NUSCALE POWER Corp (SMR) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of operations should be read together with our financial statements as of and for the years ended December 31, 2024, 2023 and 2022 together with related notes thereto. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those projected in these forward-looking statements as a result of various factors. Unless the context otherwise requires, references in this section to “NuScale,” “the Company,” “us,”

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“our” or “we” refer to NuScale Power, LLC (“NuScale LLC”) prior to the Transaction, and to NuScale Power Corporation (“NuScale Corp”) following the consummation of the Transaction.

Overview

Our mission is to provide scalable advanced nuclear technology to produce electricity, heat and clean water to improve the quality of life for people around the world. We are changing the power that changes the world by creating an energy source that is smarter, cleaner, safer and cost competitive.

Our small modular reactor (“SMR”), known as NuScale Power Module (“NPM”), provides a scalable power plant solution incorporating enhanced safety, improved affordability and extended flexibility for diverse electrical and process heat applications. Our scalable design provides carbon-free energy at a reduced cost when compared with gigawatt-sized nuclear facilities.

Since our founding in 2007, we have made significant progress towards commercializing the first SMR in the United States. In 2017, we submitted our Design Certification Application (“DCA”) to the U.S. Nuclear Regulatory Commission (“NRC”). On August 28, 2020, the NRC issued its Final Safety Evaluation Report, representing the NRC’s completion of its technical review. On September 11, 2020, the NRC issued its Standard Design Approval (“SDA”) of our NPM and scalable plant design. With this phase of NuScale’s DCA now complete, customers may proceed with plans to develop NuScale SMR-based power plants with the understanding that the NRC has approved the safety aspects of the NPM and plant design. We expect our operating losses and negative operating cash flow to grow until the commercialization of the NPM. On January 19, 2023, the NRC published in the Federal Register a final rule that certifies NuScale’s SMR design for use in the United States, which became effective 30 days after publication.

In January 2023, the Company submitted an SDA Application and the associated licensing topical reports to the NRC for NuScale’s 6-unit 77 MWe NPM design. Once approved, customers in the United States will be able to reference the certified design and SDA for expedited construction and operating licensing of NuScale’s SMR pursuant to 10 CFR Part 52. On July 31, 2023, the NRC formally announced that it has accepted the Company’s SDA Application for formal review. Based on the NRC’s published schedule for SDA Application review, we expect the NRC will complete its review and SDA approval will be received by mid-year 2025.

The Company currently has only one “Class 1” customer: RoPower Nuclear S.A. (“RoPower”), which is a joint venture established by S.N. Nuclearelectrica S.A. (“Nuclearelectrica”) and Nova Power & Gas S.A. In November 2023, we entered into the Release Agreement with CFPP LLC, the Company’s first customer, pursuant to which the Company agreed to terminate the Development Cost Reimbursement Agreement (“DCRA”), as amended, and our Long Lead Material Reimbursement Agreement (“LLM Agreement”). CFPP LLC was receiving funding for approximately 79% of its qualified project costs, including the long-lead materials (“LLM”), under a cooperative agreement with the Department of Energy (“DOE”). Under the Release Agreement, we agreed to repay CFPP LLC’s Net Development Costs. Upon final settlement of the LLM Agreement, and once DOE is compensated for its investment in the LLM (stemming from DOE’s funding under its cost share agreement with CFPP LLC), NuScale will obtain all rights and obligations associated with the LLM.

Merger with Spring Valley

In December 2021, NuScale LLC entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Spring Valley Acquisition Corp. (“Spring Valley”) and Spring Valley Merger Sub, LLC (“Merger Sub”), a wholly owned subsidiary of Spring Valley. Pursuant to the Merger Agreement, Merger Sub merged with and into NuScale LLC (the “Merger”), with NuScale LLC surviving the Merger (the “Surviving Company”), Spring Valley being renamed NuScale Corp, and NuScale LLC continuing to be held as a wholly controlled subsidiary of NuScale Power Corporation in an “Up-C” structure. On May 2, 2022, the transactions contemplated by the Merger Agreement, including the Merger (collectively the “Transaction”) were completed.

