Earnings Call Transcript - IMSR Q1 2026

Operator, Operator

Greetings. Welcome to Terrestrial Energy First Quarter 2026 Earnings Call. Please note this conference is being recorded. I will now turn the conference over to Tyler Gronbach, Vice President, Investor Relations and Public Relations. Thank you. You may begin.

Tyler Gronbach, Vice President, Investor Relations and Public Relations

Thank you, operator. Good morning, everyone, and welcome to Terrestrial Energy's First Quarter 2026 Earnings Conference Call. I'm Tyler Gronbach, Vice President of Investor Relations and Public Relations. Joining me today are Simon Irish, Chief Executive Officer; and Brian Thrasher, Chief Financial Officer. Simon will begin with a review of our strategic and operational progress during the quarter, and Brian will follow with a discussion of our financial results. We will then open the call for questions. Before we begin, I'd like to remind you that we have posted the quarterly results press release and summary slides to the Investor Relations section of our website at terrestrialenergy.com. I'd also like to remind you that today's discussion will include forward-looking statements about our business, operations and financial outlook. These statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. We encourage you to review the risk factors described in our SEC filings for a more complete discussion of these risks. With that, I'll turn the call over to Simon.

Simon Irish, Chief Executive Officer

Thank you, Tyler, and good morning, everyone. When we last spoke in March, we outlined a 3-pillar framework for assessing our progress and our commitment to disciplined execution against clear milestones. Today, I will report on first quarter progress against that framework, and Brian then will discuss our financial results. Before I turn to first quarter developments, let me briefly affirm the context in which we are operating. The generational shift in energy demand and policy that we described at year-end has only intensified in the month since. It is secular, long term and compelling. Electricity demand expectations continue to rise, driven by AI infrastructure, the reshoring of manufacturing capacity and broader electrification. Energy security is again a dominant policy theme across advanced economies. Against this market backdrop, the IMSR plant is powerfully and competitively differentiated. Let me briefly remind you of just two of those differentiators. First, size, affordability and capital efficiency. At one-sixth the size of a conventional nuclear plant, the IMSR plant is right-sized for the growth market opportunity today. Its steam turbines operate at near 50% greater efficiency than those driven by a light water reactor. Its nuclear systems operate at low pressure and with high inherent safety. All are powerful competitive economic virtues that increase affordability and financeability, reduce risk and secure strong social license for deployment. Second, our fuel strategy, and I want to spend a few moments on this point. The IMSR plant uses standard nuclear fuel, uranium at standard enrichment, i.e., less than 5% U-235, which has become the world's standard over many decades. This was a strategic choice that we made more than a decade ago, deliberately avoiding HALEU fuel use, i.e., fuel at enrichment levels between 15% and 20% U-235, the levels required by other Generation IV reactors in the advanced nuclear sector. In today's HALEU enrichment-constrained industry, our decision has removed the considerable challenges, costs and uncertainty of HALEU fuel supply at commercial scale. It also has the benefit of reducing regulated complexity and cost, both for first plant and for fleet. This is relevant to our competitive positioning and to how we believe the market should evaluate deployment readiness in our sector. Companies that choose HALEU fuel for advanced reactors now face a considerable fuel supply timeline and infrastructure cost challenge, which we have resolved more than a decade ago. As I described in March, our 3-pillar framework guides how we assess and report progress. The first pillar covers IMSR engineering and regulatory developments, including Project TETRA, our test reactor assembly and Project TEFLA, our fuel line assembly. The second covers supply chain development and the third covers our commercial pipeline of IMSR plants. Let me walk through first quarter progress for each of these three. First, our engineering and regulatory pillar. Early in the quarter, we completed an OTA contract with the Department of Energy to advance Project TETRA, our test reactor assembly, and Project TEFLA, our fuel line assembly. The projects support engineering and regulatory programs for IMSR plant commercial operation and the infrastructure development for IMSR plant fuel supply. Our graphite irradiation testing and supply activities are ongoing at NRG Petten, one of the world's most powerful test reactors. This work is essential for reactor materials qualification, supplier selection and licensing readiness. Subsequent to quarter end, we achieved another foundational regulatory milestone with the Nuclear Regulatory Commission. We completed final submissions to the NRC supporting our Postulated Initiating Events methodology, or PIE, Topical Report, and the NRC has subsequently approved that Topical Report, issuing its Safety Evaluation Report. The details are in Tuesday's press release, but let me underscore what this means. The Safety Evaluation Report establishes