Q3 2020 Perma-Fix Environmental Services Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to your Perma fix third quarter 2020 business update call. All lines have been placed on a listen only mode and the forum will be opened for your questions and comments. Following the presentation. If you should require assistance throughout the conference. Please press star zero to reach a live operator at this time. It is my pleasure to turn the floor.
We're over to your host David Waldman Investor Relations, Sir the floor is yours.
Thank you Terry and good morning, everyone and welcome to Perma fix environmental services third quarter 2020 conference call on the call with US. This morning are Mark, though president and CEO Dr. Lucena funny executive Vice President of strategic initiatives, and Ben Naccarato, Chief Financial Officer.
The company issued a press release this morning containing third quarter 2020 financial results, 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 in this call.
This call may be deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and includes certain non-GAAP financial measures. All statements on this conference call other than a statement of historical fact are forward looking statements that are subject to known and unknown risks uncertainties and other factors, which could cause actual results and performance of the company to different.
Purely from such statements.
Risks and uncertainties are detailed in the Companys filings with the 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 facts events or circumstances. After the date hereof that bear upon forward looking statements. In addition, todays discussion will include references to non-GAAP measures perma fix believes that such information.
She 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 today's news release on our web site I'd now like turn the call over to Mark Duff. Please go ahead Mark.
All right. Thanks, David and good morning, we achieved profitability in the third quarter of 2020, which reflects the dedication of our employees and managers to stay focused on implementation of our co would 19 safety plan as well as continuing to meet the needs of our clients.
All they were largely working from home as a result revenue increased 34% over Q3 of 2019, we achieved adjusted EBITDA of approximately $2 million and net income of approximately $1.4 million. This.
This was accomplished despite significant reductions in waste receipts associated with generator shutdowns over the past six months.
As we enter Q4, we are continually continuing to realize sustainable revenue in our services segment with Threeq waste receipts, increasing particularly in the month of December. However, the recent surges in coal we are presenting additional headwinds in requiring us to become more cautious in 2021 due to the slowdown of waste generation activities.
And in procurement alphabets throughout the industry.
Our sales pipelines <unk> services segment remains robust.
With significant bidding action in proposal activities ongoing over the past several months.
And over $80 million in annual bid values, a waiting for award decisions.
Backlog for both services and treatment are beginning to create some uncertainty for 2021 with the latest way Workover as government and commercial clients have restarted full operations, which.
Which has had a direct have nots restarted cooperation was that it had a direct impact on procurement actions.
And the associated awards.
While there are several larger bids were pursuing to support sustainable revenues until these awards are now or announced perfect will.
It will remain conservative in spending and investments.
Sure so.
Stability within until then until the pandemic begins to subside.
I'll now take a moment to address a few financial highlights from the third quarter relative to the same quarter in 2019 and later Ben will discuss the financial results in more detail.
Overall, our revenue increased 34% to 30 million.
Services revenue.
Revenue increased 86% to $23 million.
Treatment segment revenue was $7 million compared to 10 million for the same period last year due to the co would a 19 impacts which I'll discuss further in a moment.
We generated adjusted EBITDA of approximately $2 million compared to 2.4 million for the same period last year and lastly, we achieved net income attributable to common shareholders of $1.4 million or 12 cents per share for the third quarter of 2020 compared to 1.8 million or 15 cents.
A share for the same period last year.
As I mentioned.
Moving forward would caution based on COVID-19 resurgence. However, we remain optimistic energetic and enthusiastic about our growth strategy for 2021, which includes continued expansion of our plants and broadening our base of clients for nuclear services I'm very pleased to say that Perfix has succeeded in not only sustaining our business, but identifying new.
Initiatives and opportunities to further expand and increase our market share in the coming quarters.
We've added new resource into our marketing and sales organization and have established a comprehensive infrastructure for better customer management and.
Servicing.
In parallel we've progressed in developing a broader offering to the commercial sector through ongoing permit modifications and new treatment approaches to increase value such as the deployment and expansion of our sole sourced or technology throughout Q3, beginning with our foundation project with the U.S. Navy in San Diego.
This was all accomplished while our internal COVID-19 safety Committee drove the implementation a reserve requirements into our operation and business functions to ensure the health and safety of our staff, which has remain our highest priority.
While we continue to remain optimistic about our ability to get through the pandemic and complete 2020 with a real increase in revenue, we're beginning to see impacts from the increases in KOVA cases in our primary states of operations, including Florida, Tennessee, Washington, California, All of which have resulted in a slower generation and subsequent.
Receipts from our clients.
Its waste generation, so we're getting less waste due to the sluggishness of getting back in action by our clients.
This is particularly applicable to a waste treatment operations, which have been able to maintain efficient operations from backlog receipts, but have seen a nearly 50% drop in new ways inventories so far in 2020.
While the government operated facilities have mobilized back to their facilities full scale operations have been limited to date.
Which are critical towards waste generation activities.
Our nuclear nuclear services segment has continued to remain strong through 2020 with enhance operations and hiring through Q3, which is anticipated to be sustained through most of Q1.
Project performance has exceeded expectations as each project has seen growth strong client ratings.
Dysfunction and generation of earned value as projects have been completed safely.
In within the cost and schedule commitments.
We will also continue to position for fixed for upcoming procurements anticipated to be published over the next few months.
While I spoken more today about caution and headwinds than I have in the past few quarters Perma fix remains optimistic in our future growth plans over the next four to six quarters. This optimism is supported.
By our primary client the department of energy.
And the direction, we are beginning to see regarding waste management objectives and policy a few these highlights.
Are as follows first recent statements by Department of Energy officials have suggested carryover funds for the government 2020 year that could exceed $3 billion into 2021, if an appropriations Bill is passed eventually which would likely be a this winter this increase would be irrespective of.
Any stimulus budgets provisions and would represent nearly 40% increase over the congressional budget proposal.
Second several large d., we procurements have been recently published that include requirements for comprehensive waste management solutions as well as quote and stay contracting models.
Which support innovations and technology applications for success.
