Perma-Fix Environmental Services Inc. Q1 2023 Earnings Call
Question and answer session will follow the formal presentation.
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Please note. This conference is being recorded I will now turn the conference over to your host David Waldman Investor Relations you may begin.
Thank you Holly and good morning, everyone and welcome to Perma fix environmental services first quarter 2023 conference call on the call with US. This morning are Mark Duff, President and CEO , Dr. Lou Centofanti Executive Vice President of strategic initiatives, and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing first quarter.
2023 financial results, which is also posted on the Companys website. If you have any questions. After the call or would like any additional information about the company. Please contact crescendo communications at 201 to $6 70, 11020, I would also like to remind everyone that certain statements contained within this conference call maybe deemed forward looking statements within the <unk>.
Meaning of the private Securities Litigation Reform Act of 1095 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.
Certainties are detailed in the Companys filings 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.
From a fixed 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 morning, first let me take a moment to address the issues associated with the postponement of this earnings call yesterday.
As you know all relevant information related to the company's filings following period must be considered up to the filing of the 10-Q or 10-K.
Third we received certain new information late on Monday evening that required us to review for potential financial impacts we were able to complete the review on Tuesday, and are happy to be able to report our earnings today, we apologize for any inconvenience or impacts associated with this delay but these deployments.
Third to ensure the accuracy of our financial statements.
While 2022 was a challenging year due to the lingering effects of COVID-19 pandemic. We believe we're back on a growth trajectory that we that we were working so hard for.
We are finally, starting to realize improvements in our performance and the momentum we had prior to the pandemic as evidenced by our results. This quarter I am pleased to report we achieved a 26, 3% increase in revenue and an 83, 9% increase in gross profit for the first quarter of 2023 compared to the same.
Period last year importantly.
We also achieved sequential growth of 20% compared to the fourth quarter of 2022, even though the first quarter tends to be traditionally a seasonally weak period for us.
We saw a steady improvement throughout the quarter, including a strong March which is continued into the second quarter.
It's also worth noting that revenue increased both within our treatment and services segment. The growth in revenue reflects the initiation of several new projects in the first quarter of 'twenty three to support the backlog in both segments and provide growth opportunities into 'twenty four.
As we recently announced.
Were awarded eight new contracts over the past few months totaling approximately $15 million.
Revenue that's expected to be recognized 23 with additional optional option phases.
The potential value of over 14 million.
Moving forward.
These projects included the deployment of our source order technology for providing a remediation solution to the abandon uranium mine program through the EPA as well as the remediation of dredging settlements for the department of Defense and San Diego other new contracts have been initiated and supported the Los Alamos National Lab and.
<unk> innovative technology for onsite decontamination support for the decommissioning of nuclear power plant.
In addition to this new backlog.
Realized significant increases in bidding activities with recent opportunities requiring our core competencies in support of <unk>.
Remediation programs as well as the Army Corps of engineers cleanup initiatives U S Navy decommissioning projects.
International projects with sustainable revenue potential.
Within our treatment segment, we benefited from a steady improvement in waste receipts.
This was a result of increased waste shipments from <unk> and expanding our current waste treatment offering to the commercial utility sector, along with the oil and gas markets.
And the growth in our industrial waste programs as well, we recently received a new <unk> contract with a regional power utility to provide waste treatment services over the next five years. Once this contract is signed we will open. The this will open the door for new opportunities within utility markets that we've not seen in the past.
We expect to see continued improvement in waste receipts and an increase in project work through existing contracts recently won contracts.
And bids submitted in both segments that are waiting for awards now we expect this positive trend to continue over the next several quarters as lingering effects of the COVID-19 pandemic continued to subside.
At the same time, we are rapidly advancing several initiatives that we believe have the potential to significantly enhance our revenues and our long term backlog towards this end we have realized two important steps towards the department of energy with departmental the pursuit of the Hanford tank a remediation mission. These include the amendment of the record of decision for the direct fee.
Low activity waste facility via floor.
The approval of the waste into dental to reprocessing or Weir report, which represent opportunities to provide large scale waste treatment services at Hanford.
These announcements underscore the importance of our role in BOE strategy for the treatment of Hanford tank waste through the Vitrification program that is currently in the final construction phases and startup.
This waste estimated by <unk> to be over 8000 cubic meters annually will be more than double our current.
Our annual production rate at our plants combined in FIC and given the fixed cost nature of our business.
We have a significant positive impact from this on profitability over the next 10 years.
The outlook of the Testbed initiative, what we refer to as Tbi.
Also is known as the low level waste off site disposal project in support of the deal we have for tank disposition program.
