Q3 2021 Perma-Fix Environmental Services Inc Earnings Call
Okay.
Good afternoon, ladies and gentlemen, and welcome to the Perma fix third quarter 2021 conference call.
At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host David Waldman Investor Relations, Sir the floor is yours.
Thank you good afternoon, everyone and welcome to Perma fix environmental services third quarter 2021 conference call on the call with US. This afternoon are Mark Duff President and CEO, Dr. Lu set up Bonney executive Vice President of strategic initiatives, and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing third quarter.
2021 financial results, which is also posted on the company's website. If you have any questions. After the call would like any additional information about the company. Please contact Crescendo communications at 2126711020, 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 price.
But Securities Litigation Reform Act of 1995 and include 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 differ materially from such statements. These risks and uncertainties are detailed in the company's fine.
With the U S Securities and Exchange Commission as well as this morning's 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, today's discussion will include references to non-GAAP measures.
Fix 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 today's news release on our website I'd now like to turn the call over to Mark Duff. Please go ahead Marc.
Alright, Thanks, David and good afternoon, despite the prolonged impact of the COVID-19 pandemic I believe we're finally beginning to realize the momentum of stability that we saw in 2019 before the pandemic.
As discussed previously the federal government has been much slower than the commercial sector to resume normal operations and this was not unique to us, but also has been experienced across our industry.
By most of our peers as well Nevertheless, we've started to see an improvement in the business during the past quarter, we saw slight increase in our treatment segment revenues, which has continued to build our.
Heading into the fourth quarter.
We've seen increasing waste treatment activity, both in the commercial and the government clients importantly.
Realizing receipts from Hanford and utilities that resemble levels prior to Covid and bidding activity is also getting this two levels also seen in 2019.
Clearly, there's a significant pent up demand on waste treatment.
We hope to capitalize on having that heading into the new year with that pent up demand.
We felt the impact more heavily on our services segment this quarter, which was realized and extended hiatus in new contract Awards. However, the government has begun to issue. These awards and we're starting to see increases in services revenue backlog.
To support the next 18 months specifically.
Specifically, we won a number of service contracts and adding to approximately $50 million and project backlog since the start of the third quarter.
Alone and at least.
Projects will begin to realize revenues starting in Q4, when fuel operations begin to mobilize and we should see that growth.
Really begin to pick up in Q1 once mobilizations are complete through this quarter.
We're encouraged by some contracting goals the department of Energy's mandated for some of the larger procurements throughout the complex includes small business subcontractor requirements, which plays into our strengths. These goals include meaningful work with metrics that include over 20% of total revenue to be subcontracted.
And these are great opportunities for us and we will align with our core competencies.
Additionally to our growing pipeline, we've also secured numerous.
We call IV IQ contracts were multi award task order contracts, which is also terms termed as may talks.
Generally there are a number of limited number of companies that are selected for these contracts and each one provides an opportunity.
To bid on task orders over the next five years, we don't typically announce these awards due to the fact that.
There is uncertain funding levels associated with them and there is no way to predict backlog. However, the limited competition in the scope of works I'll provide us a good sense of potential opportunity once the clients get back into the field will begin to understand them better than these.
These are beginning to Mount up now with nearly a dozen IV Q awards that we've received in the past year and some of these are fairly large are positioning perfect for future opportunities beginning in 2022.
For example.
We recently were awarded four separate May talks a multi award task order contracts.
U S Army Corps of engineers.
Each one of those may talks as a ceiling of $95 million.
And that will support our facility reduction programs at military bases in four separate regions.
North America. So just an example of the types of <unk>.
Been able to win over the past year on year and a half.
At the same time, we continue to define and position ourselves for new procurements and market expansion opportunities with the U S Navy with.
D O D M D.
These opportunities include work scopes directly within our core competencies and we will support.
The opportunity to provide new solutions.
And but the potential for long term sustainable revenue within both treatment and services segments. We continue to maintain a solid balance sheet with cash on hand of more than $7 2 million as of September 32.
2021 on October 4th we announced a registered direct offering for gross proceeds of $6 2 million as of September 32021, we received approximately $5 5 million of the gross proceeds from the offering and the remaining 700 K coming in after the close of the quarter.
We had approximately $10 8 million of borrowing capacity on our revolving credit facility with PNC.
As of September 32021.
