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spk01: like to ask a question during this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question press star one again. 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.
spk10: Thank you, operator.
spk03: Welcome to NuScale's first quarter 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 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 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 SEC filings on Form 10-K for our fiscal year 2023 and in our prior SEC 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. As you all know, NuScale was founded on the belief that nuclear power, a cleaner, safer, more reliable form of energy, is critical to meeting the increasing global demand for carbon-free power. Today, we are seeing this belief borne out in real time. As you'll see on slide three, the need for clean, reliable power is significant and growing, driven by the electrification of the transportation, building, technology, and industrial segments. A recent five-year projection for U.S. electricity demand growth has doubled from forecasts provided just one year ago. Overall, peak demand in the U.S. is expected to grow at least 38 gigawatts over the next five years. When you consider that the country is on track to close half of its coal-fired generation capacity by 2026, the vulnerability of domestic grids to intermittency comes into greater focus, particularly when you consider that in 2023, Coal represented more than 16% of U.S. utility-scale electricity generation. The U.S. has made historic investments in climate progress and federal regulations. In-state policies have helped bend the projected greenhouse gas emissions curve further down. However, the country continues to lag behind Paris Agreement targets to cut emissions by 50 to 52% below 2005 levels by 2030 and achieve net zero emissions by 2050. For example, in 2023, the U.S. added 32 gigawatts of zero emissions electricity generation and storage. But as you see in the chart, it still falls far short of the target addition of 46 to 79 gigawatts needed to keep pace with the country's Paris Agreement goal. Let me add an additional perspective. In March, I attended SEER Week, the flagship annual conference on the energy industry calendar. And the dominant theme was artificial intelligence and AI's insatiable appetite for electricity. Data center and AI-driven companies attended the event en masse, speaking on panels and seeking out meetings with utility executives, power developers, and power production technology companies, including NuScale. A few key takeaways from these discussions, first, NuScale's SMR technology resonates so strongly with this group because our solution is scalable, reliable, near-term deployable, and aligns with their clean energy commitments. In addition, our flexible business model means they will not need to own or operate a nuclear energy plant. Second, data center and AI companies are not like traditional nuclear energy customers. The sense of urgency and the pace at which they move are clear differentiators. We are in advanced discussions with a number of these prospective customers, and several are considering commercial operation dates before the end of this decade. Third and finally, while these companies are competitors commercially, many are collaborating on energy solutions because they recognize the scope and immediate nature of their common need. As reflected on slide four, When you consider how the electricity needs of tech companies have evolved, the sense of urgency they're exhibiting is justified. Most traditional data centers built 10 years ago were energy consumers of 10 megawatts or less. Today, it's not uncommon to see 100 megawatt data centers. There are data centers planned in the next three to five years that will approach 1,000 megawatts. The International Energy Agency estimates that electricity demand from data centers globally could top 1,000 terawatt hours by 2026, more than double 2022 levels. Data centers, AI, and cloud storage are 24-7 power consumers. They require an uninterrupted reliable power supply. At CERA Week, an Amazon Web Services executive commented that the world adds a new data center every three days. This need was underscored by a new initiative between Google, Microsoft, and Nucor working together across the electricity ecosystem to develop new business models and aggregate their demand for advanced clean electricity technologies, including advanced nuclear. Initiatives like this will help bring first-of-its-kind commercial projects to the market. As you see in slide five, nearly every leading hyperscaler has made major commitments to reduce carbon emissions. NuScale's technology has the ability to provide baseload decarbonized energy at scale and can help meet those sustainability objectives. We, in turn, see our sales funnel for prospective data center and AI customers expanding with significant inbound inquiries from Tier 1 hyperscale computing providers. The most common sentiment we hear in meetings with hyperscalers, as well as data center operators like Standard Powers, I need the power now, and how do I get it? I want to emphasize this is not a passing need. We already see another big energy consumer, quantum computing, on the horizon. Strain on the grid from AI-driven power demand is made even more acute due to strong growth in domestic manufacturing, as seen on slide six. driven by domestic content requirements and on showing trends, as well as promotion of private investment to the bipartisan investment law, the