This has provided perfix the opportunity to participate with larger companies through teaming onto some of the bigger site cleanup contracts with much larger values and lastly.
Continued progress at Hanford regarding contract decisions.
And opportunities to leverage our advanced capabilities in our northwest facility.
To solve large scale problems at the Hanford sites continue to develop and mature.
As we stated as we've stated in the last few quarters Perfix has built a very strong team of waste management and health physic professionals and staff that are dedicated to growth and innovation for our clients. This foundation has provided the continued generation of opportunities in our industry.
These increases were offset partially by a drop in our cost of sales in the treatment segment has lower revenue resulted in a reduction of $1.2 million in costs, mostly variable.
Made up of transportation and disposal, while our fixed facility costs increased 436000.
Related to maintenance regulatory and.
Other depreciation type expenses.
Our gross profit for the quarter was $4.8 million or 15.7% of revenue compared to the prior year third quarter gross profit, which was $5.2 million or 22.9% of revenue.
Gross profit in our service segment increased approximately $1.8 million, but it was offset by a drop in the treatment segment of 2.2.
The margin decrease.
Was primarily impacted by the drop in treatment revenue.
Though we did see improved waste mix, which partially offset this impact increase.
Increased revenue in the service segment was.
As well as marginal improvement in the profitability of the projects.
Positively offset the drop on the treatment side.
For nine months ended September Thirtyth, our gross profit is at $12.7 million or 16.5% compared to $10.9 million or 21.3% in the prior year.
Our DNA costs for the quarter were $3.3 million compared to 2.9 in the year.
We saw higher wages incentives and that.
Bid and proposal of consulting type expenses, and they were slightly offset by lower travel and bad debt.
$4.7 million compared to 3.5 million.
Year to date in the prior year.
Turning to our balance sheet.
Come as it compares to 12 31 19.
Our back our cash balance at the end of the third quarter was 4.8 million, which was up.
Up from the 390000 at year end. This is due to the prime the PPP loan that we received in April.
Our accounts receivable and Unbilled receivables cumulatively were up approximately $6.6 million reflecting.
Increase unbilled revenue in the service segment at the end of the quarter.
Which as you and much of this is usually built immediately app at the new quarter.
Our current liabilities were up 4.9 million, reflecting increased accounts payable and expenses related to the increase in service segment business.
The increase in our long term liabilities of $5 million is primarily due to the PPP loan we received in April.
Our backlog of waste at the end of the quarter was approximately $7.5 million, which is down from 8.5 million at year end and down from $10.6 million at.
At the end of the third quarter in 2019.
Our services backlog at September Thirtyth was approximately $38 million.
And our total debt, excluding debt issuance and debt discount costs at the end of the quarter was approximately $8.8 million with 1.6 million owed to our primary lender PNC bank $5.3 million due to PNC bank.
For the PPP loan received in April.
523000 owed on our private shareholder loan.
And $1.4 million or other capital leases and loans.
Finally, I'll summarize our cash flow activity for the first nine months of 2020.
Our cash provided by continuing operations was $3.5 million, our cash used by discontinued operations was 329000.
Cash used for investing in continuing operations was $1.5 million.
Cash provided by investing activities on discontinued operations was 118000.
Cash provided by financing was 2.7 million and this is broken down as <unk>.
The receipt of the PPP loan of 5.3 million offset by our monthly payments of our on our term loan of 320000, our net payments to the revolver of 321000.
Payments to the shareholder loan of $1.5 million and other lease financing payments of 414000.
With that I'll now turn the call over to questions.
Thank you ladies and gentlemen, the floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time, if you are using a speaker phone well posing your question you pick up your handset to provide the best sound quality.
Ladies and gentlemen, if you do have a question. Please press star one on your telephone keypad at this time.
We'll take our first question from Howard Brous with Wellington Shields. Please go ahead Sir.
Thank you gentlemen, I hope to soon call signs all of you.
Good how are you Sam is in good health.
Most importantly.
You're welcome. Thanks regulations on a you are very welcome congratulations.
From my perspective on a great quarter, considering what's going on out there.
A couple of questions about opportunities you had mentioned.
I'm not going to quote you, but hanford contract decisions.
Can you discuss what you mean by that and Jefferies two potential opportunities.
Sure Howard.
Our worst situation, we can be and is.
Is the infill being unstable in regards to the procurements in other words, they're having them in a hiatus waiting for things to happen.
Because people just don't Theres, just not action oriented so, whereas as we start seeing these actions move forward with the award of a plateau contract.
To the momentum team.
In transition right now, which means a lot of things shut down including waste shipments that's going to be over with your are just in several weeks.
And then the hopefully the decision on the tank closure contract and.
In the next few months is also a dramatic and so.
And then thirdly is TV I.
What we refer to as TV on which I will continue to be encouraged on.
In regards to do is positioned to move forward with that and the $10 million that goes along with that project and hopefully I will remain on track to receive.
The next phase two tranche, a waste, which is 2000 gallons to our northwest facility for processing. So altogether, we are hoping to Q4 the debt becomes more stable more definitive.
And continue the momentum we've got right now.
Let's now.
I may take a point a couple of items.
Im familiar with the TV on contract.
Hi, Yes, when do you expect that to be.
Well rewarded or awarded.
Yeah, I mean it.
Right now from what we understand view is moving forward with it they're having to address some regulatory.
Hurdles on their side, we're ready to receive the waste and process. It just like we did the three gallons a couple of years ago. So.
So its still moving forward and I know Andy was making progress on the regulatory side. So we're optimistic that they'll be able to start actually pumping it out.
This summer.
Hi.
Let me address.
Question on the EPA contract Lucy Navajos.
Any more information about that.
I'm afraid we don't have any new information the Howard I anticipated you asking today and checked this morning with some of our guys to see if it or anything it was a no nothing was last quarter or so.
Those are the kinds of tickets a great example of a contract its just stuck from what we believe is covert a you know whatever working from home on the government side. So there's no news whatsoever.
I'd like to ask a question my understanding there were multiple bidders and some of those bidders Warren sack rejected as I understand from calls to the.
Hey can you comment about that please yeah.