an important methodology for IMSR safety analysis. It forms part of the future licensing basis of the IMSR plant as it can be referenced in future licensing applications without reevaluation. The role of Topical Reports with associated Safety Evaluation Reports reduces the scope of subsequent regulatory reviews, improves predictability by resolving key safety analyses early and increases confidence in the licensing pathway to commercial operations. Furthermore, it also enables repeated use of agreed safety frameworks for licensing of multiple IMSR plants, which is important as we look through first plant to establishing deployment efficiencies at fleet-scale. The PIE Safety Evaluation Report follows on from the NRC's 2025 Safety Evaluation Report for the IMSR's principal design criteria. Together, these two approved analyses establish foundational elements of the IMSR plant's licensing basis. Our completion of this work reflects the depth and duration of our engineering engagement with the NRC. Turning to the second pillar, supply chain developments. Our relationships with industry nuclear suppliers remain in active execution, supporting the fabrication of reactor components and the development of fuel supply infrastructure. Over the quarter, we built our supplier group for the execution of Projects TETRA and TEFLA. Turning to the third pillar, our commercial pipeline of IMSR Plant projects. Following quarter end, we executed a memorandum of understanding with Riot Platforms, creating the opportunity for a best-in-class pairing of data center and nuclear plant. The company plans to co-locate IMSR Plants with Riot-developed data centers serving AI and high-performance compute applications. The agreement covers multiple project opportunities across the U.S. and the use of natural gas as a bridge fuel to accelerate commercial power supply and enhance resilience during full plant operation. This relationship establishes a hyperscale data center commercial channel for IMSR Plants. It further underscores the demand side value of the IMSR Plant design and our business model. And it reflects exactly the kind of high-value industrial application the IMSR Plant is designed to serve. Our commercial pipeline consists of approximately 10 IMSR Plant projects. With the Riot relationship, this pipeline represents 7.8 gigawatts of indicative power capacity. The IMSR Plant's combination of affordability, capital efficiency, siting flexibility and customized supply make it well suited to the growth opportunity today. Over the quarter, we executed against clearly defined milestones, advancing across all three pillars of our business plan, always looking past the deployment of a single IMSR Plant to a fleet operating in the 2030s. With that, I will now turn the call over to Brian Thrasher, our Chief Financial Officer, to review our financial results.

Brian Thrasher, Chief Financial Officer

Thank you, Simon, and good morning, everyone. First quarter results indicate a clean balance sheet, disciplined cash management and continued investment in the engineering process and resources for commercial execution. Please note that year-over-year comparisons are unlikely to be informative this quarter given the transformations in the business in 2025. We're presenting results on a sequential quarter basis, which we believe to be a more relevant indicator of company performance. At quarter end, we held total cash and cash investments of $289.9 million. This compares to $297.8 million at year-end 2025. Cash burn for the quarter was $7.9 million, an increase of $1.8 million compared to the prior quarter after consideration of one-time transaction costs associated with the 2025 merger. Two items drove the majority of this increase. First, a first quarter 2026 payment of $600,000 for 2025 discretionary bonuses; and second, a $1 million paydown of accounts payable for vendors offering extended credit terms. The remaining $200,000 increase of first quarter cash burn is attributable to higher sequential payments for research and development costs. We expect cash burn to increase throughout 2026 as we scale our organization and resources, material testing and qualification, supplier selection activities and project-related work. This is the continuation of the ramp we began in fourth quarter last year following the completion of the merger transaction. I'll now turn to operating expenses. Research and development expenses were up $1 million sequentially, driven by our fuel development and graphite testing programs. General and administrative expenses were up $4.6 million sequentially, primarily reflecting headcount and stock-based compensation as we build out the public company team. The fourth quarter of 2025 also included a credit of approximately $2.7 million from legal and accounting expenses that were capitalized in conjunction with the merger accounting. Turning to our capitalization table. Issued and outstanding shares were up modestly, approximately 100,000 shares, from stock option exercises during the quarter. Share count is effectively unchanged from year-end 2025. In summary, our balance sheet is straightforward, clean and tight. Cash and short-term investments make up the vast majority of our assets, liabilities are limited. We have modest current liabilities and lease obligations and no debt. The company continues to hold a strong capital position to execute against the milestones Simon has outlined. That concludes our prepared remarks. Operator, please open the line for questions.