Chips and Science Act, and the Inflation Reduction Act, investment commitments for American manufacturing now since 2021 have exceeded $525 billion. As a result, and noted on slide seven, we continue to progress serious conversations with prospective industrial customers. including in the petrochemical industry, about identifying and incorporating clean energy options. In particular, producing clean, high-temperature, high-pressure steam for process heat applications. Related to this interest and activity, we are honored that we added Dr. Dirk Smit to our technical advisory board in April. Dr. Smit recently retired from Shell Corporation, where he served as their chief scientist and chairman of the Shell Science Council. I will add that NuScale is continuing to innovate in novel ways. For example, we believe we have made great progress converting brine to an effective hydrogen carrier using clean energy from a NuScale plant. In the near future, you'll see more news on the tests performed at Pacific Northwest National Laboratory that confirm our patent-pending approach. All our prospective customers value the numerous decisive advantages of NuScale technology relative to large-scale nuclear and other energy sources, as well as compared to the largely unproven claims of newly emerging SMR technology developers. NuScale enables process heat for industrial customers, providing a clean, safe, reliable base load source of energy with a small land footprint. Our small emergency planning zone allows us to co-locate with production facilities. This positions us very favorably when speaking with prospective customers. As featured on slide eight, the strategic partnership we formed with InterOne Energy, an American independent energy producer and plant development owner with significant energy and infrastructure experience, enables NuScale to bridge the power plant development plus ownership value. As seen on slides 9 and 10, with Doosan making significant steps towards production, our readiness is far more advanced than our SMR technology peers that have aspirations for U.S. Nuclear Regulatory Committee approval. And the gap continues to widen between NuScale and our SMR competitors as we continue manufacturing our NuScale power module. It also highlights the degree to which we have de-risked our modules. In April, Doosan Inheritability opened a dedicated steam generator tube bending shop. It includes the installation of new state-of-the-art tube bending machines. Recent renovations also enabled the facility to perform tube bending for new scale power modules, a key milestone in future development. I toured the Doosan's facility last month in Tsinghua, and I am so impressed with all that Doosan has done to support forgines and manufacturing NuScales power modules. We also are continuing to start new forgines and expect to have all of the forgines needed to support the first six upper reactor press officials by the end of this year. I saw that the first seven large forgines for upper reactor vessels, which we refer to as long lead materials, have made it to the forging and initial manufacturing phase. Our reactor pressure vessels are now ready to enter the next fabrication phase. Our other strategic suppliers like IHI of Japan and Par Systems in the U.S. are also making preparations to accept customer-backed orders. This includes fabrication of prototypical new scale plant components. We look forward to sharing more updates from our suppliers that demonstrate our readiness to deploy NuScale powered plants. On the regulatory side, NuScale standard design approval application for a 77 megawatt upright design was accepted for review by the U.S. Nuclear Regulatory Commission or NRC in July 2023. We expect the NRC's process to conclude on or before July of 2025. While the design is based on the same fundamental safety case and features approved by the NRC in 2020, we believe that the 77 megawatt NuScale power module supports an even wider range of customers. NuScale has deployed six E2 centers thus far, with four of these centers deployed at U.S. universities and two internationally. These energy exploration centers are the NRC approved control rooms for NuScale powered plants. As seen on slide 11, we toured the E2 Center at Seoul National University with NEA Director General Bill Magwood. This E2 Center models operations for 12 module NuScale-powered plants. Among the first NuScale has achieved, the U.S. NRC has approved three operators in a 12-unit control room. For the first time since the event at Three Mile Island, The NRC also approved control room operations without a train shift technical advisor. The U.S. State Department announced that E2 Center will be deployed in Ghana, and we are in discussions to deploy several more akin to Apple computers deployed to schools. This makes training on a new scale E2 Center the standard for advanced nuclear worldwide. Next, I'll update you on the Row Power Project. In late March, U.S. Ambassador to Romania, Kathleen Kavalec, visited Raw Power's Dorches site. Ambassador Kavalec reiterated America's commitment to deploying a new-scale SMR in Romania and underscored that the Raw Power project was an important element of the U.S.