As I mentioned, we believe we've weathered the worst of the storm due to the COVID-19 pandemic and we're now coming out the other side that said I'd like to address why we decided to raise capital when we did.
We didn't enter this offering lightly and both management and the board are very sensitive to dilution. We kept the offering small with a close group of funds. We believe our fundamental long term investors many of whom are current investors and we believe the terms of the transaction were quite favorable for the company.
We have no desire and no need to raise additional capital for the foreseeable future.
In terms of use of proceeds and we see a number of very significant opportunities ahead, especially within the treatment segment.
That would require some upgrades to our current facilities.
This funding will allow us to accelerate these facility upgrades in support of potential new revenue streams from Hanford.
And other government sites.
That could be meaningful to our our treatment segment program.
The funding will also.
To support deployment of new technologies and add the capacity of current technologies to support revenue increases as well in particular, we're very excited about potential opportunities related to the Testbed initiative, what we call Tbi also known as the low level waste off site disposal program or project.
D. We had prepared and submitted their draft waste incidental to reprocessing evaluation, what they call the weir.
For the Tbi demonstration, which provides the regulatory coverage to ship the waste off site of the.
The Hanford reservation of for processing.
The evaluation demonstrates.
That the pretreated and solidified waste will be incidental to reprocessing of spent nuclear fuel and therefore can be managed as low level waste by D. A week by.
By the comments on the draft and we report.
During the 90 day comment period is ongoing right now.
And that'll wrap up again in 90 days from November 5th.
The second phase of the demonstration will include extraction shipment transportation, a 2000 gallons of tank waste from.
Or two are perfect northwest facility in Richland, Washington, right next to the Hanford site view officials have stated shipment of this waste to our facilities should occur by next summer. If all continues on the current path in regards to the regulatory processes I've mentioned.
Perfect is confident that the demonstration will underscore the effectiveness of grouting as a supplement to <unk> current vitrification strategy, while at the same time demonstrating.
The opportunity for substantial cost savings increase.
An immediate capacity to to treat large volumes of waste.
And dramatically reduce the carbon emissions.
<unk> footprint over the current.
Our approach.
And this is important for <unk> core mission, so to wrap up Covid has begun to loosen its grip on nuclear services projects as the federal government begins to mobilize back to the offices.
In both the <unk> and the DVD, we expect to see increased spending on waste disposition.
<unk> pent up demand, while we would like we've seen better numbers in Q3, we do believe we are positioned for growth with a solid balance sheet, we continue to invest in our capabilities in our facilities.
To build a highly scalable infrastructure to support that growth.
As a result, we're very encouraged by the outlook of 2022.
On that I'll turn it over to Ben Naccarato, who will discuss the financial results in more detail Ben.
Thank you Mark.
Our total revenue from continuing operations for the third quarter was $15 8 million compared to last year's third quarter of $30 2 million, a decrease of $14 4 million or 47, 6%.
The decrease in revenue was due to the drop in revenue in our services segment, which totaled $16 2 million, while our treatment segment revenue actually increased.
Over prior year by $1 8 million.
So volume continued to lag behind prior year. The treatment segment increase was the result of higher average pricing for the waste process.
And for the <unk>.
From a rec.
Request for equitable adjustment or in <unk>.
Which increased revenue our drop in revenue in the service segment was the result of the completion of most of our larger projects and while new contracts have been awarded in the third quarter. They did not startup in time to generate enough revenue to replace those completed projects.
On a year to date basis as of September 30, our revenue was down $22 million or 28, 5%.
This drop again comes from revenues in the service segment due to the completion of these larger projects without the revenue from the new projects to replace them treatment segment revenue was effectively flat with a drop of less than 2% compared to last year and.
And we did see improved pricing, which offset the drop in LOE.
The drop from lower volume.
Our gross profit for the quarter was $2 2 million compared to $4 8 million in the third quarter of 2020, the drop in gross profit was entirely from service segment.
Where the reduced project revenue impacted gross profit from both a volume standpoint.
Margin standpoint in the treatment segment gross profit was up one $4 million due to higher revenue.
Which was offset.
Which offset the impact of a little bit lower margins on the waste we treated our fixed costs in both segments were effectively in line with prior year.
For the nine months ended September 30, gross profit was $5 5 million compared to $12 7 million in the prior year.