The Transaction is shown as a reverse recapitalization under GAAP. Spring Valley is the acquired company, with NuScale LLC treated as the acquirer. This determination reflects Legacy NuScale Equityholders holding a majority of the voting power of NuScale Corp, NuScale LLC’s pre-merger operations being the majority post-merger operations of NuScale Corp and NuScale LLC’s management team retaining similar roles at NuScale Corp. Accordingly, although NuScale Corp (f/k/a Spring Valley) is the parent company, GAAP dictates that the financial statements of NuScale Corp represent a continuation of NuScale LLC’s operations, with the Transaction being treated as though NuScale LLC issued ownership interests for Spring Valley, accompanied by a recapitalization. The net assets of NuScale LLC are stated at historical cost,

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with no incremental goodwill or other intangible assets recorded for the effects of the Transaction. The consummation of the Transaction resulted in NuScale LLC receiving cash equal to $341.5 million and assuming Warrant liabilities valued at $47.5 million.

Key Factors Affecting Our Prospects and Future Results

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including competition from carbon-based and other non-carbon-based energy generators, the risk of perceived safety issues and their consequences for our reputation and the other factors discussed under the section titled “Risk Factors.” We believe the factors described below are key to our success.

Commencing and Expanding Commercial Launch Operations

In September 2020, we became the first and only company to receive NRC SDA for a small modular reactor. We believe our commercialization activities are being completed at a pace that can support delivery of NPMs to a client site as early as 2029. In December 2022, we signed a contract for Front-End Engineering and Design (“FEED”) work with RoPower to advance the deployment of our NPMs to Romania. Under Phase 1 of the contract, we defined the major site and specific inputs for a NuScale 6-module power plant to be deployed at the Doicesti Power Station site in Romania. We expect the site in Romania to use six modules and to be commercially operable as early as 2030.

We believe the long lead-time involved with siting an SMR, the number of potential customers in our pipeline and the work being performed by these potential customers involving a NuScale deployment project bode well for our potential future success. Further, in December 2022, we completed our Standard Plant Design (“SPD”), which provides potential customers with a generic NuScale-based power plant design that will serve as a starting point for deploying site-specific designs, including supporting client licensing and deployment activities.

Regulatory Approvals

In January 2023, the Company submitted an SDA Application and the associated licensing topical reports to the NRC for a NuScale’s 6-unit 77 MWe NPM design. Once approved, customers in the United States will be able to reference the certified design and SDA for expedited construction and operating licensing of NuScale’s SMR pursuant to 10 CFR Part 52. On July 31, 2023, the NRC formally announced that it has accepted the Company’s SDA Application for review. Based on the NRC’s published schedule for SDA Application review, we expect the NRC will complete its review and SDA approval to be received by mid-year 2025.

Other factors that we believe are critical to our future success are country-level approvals of our NPM design. We also believe site-approvals by our customers to be key to facilitating broader adoption of our products and services. Obtaining these approvals before others is critical in maintaining our competitive advantage.

Key Components of Results of Operations

Our historical results may not be indicative of our future results. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or future results of operations.

Revenue

All revenue that we have generated to date arises from engineering and licensing fees and services provided to potential customers, including those as a result of the FEED services. We expect to generate a significant portion of our revenue from the sale of NPMs. We also expect to generate revenue by providing critical services, such as start-up and testing and nuclear fuel and refueling services, over the life cycle of each power plant.

Expenses

Research and Development Expense

Our research and development (“R&D”) expenses consist primarily of internal and external expenses incurred in connection with our R&D activities. These expenses include labor directly performed on our projects and fees paid to third parties working on and testing specific aspects of our NPM design. R&D costs have been expensed as incurred.

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General and Administrative Expense

General and administrative (“G&A”) expenses consist of compensation costs for personnel in executive, finance, accounting, human resources and other administrative functions. G&A expenses also include legal fees, advertising and marketing, professional fees paid for accounting, auditing and consulting services, insurance costs and facility costs.

Other Expense

Other operating expenses consist primarily of compensation costs (including indirect benefits and equity-based compensation expense) for operating personnel.

