Q2 2020 Perma-Fix Environmental Services Inc Earnings Call

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Reminder, this conference is being recorded I would now like turn this conference over to your hopes.

The Bowtie Investor Relations. Thank you you may begin.

Thank you good morning, everyone and welcome to Perma fix environmental services second quarter 2020 conference call on the call with US. This morning are marked up president and CEO Dr. <unk> sends a funny executive Vice President of strategic initiative, and Ben Naccarato, Chief Financial Officer.

The company issued a press release this morning containing second quarter 2020 financial result, which is also posted on the company's website. If you have any questions. After the call or would like any additional information about the company. Please contact crescendo communications at two one to 671 102 zero.

I'd also like to remind everyone that certain statements contained within this conference call maybe deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and includes certain non-GAAP financial measure all statements on this conference call other than a statement up historical fact are forward looking statements that are subject to.

Known and unknown risks, uncertainties, and other factors, which could which could cause actual results and performance of the company to differ material from such statements. These risks and uncertainties are detailed in the company's filings with the U.S. Securities and Exchange Commission as well as this mornings press release.

The company makes no commitment to disclose any revisions to forward looking statements or any soccer events or circumstances. After the date here that bear upon forward looking statements. In addition, today's discussion will include references to non-GAAP measures.

Believes that such information provides an additional measurement and consistent historical comparison of its performance.

A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in todays news release on our website I.

I'd now like to turn the call over to Mark Donohue. Please go ahead Mark.

Alright, Thanks Ali and good morning, everyone.

We achieved profitability in the second quarter or 2020, reflecting the resilience of our employees and managers to stay focused on implementation of our corporate safety plan to minimize the impact from Cowen My team bars as a result revenue increased 29% over Q2 of 2019 and we achieved adjusted.

EBITDA of approximately 847000.

Despite several negative impacts on waste receipts associated with generator shutdowns.

As we enter Q3, we're realizing sustainable revenue water services segment with race recently received beginning to increase although a bit slower than anticipated due to the continued impact of cobot on our clients or sales pipeline for the <unk> services segment remains robust with a number of ongoing and significant many opportunities.

The backlog approaching $50 million for the remainder of 2020. In addition, there are several larger beds worth pursuing to support sustainable revenues.

Weve submitted over $40 million proposal values in the past several months.

This for a proposal activity on the services sector will support revenue opportunities over the next several quarters if were successful in his competitions.

That was recently announced we're especially pleased that our team led by Jacobs was selected by the D., We office or environmental management to participate and a sizeable a 10 year.

Multiple award idea Q contract to provide nationwide the activation decommissioning.

In removal of facilities and waste management program support.

So when I will take a moment to address a few financial highlights from the second quarter.

Relative to the same quarter in 2019, and later Bendable Skus, the financial results and a little more detail overall revenue increased 29% 22 million services segment revenue increased 102%.

<unk> 14.2 million treatment segment revenue was 7.8 million compared to 10.1 million for the same period last year I do the impact of covert which I'll discuss further I'm also.

We generated adjusted EBITDA of approximately 850000 compared to a 1 billion for the same period last year and lastly were achieved net income attributable common shareholders of 204000 or two cents a share.

The second quarter of 2020 compared to 289000 or two cents a share for the same period last year.

Fork over 90 was beginning to unfold in Q1 of this year, we were energetic and enthusiastic about our growth strategy for 2020, which included continued expansion of our plants.

In broadening our base for nuclear services as well the impact of working from home for a few months and the limited communications with our clients through a significant wrench into our strategy in required adjustments that subsequently demanded real creativity and innovation by our team.

Hi, I'm very pleased to say that perfect succeed not always sustaining our business, but identifying new initiatives and opportunities to further expand and increase our market share in the coming quarters. These initiatives include.

Developing a broader offering to the commercial sector through several permit modification the treatment approaches the increase value.

Deployment and expansion of our sole source technology throughout Q2.

In continuing operations on several times sense of cleanup projects in the field during the height of the paint pandemic. This is all accomplished while our internal Cupid 19 safety Committee drove the implementation a rigor rigid requirements into all our operations within the field and enter business side.

Functions to ensure that the health of our staff was there remains our highest priority. We're very pleased to can confirm that perma fix has had only one coping 19 case today within our company and we continue to monitor isolate and manage potential cases to limit impacts to our workforce.

And families by limiting the potential NK potential cases <unk> of covered within the company, we've been able to continue with our project work and processing of our waste backlogs.

As with most firms Q2 saw it changes in our working environment on a daily basis that made it difficult to plan to communicate with the effectiveness that we're accustomed to in the waste management business. We were fortunate. However that we had several clients. It continued to ship waste or plants from a central operations.

Putting within D and at the Hanford site.

And we had several projects a continued to be supported ongoing operations in the field.

Cleanup operations, and which are underscored.

The trust of our clients in our project leadership and our safety program in the field.

These relationships had a positive impact on our Q2 results and have provided the opportunity to generate tangible value to our clients.

During this difficult period in our country when most field service operations were shut down due to covert.

As discussed in the last quarterly call Perma fix was successful in securing a promissory note through PNC bank.

In excess of $5 million under the paycheck.

Production program. These funds allow perfix to recall or stuff avoid feature furloughs and lay offs and assist and maintaining stability through Q2.

