled plants worldwide. Additionally, with the investment and expertise of our strategic partners, we have de-risked the manufacturing supply chain while maintaining scope for localization of certain supplies. Moving to slide 4, last year we made important progress on regulatory and manufacturing milestones. Let's start with the regulatory. In July 2023, NuScale's standard design approval application for a 77 megawatt upright design was accepted for review by the U.S. Nuclear Regulatory Commission. The NRC frequently reviews power upgrade applications similar to our move from a 50 megawatt to a 77 megawatt design. But we expect the NRC's process to conclude within 24 months. There are no perceived challenges to the process or timeline. While the design is based on the same fundamental safety case and features approved by the NRC in 2020, we strongly believe the 77 megawatt NuScale power module supports a wider range of customers. In addition, we have worked tirelessly to advance our manufacturing readiness. As you recall, we placed our first long-lead material loader with Doosan Interability in March of 2023. And last month, we visited Doosan at their world-class factory in Korea. There, we had the opportunity to witness the tremendous investment Doosan has made in advancing our production capabilities. including developing specialized technologies to manufacture forges and other materials associated with the first NuScale power modules. The scale of their facilities is absolutely astounding, and we are grateful for their partnership. For all of us, it is thrilling to see NuScale technology come to life. Our Korean, Japanese, American, and other international supply chain relationships are true competitive advantages for NuScale. even more so when you consider that many of these partners are also strategic investors. For over 10 years, NuScale has been working directly and continuously with more than 23 uniquely capable suppliers to jointly progress our design for manufacturing readiness. These suppliers have provided unwavering support of our efforts, and as a result, NuScale's supply chain is leading the industry in terms of manufacturing readiness. In addition to these operational milestones, we have continued to deepen our customer relationships and expand our pipeline, as you see on slide five. First, I'll provide an update on Rural Power. In the near term, we are working to advance the phase two of the front-end engineering design or feed work. NuScale will be providing engineering support services to Fluor Corporation in this effort. Rural Power's partners, Nucleoelectric SA, Innova Power and Gas, are experienced plant owners and operators in the nuclear space. Additionally, both the Romanian and U.S. governments are highly engaged in the process. As proposed, FEED Phase 2 work will include site characterization and regulatory analysis, and the development of a site-specific schedule and budget estimates for project execution. While NuScale contracted directly with RowPower to complete FEED Phase 1, NuScale is serving as a subcontractor and floor corporation for Row Power Feed Phase 2. Moving on to Standard Power, in October 2023, Standard Power announced their selection of NuScale's SMR technology, along with their need for a one-stop-shop solution to develop and execute their projects. As you recall, Standard Power is a provider of infrastructure as a service to advanced data processing companies. As part of their responsibility, Standard Power are currently working to line up the initial phase of financing towards two SMR plants. Each will be powered by 12 new scale power modules producing nearly two gigawatts of energy at sites in Ohio and Pennsylvania. A project this size has a significant amount of detail to be confirmed and structured before a project begins construction. And those discussions are ongoing. We'll keep our investors and partners updated on this progress. While we are moving full speed ahead with other opportunities in our business development pipeline, we remind our investors that given the scope and impact of these projects, discussions are detailed, deliberated, and staged in their progression. Looking at the demand environment more broadly, the need for clean, reliable power is far outpacing new supply coming online. As you see on slide six, electrification of the transportation, building, technology, and industrial segments is contributing to a so-called land grab. As the electric power industry prepares for a tripling of U.S. demand by 2050, this comes into even greater focus when you consider that the U.S. is on track to close half of its coal-fired generation capacity by 2026. Just 15 years after it reached its peak in 2011, the retirement of such baseload power, largely replaced by renewables, are making grids increasingly vulnerable to intermittency. Reinforcing and expanding the power grid remains an important opportunity for NuScale. Drilling down deeper, I'd like to spotlight a fast emerging opportunity in the technology sector. Simply put, each tech company in the world is investing heavily in hyperscale data processing infrastructure. Furthermore, these planned data centers are enormous energy consumers. Securing access to green 24-7 reliable power is critical for them to get site permitting and fulfill their clean energy commitments. As you see on slide seven, data center electricity consumption is expected to triple between 2020 and 2030, which is astonishing. That increase alone is equivalent to the electricity used by 40 million U.S. homes in a year, or almost a third of the total homes in America. NuScale is in discussions with major data center operators today. We see firsthand the significant interest from this group for dedicated, reliable, clean power solutions. Despite the growing demand, many potential customers are not necessarily interested in owning or operating their own nuclear power plants. That's where our partnership with IntraOne comes in. IntraOne will serve as a project developer and bring together the total package of our new scale technology with their capabilities in construction, financing, operation, and ownership. This one-stop shop solution has opened