Sponsored Cost Share

As our commercialization activities advance, we have continued to enter into cost share agreements with various entities, including both governmental and private, under which the Company is reimbursed for specific R&D activities. Generally, as our qualifying operating costs change, there is a corresponding change in the reimbursable amounts. The amount of any reimbursement is recognized in the period that we recognize the qualifying expenses.

Income Tax Effects

NuScale LLC was historically and remains a partnership for U.S. federal income tax purposes with each partner being separately taxed on its share of taxable income or loss. NuScale Corp is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to its distributive share of any net taxable income or loss and any related tax credits of NuScale LLC.

Results of Operations

Comparison of the Years Ended December 31, 2024 and 2023

Revenue and Cost of Sales

The increase in revenue was attributable to engineering and licensing fees and services in support of advancing RoPower’s goal of deploying a NuScale 6-module power plant in Romania.

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R&D Expense

R&D expenses decreased significantly during the 2024 fiscal year as the Company is transitioning from an R&D-based company to a commercial company. In doing so, management was able to implement various internal cost optimization measures, which resulted in savings in personnel costs of $8.4 million and professional fees of $50.4 million. Further, the 2023 fiscal year saw the termination of the CFPP contract and the Release Agreement payment and expense of $49.8 million.

G&A Expenses

G&A expenses increased as a result of higher marketing and advertising spend as we continue to build brand recognition across the globe, the write-off of uncollectible receivables and professional fees to help the Company navigate from an R&D-based company to a commercial company.

Other Expense

Other expenses decreased as a result of savings associated with management’s cost optimization measures and decrease in discretionary spending resulting in savings of $9.8 million in personnel costs, equity-based compensation and general costs.

Sponsored Cost Share

Sponsored cost share decreased due to the Company hitting the cost share cap with DOE, USTDA and RoPower and the termination of the CFPP contract.

Change in fair value of warrant liabilities

The price of the Warrants, which is used to calculate their fair value, has significantly increased year-over year driven by a rising stock price as the market realizes the advantages NuScale’s technology brings to the energy industry, and the Company redeemed all outstanding Warrants in the fourth quarter of the 2024 fiscal year.

Foreign income taxes

During the 2024 fiscal year, the Company executed a contract with an entity based out of Romania resulting in income tax being withheld to pay the Romanian taxing authority.

Comparison of the Years Ended December 31, 2023 and 2022

Changes in Presentation

For the year ended December 31, 2022, sponsored cost share totaling $0.2 million that was previously included in Interest income (expense) has been reclassified to Sponsored cost share to conform to the current year presentation on the accompanying consolidated statements of operations. No such reclassifications were required for 2023.

For the year ended December 31, 2022, amounts totaling $4.2 million and $3.5 million were reclassified out of G&A expenses and into R&D expenses and Other expenses, respectively, to conform to the current year presentation. No such reclassification was required in 2023.

Revenue

The increase in revenue was attributable to activities in support of the Engineering, Procurement and Construction Development Agreement for CFPP, as well as nuclear technologies consulting services.

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R&D Expense

R&D expenses increased due to the Release Agreement with CFPP in the amount of $49.8 million, partially offset by lower compensation costs of $8.7 million as we transition from R&D to commercialization activities, as well as lower professional fees.

G&A Expenses

G&A expenses increased as a result of $4.3 million in compensation costs due to an increase in headcount and $7.3 million in marketing and advertising costs as we continue to build brand recognition across the globe, partially offset by lower professional fees.

Other Expense

Other expenses increased as a result of higher equity-based compensation of $4.1 million and higher software license expenses of $2.8 million, partially offset by lower compensation costs.

Sponsored Cost Share

Sponsored cost share decreased due to a lower share percentage and funding from the DOE, partially offset by increases in United States Trade and Development Agency and subrecipient cost share for other projects.

Change in fair value of warrant liabilities

The price of the Warrants, which is used to calculate their fair value, has decreased year-over year resulting in larger income in the current period.

Liquidity and Capital Resources

On November 8, 2024, NuScale entered into a new Sales Agreement with TD Securities (USA) LLC, UBS Securities LLC, B. Riley Securities, Inc. and Canaccord Genuity LLC as sales agents under which the Company may offer and sell shares of our Class A common stock, having an aggregate sales price of up to $200.0 million (“ATM Program”). During the year ended December 31, 2024, the Company issued and sold 3,264,524 shares of Class A common stock for the gross and net proceeds of $71.2 million and $69.2 million, respectively. As of December 31, 2024, we have 21,735,476 shares of Class A common stock, at an aggregate sales price up to $128.8 million, eligible for sale under the ATM Program.