Availability of this pvp alone allow perma fix to continue the implementation of our strategic plan for growth by holding on to all our trained workforce, a who are highly trained experience in that complex nuclear operations and radiological environments.

While we continue to remain optimistic about our ability to get through the pandemic. We're beginning to see the impacts from increases in the Cobra cases in our primary states of operations, including Florida, Tennessee, Washington, The California, all of which have resulted in slower waste generation.

So were procurement actions and limited communications with the generators and our clients. This is particularly applicable on the waste treatment operations.

We have seen a modest increase in receipts through the month of July.

With anticipated increases in August and September.

Our nuclear services segment.

Completed most of our remobilization activities before the end of Q2, which should result in increased revenue in Q3 was sustainable revenue through the next two quarters at least we will continue to position perma fix for upcoming apparel procurements anticipated to be published over the next few months as the because.

We are close.

Meanwhile, we continue to identifying new opportunities to reduce cost and schedule and safety risks that radioactive waste presented to our clients through the application of innovative engineering and the use of technology.

In a cost effective manner last quarter, we discussed.

Well that last quarter, we discuss the launch of our newest technology. The Perm before home Assort system, which has been deployed in San Diego through Q2. This latest technology has been developed to celebrate segregate radioactive soils following deepwater operations in dredging applications.

The performance of the system as exceeded expectation and is provided tremendous value for clients processing nearly 9000 cubic yards a week.

And over 18000 tons and just a few months.

Engineering team is moving quickly to fabricate and deploy a second perma swartz system in the coming months to support increasing demand.

Our growth strategy has not only in Boulder services segment as we continue to realize strategic progress in our treatment segment as well, while we've discussed increasing delays and shipments are waste management team has increased our attention to the commercial sector to resolve several unique challenges in utility industry and broaden our offering.

During the quarter overall, we've had we've added over 10, new clients through this period.

During this period in both the services and the treatment sectors.

Together.

When you take a step back and really evaluate the quarter I couldn't be more proud of our team we've delivered and advance our strategy rather than just sitting back while at home and waiting for the storm.

To subside during this unprecedented period, achieving all this while increasing revenue over 2019.

And teeing up Q3 with positive momentum.

Underscores the strength of our company and our ability to adjust our vision to meet the market needs and changes.

On that note I'll turn the call over to Ben who will discuss the financial results and a little more detail Ben.

Thank you Mark I'll start with revenue.

Our total revenue from continuing operations for the second quarter was 22 million compared our year 15.1 million or an increase of 28.8%.

This increase of 4.9 million was driven by our service segment were revenue increased from 7 million in the second quarter up 29, teed up 14.2 million in the second quarter of 2020, that's an increase of 101.8%.

Year over year improvement in project activity of course is the main driver for this improvement.

In the treatment segment, our revenue decreased 2.3 million or 22.3 per se as the kobin related closures.

Of our customers impacted waste receipt.

In the quarter with most customer sites, either restricted or close.

Throughout most of the quarter.

For the six months ended June Thirtyth 2020, our revenues at 46.9 million compared to 28.8 million or an increase of 18.1 million or 62.6% growth.

From prior year.

Looking at cost of sales in the quarter, they were 18.7 million compared to 13.9 million in prior year I.

An increase of 4.9 million.

The increased revenue from the service segment was the main driver of this increase which accounted for 5.7 million increase in direct costs related to project work.

Well fixed indirect costs also went up about 509000.

These increases were partially offset by a drop in our costs. The sales in the treatment segment, where lower revenue resulted in a reduction of 1.4 million of.

Variable expenses, while the fixed facility costs.

Went up marginally.

As mentioned in our revenue discussion the treatment segment saw significant negative impact on our waste receipts due to the coping 19.

As a result.

Of payroll protection loan program loan the company was able to avoid layoff and keep all employees employs despite a significant productivity drop.

Since we will recognize the benefit of the PPP low if or when it is forgiven.

It should be recognize that the quarter includes payroll costs.

Incurred totaling about 800000 that would likely have been cut without the loan.

Turning to our gross profit quarter was the gross profit for the quarter was 3.3 million or 15% of revenue compared to prior year gross profit, which was also up 3.3 million, but 19.1% of revenue.

Gross profit in the service segment increased about 971000.

But that was offset by a similar drop in the treatment segment.

Gross margin decrease was impacted by the lower mix of treatment revenue as compared to service revenue.

As well the 800000 I just mentioned for maintaining labor made possible by the PPP loans. Excluding these additional labor costs margins year over year for the second quarter would have been comparable.

For the six months ended June Thirtyth, our gross profit is that 8 million or 16.9% compared to 5.8 billion or 20% in prior year.

Looking at our DNA cost for the quarter, we were at 2.7 million, which is in line with prior year.

We saw lower subcontract expense lower travel on lower bad debt expense sales and admin groups and that was offset by higher salaries in the corporate anatomy.

[music].

For the six months ended June Thirtyth, our current years SGN expenses are at 5.6 million or 12% of revenue, which is consistent with prior year 5.6 million.

Which was 19.4% of revenue.

Our income from continuing operations net of taxes for the order is 260000 compared to 373000 in the prior year year to date income from continuing operations net of taxes.

Yes, it's at 1.6 million compared to a loss in the prior year of 177000.