the aperture for customers considering SMRs and their energy portfolios. Early conversations are very encouraging, and we believe this partnership has changed the commercial trajectory of NuScale. Next, I will discuss our prospects with industrial companies, including a specific emphasis on using process heat to produce commercial scale clean chemical production, which you see on slide eight. NuScale enjoys numerous decisive advantages relative to both SMR technology competitors as well as other energy sources related to safety, siting, off-grid capabilities, and capacity factors, and more. Continuing on slide nine, NuScale enables clean chemical production, providing a safe, clean, reliable baseload source of energy with a very small land footprint. Our emergency planning zone allows us to co-locate with production facilities. This positions us very favorably with speaking with respective customers. We are currently engaged in eight separate funded projects related to NuScale integrated energy systems for chemical production. In fact, next week, Dr. Reyes will be speaking at the World Petrochemical Conference in Houston. We are the only nuclear company to have received an invitation and reflects our leadership amongst this customer group. Given rising demand for power and the tax credits available for advanced nuclear in the IRA, we anticipate adoption of our technology to accelerate. We continue to have constructive, highly positive, and ongoing dialogues with major utilities, industrial, and technology companies as well as local and national governments in the U.S. and globally. In summary, we have significant opportunities in front of us as we continue to build momentum, grow our business, and deliver on our commitments, and we are well positioned to capitalize in the year ahead. Now, I'll hand it over to Ramsey to provide our financial update. Ramsey?
spk08: Thank you, John, and hello, everyone. Our financial results will be available in our filing. So my focus will be on explaining major line items, our cost-cutting efforts, and expectations. I'll start by discussing our fourth core results found on slide 10, then touch on 2023 full year. All figures following are for Q4 2023, unless I say otherwise. I'll remind you that the NuScale revenue model consists of three sources. First, the sale and delivery of NuScale power modules and other equipment we have developed. Second, licensing our technologies. And third, services. In the early phase of a project, we generate services revenue by supporting several development activities, such as siting, licensing, and front-end engineering and site-specific design work, and project planning. Most of our revenue earned to date is from services for our customers and the licensing of our technology. During 2024, we anticipate advancing existing customers and adding new committed customers for our business development pipeline, which will improve cash generation and revenue. During this discussion, please keep in mind our fourth core results were impacted by the mutual termination of the Carbon-Free Power Project, or CFPP, announced by NuScale and the Utah Associated Municipal Power Systems, or UAMF, in early November. As part of this termination, a release agreement was signed resulting in a payment of 49.8 million to CFPP. As I discuss our financial results, I'll highlight key items impacted by the termination of CFPP and detail our treatment of those items. Revenue for the fourth quarter was 4.6 million. Research and development costs during the period was 37.8 million, slightly lower when compared to the same period in the prior year. However, this figure includes 11.4 million in additional expenses resulting from the termination of the CFPP-related Development Costs Reimbursement Agreement, or DACRA. Otherwise, fourth quarter research and development costs would have decreased 11.6 million from the same period in the prior year, consistent with our plan to shift financial resources to commercialization as we pivot from our R&D phase. Loss for the quarter of 56.4 million was larger than for the same period in the prior year due to the CFPP-related DACA charge, partially offset by lower professional fees. Following our payment to UAMS under the release agreement, NuScale ended the fourth quarter with cash of $125.4 million and no debt. Approximately $5.1 million of that is restricted cash, of which $5 million is earmarked for demobilization costs related to CFPP. As we discussed on the third quarter earnings call, the restricted cash under our layer of credit was in excess of our anticipated termination and demobilization expenses. For full year 2023, we anticipated negative cash flow from operations range of 102 to 142 million. Excluding expense from CFPP termination, a one-time event, we'll have ended the year with negative cash flow from operations of 133.5 million. Including the CAPP termination, we ended the year with negative cash flow from operations of 183.3 million. Looking ahead to 2024, NuScale is well positioned for our next phase of growth as we commercialize our technology, which includes near-term deployment and manufacturing. We have built a strong foundation, including world-class research and development and a powerful global supply chain to support the advancement of our strategic and operational objectives in 2024 and beyond. In January, we executed a proactive plan to better position our company commercially, financially, and strategically. This included a prudent production in our cost space, which will generate substantial annualized savings and create additional financial and commercial flexibility this year. As we work diligently to advance through the development stages of our current contracts and secure new ones, We will maintain our financial discipline and may selectively consider capital raising to sustain a conservative liquidity reserve. Before we go to Q&A, I want to note that NuScale filed an 8K aftermarket close today, which includes our earnings release, balance sheet, and income statement. Our 10K will be filed Friday. With that, I'd like to thank you again for joining today and for your continued support of NuScale. We'll take questions now.