Yeah, we havent not confirmed that but we have been told is well loop or Howard that they have shortlisted.
And that some people have who participated in the procurement have been informed that they were not selected we have no. We have not had that verified with EPA, but that is what we've been told from other bidders.
My understanding is Jacobs is your pipeline and your the Sabrina Yes, correct. Yeah, we really get it says the procurement how are we really can't get into teaming in that kind of thing right now but okay.
Yeah. So let me pull apart a couple of other opportunities.
Contract.
Can you address that opportunity please yeah.
Yeah. You walk is is is really.
A technology and facility that that's that's in place to support the large largely the next phase of the Oak Ridge closure mission.
To provide a trans loading for for large volumes of Mercury contaminated waste. So that's largely waiting for more activity for mercury.
Remediation in Oak Ridge.
So it's it's teed up as soon as the awards.
A new task order to the incumbent contract, which is the you core team or if they award. The closure contract. Then then the you core. Obviously then the walk facility I will have a would be front and center and be able to provide value to those missions as we speak right now they're not doing any mercury meter remediate.
And so there is the large volume contracts that were we have our eyes on.
Have not come out we're doing smaller things there now.
To sustain some revenue.
But not the big the big ones that we were hoping for by now, but we are beginning to generate revenue at the walk in or use it for other things today.
Yes, just the magnitude of what could potentially.
Finally be as opposed to what it is currently.
I assume youre right now, it's very minimal we're doing yeah, we're doing some equipment deacon and those types of things there now and.
So were you know its very limited revenue you know a couple of million year at most.
Would be our target.
With.
If it was if we were to use it for trans loading.
A large volumes of ways out west and we can see.
Between five and 10 million a year would be would be very conservative number depending on the volume of waste. The deal is moving within the Oak Ridge closure.
One just yes conversation about a channel change any possible administration.
Should be by the administration.
Biden win the presidency do you see any change in treatment on services.
By the vineyards is immediately.
No Biden when I.
I think there is a number of things that will happen for US mostly positive you know I think the stimulus would likely be a little bit better in the future.
And but overall you know that the Democratic administration.
Durations have been good for funding the deal we environmental management programs, we expect that to continue.
But we don't see a significant change between administration changes.
There's a couple of things that we'd lose you know with that would be at risk I should say Howard if if the Trump administration does not win and that would be just the risk of some of the momentum we've got on some of the bigger projects that we already mentioned.
But they will likely continue as it has a very strong federal staff that.
That will be the common thread between both administrations and the federal stuff and in German tower reinforced all.
Do headquarters as well as the bigger sites will likely remain in and they'll carry those balls forward. So I don't see a dramatic impact either way I think the biggest potential impact we have is where they're going to do with it the $3 billion they haven't carryover.
And will there be any stimulus I like.
Like there was with the A.R.A.
Initiative back in 2011, so those two questions are big ones.
As you probably know when they had the last stimulus package.
Almost 10 years ago now.
There was a lot of emphasis on waste management and moving waste.
To clean up the sites that we were really good to us we're hoping for the same thing, but it's hard to speculate what they spend it on.
But though whatever they do it will be action oriented and they'll generate way so.
Or just.
Generally what will be good for us.
Just two more real quick just to be on contract.
We assume that it will be awarded or re awarded and when do you think that.
Could be.
Based on your best guess, yeah, the contract Big I'm, not really that familiar with the contract vehicle right now I know that they are moving forward with things.
Howard.
I would anticipate.
That to continue to get through the regulatory side of it and.
Begin to move forward with it with the waste.
Waste removal from the tank for the 2000 gallons.
As I said by this summer.
So I'm not really sure I really can't comment on the contract itself other than a it seems to be to be moving well idea. We views. This initiative as a high value to the overall mission.
And obviously, we haven't been boys are waiting for this for quite some time and hopefully they'll continue to all the way through the 2000 gallons and beyond so.
I can't give you a definitive time one of the contract in freight.
Okay Fair enough. Thank you for your comments.
All right. Thanks are.
Thank you.
As a reminder, ladies and gentlemen, if you do have a question. Please press star one on your telephone keypad at this time again Thats star one on your telephone keypad to enter the queue.
We'll take our next question from Steven Stein. Please go ahead Sir.
Good morning, gentlemen, good quarter congratulations.
So no one said it I normally say it so you've met you basically did last year in sales so.
You know and years, you're saying you got $38 million in service seven they have made in treatment. So is that all going to be finished in the is that going to be like for example, the $38 million in service will that be completed in the fourth quarter.
No Steven that will all be completed in the fourth quarter that will bleed significantly into next.
Next year.
And through Q1.
Minimum.
And the $7 million it rolls over pretty quick.
As far as the waste treatment side of the house goes so we and we depend on.
Replenishing that along the way.
But it as an indicator of how much waste receipts were getting in which as Weve mentioned.
Slow down.
From Cowen as as we've also mentioned we did have a good September on waste shipments.
So we saw some increasing.
It has plateaued and it will likely slow down in November December but.
But we typically start to see it pick back up after the first year weather permitting so were right to answer your question. The 30 million will bleed into Q1 pretty well, we hope to Oh, we plan to break the 100 million Mark for revenue in Q4 for the year. So.
So we plan to have a good Q4 as well.
And and take that momentum into next year.
Now am I correct that you look quickly over the.
The the numbers, you're paying down debt right like you are paying off loans, so while you're doing racks in the midst of all this you're paying down debt to which you which you know is not an associated but am I correct in that.
Perception, yes.
Yes, good yeah, we're all right care of our term loan that we had.
Term loan and the shareholder loan so.
So that you know that Thats, something I mean that that in these times to be able to say that and that your sales are up I mean, that's five us. So let me ask the question why is why when we talk I mean, okay. So I understand to get the treatment ways. It's got to be generated by coal that is not a problem in service.
It's not a problem in service Stephen as much. It is in service procurement. So we're we're doing it we're in or feel in the field now even though our clients are largely worked from home we have about 150 people over.
380 people in the field.
So yeah those operations can continue where we're seeing.