-Romania strategic partnership. Planning continues for Raw Power projects phase two front-end engineering design work, while commercial and government stakeholders work to finalize terms. While NuScale contracted directly with Row Power to complete Feed Phase 1, as planned, NuScale will serve as a subcontractor to FLOR for Row Power's Feed Phase 2. In late April, the President of Romania in a Romanian delegation toured Nuson's Interabilities Manufacturing Facility and saw the NuScale Power Module components being manufactured there. Before I conclude, I want to reiterate that nuclear energy is such a valuable commodity in the context of the global energy transition because it's a sustainable solution that executes reliably, a pairing that does not exist with other current energy solutions. Whether it's industrial electrification, process heat, or the rapidly escalating demand of the data economy, NuScale's SMR technology is part of the solution. Given our ability to produce clean, reliable energy, reach customers, and help them achieve their sustainability goals. We maintain competitive advantages in technology, safety, manufacturing readiness, siting, and regulatory success, and expect to play an integral role in helping a wide range of customers meet their 24-7 energy needs while reinforcing and expanding the power grid. Now, I'll turn 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 filings, so my focus will be on explaining major line items. I will discuss our first quarter results, found on slide 12, and relevant factors impacting our financial position. All figures following are for Q1 2024, unless I state otherwise. I'll begin with NuScale's improved financial position. In January, the company implemented a series of strategic initiatives to better align our resources with NuScale's primary objective of transitioning towards commercialization and revenue producing commercial contracts. These actions further NuScale's long-term financial stability by generating approximately 50 to 60 million in annualized savings starting in the second quarter of this year. NuScale's overall cash position improved during the period and in the first quarter with cash in equivalence of 137.1 million 5.1 of which is restricted, and no debt. This compares to the end of the fourth quarter of 2023 when the company had cash and equivalents of 125.4 million, 5.1 of which was restricted, and no debt. Newscale also reported revenue of 1.4 million and net loss of 48.1 million for the three-month period ending March 31st. This compares to revenue of 5.5 million and net loss of 35.6 million for the same period in 2023. Higher net loss reported in the current quarter is driven by a one-time $3.2 million charge associated with cost reduction efforts related to our transition from an R&D-based company to commercial operations, and also a $9 million non-cash adjustment to the fair value of our warrants driven by the increase in our share price. Looking forward, NuScale will maintain our financial discipline and prudently sustain a conservative liquidity reserve. I conclude my remarks with a brief view of our capitalization summary on slide 13. Additional information may be found on our SEC form 10-Q and earnings release may be available prior to this call. With that, I'd like to thank you again for joining today and for a continued support of Newscale.
spk06: We'll now take questions. Operator?
spk01: Thank you. The floor is now open for questions. If you had dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. Your first question comes from the line of George Giannourakis with Canaccord Genuity. Please go ahead.
spk04: Hi. Good evening, everyone, and thank you for taking my questions. Thank you, Gerard. So you articulated, like, a lot of momentum in your discussions with some of the hyperscale data center companies, and I'm curious as to, you know, when you see that momentum translating materializing into orders. It seems like it's close, but any guidance there would be much appreciated. Thank you.
spk10: Yeah, George.
spk02: John Hopkins here. Just, you know, it wasn't that long ago when I commented that we saw a lot of activity with utilities related to coal plant refurbishment. And then last year we saw a lot of activity and discussions around hydrogen production, process heat, ammonia. However, what I see this time in conversations with these Tier 1 and others as it relates to AI and data centers, it's not rhetoric. They have a demand, and they have an immediate demand, and it just continues to perpetuate. And it's not that the coal plants have gone away or the hydrogen production. This is compounded by the additional requirements of these data centers and AI. And we have NDAs in place, and we put these NDAs in place very quickly because Everybody's kicking tires down and wants to see who can deliver first. And as I mentioned, we have a, I was just in a Doosan and I was stunned to see the advancement of seeing seven of our 4Gs coming offline. They're even doing two bending and they're doing our helical coil steam generators. They're actually scaled up in testing currently. And these things are invaluable to us because if somebody wants to move quickly, I could probably save over a year of the schedule because we already have these long lead eyes in hand. So I think the difference to your question is that there's a lot of pressure now coming on when I see utilities from data centers and from AI companies saying, we need to meet the demand now. And if you can't deal with it, we'll have to go somewhere else. And so I'm seeing, you know, the utilities now, you know, we had the Inflation Reduction Act and we had The others that I talked about, but I've never seen any movement as fast as what I'm seeing currently right now. So we're pretty bullish on the market. This is exactly what I feel, and we needed a burning platform. I think this is going to be what promulgates this industry to really take off.