spk04: operator thank you as a reminder if you would like to ask a question please press star followed by the number one on your telephone keypad your first question comes from the line of mark bianchi from td cowan please go ahead hey thanks um i i guess first one ramsey on the cash balance 125 million um how do you see that progressing
spk06: in first quarter and for 2024, and maybe you could talk to us about what could cause that outlook to be better or worse than what your base case might be.
spk09: I'd be happy to do that. I think from a management perspective, there are three main toggles when we focus on cash. One is revenues. One is cost savings. One is capital markets. I feel that we're entering 2024 with very solid footing. their visibility to revenue-generating business. We started the year with a tremendous cost-cutting effort, which I think really aligned or optimized our resources more efficiently towards the commercialization process that we're embarking on. And finally, we have capital markets available to us. As was disclosed, we have an ATM facility. It's something that we use very sparingly, and I think that really just to focus on revenue generation and expense reduction through liquidity management is management's approach to 2024. I think that's a very good position towards the end of the year.
spk06: Okay. Could you perhaps put some numbers around it just so we can maybe understand the boundary of outcomes?
spk09: Sure, Mark. You know, I haven't... We've had this discussion before in the analyst community. where we have not provided guidance on numbers. I think that as Newskill goes towards commercialization and starts to build a stable portfolio of revenue-producing contracts, those items and those ideas of forecasting cash and revenue numbers will become a little bit more... Yeah, will become a little bit more clear as we progress the business. So, Mark, we haven't provided guidance for a reason. We're looking at a handful of contracts this year, and they'll be pretty lengthy contracts. So until we get those moving in place and understand the timing of deliveries, we're not going to give anybody some numbers.
spk06: Got it. Okay. You mentioned the flexibility on capital raise with the ATM. Have you done anything? here so far this year? I mean, the stock has had quite a run here in the last couple weeks.
spk09: We will disclose in the 2023 financial use of the ATM over 2023. I don't disclose what I've done in the current quarter, but I think it's pretty evident from our stock movement that management has treated the ATM with the utmost of care, you know, for our cash, but there's no requirements as well as for our shareholders.
spk06: Okay, great. Maybe just one more, if I could, on just NTR1 standard power. Anything to update on that opportunity? And then, you know, if there isn't, maybe you could help us frame when we might expect an update there.
spk00: John, you want to take that question? John?
spk02: I get it. I was on mute. I'm sorry. No, Mark. If you recall, in October, Standard Power announced that they selected NuScale as the technology of choice. We've been in discussions on a regular basis with them. It's a complicated process. They're looking at two facilities and we've got two gigawatts of carbon-free energy from us at a site in Ohio and a site in Pennsylvania. We've been in regular discussions as Intra 1 progressing along, so hopefully here in a nearer term that we'll be able to say something, but we'll definitely keep you noticed as this thing proceeds. It's very much still in play.
spk03: Okay. Thank you. I'll turn it back.
spk04: As a reminder, if you would like to ask a question, please press star 1. Your next question comes from the line of Leanne Hayden from Canaccord Genuity. Please go ahead.
spk05: Hi, everyone. Thanks so much for taking my questions. Just to start, I was curious to know how confident you guys are in your ability to scale manufacturing. You know, just given that this is a pretty new technology, you're not very integrated, just how confident are you that you can move from design to manufacturing?
spk02: We're very, you know, one thing we've done is a lot of monies with the $1.8 billion that's been invested in NuScale, a lot of that monies was de-risking our module and actually scaling up and modeling to where a lot of it's off the shelf. And as we mentioned before, our fuel comes from traditional conventional fuel. Also from a supply chain, we continue to build out, but I was just with, this is John Hopkins, with the CEO of Doosan, as I mentioned during the script, that they made significant progress anticipating the future of modules. Because as you know, our model is predicated not just to do a one-off project. These are fungible assets. We're going to build them in a factory and ship them. And so right now, we're pretty confident we'll keep up to demand as it comes in. But we're also very cognizant we're not going to overextend our capacity to execute, which is very key. So, you know, with our strategic partners and the beauty of these strategic partners in Japan and Korea and the U.S., not only the suppliers or OEMs, but they're also investors. So they're taking a holistic view, not looking at a one-off, which affords us very competitive rates from that because the way we operate is that these suppliers are recognize they have to be commercially viable it's just not a viable they're just not a given that work will come that way so i was just with the ceo of duson my team was just out in japan and we stay in regular contact and we continue to build our supply chain out both locally within the u.s and international okay got it great thank you for that um when can we expect an additional project announcement and in your opinion
spk05: If you have any visibility, what are the likely markets that we should expect that announcement in, like whether it's international or data center related or it's coal to nuclear reprocessing or chemical production? What do you expect to see?