We had net income attributable to common shareholders of 204000 compared to last years.

Income of 289000.

And year to date net income attributable to common shareholders is at 1.4 million compared to a loss in the prior year of 383000.

Our net income per share for the quarter is two cents.

Well, which is consistent with prior year.

Net income per share for the year to date.

12% as compared to a loss of three cents per share for prior year.

Our adjusted EBITDA from continuing operations for the quarter as defined in this mornings press release was 847000 compared to a million in the prior year.

On a year to date basis, our adjusted EBITDA is 2.7 million compared to 1.1 million in the year to date prior year.

Turning to a few balance sheet items as compared to December 31st 19.

Our cash balance at year end.

At the end of the year, perhaps at the end of the second quarter was 5.6 million, which is up 390000.

Right up from 390000 at your end. This increase is entirely due to the PPP loan we received in April.

Accounts receivable in Unbilled receivables cumulatively are up about 700000.

Reflecting increased revenue at the end of the quarter.

Our current liabilities were up approximately 524000, reflecting timing of payments.

Backlog of waste. That's the ended the quarter was approximately 6.4 million which is down.

8.5 million at year end and down from 9.4 million that yes second quarter of 19.

Our services backlog at the end of June.

Was approximately 48 million.

[laughter].

Our total debt, excluding debt issuance and debt discount costs at the ended the quarter.

Was 9.4 million and this is made up of 1.7 million owed to our primary lender PNC Bank 5.7 million due to PNC bank.

For the PPP loan received in April.

1.2 million owed to our private shareholder on our private shareholder loan and 845000 for other finance lease.

I'll now summarize quickly our cash flow activity for the first six months of 2020.

Cash provided by continuing operations was 3 million.

Cash used in discontinued operations was 259000, our cash used in investing.

Renewing operations is 1.4 million.

Cash provided by investing of discontinued operations was 13000.

Cash provided by the financing was 4 million representing the receipt of the DPP loan of 5.7 million.

Offset by our monthly payment to the term loan of 212000 net payments to the revolver of 321000 payments on the shareholder loan of 832000 and other lease financing payments of 301.

With that operator, I'll now turn the call over to question.

I will be conducting a question answer session. If you like to ask your question. Please press star one on your telephone keypad. They confirmation to indicate your line is in the question Q. You May proceed starts to if you would like.

A question from the Q.

Do you think bigger equipment it may be necessary for you to pick up that before passing the starkey one moment.

Your question.

[laughter].

The first question.

Howard.

You May proceed with your question.

Thank you.

Well I just want to come back to some of the contracts we've talked about in the past the EPA contract with Jacobs as a prime and you and it's a sub.

For the remediation of the Navajo.

Mines have you heard anything new about that.

Well Howard as you know talk it went silent for a good year.

But we did actually see something in the press recently that they plan on making an announcement before the end of this quarter. So that's the first we've heard anything and I was like a week ago. They made a commitment to make that award. So that's all we heard this point.

They put out any other RF piece.

Additional.

Contracts no that they haven't Howard you and we would do expect some for different components of scope, but right now obviously, nothing even though the whole product program.

I have a lot of fanfare and hype and then went quiet for like 18 months in two years, but it looks like it's it's picking back up here.

Here is glad to hear it.

Secondly, the Navy contract.

But expanded are you still just working on a few site.

Well, we have several navy contracts Oh, one doesn't wear subcontractor, both but one is in San Diego with the source order we have other contracts in the San Francisco Bay area that.

We're also getting rolling.

So, they're all rolling pretty well and so they're all growing doesn't seem to be doing pretty good whether there'll be no significant contract mods.

Still remains to be seen at this point, but there, but the going very well.

All right.

I don't want to address one issue.

Jacobs lost C.

Tank closure contract to be Wx technologies.

And the other data was a couple of my correct on that.

Yes, but it was Atkins was the primary <unk> E. Com was like yeah. There he comes on her team.

Okay.

The.

Deal, we office of General Counsel wrote a letter.

On July 22nd and I'm quoting from the letter following our investigation in addressing other issues as appropriate deal, we will make a new awards determination and it goes on.

Can you comment if you can about.

One.

What's that status is in terms of I know the appeals roll canceled.

Okay do you have any comments about that.

No it's actually.

All the information we have to Howard at this point.

Do we do we did say in another meeting.

Informed me that they said they would notify all the proposal offers once the corrective actions.

Were completed.

With no indication of schedules or anything and so far our team has not been notified of any of those corrective action. So we're all this anxiously waiting here what the phrase.

As you stated New award determination means.

And we're just standing by so yeah, we have no other information besides what is public in that letter.

Alright fair enough. So let me continue just if we can comment further on this.

From my understanding that the deal we historically they would not give to say Atkins if it's a large contracts. So they got from last year and an additional 10 to 13 billion. This year, that's usually not done it had a fair comment based on your knowledge.

You know I don't know a fit as a fair comment Howard that does not traditionally done however, keep in mind that the plateau was awarded the E com.

And Adkins was a minority member.

And this was led by Atkins with E Commerce, a minority member.

So I really sincerely think that they will award to the best proposal.

At this point.

And I would hate to speculate on any other objective on behalf of do you at this point.

Gee I.

I feel like do you actually is the best proposal.

[laughter], we'd like to their go to unfortunate we haven't seen the other proposals so [laughter] we'd be speculating.