Some concern is we've got $80 million in bids outstanding without awards occurring out of it. So the procurement side of the house is where we're seeing the impact on services.
And that could all loosen up very quickly and we could get a little a flush of awards or hopefully our proportional share of them.
And be fine or if this covert thing continues you know well.
Well into Q1.
Then we will see some delays there and you.
You know some situation to walk gaps between our projects, which nobody wants so.
Thats, where the issue is on the services side.
Hi, So so you just said you know it's obvious you're going to do 100 million this year, which in itself is a staggering.
So, let's assume the worst you're going to do 100 million next year.
Yes, and that was I would normally I would normally expect you do 200 million, but do you think that you know and I understand all the the obstacles out there, but do you think that you can at least be flat, which I think is quite an accomplishment at this thing continues.
That's a great question Stephen Yes. The answer is yes, we think will be a minimum flat. We you know we have been talking for quite some time on these calls that we were really planning on 50% growth every year.
And we almost had it this year, we had last year, we had and we've got we're close to having it this year.
We took a beating here you know with the waste receipts.
Receipts, but we are planning to at least be flat next year.
With some modest growth.
But we've also submitted a lot of very large bids.
Four big projects 100 million dollar plus projects over several years.
In a couple of those awards will will get us higher and get us to that goal, but our minimum is to two is to break or two to see growth over this year, which would be over 100 million.
Hi itself. So presuming presuming your flat next year and then you don't have the 5 million that you got from the government is going to be all right cash flow.
Yes, it will be good cash flow were expecting.
Better margins you know as Ben was kind of mentioning is.
Services generates less margin than treatment, which is obvious because of our assets and treatment.
With the with getting waste receipts back to normal getting the EBIT is up in the margins up on average.
Put us in a position where we fly.
Hi, So when you say when you say, there's 80 million out there is the issue that the people are not there to go consummate the bid or its guests they can't because no ones out in the field.
Or is it no.
It's not that the field so much it's other feels much Steve as it is the procurement process and the procurement Brian.
So it's I think it's really you really can't tell in our position we're not we're not privy to inside information. So we're speculating when we say that its a procurement process is taking longer than it normally would because of cowen.
Hi, So you say the treatments down I.
So presuming.
Everything was okay, how much more would treatment Ben.
Or is that well it would have been in that way.
It would have been Delaware stuff it would have been dealt with it could have been double.
Yeah, that's speculation Stephen but yes, so right now we're we're planning on 30 to 40 million for 2020.
We'll we'll come in a little bit higher than half that.
And.
I believe we would have met it so yeah, we lost a good talking almost 15 to 20 million and waste receipts that we would have gotten otherwise.
So they're actually.
Yes, so there.
Our next question from Howard. Please go ahead Sir.
Yes.
Good quarter, Mark two quick questions one is.
I hear you right you are optimistic about the long term and about 21.
What we might expect over the next quarter or two to be sort of flat to down is that a.
Fair summary remain missing something.
No you hit it right on the head how we're we're not we're really not expecting it to be but there's a there's a potential to Q2 could be.
You could see a dip.
Again, if we see this co would things start to break up a little bit.
In early in Q1 and.
And start seeing some normalcy in people go back to the operations and and things like that I mentioned before the procurement cycle.
What we find won't see any kind of impact, but we need to start seeing some so normalcy in three or four months. So the Q2 can be back up Q1 looks pretty strong and we're we've got a good momentum coming inadequate Q4, it's the Q2 part that it's got us.
More cautious got.
Got you.
Hello.
The loan going to play out.
As you see it at this point.
Well right now we've we've got an application in for forgiveness.
And.
Pass the primary lender and with the FDA.
And what we've been told is.
It can be up to 90 days by the FDA.
And that clock started on or about the middle of October.
Okay, and presumably everything right now is on the books you haven't taken any of that so many that's going to be forgiven.
Correct.
Okay. Thanks.
Thanks Howard.
We'll take our next question from Anthony.
Go ahead Sir.
Hi, guys I hope you all are well congratulations on a good quarter.
Thank you Anthony.
So we.
One question I have is the Washington state.
Department The college G. for years has argued that the Hanford Tri Party agreement and the 2016 amended consent decree.
Choir or are based on the plan to vitro biology, Hanford radioactive undergrad storage tank waste.
And.
The state.
Department of ecology on multiple occasions has stated that vitrification is the only acceptable method of treating hanford underground low activity waste.
The lead regulator of.
Is that departments nuclear waste program has just left the agency after four and a half years intercede in her seat to.
Just pursue a different professional opportunity can you please discuss.
If you have a point of view.
What impact do you expect as a result of her departure on the prospects for treating the supplemental low activity waste stored in the underground tanks. It hasnt yet at Hanford through grouting as an additional supplemental method to vitrification.
Well I mean I'd be hesitant to comment about a regulator entity on this call. However, I will say that.
I think other apartment.
Has made.
Significant strides in.
In their strategy to to demonstrate action.
In their cleanup programs, we've also made great strides and progressing.
Progressing with their DFE law facility and construction of the infrastructure and the overall tank program.
So a lot has changed in the last 12 to 18 months in regards to the overall program and the D. we leadership.
Has has focused on this this whole initiative as well.
And are on the same page and there's there's a fresh momentum renewed real momentum from what we see and we are at a distance Anthony you know we're not in that in the weeds with the with these things. So we will watch from a distance.
But we see that that all being so positive.
And.
But what's happened with the Savannah River initiative.
And the negotiations are ongoing with the state that's why we see a lot of optimism and moving forward with.
With a supplement to whether the flaw treatment facility, which obviously would include offsite commercial waste treatment of the tank waste.
So I don't know how much of it is associated with that but a manager leaving.
As much as it is.
The strategy by deal, we and the relationships they have with the regulators overall.
So when you when you spoke about the timing of that TV I staged to being this summer is that or is that a conservative expectation or is that more aggressive expectation.
I think thats conservative I think that.
And again.
It depends a lot on co would you know if how much that slows things down meetings down in those kind of things and are on behalf of the regulators.