Continues to be recognized by <unk> as a potential supplement to the vitrification mission to provide a solution for the 59 million gallons of tank waste stored at the site Tbi program, which is based on the grounding technology continues to progress and we expect to receive the next 2000 gallons.
Tank waste within the next few quarters.
Perfect maintains these capabilities today and a perfect northwest facility, which is permitted and outfitted to safely and compliant grout up to 30000 gallons per month with the ability to expand to over 1 million gallons a year, while dramatically reducing cost comparative vitrification.
We're also pursuing several additional international waste opportunities that we believe will provide sustainable revenue in the latter half of this year in both the services and treatment segments. We remain optimistic about the announcements, which could be any day now of a key procurement in Italy that will support our expansion program throughout Europe .
This announcement in addition to the near term opportunities we have.
Sylvia.
Croatia, Mexico, Canada, and the UK and Germany will provide an increased market potential that will leverage our technologies and our core competencies. In addition, we're pursuing several large waste processing opportunities at large doa sites that could include.
Waste inventories that have been backed up due to COVID-19 as well as the lack of available technologies to provide high efficiency processing.
These wastes are expected to provide sustained receipts through the next three or four quarters, providing an opportunity for from.
From $10 million to $20 million potential annual revenue.
Turning back to our financials for a moment EBITDA in Q1 of 'twenty three improved to an income of 171000 compared to a loss of one 4 million in Q1 of 2022 aside from our expectation for revenue growth, having a positive impact.
On our EBITDA going forward, we continue to focus on a reduction in our SG&A expenses and billable in direct operating cost as a result, we anticipate a meaningful improvement in profitability and cash flow going forward.
So to wrap up it's clear to US there is a solid federal budget and a significant backlog of demand that we expect to capitalize on going forward. As a result, we remain confident the balance of 2023, we will see a significant improvement over 2022 and as I mentioned earlier, we're seeing continued momentum heading into the second quarter.
We continue to invest in our capabilities in our facilities and a highly scalable infrastructure and believe that we're in a great position to take advantage of the pent up demand.
As we continue to increase revenues, we expect to benefit from the predictable cash flows of our services segment and high incremental margins within our treatment segment. As a result, we believe we are well positioned to exceed the performance of profitability. We had obtained prior to the pandemic through increased bidding activities waste treatment capability expansion and.
Improved federal budgets on that note.
I'll now turn the call over to Ben who will discuss the financial results in more detail Ben.
Thanks, Mark let me start with revenue our total revenue from continuing operations was in the first quarter was $20 1 million compared to last year's first quarter $15 9 million, that's an increase of $4 2 million or 26, 3%.
Our revenue increased by $2 1 million in each of our in each of our segments as our treatment segment began to process. The increased waste shipments from backlog that we saw trending upward in the last part of 2022.
The improved waste volume received <unk> process also led to improvement in.
The treatment segment well higher revenue in the service segment was the result of increased project revenue.
Turning to cost of sales our total cost of sales were up $17 1 million in the first quarter compared to $14 three in the prior year Thats, an increase of $2 8 million or 19, 7%.
In the premium segment are variable or incremental expenses.
At 25, 6% of revenue compared to 22 last year and Thats related to higher trends in disposal expenses, primarily at R. R.
Facility.
Our fixed facility costs were also up compared to last year due mostly to depreciation expenses at our <unk> facility as well as unusually high natural gas expenses in the Pacific Northwest.
Which impacted our northwest facility.
Our incremental expenses in our services segment were 74% compared to 77% last year due to lower project related expenses.
Our gross profit for the quarter was $3. One was 3 million excuse me compared to $1 6 million in 2022 again, both segments improved with our treatment segment, improving by 614000 in the service segment improving by 759000.
The treatment segment gross profit.
Improvement came primarily from the higher revenue.
But was offset by a little bit lower margin related to the waste mix.
Also.
Fixed facility cost.
Gross profit from the service segment was the result of both increased revenue and increase and the improvement in the profitability of our project.
Our total G&A costs for the quarter were $3 5 million or 17, 3% of revenue compared to $3 4 million or 21, 5% of revenue in the prior year.
A small increase of 64000 was primarily due to higher employee benefit expenses offset by lower audit fees consulting fees and salary.
Our net loss for the quarter was 411000 compared to last year's net loss of $1 3 million.
Our total base or basic loss per share for the quarter was <unk> <unk> compared to a loss last year.
Our adjusted EBITDA from continuing operations.
In this morning's press release was income of 171000 compared to a loss of $1 four last year.