spk06: Thank you for that. And maybe just as a follow-up,
spk04: As a follow-up, are there any implications to you of the restrictions on Russian uranium imports? Thank you.
spk02: No, there is none at all. Our chief technology officer, Dr. Jose Reyes, back in the year 2000, made a conscious decision to stay as an advanced light water reactor, predominantly because that's what the nuclear regulators all over the world do. They know light water. And so we're typically what we call conventional fuel.
spk01: less than five percent a wrench and our fuel is actually manufactured by framitone here in the united states so fuel is not an issue for us thank you so much i'll hop back in queue again if you would like to ask a question press star 1 on your telephone keypad your next question comes from the line of mark bianchi with td cowan please go ahead
spk09: Hey, thanks. John, I want to follow up on that last discussion about the data center demand. You mentioned there were several that wanted to have commercial operation before the end of the decade. How many do you think could be awarded to the industry? I'm curious of how meaningful this would be. And I know you probably don't want to get into saying how many you could get, but just what are the real prospects that are out there? Is it Like two or three? Is it 10? Help us understand how much that can be.
spk02: I think what comes down to, Mark, and thank you for the question, is the capacity to execute. One thing we don't want to do is overextend our capacity to execute. So what I'm looking for right now in our model, you know, is pretty simple. You know, we will take first-of-a-kind risk. Provide us long-term our PPAs. And that's what we're asking for. So right now we've got six modules coming offline. Doosan says they could fabricate 20 modules in an annual timeframe. And they're actually gearing up, as I said before. So, and what I like the fact on these, what I call fungible assets, I can move these modules. We're building in a factory. So, as you remember, our model's predicated not to do one-off projects, but have one or two. And we can locate or relocate these from the factory. You know, as we're building in a factory, you're doing the commercial work in the field simultaneously. we can move pretty quickly. So for me right now, I'm not greedy. Just give me one plant, one plant to start. And I'm telling you, I've never, you probably hear it. This is the first time I've really seen activity movement. You know, people ask me about where, where's standard power. They're still there. That these are large and complicated financial transactions that just take time to finalize. But, um, The standard player has not gone away. And again, the others like the Amazon and Google, you read the announcement, you know, with Nucor and Google and Microsoft teaming together. I was recently at a conference and I heard one of the senior executives say, you know, in the market, we're competition. Commercially, we're competitors. However, when it comes to energy, we're collaborated because we all have a standard need. And they're looking to move where time is of the essence.
spk09: Right, right. Okay. I guess just two others for me. One, in the quarterly filings for the last few quarters, there's been a sales and marketing agreement. I think it started out as about $20 million a few quarters ago, and it's been amortized lower as time goes on. Is that the agreement with Entra 1? And if not, Is there some expectation for some sort of an award to occur because of this agreement? And if an award doesn't occur, you know, do you get the money back or something like that? Maybe you could just talk about what's going on there.
spk02: Yeah, I don't know if I'm at liberty to really say where that money went other than it is for development purposes. And again, this is a, as I said, these are complicated transactions. But I will say our partner, IntraOne, You know, they're in discussions with the top five tier banks. I mean, I'm in discussions with them as well. And what they're looking for is bankable projects. You know, as I commented before, they don't necessarily want to just go and finance a nuclear power plant. These banks are looking for assets under management. So they're looking at what IntraOne brings is the overarching infrastructure of not just nuclear, but it could be LNG, hydrogen, ammonia, etc., So, you know, we're assisting in some development costs and making this market happen. And I'm glad we did it because I'm starting to finally see hopefully this is going to come to fruition.