They are working with you we on their on their hurdles.
But again, assuming that life begins to get back to normal in January February timeframe.
Which we all know is not necessarily a conservative assumption.
It then yes, I think a summer as is reasonable if we continue to see more covert delays through Q1 that may be push to go into the fall.
Okay.
And still protect.
[laughter] switch part of a team led by Jacobs that was selected by the deal. We did participate on a 10 year I'd you services contract nationwide.
Can you just your question update on to what extent D. A week to date has announced any task orders associated with this contract.
And what your expectations are around winning business associated with that.
Yes, and it went viewers had several meetings and have spoken to conferences in regards to that question. That's a frequently asked question in those meetings because of the expectation anticipation by all the folks that were selected for that the contract value is response.
It was at one point that there was a half a dozen projects cued up.
And they were anticipating move forward with that since then we have other meetings or other conferences, where they've said, there's only one or two so I really don't know whats queued up in that contract vehicle.
It may depend on stimulus and may depend on how they're going to spend the the other there are carryover backlog.
But we haven't seen anything we haven't seen a forecast.
And Weve anything that we would say in regards to.
The potential for RF piece would be completely speculation on and not supported by anything view is it formally so I think the one thing we do know Anthony is that we haven't seen anything.
And we haven't seen a forecast and without a forecasted you typically get a forecast, but together if if.
If you're expecting some kind of some past quarters to come out.
Okay, Mark Thank you very much and again congratulations on a good quarter.
Great. Thank you anything.
Well take our next question from Bob Johnson with Wordscape Dotcom. Please go ahead.
Hi, guys good quarter.
Wanted to just ask a quick question about the perma sort.
Oh system and kind of help me understand how big.
Big a market that is and how you sell it so.
Yeah. The primary source system is a technology that we've really refined a lot in the last year and what it does is you put a.
A quantity of ways like a yard of ways into a hopper imports are down onto a conveyor belt.
We have some proprietary software in detection systems that detect.
Well the cesium source the radio out activity in that soil as it moves at the conveyor belt and gets to the yen the detectors tell the conveyor belt, which way to go as far as the gates goes so it goes either enter into a clean pile on one side or a contaminated Paul on the other side. What's that allows you to do is to.
Two very rapidly.
Like like 200 tons, an hour kind of thing which is really moving.
Right very rapidly minimize the ways that you have to send to an expensive disposal facility.
And it allows you to soar.
Very rapidly so you can.
Somewhat concentrate or least pull pull out that contaminated part with very high degree of the quality.
And.
We're doing this now for some some dredging operations in San Diego, we've done it for other projects along the way. This our fourth of this project, but this is the first time with this new system.
As far as the market goes as a tremendous market out there for that basically if you're doing remediation to have a very logical ways.
And this this would this will work very well, we're we're doing so R&D on expanding that segregation capability into non rad types of contamination like Mercury.
And other types of of constituents, which are very important for upcoming missions and upcoming bids.
Which would allow us to the very rapidly sort.
Other contamination as well so the market is very broad if we get those are that software working.
And those detection systems working so right now we have.
Two projects ongoing.
The values of those projects is.
Below 10 million.
But we do see it applying to a lot of other very large projects.
That are coming up for procurement.
And providing a a a very real solution.
For a cost savings that would.
We'll put it from a fixed in a position to join larger teams.
And be a part of of a real important solutions for some of those procurements.
So it's really just getting started it's not it's not all brand new but the the performance we've seen on this current system.
As advanced.
It has exceeded expectations for the for the clients who were working with.
Right.
Is that an RFP type of.
Process or how do you on the customer front.
Yeah, it's mostly RFP process, where they will have a technical solution required and sometimes it's just the rate require no because our ability to segregate the waste will be or have a cheaper rate.
Waste disposal cost so it both ways, but mostly through the RFP process.
Okay, great. Thank you.
Thank you.
Our next question will return to Stephen Fine. Please go ahead Sir.
I had air plugs on I don't know if that's the problem then Dan when I hold the phone if I dipped down my my voice goes down.
Hi, My fellow stockholders and I know you guys can't said, there's a report that came out I don't know who was the GA.
No were something that came out about six months ago, and basically have talked about the.
The.
The tankage and basically it's that's question that's going to last and in this report one of the things that was his knowledge that one of the alternatives is the TP I would say call. It something else and then in addition, when the when the deal. We responded to this deal we said yes.
That that could be an option so.
Yes and.
I guess I, you know I look I'm, an engineer and I'm very technical dislike did for 40 years and I guess.
You know just amazed that.
Simply as a backup system as that if something happened that you know, they're not comedy and you know I'm, not saying, they well and I know they could be lessening and because God forbid something happened you are there and the other issue is that you know and this is my personal opinion.
And is that everything I read says this is going to take decades. So even if you guys were sitting on the side doing this in small amounts it still stays the government money because you know all this money. That's just been pumped into you know into our economy has to now make what it's going to cost us.
To to do.
Hanford more money soundly you know and then we have climate ecological issues that crowd out stuff.
Hello, I'm not sure what the question there, Steve, but yes a.
We've seen as reports I just had reports to the core engineers had reports as well along the way along with CIO and.
And it's they certainly do highlight alternatives.
To supplement I think its important wars to supplement the ongoing strategy.
And hopefully we'll start seeing some of that.
Supplementing going on in the next couple of years.
Well move to our next question from Tristan Barr with MTB asset management. Please go ahead.
Hey, guys. Congratulations on if I'm right I think this was your best quarter since Q2 of 2012.
Well and you know, it's kind of amazing to watch the stock it hit on on what is truly is a fantastic quarter and I must admit I think I think thats directly a result of the tone that was taken in the press release and on this call I mean, most companies at this point in time are encouraging people to.
I kind of look through the pandemic and into look like if you look at what results may be like in a normalized environment, where I think you guys have had been a little conservative here and warrants people about what you know things may look like should the pandemic continue.
You guys had a monster starts a year through the teeth of a pandemic whereby your own accounts, you've lost $15 million to $20 million of high margin treatment business, I mean, that's $3 million to $5 million in EBITDA.