I appreciate it I'll go back into queue. Thank you.

Okay. Thanks, Howard I.

My pleasure.

As a reminder.

A question Please press star one.

One moment.

Yeah.

Our next question comes from the line.

On the Big Block Research you May proceed with your question.

Thanks, Good morning, everybody.

Morning, Steve already.

Just a question on the revenue that was delayed.

Hi, good old has all the work being performed as they're.

Product going out or is this something that will take a few quarters to ultimately.

Being able to recognize.

Well, Steve This is Ben I guess, the the way we recognize revenue is in a three phase.

Upon receipt of revenue upon processing and then upon disposal.

And so what we saw in the second quarter was pretty significant drop in the receipt portion we did have a backlog.

That was.

Recognized.

But the way we operate is we're kind of constantly replenishing that backlog and Thats why you saw a bit of a smaller number a bit of a drop in our backlog.

So.

The work the work that we that we recognize as revenue is actually work done so okay.

If we see a pickup in there was receipts in the third quarter than ideally, we will have the receipt portion and additional processing that will catch up here.

Okay got it thanks.

Then on the soil treatment it sounds like Youre equipment is successful they want another one does that give you an opportunity to show it off at all and.

Are there were other people looking at it I think I ask once before but I'll ask again. If this is something you plan to continue to own and operate or if it's something you could show was a turnkey.

Are you thinking.

About that.

Yes, the you know it right now it's a second client that we're building here for the second application.

And.

We're very confident that we've we've been able to identify some other opportunities as well. So we should we see being able to attorneys things over and keeping working.

Until we get the three or four I would kind of see ourselves with three of them and maybe a backup or something like that in the next 18 months or so we don't foresee.

Leasing is out to anyone at this point until we see as operating them.

With some of the expertise we have it does take quite a bit of engineering skill to keep these things moving all the software you know is proprietary.

And that's really the trick the whole thing is a software in the <unk> dr. source that.

Runs the gates system on the can bear.

So I really would doubt do we would we would lease it out.

And not just run ourselves.

I guess three to four over the next 18 months.

Better than one or two now I guess.

Is this something where you see some sort them out there at some point do you think there's no you there's only so much going on in this and as industry overall.

And.

If there is there's a limit the applications it doesn't sort everything.

It is only sorts a certain source term a we've been we've been doing some R&D actually Steve to broaden that so we can sort of new even non radiological.

Contaminants.

And if we get if we can break through on that.

And then it'll it'll expand further.

Okay, but at the very least you see a continued revenue stream.

Okay, absolutely product, okay. Thanks very much.

<unk>.

Our next question comes from the line up.

You May proceed with your question.

Thank you Mark it looks like you're in the 100 million dollar run rate range give or take a little bit and just trying to get a sense of what is this the types of EBITDA business. After everything or do you think you can do better than other overtime.

You know our that it really depends on if our waste received or waste treatment SEC segment can catch up we believe it can or expanding it rapidly.

To the extent of or adding a lot more commercial waste.

And expanding what we can take in process on the deal, we and do you decide as well.

So to answer your question, Yeah, we do Tempur since our goal, we're probably going to be a little short of that because we don't make the same margin on the services and services right now is such a high percentage of total revenue.

That that that's going to be tough to get to 10% but.

But tempur sort of certainly as our goal.

As we can increase or the second the waste treatment segment will get closer to.

Okay, and all the services Oh, what percentage of those revenues would be a user.

Fixed price or a ton of materials not to exceed.

Where there's some risk to the margins.

Yeah right now.

We have a few.

Fixed unit rate contracts, where we're getting paid on for like like for example for cubic yard a soil removed and disposed of.

But overall I think.

We're probably for the service is just a serves as a segment of let's say it's around 70.

70% of our total revenue, we're probably in a 90% to 95% PNM.

All of our our California projects, our Seattle project.

And all of our smaller projects are all PNM.

So the risk is less than usual, we do have a few small demolition jobs for the core and some of our cleanup work in Canada, our fixed unit rate or fixed price I would say total revenue this year.

It would be in the $5 million to $7 million range total at most for the fixed price component as a REIT, we agree with that as well.

Yes, this year, yes, yes.

Is there much in a way of achievement PNM not to exceed which.

I'm pleased that gets hard to differentiate from.

Oh the fixed.

Prices at an issue or is it mostly as most European I'm, just just you know.

Just PNM yeah, we don't have a lot of a hard Dave because.

The remediation business. There's so many surprises you find things are chugging along are doing demolition.

So the those dates typically slip with changed notices.

And so you work with your clients through those so we don't have a lot of not to exceed the hammers on our projects.

Great. Thank you.

You bet.

Our next question comes from the line.

You May proceed with your question.

Hi, guys.

Congratulations I think.

You know with the world as challenging as it is I was shocked to see you did that well, but what's even more.

You know what you would see than.

Fantastic is one beds as you've got a for when you guys say that a 40.

48 to 10.

$50 million service backlog that means you are talking almost a $100 million. This year. When you did seven day last year, you know I understand service as different issues, but that's a that's quite impressive now been made a comment that you have a backlog of 48 million and service what's the backlog in treatment.

Understanding but is there a backlog in treatment presuming flow flows were.

You know coming right.