This gross profit again was impacted by lower revenue and reduced margins in the service segment as well as to a lesser extent in the treatment segment.
Our G&A costs for the quarter were $3 3 million, which was in line with $3 3 million in the third quarter last year as lower marketing and business BNP.
Expenses were offset by higher wages and public company costs for the nine months ended September 30, our G&A expenses were $9 6 million compared to $8 9 million in the prior year.
Marketing and BMP expenses related to new business opportunities.
Compared to last year as were salaries and public company costs.
Our net income attributable to common shareholders for the quarter was $1 4 million compared to last year's net income, which was also $1 4 million.
21 income was driven primarily by the reversal of the Companys valuation allowance related to the net operating loss deferred asset, which improved the bottom line by $2 4 million I'll.
I'll take a minute to further explain the tax adjustment in more detail.
The company carries a net deferred tax asset made up primarily of net operating losses, which totaled $8 6 million as of December 31.
Due to uncertainty of realizing the value of this asset.
<unk> always fully reserved.
We call. This a full valuation allowance in 2021, we determined that it was more likely than not that a certain amount of this deferred tax assets will be realized as such we reduced the valuation allowance by $2 4 million, which contributed to a total tax benefit of $2 8 million.
Basic income per share was <unk> 11, compared to 12 last year.
Year to date basic income per share was 27 <unk> compared to 24 in 2020.
Our adjusted EBITDA from continuing operations for the quarter as we defined in this morning's press release was a loss of 798000 compared to income of $2 million last year reflective of the significant revenue drop in the service segment and the continued delays in contract awards.
Impacted by Covid.
Turning to the balance sheet.
When comparing with year end cash.
Cash on the balance sheet was $7 2 million.
Down a little bit from $7 9 million at the end of 2020.
Our cumulative accounts receivable and Unbilled receivables were down $6 6 million, reflecting reflecting the reduction in revenue when compared with 2000 Twenty's Q4 in the service segment.
Current liabilities were down $10 7 million as a result of timing of our payments the reduction of activity in the service segment and the PPP loan forgiveness in the second quarter.
Our backlog at the end of September 2021 was $7 1 million down slightly from $7 6 million at year end and down from $7 5 million as of September 2020.
Total bank debt at the end of the quarter was $1 2 million, which is owed to.
Our credit facility PNC Bank.
Finally, I'll summarize cash flow activity for the year, our cash used by continuing operations.
Was 4 million cash used by discontinued operation was $296000.
Cash used for investing in continuing ops was $1 1 million and this is primarily capital spending.
And cash provided by financing was $4 8 million, which represented by $5 4 million received as part of our share offering.
Our monthly payments for the term loan of 330000 and payments to finance lease and other debt.
321000.
With that operator, I'll now turn the question over to you.
Certainly ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we do ask that while posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Once again, if you have any questions or comments. Please press star one on your phone.
Your first question is coming from how it grows from Wellington Shields. Your line is live.
Thank you Mark Little Ben David first of all I hope that.
Everyone is well and.
Continuing to avoid COVID-19.
If it comes along.
Thanks Howard.
Very welcome.
Closure, Wellington Shields whole manager of the 1 million share common stock equity offering.
In 2000.
And I was an investment banker responsible for the deal.
In addition for full disclosure.
Members of my immediate formerly owned shares.
Perma fix.
So let me start with a couple of questions.
Alleviated one nuclear powered ship.
How many more.
<unk> are in the process of decommissioning.
And what kind of market are we talking about say over the next three to five years.
Yes Howard.
We have been able to secure one of the first ships.
<unk> is actually outsourced.
They decommission their own ships, although I should say Navy actually did it internally up until a few years ago.
And the Navy realized in a formal way that it would be better off using their talents and building ships and avoid using the same resources for doing decommissioning because the skill set is so much different and as such a limited skill set overall, so they sort of outsourcing that they've done two or three ships.
Now.
In the last several years the Sturgis was the first one and.
And there's another one being done in Alabama, and then the one that we were able to win a call.
Called the <unk> key.
We're doing it in the Norfolk Naval shipyard right now and as the Big win we had a couple of months ago is often running very well.
To answer your question.
If you go to a J I'll report I don't have it in front of me, but <unk> reports.
That there is about 48 ships destined to be decommissioned over the next five years.