And you've made no no mention of the fact that that business didn't go away. It's just delayed I mean that waste needs to be treated and disposed of and so it's it's sitting at customer sites and when they pick back up you pick back up so at some point in time, you're going to have a taking the pipeline you had a question you people you've lead people to believe in and you.
He switched it a little bit the Q4 and Q1 are going to be Q4 is going to be very strong. It sounds like Q1 will be strong as well and you're telling people that Q2 could be weeks should the pandemic continue and should the government not get back the business.
I mean, I just don't understand this kind of excessive conservatism when you've done such a good job turning around the service business you can't control that the treatment volumes, but they will return at some point in time and you Havent highlighted the fact that that's you know that's going to be pent up demand for your high margin side of the business.
I mean, you know Q to Q.
Q2 may be weak, but thats, a long long way off and as you said you know there.
Theres a lot of bids out there and when they were awarded that could very very quickly come back up to the point, where you shouldn't have worn people at all so you know I just I wish you guys would take a little bit of a victory lap acknowledged the turn in the service business and the tremendous job that youve done.
Kind of adding legs to the stool and.
In and save it yet while Q2, you know to be weak you still have a very strong Q4 are you still have a very strong Q1, you've been paying down debt you're likely to get the the PTP loans forgiven and no by the way we have to absolutely massive company changing prospects out there, which could be the reward of that.
You see it.
And building on what Steven said, you know that the deal we itself in response to the audit of the tank waste said, we really should take a look at just treating the waste rather than the kicking the can down the road I mean that is just significantly positive impact statement to the TBR and it just seems like you know you guys instead of focusing on the positives.
He pointing out what could go wrong in 66 to seven months.
Yeah, well I appreciate your comments ER triston.
I understand where you're coming from we did have.
A lot to brag about I thought we did.
I cant explain.
You know that the drop in the stock in the last few minutes, but.
But what I can say is that we're also not the first company.
Trading and publicly right now that is express.
Express caution from for Covance.
In fact, I challenge you to find many that haven't expressed caution a we haven't expressed caution until now because.
Because we've been chugging, along pretty well and had good strong backlogs are the caution we're expressing.
Is specifically associated with what we see coming.
We've had a delayed impact from covert that causes me, particularly to be concern.
However.
We as I also said in a statement that we have the management team the tools and technology and and what it takes to get past it. So.
So even if it does it does is it's not going to be a sustained impact in other words, our market is not going away and we're not going to lose our competitive edge or just taken taken up a bit some concern regards to delays in procurement announcements.
And delays and waste receipts.
So we.
We do think we're going to have a strong close for the year.
And our.
Our Q4 looks like it's going to get us over the finish line to over 100 million without.
Without too much problem at this point.
And I guess, it would go well into Q1, but.
I appreciate your comments in regards to our being conservative we we wonder before forthright with our investors.
And you're seeing being forthright, it's just it seems again, a little overly cautious the $15 million to $20 million in treatment revenues is that loss.
Not lost its.
Primarily doesn't I can say is probably very limited very limited amount of it is lost its delayed.
So so again, so so most companies when expressing caution with cove, it still eat who kind of guide to what a normalized environment would look like I mean, so soon normalized environment to you I mean, you mentioned, 60% a year growth I mean in a normalized environment I mean, you.
Hi, guys are doing 100, you know based on based on what you've delivered and now you know not even including what looks to be like a pig in the python whenever waste shipments restart and not including the potential benefits of the TV I in the TCC is a company that's doing $120 million.
Plus in revenue and 10% EBITDA.
I mean at some point in time, while while you know and I think correctly pointing out the rest of the model. You also have to point out with the model is in in it. Some point in time you know the you know we will get pass code I mean, you've been paying down debt you clearly have the cash flow you know to get to the other side of it.
So I think you guys need to point out the people what the other side looks like and given the fact that again, you're looking at 120 million plus and $12 million plus in EBITDA and you have these two kind of massive potential contracts that are you know imminent I mean, you could be awarded at any point.
In in time.
I would argue that that supports a much higher stock price and $6.50 and so like I do think that that you guys are correct to point out some of the risks and pitfalls that come with you know a global pandemic, but you also have to point out how well you've already executed through the pandemic and it hasn't exactly been a non event for you guys given the 50.
The $20 million of high margin revenue, that's been lost or sorry, that's been delayed that should flow through at some point in time and not counting that and not counting the two big things I mean, you've got a very very very attractive base to build off of going forward and so you know I think you actually have to start promoting the good.
With the bad and say this is where we're standing and we you know we feel and we look pretty good particularly at this price and a you know you've got a hell of a story to tell.
Well, we agree with you as you know trust and that we are undervalued at this point and we do have a lot to.
Most about in regards to how we've changed so we.
I think we've been doing that.
Yeah, we're hoping to get some of these big opportunities you mentioned.
Awarded them and build on them, we haven't had a lot that we expected over the last nine months it happened that hasn't happened.
They haven't with anyone due to the pandemic.
So hopefully we'll sort of see that in the next couple of months and be able to do the press releases and get to the risk behind us and get that growth back that you're talking about.
Okay, great and I'm glad to hear that you agree with me on that the other by nature of the stock I look forward to Ah I know that you and some others have been you know have been aggressive in buying but buying stock personally I'd like to see the few board members that you have that certainly have the resources that are under invested in the stock to take advantage of this debt.
And ER and ER, you know show their confidence as well I appreciate it.
Well I think addressing.
Our next question will return again this Steven Fine. Please go ahead Sir.
I don't know if I am.
I heard Tristan and.
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Interesting made comments I think that were.
I agree with the the positiveness, but I was also a government contractor and.
One has to be one has to have your melody alright, and its that simple because you do deal with different personalities and so forth also I you know I.
I've now been a stockholder and now were going on for years.
And two years ago, you know you guys were.
We're optimistic and then it didn't come in people yelling about it now you're showing you know in your defense and then Youve now Mark. So now your defense, you're showing you Melanie and you're exceeding I guess, what I'd. Rather you you know, even though I totally agree with Chris into saying I totally agree the stock is undervalued I'd rather.