Yes, Steve we it's about six point, whether I say 6.4 million more.

Yeah, and that is and that's a quarterly number we monitor all the time and that is down a little bit and thats reflective of the slowdown in in the receipt.

Hi, Joe.

Hi, there, but you know I presume you're I presume that's.

You are in a.

Where environment because of code that the 5 million that you got from the government how much of that as venues.

It's all use.

Okay Alright. So my question is if you didn't have the 5 million how would that impact how would that have impact the financials.

If we didnt have the 5 million.

We you know we would have had a lot harder decisions to make with.

With labor.

You know I mentioned, just the cost of sales.

Number of 800, K and that's conservative that's really reflective of the significant slowdown in the treatment side.

But we would have also had a lot of decisions than we had talked about a lot of decisions in the.

From a corporate standpoint.

To maintain.

And so you know easily between 1 million in a million five impact on the quarter.

Okay, all right, but you know you had it you deserve it and.

I'll hopefully you want to pare back.

The one one cop one other thing I saw in the.

Financials going through there there was 140 million per medical so what's that for.

Not 140 million or 40000, I mean, yes, yes, that's just.

The medical segment is still active it's a it's somewhat of a mothball mode right now, but there are costs of maintaining.

A lot of that cost is internal.

Our efforts by some of the folks in our shop here to maintain a public company.

So it's pretty minimal it's probably it's probably from a cash standpoint costing us about.

$6000 a month.

Okay.

Good thanks.

Okay, Alright, the one of the first question I think with some Howard when he talked about the.

The.

How do I express it the new.

The new hope the new chance the new.

Yes, it's a fresh air at Hanford, where they are reevaluating the contract and I'll just throw this out the Howard and I won't.

No.

Asked the question, but I've I've read that one of the reasons that they throw out the appeal is because the.

The award company had an employee who supposing work for de levering and that's let's put it this way created some questions. So for me that.

You know my feeling is.

That makes things even.

More positive that that happens, but to me you know.

What you guys are doing is fabulous you're building a diversified company and if that happens that has it.

Happens when you talk about this promise sort and and you talk about.

More machines. So what do you what do you estimating that lets say I had three machines at that we're generating year revenue.

You know.

Steve is probably a good estimate and again this just estimate that a these things will run five to 7 million a year in revenue each.

Depending on how long you or your cycle is that they're in the field for.

They are running all year long it would be higher than not but typically they wouldn't be a so I think I think we could assume at this point that 5 million revenue per unit.

As a pretty good guess at this point I think I think the important thing is on these things Steve is that this is a real solution.

Two of our very common problem and that is it minimizes waste.

That go into a very expensive landfill.

In other words, you can put allow the soil back because you've you've characterized it very quickly.

As opposed to shipping it to a offsite landfill. So this is it's more exciting to us even then 5 million year and that it's a solution.

That would allow us to bid on remediation projects very aggressively.

And make us put us in a pervert preferred position offer teaming with some of our partners and solving problems on larger projects. So there'll be no not just the five main revenue from those but services to go along with that as well.

What's the point well.

Well how much the one of these things cost.

Well, we can't get into that proprietary just point, but it's a lot like 5 million lawless right. So so in other words your pay back on this thing you're payback on the investment is is quite quick and so forth relative is yes, okay that is.

Good okay.

What about the TB eyewear of that.

But TV I continues to be supported by do you eat and Hanford and headquarters.

It's kind of slowed down a little bit with all the TCC issues nodes stores into TCC scope of the contract.

For the Dbi with the $10 million that was set aside for this project in 2020.

And we're still at this point until further notice that we get more information.

Still anticipating receiving at 2000 gallons by the end of this year.

So again it could take a lot of twists and turns Steve the right now.

The guidance we've gotten from.

From the folks.

On the project.

So so basically you're painting a picture that.

You're expanding service you have a backlog of service.

48 million you had this relationship with Jackups, where you'll be able to bid and then that was one another question.

When do you see our you bidding on that or you bidding with Jacobson on as one of the nine bidders on new things out.

Alright, we are we do have that relationship with them, we anticipating idea we announced recently.

Is that.

They are.

Anticipated a number of task orders to come out between now and end of the calendar year.

So we're anxiously waiting those are also stated they're going to publish a forecast or some type of schedule of task orders. We don't have that yet so we don't know what that looks like but.

All indications from deal we procurement headquarters is it theres a number of task orders being.

Ready to go through that contract and we.

It will work with Jacobs.

To pursue each one of them.

And then.

You have said in past thing the geo amount billed business to be $100 million, whereas that.

That is we're waiting for that the final permit modification from the treat ability study that we did over the last year to year and a half with veolia.

So we burn we melted a significant amount of.

Sodium up there that we receive from I. anyhow I NL in Idaho.

And.

Once you do that run and you resubmit, where you submit a treat ability study permit mohd.

We're waiting for that to come back from the state now we anticipate seeing that sometime before the end of this year.

And once we receive that then we'll be able to trust to process.

Sodium that 100 million that you mentioned very very rapidly after that at a full production rate. Once we receive that model. So we were kind of where we're in permitting space right now Steve.

Okay.

Hi, so so so when I looked at Hanford. So please correct me I mean.

You have an existing there's no was hit with Hanford running whatever is you have business there from hampered as a subcontractor from somebody is that correct nor under normal conditions.