Operator, Operator

Our first question is from Derek Soderberg with Cantor Fitzgerald.

Derek Soderberg, Analyst, Cantor Fitzgerald

So Simon, I appreciate the color on the standard LEU and HALEU dynamic. That distinction certainly makes sense as a differentiator to other Gen 4 reactors at the feedstock level. So the next step is taking that and deconverting it and fabricating it into molten salt, right? So I'm curious if you can walk us through the TEFLA pilot plant timeline, when you expect commercial scale fuel production there to be online maybe relative to the first plant deployment? And then sort of on top of that, is fuel fabrication sort of the binding constraint to the deployment schedule here?

Simon Irish, Chief Executive Officer

Yes, Derek. Thanks for the question. In terms of our entire fuel supply program, the end reactor feed is IMSR fuel salt. HALEU is the enriched material that comes out of an enrichment plant; it's the first link of the supply chain. The reason we emphasize HALEU to the degree we do is because without an enriched feed there is no supply chain. HALEU is therefore extremely important. In our Westinghouse-related discussions the next link is deconversion, which is the step to the chemical form we need, uranium tetrafluoride. Deconversion and the subsequent chemistry to produce the fluoride form are very much part of the whole nuclear supply chain. The deconversion we need is from the hexafluoride form that comes out of enrichment plants to the uranium tetrafluoride chemical form. The physical form for reactor feed is the IMSR fuel salt. There are additional steps to arrive at the physical form, but keep one point in mind: the physical form is not a conventional detailed reactor assembly such as a fuel bundle. Our fuel is a liquid, so manufacturing is essentially a chemical production process to create a final fuel form, which is the IMSR fuel salt. That requires fluoride chemistry to the precise purity requirements needed for licensed reactor feed. Those additional steps are what we will be developing in Project TEFLA at the pilot level. Project TEFLA is therefore important to perfecting and industrializing the processes that will need to be put in place to create that final fuel form, the IMSR fuel salt, the final reactor feed that goes into the reactor. From a business perspective, we are not looking to be solely a plant operator, but we are looking to be principal in fuel supply and in IMSR core unit supply. Project TEFLA plays a very big role in us developing and protecting the IP and the industrial processes needed for fleet-level fuel supply.

Derek Soderberg, Analyst, Cantor Fitzgerald

Got it. Really appreciate the color on that. And then with the PIE Topical Report approved by the NRC, what sort of are the next regulatory submissions we should be watching out for as you guys prepare for the formal site licensing and construction?

Simon Irish, Chief Executive Officer

Thanks, Derek. In terms of regulatory preparedness there are two important branches to watch. One is preparing for the operating license, which makes the case that your nuclear systems are compliant with nuclear safety standards. The other is the construction permit, where you sign off on environmental requirements and can start construction activities on site. Many in the market focus on construction permits, but construction permits do not address the safety of nuclear systems. The safety of nuclear systems is associated with your preparedness to submit an operating license. That preparedness can be established clearly with Topical Report work because a Topical Report allows you to discharge elements of safety analysis that will ultimately go into the final operating license. We are pleased to have submitted multiple Topical Reports to the NRC, engaged with staff on a timely basis, and received approval of the PIE Topical Report along with the associated Safety Evaluation Report. Those approvals and an approved methodology put you in a stronger position to submit the operating license. And it is the operating license that enables commercial operation of a nuclear plant. The construction permit allows you to move EPC teams onto the site, but the operating license is the end game.

