Prepared remarks
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.
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.
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 Other Transaction Authority 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 ten 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.
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 the 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.
Questions and answers
Our first question is from Derek Soderberg with Cantor Fitzgerald.
So Simon, I appreciate the color on the LEU and HALEU dynamic. That distinction certainly makes sense as a differentiator to other Gen IV 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 the binding constraint to the deployment schedule here?
Yes, Derek, thanks for the question. In terms of our entire fuel supply program, we have been providing more detail on exactly how we're going to achieve fleet-level supply. 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 is because without it, there is no supply chain; it is the first link, and it's therefore extremely important. The next link, as your question notes about deconversion, is deconverting to the chemical form we need, which is uranium tetrafluoride. Deconversion and conversion chemistry is a well-established part of the nuclear supply chain. The deconversion that we need, from the enriched product that comes out of enrichment plants, is to the fluoride chemical form. The end product is uranium tetrafluoride. The physical form for reactor feed is IMSR fuel salt. So there are additional steps to come up with the physical form. Keep one point in mind on the physical form: the form that goes into our reactor is not a fuel bundle as in conventional reactors. We do not use a solid fuel assembly; we use a liquid fuel. Manufacturing is therefore a chemical production process to create a final fuel form, which is the IMSR fuel salt. That is a fluoride chemistry produced to precise purity requirements to be licensed reactor feed for a licensed plant. Those additional steps will be developed in Project TEFLA at the pilot level. This is why Project TEFLA is important to one of the key elements of our business plan. We're not looking to become a large-scale fuel fabricator in the traditional sense, but we are aiming to be a principal in fuel supply and to be principal in IMSR core unit supply as well. The final step of the process, where we believe there's an opportunity for us to add considerable value, particularly from an IP perspective, is the industrialization and perfection of the processes needed to create the IMSR fuel salt. Project TEFLA plays a very big role in us perfecting and industrializing those processes that will need to be put in place to create the final reactor feed that goes into the reactor.
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?
Thanks, Derek. In terms of regulatory preparedness, there are two principal branches to watch. The first is preparing for an operating license, which demonstrates that your nuclear systems comply with nuclear safety standards. The second is the construction permit, where you sign off on the large environmental requirements and can begin construction activities. Many companies focus on construction permits, but those do not, by themselves, address the safety of nuclear systems required to operate. The safety of nuclear systems is associated with preparedness to submit an operating license. That preparedness can be demonstrated through Topical Report submissions because a Topical Report allows you to discharge an element of safety analysis that will ultimately be included in the final operating license. We're pleased to report the progress we've made with submitting Topical Reports to the NRC, engaging with staff in a timely manner and receiving approval and issuance of the Safety Evaluation Report. Those approved methodologies are valuable; they put you in an increasingly confident position to submit the operating license. The operating license is the end goal that allows you to operate a nuclear plant for commercial purposes. The construction permit allows you to move your EPC teams onto a site, but the operating license is the critical end game.
Our next question is from George Gianarikas with Canaccord Genuity.
I'd like to continue on the fuel thread. Have you explored the use of LEU+ in your reactor design?
Yes. When we made our decision more than a decade ago to use standard nuclear fuel, LEU at no more than 5% U-235, that was deliberate. LEU+ could potentially have some technical benefits that might translate into commercial benefits if it becomes readily available. If LEU+ becomes broadly and easily available, we will examine it carefully. Our analysis is that, from a commercial perspective, any benefit would likely be marginal, but we will look at it if it becomes broadly available.
And the design is flexible enough such that I would assume that you could feed it into the reactor?
Yes. From a design perspective, you could view us as a versatile engine of nuclear reactor systems. Our design can accommodate a wide array of fuel types without the long and expensive regulatory process required to qualify a solid physical fuel form. We use liquid fuel. At one end, you can comfortably use LEU enriched to no more than 5%, which is where we are today and is a secure place to start. At the other end, our system could accommodate spent nuclear fuel, plutonium, thorium and other fuels that are sometimes proposed. We haven't pursued those fuels because we believe the immediate problem to solve is affordability and cost. Our commercial focus so far has been on standard-assay LEU, but we do recognize the potential of other fuel options and could consider them as market and policy circumstances evolve.
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?
Part 57, as I understand it, is focused on microreactors. Our regulatory team has not identified it as a directly relevant development for Terrestrial Energy. It appears more focused on microreactors. If you want, I'm happy to go offline and discuss that further after consulting with our regulatory team. The pathway we are more focused on is Part 53 because that could offer a practical alternative licensing pathway for us, both for the first plant and for fleet deployment.
We now have a follow-up from Derek Soderberg with 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?
Derek, perhaps indirectly. Capital markets and capital providers like regulatory clarity in order to achieve project goals. The OTA contract with the Department of Energy provides the regulatory clarity we need to complete TETRA and TEFLA. So yes, it helps from a capital perspective in that regard.
Got it. Got it. And then my final one, just on your pipeline of ten projects. I think in the past you've talked about potentially declaring one to three 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?
Yes. We reiterate the guidance we issued in March of one to three additional projects. We are tracking against that guidance, and the Riot announcement from a couple of weeks back is part of that progress.
With no further questions, I would like to hand the conference back over to Simon for closing remarks.
Thank you. Thank you for joining us today and for 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.
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.