Yes, we get a significant amount of waste.

On a sustained basis from the plateau.

Yes.

Smaller amount from the tank operations, we anticipate all those that continue on the current.

Trajectory that they are.

Irrespective of.

Have a contract change will likely take take maybe maybe take a a month or two hit for receipts. Once you know transition is in full swing, but it's all part of the overall cleanup strategy to be shipping some that ways to our facility. There at Hanford. So we don't expect at the change irrespective of who is running a contract.

All right and so so we had the.

And other whereas I'm try we there is the the hope and now maybe the icing on the cake of another chance with the tank closure contract, but even if that doesn't happen you have businesses hamper you had the potential of the TB.

And you know the way I'm reading as as a technical person is that in theory, you could be billing the TBR high with a completed vitrification plant and you could be still and you could be enhancing.

You could be saving money.

The vitrification plant could be running and you could be running and.

If there is no from what I've read.

The vitrification plans Deborah when it's ever when it's finished its still going to take decades that do that so therefore, a TV I initiative would would really save money and get things done faster. So you're in great shape is what I'm trying to say.

We would have degree we think so Steve we refer to the TV Ais a supplemental treatment to other waste treatment plant mission. So yes, yes to your all your statements.

All right. So I'm I'm presuming that you know in our in our very challenging world that.

You know you've mapped out scenarios relative to.

Different things happening so that.

You know you're going to cope and so forth.

You know.

My last question is.

I read somewhere that the OE had extra money.

Would you and so my question is.

Hasn't been use so is that money being pushed into the new fiscal year and would that affect budgeting or was that just going to supplement budgeting and could that then also.

Push towards greater opportunities.

I do think there's great opportunity Steve without.

Talking to friends of mine to different sites not all of them are several of them, it's difficult to understand where they are.

In their spending overall because.

Just the unusual nature of the last three or four months.

So I think I think they're trying to figure out where they are.

In spending and what they're trying to get done before and the capital of fiscal year.

So yes to answer your question. There is we're anticipating opportunities we're anticipating a surge in waste shipments at the end of September.

To support trying to get waste off site.

As opposed to putting extra dollars on labor, it's usually easier to accelerate spending by shipping waste off site.

And we do expect that to carry over into Q.

Our fourth quarter Q1 of the government fiscal year.

I I guess I mean, I, just again I'm, saying is very calmly I truly applauded the effort.

In the midst of what we're going through I know this I'm I'm you know.

Living this and.

I have a wife too she gets achieved debts on living it and.

You guys are out there and.

Had a good quarter and then you have all these opportunities and silly and.

Which is amazing that your that you get your in this creative and you've gotten ourselves to be this diversified and then having.

Then you and you have dreams beyond that so congratulations and.

You know congratulations thank bill Thanks, Steve we appreciate that and we appreciate your support you know just one note along that line is is a or the company that basically 360 people or so right now we've got almost 130 people in the field out in away from home.

Over the last several months during a pandemic so.

Perhaps also our staff have been willing to travel.

And live in hotels and live in apartments.

And support the field operations, which made this a great quarter.

I wouldn't have predicted that we'd have such such an enormous support within the team, but everybody stepped up during a time, where this extra risk.

And they are out there, we're going to feel to making things happen well a lot of a lot of sites are shut down. So it's been it's been or our team. It's it stepped up so but thanks for your score.

And I'll make one final comment since.

I didn't get a chance to talk the last the last thing but the.

I was a chemical manufacturer and I've got very interested in.

In this area looking for a nuance relative to relative to the virus and after my work I really come down to the point that the key is ventilation. So pulling how your people that were in nights when they're in these hotels to be very careful and to check on the air conditioning system, because I've read many articles that.

Yes, this can be transmitted in a poorly.

One air conditioning system. So ventilation is so important AG.

Aside from others. Thanks.

Thank you so much and exam Gander rack congratulations thank you see.

Our next question comes from the line attrition.

The asset management you May proceed with your question.

Hey, guys.

Kind of funny as you know I typically avoid commenting on calls the risk of sounding like a cheerleader, but I.

No I just have to say the turn that you guys shown in the services business.

Within this pandemic is nothing short of extraordinary I mean that backlog number is incredibly impressive and you know that $100 million run rate, which seemed like a bit of a reach.

Please now is now all of sudden not necessarily reality, yet, but certainly.

Looks like it's it's going to come to pass and I just wanted to say congratulations on that.

Well. Thanks, trusting you know as large our executive Vice President for services and Libardo as larger response from that and as Dave that goes by where he and I don't.

Marvel at how fortunate we are to have have such a good backlog during such a difficult times. So we feel like we're really fortunate because of that as well, but think interest and we appreciate your support.

So so now I'm going to switch a nasty the what have you done from me lately question, which is.

Given the extraordinary turn in the services side.

Mostly koby it is going to have an impact on the treatment segment.

And I think thats to be expected and I, certainly understand but I was really kind of encouraged to hear it several different times. During this call. It seems like you have.

An incredible amount of opportunities to now expand the treatment segment, which is of course, your higher margin business and so.

I'd like to kind of cheese, those out a little bit kind of get it in one spot I mean, you obviously you have the TV.

It is encouraging to hear that you are now in permitting stage. This with the only and then you mentioned it be able to turn that pretty quickly what is pretty quickly look like in in your mind I mean, how.