Previous to the current ATM Program, the Company fully utilized a similar agreement under which the Company offered and sold 20,000,000 shares of the Company’s Class A common stock. During the year ended December 31, 2024, the Company issued and sold 18,262,622 shares of Class A common stock for the gross and net proceeds of $139.0 million and $135.5 million, respectively, while during the year ended December 31, 2023, the Company issued and sold 1,737,378 shares of Class A common stock for the gross and net proceeds of $10.4 million and $9.8 million, respectively.

Subsequent to December 31, 2024, the Company issued and sold 4,548,127 shares of Class A common stock for the gross and net proceeds of $102,416 and $99,855, respectively, under the ATM Program.

On November 19, 2024, the Company provided notice in accordance with its Warrant Agreement dated November 23, 2020 between the Company and Continental Stock Transfer & Trust Company, as warrant agent, of the redemption of all Warrants outstanding as of 5:00 p.m., New York City time, on December 19, 2024 (the “Redemption Time”). As of the Redemption Time, 599,440 Warrants were outstanding and were redeemed by NuScale for $0.01 per Warrant. During the year ended December 31, 2024, Warrant holders exercised 17,859,261 Warrants for Class A common shares and $205.4 million in cash. There were no Warrants outstanding as of December 31, 2024.

Since NuScale’s inception, we have incurred significant operating losses and have an accumulated deficit of $377.1 million, with negative operating cash flows. As of December 31, 2024, we had cash and cash equivalents of $401.6 million and restricted cash of $5.1 million with no debt, while using $108.7 million of cash in operations. Historically, our primary sources of cash included investment capital, government grants and government sponsored cost share agreements to support the advancement of the Company’s SMR technology both domestically and abroad. As we transition from a focus on research and development to commercialization of our technology, the Company is focusing on revenue producing

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commercial contracts. During the year ended December 31, 2024, the Company executed two revenue generating agreements in relation to the advancement of Doicesti project Phase 2 Front-End Engineering Design, a project which targets the development of six NuScale power modules at a former coal plant site in Doicesti, Romania.

On January 5, 2024, NuScale announced a plan to reduce the Company’s workforce by 154 full-time employees, or 28%, in order to continue our transition from an R&D-based company to a commercial company. This resulted in a one-time charge of $3.2 million during the year ended December 31, 2024, and is included in Other expenses on our consolidated income statement.

We believe that based on our current level of operating expenses and currently available cash resources, we will have sufficient funds available to cover R&D activities and operating cash needs for the next twelve months. However, considering that we have not yet completed the development of a commercial product and have minimal revenue to date, we may require additional funds in future years. Further, management plans to prudently manage its expenses and cash reserves into the future, recognizing the need to secure additional customer commitments to support long-term operations. For additional information on our potential need for future funding, see the section of this Annual Report on Form 10-K entitled “Risk Factors”.

The following table sets forth the primary sources and uses of cash and cash equivalents for the periods presented below:

Comparison of Cash Flows for the Years Ended December 31, 2024 and 2023

Cash Flows used in Operating Activities

Net cash used in our operating activities decreased during the year ended December 31, 2024, as management was able to implement cost optimization measures while transitioning from an R&D company to a commercial company. In addition, the Company did not incur any termination fees similar to the $49.8 million payment to CFPP associated with the Release Agreement made in the 2023 fiscal year.

Cash Flows used in Investing Activities

The majority of the Company’s investing cash flows result from the purchase and sale of short-term investments, with minimal capital expenditures annually.

Cash Flows provided by Financing Activities

The Company’s financing activities consist of proceeds arising from utilizing our ATM sales and the exercise of options and warrants. The current year saw much higher ATM activity, as management took advantage of a rising stock price to increase our cash balance by $204.6 million as we continue to fund business development measures. In connection with NuScale’s announced redemption of the outstanding Warrants, Warrant exercises prior to the redemption time on December 19, 2024 resulted in approximately $205.4 million in proceeds, while the remaining increase in cash resulted from stock option exercises.