Operator, Operator

Our next question is from George Gianarikas with Canaccord Genuity.

George Gianarikas, Analyst, Canaccord Genuity

I'd like to continue on the fuel thread. Have you explored the use of LEU+ in your reactor design?

Simon Irish, Chief Executive Officer

Yes. When we made our decision about ten years ago to use standard nuclear fuel, we considered a range of options. LEU+ could potentially have some technical benefits that may translate to commercial benefits if it becomes readily and broadly available. We would examine it carefully if that happens, but our analysis today is that from a commercial perspective any improvement would likely be marginal. If LEU+ becomes broadly available, we will look at it closely.

George Gianarikas, Analyst, Canaccord Genuity

And the design is flexible enough such that I would assume that you could feed it into the reactor?

Simon Irish, Chief Executive Officer

Yes. From a design perspective, you could view our system as highly fuel-flexible. We use a liquid fuel form rather than a physical fuel bundle, so the system can accommodate a wide array of fuel chemistries. At the one end, using LEU at no more than 5% enrichment is a secure and straightforward place to start. At the other end, the system could accommodate spent nuclear fuel, plutonium, thorium and other fuels if market circumstances and policy dictate that route. We have not pursued those exotic fuels because our commercial focus is on affordability and capital efficiency. Keeping the fuel approach simple supports our objectives for cost and speed of deployment, but the design does provide flexibility for other fuel types in the future.

George Gianarikas, Analyst, Canaccord Genuity

And maybe just last question for me. Just your thoughts on Part 57. It appears to be just some inklings of detail there. Any potential leverage you could have in terms of using it to accelerate your pathway?

Simon Irish, Chief Executive Officer

I believe Part 57 is more focused on microreactors. Our regulatory team has not identified it as directly relevant to Terrestrial Energy. The one regulation we are watching closely is Part 53 because that could be a practical licensing pathway for us, both for the first plant and for fleet deployment. I'm happy to follow up offline after consulting with our regulatory team on the potential implications of Part 57 and whether any portions, such as waste-related elements, could be leveraged for other reactor classes.

Operator, Operator

We now have a follow-up from Derek Soderberg with Cantor Fitzgerald.

Derek Soderberg, Analyst, Cantor Fitzgerald

Just a couple more. First, regarding the executed OTA agreements with the DOE. Is that going to help you guys at all with capital expenditures for the TETRA and TEFLA programs over the next year or so?

Simon Irish, Chief Executive Officer

Derek, I think indirectly, yes. Capital providers like regulatory clarity when assessing project goals. The OTA contract with the Department of Energy provides that regulatory clarity and support to get TETRA and TEFLA done. So it helps from a capital perspective in that way.

Derek Soderberg, Analyst, Cantor Fitzgerald

Got it. Got it. And then my final one, just on your pipeline of 10 projects. I think in the past, you guys have talked about potentially declaring 1 to 3 additional projects this year, and you've got the Riot MOU now announced. Are you still tracking towards additional site or partner disclosures this year?

Simon Irish, Chief Executive Officer

Yes. We reiterate the guidance we issued in March of one to three additional projects this year. The Riot announcement is clearly part of that pipeline momentum, and we are tracking to that guidance.

Operator, Operator

With no further questions, I would like to hand the conference back over to Simon for closing remarks.

Simon Irish, Chief Executive Officer

Thank you. So, thank you for joining us today and your interest in the company. We set expectations for the year ahead last quarter, and we're pleased with the progress this quarter against that benchmark. The work ahead of us is all about execution. We look forward to demonstrating that milestone by milestone through 2026 and beyond. Thank you.

Operator, Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.