How much longer do you think you'll be in the permitting standpoint, and then once that goes into production what does that flow through look like on the piano.

Yeah, right now our general manager or Archer, our executive Vice President for waste treatment richer grondin is if it in a runs or has run our hamper facility for many years. He is leading that effort. He tells me that do that the good relationship they have with the state.

We should see.

Operations to begin around the first of the year at the latest.

And begin to to burn almost a weekly basis.

With the Jo mill, a once we get through that permitting phase that waste as is sitting in Idaho, we're ready to go. So we're excited about that.

I'd like to be able to think we can get between 10 to 15 million year in and in revenue on that along with our partners at Veolia.

And if we have a great working relationship with them are really good operating agreement.

And that should be very doable, we are getting all the other sodium waste from iron out here in Oak Ridge facility as well, but not to the extent, we expect to be to be rolling up at Hanford.

I'm not sure if that answers.

Other component.

Terreson is on the commercial sector. We've spent about a year now focusing on on getting their foot in the commercial segment in the utility market.

Our market along with our oil and gas.

Pipeline sludges as well that have a significant amounts of norm in it.

Thats something that we had just traditionally haven't done the large volume on and we spent a lot of time and effort to increase that we are certainly get some real traction now getting some some wins.

And building those relationships, which take a year or two to do.

And so we're going to see that increase as well as long along with it to you we sustained waste shipments along with that.

So the 10 to 15 million on the GM out is that inclusive of the earliest take or is that perma fix is revenue alone.

That would be the total revenue I believe Chris and at this point between us.

Okay and then.

This this increased commercial business I mean, obviously that that takes longer but is also more stable and usually if.

My research is correct kind of a more steady revenue stream and.

You know a little less dependent on budget vicissitudes.

How how big do you think backing get say for 2021.

Well, that's a tough question, probably I could our goal is to try to get at the 10 or 20% in the next two years.

It's really tough because you start out with a dramatic drum there and hopefully get you are getting up to a railcar here and railcar there.

And it all depends if you're if we're getting operational waste or.

Waste, it's coming from maybe a demolition project or.

Contamination event or something like that so.

But I would think a good gauge and again this is speculation Justin is 10% to 20% of our.

Waste segment total so that would be.

Five to $5 million to $7 million year.

It would be a goal for 21.

And I'm going to apologize in advance because I think you guys have been pretty careful to be conservative and again I understand that that Kobe proposal ranch and.

Waste shipments were uncertain pretty coded and so it would be estimate actually more so after coded but are during code it.

But you kind of touched on something there towards the end that I I think is quite material, which is so you have this rather impressive services backlog.

You acknowledge that so far into Q3, the treatment backlog isn't what you would like it to be but you have this year end budget flush coming up which would would seem to indicate that you expect a fair amount of waste to be shifts.

Towards the end of Q3, which should.

Again, I don't want to put words in your mouth that sounds like Q4, it could be quite excited.

Yeah, we would agree that we are as we sit in the script a little disappointed in Q3 hasn't accelerated more.

I think we're all the whole country seems to be little surprised at how this is dragging on.

And most are friends of the deal we sites are moving very very cautiously.

And so we haven't had the receipts that we would hope for in July they are increasing as we said, but once that starts to look a little better.

We know there's backlog at the has to go so we're hoping that we start seeing that into August early September and then see a great great.

Q4 for us.

Okay, Okay, well that was it on my end again, congratulations and that's a heck of a churn in the service sector and congratulations on a job well done.

Great. Thanks for some.

No.

Our next question comes from the line <unk> Robinson.

Research you May proceed with your question.

Thanks again, just wanted to do with a follow up on water treatment in Florida.

Cobot had have an impact there.

What's the outlook for that just an update looking forward for the riskier.

You know C., we have a couple of of exciting bids out for water down there that has been held up because of coven.

And we haven't we haven't seen as awarded yet we're not processing a significant my watered today.

But we have had some of the last two quarters, So where does it is coming in.

Nothing dramatic quantities, but we were bidding on some big quantities. So we're hoping that we have this call and another quarter or we can tell you that.

Who is running at a pretty sustained rate.

Got it thanks very much.

All right.

Our next question comes from the line James Scott Scott.

You May proceed with your question.

Hi, those congratulations on a great quarter and equally if not more important just a fantastic turnaround over the last 12 to 18 month.

And I look back I think Mark you mentioned there is now 360 employees I was wondering if you will recall how many of their there. When you took the took the helm here a little while back.

You know James we track that every quarter, our four board meeting I want to say it was a in the 220 to 40 range something like in that range all together.

Sure, we've gotten up to the Threeeighty before the.

For cobot hit so yeah. It's been good some really good news this new services projects are really helped to that.

Great I did seeing the force through the trees that that's a really important number and of course that workforce is highly talented.

Very specialized in of extreme value so new done a nice job of building value for all shareholders that again I can't think enough for that.

I'm looking here.

A couple of comments that you made one of them 10, new clients that you were able to say that significant can you give a little more color on kind of the mix, so that client base and as as far as as concerned what kind of potential future opportunities those new clients might the theoretically bring to the table.

Well I'm glad you picked up on that James because I kind of ripped through that and that's a real nugget to get 10, new clients during covert.