There are various sizes theyre not all nuclear I want to say, probably 25, I think I want to say 12 over the more nuclear.
And.
So they're on a rapid pace to do some will be done up of Puget sound specifically the subs.
And the ships will be done at various other places. So it kind of gives you a sense. There's also two.
A very large.
<unk> that are about two to three years out from funding, which means you'll start planning here on a pretty soon.
Limits and the enterprise aircraft carriers.
Obviously $1 billion plus projects.
And we're excited about the fact that.
Being one or two companies that have done this type of work.
So far that we have our foot in the door very well.
We will perform well in this shift that we've got.
And be in a position to.
Bid and win on some of those 48 that I mentioned as well as perhaps a team.
On the aircraft carriers that are coming up as well so a very big opportunity overall for this type of market, our skill set which is waste management and our rate logical protection as it relates to demolition lines up very very well at this with the right team partners that have experienced with chips.
Like we have a really good future on the market.
So could you give us a sense of what.
Chip.
For your purposes would be in terms of potential revenue.
They range pretty widely Howard said.
Our ship that we've got is a tender I did not have a reactor on it took care of about a dozen nuclear subs over.
About a 40 year period I believe.
The ship is about.
A third of its contaminated in other words about 150 rooms or contaminated ought to be decon, and that's about a $40 million job. Some of the other ships that had reactors on them, we will have more contamination.
<unk> will have been removed by the Navy and it will just be scrapping and cleaning up the rest of it.
So that it can be released.
Anywhere to answer your question I think we're probably one of the smallest ones that come out.
Maybe the first one was about $40 million as well or is this 40 and there is another one that's around 100, but to integrate so probably somewhere between $40 million.
150 is going to be the general range of these things will come in at.
Hey, Thanks, guys I'm talking over five years, an opportunity of more than $2 billion.
Chase roughly yes, yes, it's hard to say how contaminated some of them are Howard, but that's probably not really far off and then Diego report has some some numbers like that.
Well, so it's pretty well documented what the navy is going to spend.
Spend on this initiative.
And refurbishing their fleet and.
And frankly, you know the refurbish it there's always so much space for these ships to be stored the ones that are out of commission are being decommissioned the only place to put them. So they've got to get rid of them to make room for the new ones.
Alright, thank you.
Thank you.
There was a contract led house.
Let me back up.
The EPA had a settlement with the Navajo nation, we've talked about this on prior calls.
Settlement I believe is certainly in excess of $1 billion. There was a contract that was laid out several months ago.
$220 million.
Hello.
Are you involved in that contract and can you comment.
We are powered we were successful in securing one of those contracts. That's one of the May talks I referred to in the script.
We've made three awards.
We were one of those awards.
A formal team with a company called Arrowhead.
Native American firm out of the reach out of the Navajo region, along with Jacobs, which obviously, a large engineering company.
And.
The Bottomline is not much has happened through that May talk.
And we.
Patiently waiting.
The situation is I did do a little research on this just in the last week.
And was kind of surprised but the EPA has been running money.
Through the A&D contractor, which is tetra tech and Amy contractors basically.
Got the scope of work to characterize and so to speak tee up properties or mines, I should say to run through the cleanup initiatives. So they built characterize them develop the scope to a government estimate.
And put together the task order for EPA to bid out and.
And they've been spending about $7 million a year over the last three and a half years.
All of those initiatives. So it appears that there is a good backlog of properties and mines.
Understanding it's probably around the 20% to five properties.
And that will.
Likely to start to see task orders in 2022.
One one additional thing I don't want to get to the Tbi.
What's the market opportunity that you talked about it in the last conference call and implied.
Sometime in 2022 to begin working on it.
That's the vacuum.
Yes thermal absorption yes.
<unk> unit were putting in Florida, Yes, I did fail to mentioned I'll talk about that probably last three of these calls.
That's going pretty well.
One of the only real.
Initiatives that were seeing at this point in time impacted by the.
Supply chain issues.
And so we have several parts associated with that <unk> that have <unk>.
Been delayed.
<unk> had scheduled to have it up and running before Christmas.
It looks like it's going to be more like early to mid March.
And we will have it up and running.
To start in January but running hot in March so it's going to get.
Probably eight to 10 week delay.
But we should start to generate initially some revenue in Q1.
If if all goes well, we do have high confidence that the parts will be provided.
