Terrestrial Energy Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good morning, everyone, and welcome to Terrestrial Energy's second quarter 2026 earnings conference call. I am 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 would 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 would 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 those risks. With that, I will turn the call over to Simon.

Thank you, Tyler, and good morning, everyone. When we last spoke in May, I reported progress against the three pillar framework of business plan execution that we set out in March guidance. Today, I will do the same for the second quarter and then spend the greater part of my time on our business model and our recent update to unit economics. Brian then will follow with our financial results. Over the past several months, we have been in front of investors more than to any point in the company's history, and that was deliberate. The nuclear tech sector is in a period of secular development. It is still a young and expanding sector for portfolio allocation as the market recognizes the structural long-term bull case for SMRs and nuclear energy supply.

In this context, we're hearing a strong desire to understand the factors that differentiate nuclear plant designs, nuclear technology, regulatory and supply chain strategies, and business models. We understand the importance of this to investors' analysis for nuclear tech stocks. During this call, we'll be discussing some of the unique factors that strongly position Terrestrial Energy. I will summarize the five nuclear plant design factors that differentiate the IMSR plant, talk further on our business model, and our differentiated dual supply strategy. All this differentiation is in pursuit of one aim, the mission set by the company at its founding in 2013 to use nuclear innovation to solve the only problem worth solving with private capital, the affordability and capital efficiency of nuclear plant, and by extension, the cost of nuclear power, and solve that problem quickly and at scale.

We are differentiated as everything we do, every decision we have made points back to that founding problem statement in a clear and logically compelling way. This goal is the first point of differentiation. First, let me now talk through second quarter progress across the three pillars of business plan execution. Referring to slides 4 and 5 of this quarter's investor update, I will start with our engineering and regulation programs. Project TETRA and Project TEFLA, our test reactor and fuel line pilot projects, both in partnership with DOE, advanced in the quarter. TETRA will support the data collection required for the NRC operating license application for the IMSR plant. Project TEFLA will develop the fuel production processes for IMSR Fuel Salt commercial supply. On the regulatory side, on May 12th, the NRC issued its Safety Evaluation Report, approving our Topical Report on Postulated Initiating Events methodology.

This follows the previously issued Safety Evaluation Report on IMSR principal design criteria and early development and a point of differentiation. As I described during our first quarter earnings call, these approved NRC analyses form foundational elements of the IMSR plant's licensing basis and can be referenced in future applications without reevaluation. Our graphite irradiation testing continued at NRG Petten, one of the world's most powerful test reactors. This work is essential for Terrestrial Energy's reactor materials qualification, licensing readiness, as well as supplier down selection. Over the quarter, we adjusted our NRG testing program, adding further irradiation cycles, which is also evidenced in quarter-over-quarter variances with R&D expenditures. Turning to the second pillar, supply chain developments. Procurement of fuel, components, and services continues for both the TETRA and TEFLA projects.

This quarter, we announced an engineering service agreement with Zachry Nuclear, which supports the development of projects at the Texas A&M RELLIS site, and importantly, the site characterization and data collection work to assemble an NRC construction permit application for the planned commercial IMSR plant on that site. Turning to the third pillar, our commercial pipeline of IMSR plant projects. In June, we signed ground lease and research agreements with Texas A&M for exclusive use of a 77-acre site at the RELLIS campus. This development provides the path to complete site characterization work and environmental evaluations for the IMSR plant and other facilities on the Texas A&M site in advance of construction. In May, we announced a relationship with Riot Platforms to supply electric power for data center operation.

The party's intention is to develop a best-in-class pairing of a small and modular reactor plant with a large data center, taking advantage of the competitive operating characteristics of the IMSR plant, notably its capacity to use natural gas as a bridge fuel, initially to deliver fast commercial operation and power supply, and then longer-term, as a backup after nuclear systems are in operation. This arrangement will take advantage of a differentiating feature of the IMSR plant design, namely the ability for its non-nuclear, thermal, and electric facility to be customized. This is not possible with the balance of plant systems tied to light water reactors. Our next step with Riot will be to down select to a first site as part of a program targeting 4 gigawatts of IMSR plant generation in support of Riot data center operations.

With the Riot Platforms development, the indicative generating capacity of our pipeline of commercial projects grows to 7.8 gigawatts. Given these and other characteristics of the IMSR plant design, our commercial opportunities cover three large market verticals: data centers, industrial process heat, and the replacement of retiring coal plant capacity. I would like now to turn to our updates on unit economics and start with a brief recap of our business model. Referring to slide 6 of this quarter's investor update. Terrestrial Energy does not plan to build, own, or operate IMSR plants. We will leave these activities to others with long-established and recognized industry capabilities in construction and operation. In this respect, our business model is relatively conventional for a reactor developer.

From this position, we can operate a capital-light business model, allocating capital efficiently to build high-margin businesses where we have a competitive and defendable advantage, and typically based on proprietary IP concentration and production capabilities. With additional engineering work over the last 12 months and directed at projects such as TEFLA, we have updated and re-estimated our IMSR plant unit economics and by extension, our serviceable addressable market. Our business is to manufacture and supply to operating plants IMSR Core-units and major reactant components and designed to be replaced every 7 years over the plant's 56-year design life. This implies the supply of 16 IMSR Core-units or accumulative revenues of approximately $1.6 billion. The IMSR Core-unit contains the foundational IP of our company, an innovation that unleashes the extraordinary industrial potential of molten salt reactor technology.

Our IMSR Fuel Salt supply business will capture proprietary expertise enabled now by TEFLA and other innovations. Both qualify as principal businesses because each combines concentrated proprietary IP with proprietary production capabilities. On slide 6, you will note that estimated cumulative lifetime revenues per unit are now $2.7 billion, up from $2.1 billion, with a blended gross profit margin of 33%, up from 22% in our prior model. Of those revenues, 79% occur following the construction of the plant and will be secured through long-dated supply contracts for the periodic replacement of the Core-units and regular fuel salt supply. The dominant activity at 58% of total revenues is Core-unit supply, with fuel salt supply being 21%. These businesses will drive most of the value creation in our future business.

Our review of unit economics included a re-estimation of gross profit margins for the IMSR Core-unit and fuel supply businesses to 33% and 40% respectively, higher than the margins for pre-construction and construction services, and this further points to the dominance of these two principal businesses. We expect to announce developments in the coming quarters as we move forward with our programs to build these two important supply businesses with their production facilities. Referring to slide seven. The updated unit revenue estimates have increased our service of addressable market to $2.3 trillion by 2050, up from $1.9 trillion, a $400 billion increase. This reflects the market that our plant design and supply businesses are built to serve at scale. I want to spend a few moments on our fuel strategy and development of IMSR Fuel Salt supply.