Do you have you melody and surprise us every time, because it's it's amazing what you're doing.
I, just think I I think that again to my fellow stockholders and I'll say, it a little bit in a calm or away.
As I study, what's going out there and try to read and understand even if they build that fit your vacation plant, it's still not big enough and they're still going to need yet. So that's what just boggles My mind, because you know we're in an earthquake. So Andrew is dangerous.
They are we see there are arguments about climate change and you know I just don't get it I mean this is Ben you know this has been an education a couple of other questions.
Why does a medical gone away I still see it there.
Hello.
Yes.
Ah Hey, Steve Yes Lou.
We are.
We're still looking at options in terms of.
Way to go with medical presently, it's a and.
And we Havent.
We still see we see several options in terms of what to do with an income.
Including going away, so we're going down various paths in terms of.
What to do with medical.
Yes, because one thing we can say Steve with medical expenses again. This is mark is that we have absolutely minimize the cost of the company.
So as we possibly can at this point to make sure we don't drain on other our other operations and initiatives we got ongoing.
Well I had my opinion it should go away because there's just too many folks out there now that have had done what you were trying to do and you know I I congratulate you know I applaud the effort, but one also has to say when the state now and when to go when they go on.
When you were talking Mark about that.
That you.
Enhanced or infrastructure. So that you know we have to stop what does that specifically mean, you know I'm not in great depth, but what does that mean that new people were it was a bold statement. So what does that mean.
Yeah, and it's a it's a very tangible statement to Steven or maybe a couple of things number one that we've added some.
Some new professionals and Rick on the marketing side as pure marketing.
As far as branding goes to expand us into different direction, we've hired a couple additional.
Sales professionals on the waste treatment side that come from the commercial industry, the break us more into utilities and commercial power groups.
We're deploying a new CRM system.
That's more organized and copper.
A comprehensive to support all the folks that are in business development. So there is a big initiative Weve got ongoing we have a new marketing plan in place.
And so.
So it's a more organized.
Organized and a detailed approach to business expansion as what we've got in place and.
People people want to industry, we'll start seeing that hi application in the next couple of quarters.
Is there a.
I'm presuming there is the street as strategic plan. There. So is there a strategic initiatives that say down the road all are.
Dreams. If you will you know where you got to have a dream the lives.
But let's say our dreams don't come through at Hanford is there a strategic plan of where you go like you know in other words, becoming part of somebody else buying somebody.
You know becoming more of a service company. It is is that you know has is that discussed.
It is Steven so disgusted every board meeting each quarter, a we have a list of transformative initiatives that we are pursuing at any given time.
TB is just one of those there's six or seven others going on at the same time, each time of everything from the he walked facility in expenses and and deploying new technologies, there to a capital improvements at different locations.
To expansion of our our international work as a number of other ones as well.
So we knew we were moving a lot of different directions. All at the same time, but no not too many enough that we can handle and keep our maturing from quarter to quarter and we present to the board each quarter on each one of those.
Hi, Dan back to couple more questions.
You made a comment that the CAG tank closure is alive. So from that am I to infer that you have had discussions that it hasn't been you know it's still out there and dealing is still considering it because you know I do comment they extended.
You know the present people that are doing the tank maintenance.
No and the extension was rather right because when they extend it people before they said you know, we're extending until we award, but they extended them and didn't make that comment so so.
So Mike you again, Mike My question is.
You know when we say it's still out there does that mean there is it is it going to be you know where they can award this thing or what because it is radical.
Yes.
You know, it's a procure in the procurement process, Steve and so basically where it is right. Now is view, we has publicly said that they're continuing to look inwardly.
At it.
How they made the selection in the first time based on.
The protest claims.
And so they are still in that process, they've been given no indication of which way, they're leaning and what they might do there's an enormous amount of speculation out there about the future or how they may folded into something else or do something with the overall better we're going to do about FFO wherever we're going to do.
I don't think anyone in our industry really has a a guess as to what might happen. If they do I actually don't know what it is which no I'm not an in no way to know when these things. So we really have no idea, where do we have going Oh.
The participants like a perfect ours very simply waiting.
For for it for further information.
And then that's really like there was a.
Okay. So about a year ago there were there.
I don't know, maybe I drank too much Kathy, but a year ago.
You know there was discussion about.
The action of the deal we definitely classifying the low and high now that is reality now it was low and there is high and Thats accepted or is that still question by the state of Washington.
Yeah, I I really cant address that at this point, Okay, Alright, all fine that's I'm going to ask I might then my last question is this presuming you get you know not presuming I would imagine you're going to get to 2000 gallons, even though in my mind. It's a waste of time did you pull in the science, but if you get that really you get.
2000 gallons, how long does it take you to process 2000 gallons.
Probably about a week at most only because runoff and operational mobile.
A few days actually [laughter], it's not a lot.
All right Hi, I wanted to make that point, so my fellow stockholders understand.
You know that that you know what you're doing all right look I I talked a lot.
I I do believe you know the stock is undervalued I I think what you guys have done is yes, absolutely you just need to be applauded I mean, you've gone out diversify yourself and you survive in this world I mean, it's just you know I mean I'm just.
The final by this world and you guys are surviving yeah are you know you had a substantive quarter youre, giving us hope and you know and stay humble I disagree with that Tristan yes.
One thing promoting the stock, but stay humble because when you stay humble that means you're going to you're going to evaluate the positive and negative you're going to think about you're going to think about what can happen and then you're going to plan for it and that's the type of company I want to know so anyway, congratulations and I applaud all efforts.
Okay great.
We'll take our next question from Chuck Dickinson. Please go ahead Sir.
Hi, good morning, guys.
I just wanted to say for the record.
That I know, we're not doing a poll here, but when I heard trusts and go into is a little speech there. It sounded like got exactly what I was going to say I mean, I'm in 99% agreement with what he said on the other hand the 1%.