spk02: Well, let me just say, you know, this time last year when we talked, it was all about coal refurbishment, working with utilities, and it quickly became more process-oriented where industrials are looking at clean energy for process heat or hydrogen, ammonia, And now there's the big push on energy consumption for data centers and AI. Where I think near term we could come from is the project we mentioned in row power. I'm hopeful that in April, we pretty much floor is the prime on this with a subcontractor. Floor is operated under a limited notice to proceed. We're in the final negotiations of our limited notice to proceed as well as our our technology licensing agreement. So the timeline right now, hopefully, is by early April, we'll be doing a signing ceremony to kick off this project. So that one could be first out of shoot. Or again, as I said before, I don't want to set an early expectation, but our project with Standard Power still continues to proceed. And then I will say I've never seen anything like it, this whole data center, AI, with some of the tier one alphas in that industry, they need energy. And we're in discussions with not only tier one, but others. So timing's everything, but we're just seeing the market continue to build.
spk05: Okay. All right. Great. And then just last one from me. How should we be thinking about OpEx moving forward, especially given the recent headcount reduction?
spk02: If you think of the headcount reduction, what we did, we went from predominantly research and development over the years, which got us through the Nuclear Regulatory Commission licensing process and also helped us, not only helped us, but allowed us to do all the modeling and the scaling up of our equipment. Now we're going into the commercialization and deployment, which some of it requires different skill sets. So what we are assured of and what our customers have asked us, do you have the capacity to execute? And that's what the bottom line is. So we didn't, we're not in a position to, we're not, we don't have those people to execute these initial projects. So I'm pretty secure we're not going to have a problem in that area.
spk09: John, I may add to that idea is that as we went through this cost reduction exercise, what we really did also was kind of bright side some of the general administrative costs within the company. I think what you'll see is that as we start to generate revenues, we'll have left at that SGMA overheads, and looking at a high rate of profitability. That's really what we're going for with that type of idea. And when we mentioned the risk reduction forces, John had said that we've maintained, I think, the core DNA of the intellectual capacity of the company. That was a very well-calibrated, very well-planned action. And so, you know, our APEX, even today, remains very low. I think we remain very nimble and our ability to scale as revenues come up, manage our margin, and really have a view towards cash.
spk05: Okay. That makes sense. That's all from me. Thank you, guys.
spk03: Thank you. You bet. Thank you.
spk04: Your next question comes from the line of Ryan Finks from B. Reilly Securities. Please go ahead.
spk07: Hey, guys. Thanks for taking my questions. You bet. It looks like nuclear has been getting a lot of federal support in the news lately between the Atomic Energy Advancement Act and budget requests, not only for 24, but for 25. Can you talk about how some of those initiatives that you've seen could impact NuScale and potential customers in the U.S.?
spk02: Absolutely. In fact, great question. We have both my COO and my general counsel were on the Hill this week. There's a bill advancing in Congress that would allocate about $800 million to a competitive cost share award for not more than two SMR deployments in the US. Also an additional $100 million for SMR manufacturing that could be deployed no later than 2030. We're anticipating if it hasn't already been approved to be approved, So the U.S. government stays very strong behind this industry. And we also still continue to have very strong advocacy for the Department of State on international markets.
spk07: Got it. That's helpful. And that kind of leads into my second question internationally. Last week, Fuel Cell Energy talked about its participation in a private-public partnership related to ammonia production in Ukraine. Were NuScale expected to potentially supply the SMRs? I think the project was announced over a year ago, but their comments made it seem like it's progressing. Is there anything to share from NuScale's end on that one?
spk02: Yeah, that came about during COP27 at Sharma Sheikh, Egypt, if you recall. I was on stage as John Hopkins with Secretary Kerry And he announced that the US is going to assist Ukraine in deploying an American technology new skill for the ammonia hydrogen production, predominantly ammonia. And we're still in discussions. Unfortunately, until the situation gets to the point that we can actually execute and the bombs stop falling, but we are still in negotiations with that consortium. It's amazing because you can well imagine the power requirements that's going to be required in the ukraine at such a time that when we're allowed to get in so does that help yeah makes sense appreciate that call i'll turn it back thanks guys we have no further questions in our queue at this time i will now turn the call back over to john hopkins for closing remarks yeah thank you very much um You know, I just believe NuScale is still very well positioned as a first mover in the SMR space. And we're poised to commercialize and deliver clean energy at scale. Nuclear technology, we believe, is absolutely essential to powering the global energy transition. We also strongly believe we continue to be at the forefront of that effort with our work to deliver safe, scalable, and reliable carbon-free nuclear power. And I want to thank everybody on the call today. More to come. Thank you very much.
spk04: This concludes today's conference call. Thank you for your participation and you may now disconnect.
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