I'll turn to the balance sheet and comparison to year end 'twenty two our cash on the balance sheet was $2 4 million compared to one nine at.
At the end of the year.
Our accounts receivable and Unbilled receivable were both up.
Combined by $2 2 million due to an increase in quarterly revenue compared to our fourth quarter of last year.
Our current liabilities were up approximately $1 nine reflecting increased costs.
<unk> with production as well as the timing of vendor payments.
And our backlog at the end of March 23 was $9 4 million, which is consistent with the $9 2 million at the end of last year, but up from the $6 1 million in March of 'twenty two.
Our total debt at quarter end was 990000, most of which is out to our P&C bank.
And finally, our cash flow activity for 2023, our cash provided from continuing operations was $1 8 million.
Our cash used by our discontinued operations was 198000.
Cash used for investing in continuing operations was 748000, most of which was capital spending.
Cash used for financing was 204000, representing our monthly payments to our credit facility at P&C of 137000, as well as payments for finance leases and other financing expenses totaling 67.
With that I'll turn the call back to the operator for questions.
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Your first question for today's coming from Howard browse at Wellington Shields.
Mark Ben Lu.
Well I hope that all of you are well and your families.
As well also.
Good morning Howard.
Howard.
Very welcome.
Well congratulations on the quarter.
Congratulations on the opportunity.
For full disclosure.
Hi acted as an investment banker when your capital raise at $6 2 million a year ago September .
And in addition, I have to disclose that members of my family owned shares on permitting.
Hi.
Questions focused basically on timelines.
Opportunities.
My understanding and I would likely confirmation of this of the vitrification plant should be operational in Q3 of 2024.
Yes.
Yes Howard.
It hasn't.
It hasn't.
Published a.
Our recent schedule that I've seen at least.
And although there has been several congressional hearings in regards to the Hanford mission. All indications are that are still on track for the expectation of.
Of getting that via flow operational in the second half of 'twenty four.
Okay.
Which basically means revenue from that in 2024.
Secondly, my understanding.
The combination of those two.
<unk> thousand gallon tanks.
Does it take place.
Basically Q4 2023.
That is correct at the current the current plan is seems to be tracking that way general status of it.
He is.
Working with the state regulators.
For what they call our D&B permit that basically allows them to pull the waste out of the tank.
And once that's done.
And then it will be able to start extracting noise or after it's approved by the states thickness or extract noise to get to us and thats expected to be towards the end of this year.
At this point.
So.
Thirdly.
We had always expected a third test of 300000 gallons.
According to the multiple documents that are out there.
Particularly the final waste incidental to reprocessing is a long title evaluation for electrified low activity waste and secondary waste at the Hanford site in that document.
Several mentioned.
Not having a 300000 gallon test.
2024.
By implication and clearly.
You didn't need a permit for a larger my understanding.
Is that sometime in.
2020 for Q3.
It will probably go to about 300000 tests.
Full scale.
Tbi.
Gallons and I know you would need any additional permits for that.
60 day.
Commentary.
What are your thoughts about that that's my understanding of 'twenty 'twenty four basically in Q3.
Yes.
Right Howard generally.
As I think I mentioned in our last call has what they call a road map.
For the tank mission.
<unk> plays a major part of that.
It's definitely true that.
It's definitely true that.
Phase II, which is the 2000 gallons, which you just talked about should be later this year was to be followed up with a phase three of 300000 gallons that phase appears to have faded away and Doa has talked about moving directly into.
And operational.
Phase or what we used to refer to as 200000 gallons.
Generally.
Moving forward the grouting campaign after.
The phase II was over so.
So view doesn't share that roadmap with us in regards to how it all fits together we're anticipating.
Because the regulatory approvals are in place and.
In all <unk> really has to do is decide to move forward with that next phase of what we used to call phase III.
Which is an operational phases that can happen.
Several months after the 2000 gallons is process.
It will also generate a report on how it work and the performance of the grouting that type of thing.
Take several months to get all of that approved.
So we'd likely be sometime in late 'twenty four we will start to see more of our operational receipt of waste for grouting at least that's what we're expecting.
Okay.
National Academy of Science, which is absolutely in favor of crowding and comment is used.
Using glad I could say.
Government about a $100 billion.
Over the period of time.
A webinar in Richland, Washington on June six to discuss Tbi.
Crowding method.
The fact that.
Okay.
Massive saving from the government any comments about that.
Yes.
They have those periodically up in.
Near Hanford, Richland, and we typically have had those and participate as appropriate on those in regards to a question and answer those kind of things will definitely be there for that.
And.
Just wrapped up their final report.
Last year I don't not sure.