spk09: Okay, great. And then the last – sorry, go ahead, John.
spk02: Go ahead. No, I'm sorry. I interrupted. Sorry.
spk09: I was just going to ask one for Ramsey on cash. So the Q has a $33 million cash use and use. talked about in the slides here of the 50 to 60 million dollars of annualized savings that'll happen in the second quarter so that's like 13 million bucks a quarter of savings should the implication then be that like the cash use in second quarter and beyond should be in that ballpark of 20 million bucks uh so mark when we announced the uh our cost savings plan in january
spk07: We did mention a savings of $50 to $60 million on an annualized basis. Our cash from operations for this quarter was, I think, about negative $33.5 million. I anticipate that our cash burn on an ongoing basis will be sub $10 million. We took a number of one-time charges during the first quarter. So I think you're about in the ballpark if you're thinking 20 or low 20s is a quarterly cash burn rate, just based on where we stand today.
spk09: Okay. And to confirm, that doesn't contemplate any further ATM sales. I know you could do those, but the numbers we're talking about here, that's before any benefit from ATM.
spk07: I'm talking about cash flow for operations.
spk06: Got it.
spk09: Yeah.
spk06: Great. Absolutely.
spk09: Thanks very much. I'll turn it back.
spk01: Your next question comes from the line of Ryan Fingst with B. Reilly. Please go ahead.
spk05: Hey, good evening, guys. For road power – hey, guys. Understanding that the timing for road power is out of your control, can you just remind us what the final steps are there to finalize terms for the Phase II feed work?
spk02: Yeah, Ryan. In fact, we had an update this morning with our real power client. And as I commented, I was with the president of Romania two weeks ago in Romania when he toured the Doosan facility. We completed working with Floor Corporation to feed phase one. We're now entering into the LNTP or the limited notice to proceed feed phase two, where NuScale is a subcontractor to Floor Corporation. And their vote was to have occurred in April 17th. With the shareholders of raw power, however, whatever reason we don't know. Also, we were told it has nothing to do with new scale technology or. The contractors is politically driven in a in a year of of elections that they postpone the date. The shareholders voted to June, July. And we were told as of this morning that that's still progressing. It's not a financial issue. And all we know is that the vote has been abstained or delayed until June-July timeframe. So that's, you know, the extent of what they've told us.
spk00: Okay.
spk02: The limited to proceed phase is, you know, as I said, we're a subcontractor to Florida. The duration of that is about a one-year duration before they move into the the final notice to proceed.
spk05: Does that help? Got it. Yep, sure does. Thanks, John. And then just one more, wondering if you had any update on the two SMR appropriations programs that we spoke about a little bit on the last call.
spk02: Yeah, it's still, we're waiting for the request to come out. It's, you know, the initial, there's for $800 million in our discussions with government, you know, that, That award will probably be, you know, go on to the next administration. But then there's another award for $100 million that we're waiting on manufacturing and supply chain of normally about $100 million. And what we were told, the turnaround on that time, on that contract, is 90 days. So we're still waiting, and hopefully it'll come to fruition. At least that $100 million we'll know here pretty soon. That's what we're told.
spk10: It is an election year, mind you.
spk05: Yeah, understood. I appreciate that caller. I'll turn it back. Thanks.
spk01: We have reached the allotted time for questions. I will now turn the call over to NuScale CEO John Hopkins for closing remarks.
spk02: Yes, thank you, operator. You know, as we stated before, NuScale is the only SMR design certified by the U.S. Nuclear Regulatory Commission. We, along with our strategic partner, IntraOne, have built, we believe, a very robust business development pipeline. NuScale has industry-leading manufacturing readiness and is well-positioned to commercialize and deliver clean energy at scale. Nuclear technology is essential to powering the global energy transition, and we believe we're at the forefront of that effort with our work to deliver safe, scalable, and reliable carbon-free nuclear power. I believe we're off to a good start in 2024, with progress on all fronts. And I look forward to what we will accomplish together throughout the remainder of the year. I'd like to thank everybody for their interest in NuScale and for participating on the call today. Operator?
spk01: Thank you. This concludes today's conference call. You may now disconnect.
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