But like I said, there's a little bit late.
Alright.
Last but not least tbi.
Sorry to the CLO activity waste.
We're.
That's you're talking about the 2000 gallons in a later date is August 27 from the department of Ecology State of Washington to the jelly They talked about to test one certainly for 2000 <unk>.
<unk>.
And then analyze it in the second test.
And then you mentioned in both instances.
500000 gallons of tank waste, which would be included.
This is of course once.
I believe that there will be some.
Public comment periods on both of these things but.
You mentioned in both of these.
Correct.
That is correct.
This is a complicated.
A process that we're going through that has lots of lots of room for for movement.
So where we are right now is theres, a number of things that have to happen to.
To get to 2000 gallons and then.
Some decisions that have to be maybe tweak. The after 2000 before you get to the 300000, so right now just a checklist.
To get to 2000.
They need to have.
<unk> work in <unk> is the tank side, Susan removal system, that's going to pull the waste out.
Most to be construction supposed to be completed in January.
And.
It's going to be capable of doing about five gallons a minute. So it should run very well and be very.
Sufficient and providing that waste in this high confidence that we'll be running the second thing is the where you mentioned the waste incidental reprocessing I mentioned in my script as well.
It is out for public comment right now for 90 days.
And what they've demonstrated in that report.
Was that the once the cesium iodine removed in other words, it's filtered treated.
And then D.
We should be able to handle that waste as a low level waste.
And support the 2000 gallon.
The third thing is the environmental assessment goes through what they call. The NEPA process. That's also I believe had called to come Im sure Im not sure if its open or closed at this point, but it's a few months ahead of the weir.
And that basically looks at at.
Alternatives to make sure that when do we make the decision or the government makes a decision.
The alternatives are considered when you look they look at southern rate alternatives.
And they are looking at making sure the alternative for Offsite treatment.
What we're proposing is.
Is viable and doesn't impact the environment. So thats also going to be done and then the last thing is our D&B permit once the once the EAA is done and once the work is done they apply for an <unk> permit and.
And they are scheduled to do that after the weird closes which is in the spring they should have it by summer and then ship in the summer so to answer your question specifically.
2000 gallons in the 300000 gallons.
Good it depend on on public comment is going to depend on what the results of the 2000 gallon demonstration is which should in my mind should be quite simple, it's going to go very well.
<unk> can make a decision on whether they think the weir and EEA are sufficient or anything should be modified and amended or something like that to jump from 2000 to 300000.
So it's largely subjective.
And from what I understand how were to talk to some regulatory experts about this.
They said that to the deal we want to accelerate.
And then 300000 gallons they can with some minor modifications.
As the permits.
Or that we are in the EMEA.
And keep this ball rolling.
And but that's all predicated on support of the regulator as well so.
So in other words to answer your question, specifically and the regulator have the ability to keep that that system rolling.
Or they may decide to do some other evaluations between the two tests.
We're hoping that.
Nothing is going to really change between the we're in the EBITDA I mean is that going to be any new information that really.
Consider overall.
At worst case scenario will be some type of modification of this permits permits.
Permit process.
And have a limited period of time in and perhaps be able to start treating at full capacity.
<unk> into 2023 time frame.
It's 500000 gallons.
And the documents not 300 accounts by the way.
Yes, it's 300000, they've mentioned in that documents correct Thats fit phase III, We've said 500, yes, yes.
I think once they get rollout at.
Once they get rolling at the operational level, it's going to be more of a monthly burn so right now.
Working archive, our capacity and our permits without any modifications will take 30000 gallons a month.
With minor modifications, we can we can jump that up to $1 billion. So.
It just depends on on how much they want to ship to us.
So is there a good probability that.
Getting lean.
Four of 500000 gallons.
Does the 2000.
Indeed.
There's a lot of politics involved here Howard as we've talked about it on a recall so I hate to speculate on that.
Optimistic.
We will see the value in this as a supplement the DF law as I've said before.
Perma fix we will get.
Some of the affluent waste from D a floor as well so.
Perfect World is via block comes up it gets rolling in December of 'twenty three.
And do you see as the value and the supplement work that we can do at the same time, so that in 2023, they're both running.
And Theyre MTN tanks at a rapid pace, so I remain optimistic.
Optimistic that there will be limited.
A number of hurdles between phase II and phase III.