I do understand you know what you're looking at Q2, we're talking watch that starts in April we're already in November so, it's really not that far away and if you start to see a little something with rig direct procurement that tells you well there might be a little hiccup here, let's get out in front of it we don't want to surprise shareholders. We don't want.
People coming back to us and saying why did you never tell us that there might might have been an issue here, even though you know we can actually see on the treatment side, that's been happening with delayed shipments for at least a couple or few quarters.
Already it's just that the outsized opportunities.
That provide upside to you and I don't need to go through them again.
Really outweigh what is probably a fairly a femoral issue in terms of possible or potential Colgate impact that nobody can gauge that almost every company is going to have to face.
So I won't weigh in on that any any further.
You did say two things that I thought were very interesting that I had not heard before or incremental and the first one being about this carryover of a deal easy fun amounting to over $3 billion going into Twentytwenty, one that's a 40% increase.
And obviously you would have bought hopefully some potential exposure to that.
So that that's that's kind of a a big.
Big item and I'm glad you highlighted it.
The question I would have there is does that money has to be spent next year is likely to be spent or is there an option, where they just say well you know well, we'll try to redirect that to another department if we have to offer.
Provide stimulus funds somewhere else. So that's what that's that's the first question and then the second thing that you brought up that I thought was very interesting was this whole idea of could there potentially be a new stimulus package that comes out much like there was a decade ago, which I wasn't aware of.
That could also be a huge factor. So those two things I mean, the 3 billion in the carryover of the of the deal at least on an hour and at least the potential or an idea because it happened before and it's been over a decade and we have to get this economy, moving again and the Democrats are likely if if biden outcomes and the likely going to consider a lot of.
Cautions that maybe one of those are two huge items over and above the large contract bid opportunities that you have out there that you have not spoken about before.
So tell me again on a $3 billion fund does it have to be spent what's the likelihood that it gets spent and any other color you could provide on a what a stimulus package looks like versus last a historical one.
Oh, Yes, Chuck I appreciate your opening comments.
In regards to interest in his comments.
But to address your question directly the $3 billion.
That came from some statements that D., we made about a week or so ago that they had about 3 billion.
In carryover so it's not a fund it's not something that's been appropriate by Congress necessarily specifically for the carry into 2021, it's money that was not spent.
2020, due to the shutdown and.
Impacts from covert overall, so as carryover money or they can't spend that until the government approval or a sign to budget.
And enacts a budget.
And then they can tap into that in addition to their budget that's approved by Congress.
So one could look at that and say okay. They you know last year, our budget versus the congressional budgets around 7 billion.
Congressional marks I know assuming that they go with those which I think is reasonable speculation.
Then just 3 billion would be spent on top of the 7 billion other they get for.
2021, that's government fiscal year 20, 2021 so.
So it's not it's not a fun, but there was also the same if you know if they have it as carryover, they're able to spend I have absolutely no idea what do you do with it where though spread it out or will I don't know what the rules are I'm not an expert on on these types of things other than having seen the press release and the the articles that have been.
Published in regards to the fact that they they they're planning to have that funding as far as the second comment is more the stimulus that was complete speculation.
As to you know if they if they have it and infrastructure type of package that they've had before with you, we whom I do not know if that's the case or not that was speculation that you know.
Given where things were.
In early Obama administration for the A.R.A.
Enactment.
If they had something similar to that.
We would anticipate.
The department seeing something along the way as to when remember all the shovel ready projects.
That were funded.
So that's again, that's complete speculation whether the.
The new administration or if there is a new administration.
Would would fund something like that or not so it would again, we don't have any information on that we're not we're not saying it was going to be anything like that but there's a you know it was is it all I was mentioning was there is a potential for something like that.
After the elections over.
Well I think Thats worth worth.
Worth mentioning and getting that up.
Yeah, and you correct me if I'm wrong on this but I think under the.
The Trump administration or Hasnt Trump the last couple of years, maybe more than that.
Sort of looked at the Hanford and decided well, let's let's maybe take this budget down a little bit here and its own way and that hasn't really happened only because its congress that authorized as it has the ultimate decision on the purse strings and they basically overridden him and in effect said.
We're going to look at this thing we think a hamper its pretty important and no we're not going to take the the budget down there. So I know you don't know how this election turns out you don't know what a Democratic administration should buy do not move in is is going to do but we do have historical precedent that at least on a couple of occasions and maybe.
More than that.
This administration.
Just at the highest level or the present as as argued for less funding going into Hanford am I wrong about that.
Yeah, that's that's where I understand its future.
Okay all.
All right great quarter guys.
Okay. Thank you.
Our next question will return to trust in bar with MTB asset management. Please go ahead Sir.
I just wanted to kind of clarify something here by no means do I think you guys should be all Sunshine and you only get the positive outlook I just think it would've been more balanced given the fact that you have the potential for this kind of a.
Rather substantial pickup of unspent money from from the current year flow into next year, and obviously, the prospect that potential stimulus actually being a benefit as well, but you know the the kind of caution towards Q2 might have been better expressed in on the Q4 call a you know should.
This this delay in procurements, you know still be around at that point in time.
You know and again I mean that the amount of money that could potentially slow through it correct me if I'm wrong. I mean that is also likely to be more now skewed towards treatment than than services is that correct.
Oh, it's likely likely impact both but it depends on the projects that are available to you funded trust and so it's it's pretty tough to tell how how do we would spend that money or they you know.
In regards to whether they would do service procurements cleanup projects or simply move more waste out it's really hard to tell.
Got you. Thanks for it was certainly certainly but you can assume it would be both.
Great. Thank you that appears to be all the questions that we have at this time.
All right I'd like to thank everyone for participating in our third quarter conference call. As I mentioned earlier were successfully were successful navigating our could have been a more challenging environment due to go over 19, and we're well positioned heading into the fourth quarter.
Based on our current sales pipeline.
Our accelerating bidding activity in backlog.
The potential for strong carryover from 2020, a funding sources, we remain highly encouraged by the outlook for our business in the coming several quarters I. Thank you for participating.
Ladies and gentlemen, this does conclude today's teleconference. We thank you again for your participation you may disconnect. Your lines at this time and have a great day.
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