Comparison of Cash Flows for the Years Ended December 31, 2023 and 2022

Cash Flows used in Operating Activities

Net cash used in our operating activities increased during year ended December 31, 2023 due to the Release Agreement payment to CFPP LLC in the amount of $49.8 million, partially offset by a buildup of our accounts payables and accruals associated with the manufacture of our long-lead materials.

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Cash Flows used in Investing Activities

Investing cash flows generally reflect capital expenditures on computer equipment and software. However, in 2022, we invested $50 million in short-term investments, while in 2023, we sold those short-term investments.

Cash Flows provided by Financing Activities

During 2023, our cash provided by financing activities consisted of proceeds from our ATM sales and the exercise of options, while in 2022 the majority of the cash consisted of proceeds from the Transaction, with another $28.7 million received for the exercise of warrants and options.

Commitments and Contractual Obligations

We do not have any material commitments and contractual obligations.

Off-Balance Sheet Arrangements

Under the Release Agreement, the Company is required to have credit support to fund the amount of its potential reimbursement of demobilization and wind down costs with CFPP LLC. This account is identified as restricted cash in the amount of $5.1 million, on the accompanying consolidated balance sheet and acts as collateral for the $5.0 million letter of credit outstanding at December 31, 2024.

Effective January 1, 2025, the Company entered into sales and marketing agreements in the amount of $34.8 million for services to be performed ratably over the 2025 fiscal year.

From time to time, NuScale enters into technical assistance grant programs with the United States Trade and Development Agency (“USTDA”), whereby the Company receives cost share commitments to support licensing work in foreign markets. Under these programs, NuScale has agreed to pay the USTDA a certain percentage of all revenue earned in a geographic area or associated with a specific contract. Should NuScale earn revenue under the guidelines of these programs, the Company could owe the USTDA for funds previously received, or up to $7.4 million.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with GAAP. Preparation of the financial statements requires our management to make a number of judgments, estimates and assumptions relating to the reported amount of expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our financial statements. Our significant accounting policies are described in Note 3 within our “Notes to the Consolidated Financial Statements”. Additional information about our critical accounting policies follows:

Revenue Recognition

In addition to advancing the commercialization of our SMR, we provide engineering and licensing services to customers.

We recognize fixed price contract revenue with multiple performance obligations as each obligation is completed. We allocate the transaction price to each performance obligation using an estimate of the stand-alone selling price of each distinct service in the contract. For performance obligations satisfied at a point in time we recognize revenue when delivery of the promised good has occurred or the service has been rendered. For performance obligations satisfied over time we use the cost to cost input method to estimate the amount to recognize. Revenue recognized on contracts that has not been billed to customers is classified as a current asset under accounts and other receivables on the consolidated balance sheet. Amounts billed to clients in excess of revenue recognized are classified as a current liability under deferred revenue on the consolidated balance sheet.

NuScale has also executed contracts that include variable consideration. The variable consideration is recognized subject to appropriate constraints, as required by GAAP, to avoid a significant reversal of revenue in future periods. Management reviews the Company’s variable consideration on at least a quarterly basis. The only significant contract with variable consideration outstanding at December 31, 2024, is a time and material contract that will be recognized as services are provided, until the customer’s goals are achieved or the contract terminates.

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Revenue recognition and profit is dependent upon a number of factors, including the accuracy of a variety of estimates made at the balance sheet date, such as engineering progress, material quantities, the achievement of milestones, penalty provisions, labor productivity and cost estimates. We continuously monitor factors that may affect the quality of our estimates, and material changes in estimates are disclosed accordingly.

We exclude all taxes assessed by governmental authorities from our measurement of transaction prices that are both

(i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of revenue or cost of sales.

We generally provide limited warranties for work performed under our engineering contracts. The warranty periods typically extend for a limited duration following substantial completion of our work.

Recent Accounting Pronouncements

Refer to Note 3 in the consolidated financial statements for a summary of recently adopted and recently issued accounting standards and their related effects or anticipated effects on our consolidated results of operations and financial condition.