That's all I have thank you good luck.
Thank you. Your next question is coming from Anthony <unk>. Your line is live.
Hi, gentlemen, hope you all are well Mark hope you're well Anthony.
Can you. Please explain what difference it makes to perma fix to be named a prime contractor on the Hanford tank disposition contract.
Since a subcontractor.
Can you please clarify.
Whether perma fix can be named as a subcontractor.
On that contract, even if perma fix ends up being part of the losing consortium that is bid for that contract.
Sure Anthony.
First of all I can't talk anything about the procurement and where we stand on it because it's an open procurement and obviously.
A very significant lots of NDA as have been signed so I'm not going to talk specifically about our role in it but in a general sense.
Being.
Being named with the prime on that on the procurement or the proposal itself.
Blocks.
Our company in <unk>.
For specific scope. So you know that when you when youre going to get this scope. The government requires you to define each company's role in the commitment from the prime to use that company for that role and evaluate your on that basis.
And you build your team around.
That strategy, so being named on any bid.
Guarantees you certain SKU.
<unk> or at least gives you a signal a probability of a certain scope.
When when it's awarded so.
It's a lock in for sustainable long term revenue and in most cases Anthony includes commitment for a significant number of <unk>.
Ftes or employees that you have in your company.
So that's the value.
This is a different type of deal with us and in the tank closure contract ITC has referred to.
The scope of work doesn't specifically say.
It doesn't ask you who doesn't define the scope and this bid for treatment supplemental treatment of the tank waste.
Because this is literally the IV IQ that task order will come after the award so the only thing you really bidding on.
And having to define how are you going to do it.
Transition. So you find that hey, this is that we're going to transition and during that period. They always going to hand, you a handful of task orders and say, okay. Here's all the things you got to do you've got to maintain compliance with the tank farm you've got to start up the of law you got it.
Run these facilities deal with these ways.
And at one one could speculate that there'll be a task order that includes supplemental treatment of tank waste.
And again.
Just painting a picture here. So there's none of this is written anywhere.
And we.
We would be in a position if we were on the losing team or the winning team we would be in a position to support that task order as a subcontractor or on the team and so again.
Theres not any not a lot of options for treatment of that waste outside of VF law. So one could speculate eight.
We're on the losing team the winner would cost in say.
Give us a quote for treating this waste off site.
Our supplement as a supplement to DF law, and we will provide that that service. The reason, we're so confident because we're the only ones that have a facility right next to <unk> that could take the waste without transporting they're always down the highway.
Where permitted.
We've demonstrated we can do it and we've demonstrated performance so with all that in mind, if we're not on the winning team.
And if we're just a subcontractor then we still are very confident that we would provide that supplemental treatment.
So I mean, it just sounds like.
Really at the end of the day.
In the niche that you serve.
And given the fact that there really is no one else to go to do what you do it sounds like it really doesn't matter whether you're.
Our prime contractor or a subprime.
On on on the Hanford tank closure.
I mean it is.
Is that the bottom line.
That's the bottom of the bottom line exactly that Anthony is.
If there are two different initiatives with two different.
<unk>.
Revenue streams.
First if we're on the winning bid that's a nuclear services job as their bodies off site.
And they are working on the plan just like anybody else.
The second opportunity is that.
Treating the waste off site at our facility.
And Thats a separate initiative.
Independent of each other.
Those are independent of one another so.
You could be more that you could be part.
The winning consortium and do both services and treatment and you could be a subprime subprime being too.
The other party that winning this contract and do both treatment and services revenues.
Correct correct.
Okay.
Got it.
And.
Okay.
You had mentioned.
Being a small business and.
I think you had mentioned that.
20% of revenues of the contract award.
Could be or over 20% could be sub contracted maybe you could just elaborate on that and.
First could you help explain under what circumstances are prime contractors of the deal.
Yes.
Subject to small business sub contracting requirements.
And are there sub contracting requirements.
Always the same across all projects awarded by giving agency.
Or do they vary and if you could just help give us a sense as to what to what degree Barry.
Sure.
<unk>.
As the largest $1 billion.
Contracting AUC in.
They are very sensitive and understand the value and smaller small businesses bring to our industry and to make sure that theyre growing and there's opportunities for them and certainly some of these contracts are so gigantic.
So difficult to manage.