During that period, when you can't get out of your office or your house.

So you didn't really excited about that and buying up to tell you are looking through the list there all they're all really confidential.

For the most part so I can't give you names.

But most of more commercial there's some some small ones and someone to have potential for real growth.

Doing everything from most of its characterization on characterizing things or areas or components.

And.

Our health physics.

Arm of the company, which again any lombardo managers out of the new bright in Pennsylvania office.

Has done very well at marketing the oil and gas industry as well as.

The mining industry scrap metal industries.

As well as power utility in power and we're starting to see us and word of mouth, some new relationships be being built and some real pay off from a from those marketing initiatives. So.

It is exciting component if we can grow that much during no during a pandemic. She thinks we could do really well when we're back to normal.

Well they are you going again, congratulations because I view that as a very meaningful accomplishment and can't be more thrilled. The the here Tim that really did surprise me as far as just a couple of other points Hanford TV I back out of soon as they can start shipping that we're we're standing ready and and pretty much ready there.

Role there is all the permitting now in place and so once we start receiving product we can describe creeping up just as soon as possible whether that stand.

Yeah, maybe there's limitations on volumes, but right now we have the ability and were permitted to receive that weighs on or current permit.

And.

We're ready to go so that when a 2000 gallons comes.

We are ready for that and we have limitations that are much higher than that so were good to go when they start they start pumping it out of the tank.

Great that's exciting and just kind of again the big picture at Hanford is still pretty much. The same 56 7 million gallons of which roughly 50 million as low level waste.

Well, it's well documented the vitrification plant was never designed to treat all of that waste and really from everything that I understand we're the only other solution there right now so once they start.

Tim ramp processing, certainly we're going to get some of that in the question is how much and how quickly we get that so is that a pretty fair assessment of where Hanford stands right now.

Yeah, we'd like to think that James just certainly our position.

Our to speculate what will happen you know.

We are at Hanford, but that's our view of it as well.

Right and the vitrification blended so also well documented isn't to be fully operational right now until 2036 and of course, there already what 15 or 20 years overdue on that schedule, So who knows what the real number is there as Mike exclusion and the longer waste the more.

Tanks that are going to be leaking and the more necessity. It is to get a b to seek out the alternative solutions and we have the cost saving solutions far superior. So I think hanford isn't a fabulous shape and just overtime is going to work into our hand beautifully and then one other got it just question as far as self bonding.

Thing is concerned I know, we've got the 5 million Bucks back a year ago.

Looking forward, how much is still available to us there and kind of that off balance sheet situation can we just pocket where that stands today and maybe been wants to grab them.

Yes, just Steve just to clarify are you asking how much of the self funding we have right now.

Yes, hi.

In effect restricted cash right and we theoretically could access that we could go out and purchase bonding and Axesat Cas just to understand how much real liquidity. The company has that isn't quite apparent when looking at the balance sheet.

Correct, and it's about 11, 11 or 12 million.

Yes elaborate for.

11.4, you bet. So there's really a lot of cash there and the balance sheet is.

In fine shape, when when taking that into consideration you, but well hey, I'll. Let you go I see we exceeded the our market I'm sure just couldn't be more thrilled with the progress over the quarter over the last year year and a half that's been a wonderful transition in the future looks very bright demand.

And then again complement you on can thank you enough. Thank you.

Thank you see.

Okay.

Our next question comes from the line them Steven Fine you May proceed with your question.

I got two quick things what is have you set up that plant and the mill the country to assemble stop what you wrote about last year, what has happened with that.

In other words, we bring big things in and so forth you pad stuff out on that.

Earlier in the are you have business, there now or what yeah.

Yeah, Steve that's called the environmental waste Operation Center or the E walk.

Located here in Oak Ridge, we have I want to say six procurements out right now waiting to hear on.

So we've been a lot of things for that facility in February.

January timeframe in anticipation of receiving waste material.

In in Q2, and then cobot hit and Everything's kind of stopped we did wouldn't one job.

Small job doing some decontamination of equipment.

And.

Thats kind of getting this go on but it's very limited revenue at this point waiting to hear on these other bids.

And hopefully by next quarter, we'll have some good sustainable revenue for that but.

In very limited.

Very limited.

Well.

Hi, one more quick question. So is it reasonable to say that as you.

As you explode in service.

With the understanding of service that service could lead to treatment business. So in other words, you have customer that you're with service and that could end up bringing treatment business.

Absolutely Thats the model, we're we're trying to try to implement Steve it.

On each of these big these large deal we bids that were participating or trying to participate in.

That's kind of the that's kind of cell.

That's right.

But even even in the non deal we that could be applicable as well yeah exactly and then I know thats been our strategy for the fits very beginning.

It was you're making the changes is to integrate both those sectors together more.

Hi, Thank you again.

Thank you.

Ladies and gentlemen, we have reached the end of the question answer session I would like to turn this call back over to Mr. Marcelo for closing remarks.

Alright, Thank you I'd like to thank everyone for participating in our second quarter conference call as I mentioned earlier, we were we successfully navigated what could have been a much more challenging environment due to covert 19, and we're well positioned heading into the third quarter based on our current sales pipeline accelerating bidding.

Activity in backlog, we remain highly encouraged by our outlook for the business. So again, thank you everyone for participating.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for participation have a great.

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