The department looks at it and says look we can't we can't really manage ourselves as a department.
Hundreds of small business contract. So what we're going to do is we're going to go to the Big boys.
Multibillion dollar contract and give them goals and they have to do it.
It worked out just fine.
The tank closure contract.
Goal is about 20%.
<unk> revenue, which is about $180 million every year.
What we will do is they'll make that prime contractor demonstrate each year as they have subbed out $180 million to small businesses.
And work.
And bill tied to it.
Brian.
Hey, you guys you met your goal you Didnt meet it and if you don't meet that then we're going to dock use.
Some fee and and make sure you know there is incentive you got to meet this goal if you want all your fee.
And sometimes that number is as high as 40% and we've seen those several times.
Total revenue, 40% of it has to go to small businesses of all various different types of small business to this isn't just it's everything from.
From IP companies to two vendors who can provide.
Onsite services or even equipment and materials.
So when Europe Prime and I have been in those shoes, a couple of times.
As a second manager have to look at it and say Hey, we've got these things out the small business for four subcontracts and make sure that they are participating.
And what it does it limits the competition, there's only a couple of companies that are in <unk>.
And to bid on them.
And it keeps the small business is growing and make sure there is opportunities for this business to do well.
It's really important that they take it seriously Doa has improved their small business program dramatically over the last 10 years overall.
Some sites are better at it than others.
And every small business out there can tell you who the best ones, where he was the worst.
But they are all getting better all the time and.
It's important for <unk> to have that approach.
Diesel Gd sub contracting requirements that will apply to every contract day award or is there a certain minimum thresholds.
They all have small business plans every every one it's not a small business set aside which is not many but everyone's not has a small business plan is required to be written by the prime the winner.
That defines how theyre going to meet the goals and the RFP. So yes. They all have some some goal.
But they do vary in percentages depending on unreasonable.
And is this the same with Vod.
Yes to a large degree.
I don't know on the environmental side, yes.
Youre building.
F 35 fighter Jets I don't know if it has the same.
Approach, but certainly on usually on construction and on environmental contracts, yes, they have goals like that.
Okay.
Last question.
You mentioned that you currently have capacity to do 30000 gallons of treatment per months.
Q.
Up.
From.
360000 gallons a year to 500000 gallons a year.
Then two 1 million gallons per year, how much capex would be required.
To go from 300000 to a million or estimating and we haven't really been all the calculations on as Anthony but it's going to be under $1 million to do that.
Yes.
Is that kind of thing you can do it gradually in other words. There is series of mixers that are required we have the space Fortunately and.
<unk> makes us a lot simpler we have the space now designated for it but we'd have to buy some mixers and by some infrastructure and some and address some power issues and.
That type of thing.
But it's not dramatic.
So we can get to 1 billion pretty easy when we get the $3 million, which I hope that we're talking about.
In the next five years.
Then we're going to have to add some space and.
Some additional buildings.
Which we'd gladly do and that we look at that and said.
Three to five years, if that happens that will be probably get three or $4 million of capital need.
Yes.
Thank you appreciate it.
Thank you once again, ladies and gentlemen, if you have any questions or comments. Please press star one on your phone at this time.
Next question is coming from Ryan Hamilton from Morgan Dempsey Capital Management. Your line is live.
Good afternoon, and thanks for taking my calls.
Sure Ryan.
I may have jumped in a little late so I apologize if some of this might have been touched on already.
Are you.
On the Navy side are you putting that that business in services.
Yes, that's all in services.
Okay. It sounds good.
Bidding activity could you maybe touch on the.
The size of the projects that youre seeing or maybe the number number of bidders.
That are submitting bids and maybe how that compares historically.
Yes.
It really ranges right across the board on all of these things like some of these may talks we've just won.
One region that has 10 awards and as one region has three awards.
And.
Typically it will be on those may talks.
More than a dozen people bidding. It so you really don't have a sense of.
Who is really beating against you.
Sometimes it's really hard to find out on the <unk> side of the house.
The bids we've been putting in there will be three to five bidders.
Generally.
And.
For example, the Princeton job that we just won.
Is it.
Decommissioning of some equipment up in Princeton University of principal plasma physics lab.
It's about a $14 million job there was a bidders, including some large businesses.
So it really range, depending on it a couple of jobs, we bid where there's no other competition.
And so it just ranges from.
From zero to 5% at most.
On a task order.
Alright, it sounds good.
One more on the Navy side is there any opportunity for business on the <unk>.
Treatment front.
That's a good question, we only talked about the <unk>.
We do a lot of voice treatment for Navy nuclear propulsion group, we do several million dollars a year, we get all of their mixed waste.
But as far as the waste generated from these initiatives.
Most of it is.
Sure.
The contamination is low enough that you'll simply cut up.
Scrap metal into smaller pieces and put them in a specialized container and it can go out for disposal direct for disposals. So there's very little waste.
It needs treatment again.
The rate activity on is low enough that it can go directly into disposal in treatment is necessary and that's what we found for most of the shifts that we've seen so far.
Is there any opportunity on the sub side submarine Sir.
The submarine side.
Our amazing engineering feats the way the submarines work is there's three pieces to a submarine generally.
The.
All the nuclear components are in the center sleeve they call. It and then both ends of them are can be removed and they maintain all of the radiological contamination in that center piece, where the reactor is and it comes out like almost like a ring.
And they are able to ship that whole ring for the most part off two hanford for disposal.
So there's not a lot of waste generated.
Actually built those things and designed them.
Four with decommissioning in mind to keep it simple shifts.
<unk> are not like that.
Usually integrated and all of the contamination is to ship.
So again, they haven't done a lot of them. So I don't know what I'm talking about is what.
A very distinguished Admiral told me.
How it works.
Seen it firsthand I don't know if they are all like that but was up I'm familiar with there's not that much waste generated from it that is coming to us.
It's really fascinating.
Last one for me I believe it was either last call maybe.
Before that you had touched about some business coming in from overseas.
Treatment side maybe.
Maybe could you just touch on that maybe what youre seeing in that market and maybe where you see it going forward.
I'm glad you asked that Ron it's one of the more exciting things that we're doing and I didn't talk about it all today, we are seeing a real increase in international waste.
Interest.
At this point in time it is not a.
Treatment facility in Europe.
The facility, we have in Richland that can incinerate.
<unk> article wastes and significant reduce the volume.
So we're starting to see a big influx of interest.
We've received some waste in Germany as well as the UK, we have waste from Italy coming in next quarter and we have some big bids.
And the $20 million range ongoing right now all over Europe and.
We're excited about what that's going to mean to us in 2022, and really get rolling into 'twenty three.
We figured out the logistics for shipping and.
And which was the big hurdle.
How to get the permits you need to do to go through ports.
Basically we incinerator burn it.
Which size reduction reduces well below 90%.
Ship it back to them.
And they rocket up or <unk> up.
And put it into long term storage or they can put it in some disposal facilities as well so.
That's really starting to get a lot of traction it will open up a lot of markets for us once we get some clients that are used to shipping to us.
And I see that as a real incremental opportunity for growth.
What are the margins look like on that compared to domestic.
Domestic.
They're about the same we keep them about the same it's.
Obviously very expensive to ship it.
But.
Such as no Theres no real competition for some of the ways that we're talking about.
The cover on that.
A lot cheaper for them to do that than to build a facility over there that's for sure.
And is it is it safe to say that European governments are suffering from the same delays as the U S government as far as awarding contracts.
Moving to the stuff.
That's absolutely right. They are starting to come out of it England's we're working with them right now.
We're a little bit ahead of her body.
Procurements of those types of things goes, but the rest of Europe is still.
Couple of months behind us.
<unk>.
We're meeting with them all the time and talking to them all the time.
And they have regulatory goals, just like we do to move waste out.
Get rid of them.
And so I do expect it to really pick up.
In Q2.
Awesome. Thanks for the time I really appreciate it good luck going forward.
Thank you.
Thank you there are no further questions in the queue I will now hand, the conference back to management for closing remarks. Please go ahead.
Okay.
Mike.
Those are all over my desk here.
Ill conclude by saying that wraps up our.
Q3 quarterly conference call again, we remain very confident.
In the outlook for our business.
Going into Q4 as well as the new year.
We appreciate the continued support of all of our shareholders and.
And we look forward to providing further updates as they unfold along the way through press releases.
Our website. So thank you all for calling in.
Thank you ladies and gentlemen. This concludes today's event you may disconnect at this time and have a wonderful day.
You for your participation.