Sure.
Actual meeting since then so assume that they'll talk about their final report in their findings.
And address directly.
What the intentions are for moving forward the grouting as well so.
Natural kind of a science of support for Grouting has been a big boost to the credibility of the program.
And in the analysis they have done on their 500 page report is the basis of a lot of the.
Decisions by Doa to start considering grouting as a supplement to the <unk> facility.
One comment.
My understanding is that you use.
Umatilla tribe.
I have been.
<unk> of our existence.
We're getting movement in Tbi, it's my understanding that both have one change there.
And both have written letters to the <unk>.
Various government entities in favor of moving forward with Tbi.
Can you comment on that please that is true and Thats very true Howard and we certainly appreciate their support on both fronts, but yes, the <unk> and the.
UA $5 98 Union, there, which is central to.
That area.
At both written letters either to congressional delegations of the state.
Bowie as well.
And both endorsing the grouting approach.
And the.
The support to expedite implementation so that's been.
An important part of move forward with us to get their support and it plays a big role in Boe's position as well so that is all true.
One more question and a comment.
The questions basically.
Some people have called me up and asked we've got competition.
Other entities like.
Solutions energy control systems.
And the answer is my understanding is there is no competition.
The reason I understand that.
It would take.
345 years to get the permits 234 years to build a plant.
That's one.
Secondly.
You have to cross.
Probably via rail Rheumatology drive land.
And basically you're going to cross the line with radioactive material, that's almost creating a chernobyl type incident.
Looking at Palatin, Ohio.
Basically the comments I've just made is that a correct statement.
Yes.
The bottom line is that.
There is not an existing facility in the regional area that has the capabilities to support the growing that we're talking about.
Facility that's permitted.
<unk>.
And ready to go.
Company would have to go through.
Getting a permit which will be very very difficult take quite some time get through construction.
And everything goes along with that would be a minimum of five years to seven years, and maybe longer and maybe not even able to get the permit based on the public comment requirements that we have.
To go through so it does limit our competition for a local facility.
And makes it that barrier to entry very high.
As far as shipping absolutely right Howard shipping raw waste after it comes off statistic or from the tanks.
To another facility off site, which would at least be 600 malls would have to go through the Umatilla reservation.
And.
Would not be the safest way of handling this in as opposed to treating the waste.
At a local facility, which is right outside the Hanford fence.
Basically.
So it would not it would not be an optimal way of doing things and would be.
Safety concerns as well as financial issues.
Would make that much more difficult.
It puts our facility there and the Richland and a very.
Key position.
With very difficult barrier to entry for anyone competing with us on that routing technology for the tax.
So.
My last question of understanding is when you talk about 56 million gallons of staff and 177 times.
But my understanding.
Consulting and others.
It's probably 200 million gallons that need to be treated because all the water was training funding yes.
Years ago.
And you need the water too.
Implement vitrification.
So effectively you are not.
$2 56 million gallons over a very long period between 200 million gallons roughly is that a correct statement.
That's exactly right how are we going to talk about that much for basically.
<unk> space and these tanks.
Over the years has pulled out the liquids. So you can add more in their food.
And are those tanks and save a lot of money in space.
If you extract the liquids and concentrate.
The way that you're putting in and Thats been done pretty much all the tanks.
Little more liquids and others.
But to get the liquids out you have to add a slurry.
Two the tanks the waste material to pull it out.
So you are absolutely right, whether it's a two or three or four multiplier.
To say depending on the matrix.
<unk>.
But that is definitely true that it will be definitely closer to 200 million gallons.
Of total material moved first tanks. After you consider the addition of the slower you have to put in so.
It's important concept because.
Remembering that the <unk> facility.
As.
Designed to process about 1 million gallons a year.
Consider how much total waste they've got.
We definitely is in need of a supplemental technology and capability.
To be able to treat those tanks and a reasonable amount of time.
As opposed to just a million gallons a year over 200 years. So.
That is an important point in regards to the inventory and what the the backlog or inventory waste.
At Hanford.
Well, if we guarantee it's 200 years guarantee we will all be alive by them yes.
I have known guarantees that effort.
Last comment.
By implication with Tbi and VF loss.
Really talking about revenues and earnings in 2024.
Is that a fair comment and the second point.
After that it will be my last.
Can you can you comment about that please.
Yes, I mean 24, we see a ramp up in late 'twenty four.
Between via floor waste.
You identified in that.
Rod Amendment.
And the startup of <unk>.
Tbi.
And a number of other things, we see a ramp up in 'twenty four.
And really to get Tschuggen of 25 to 24 will the second half of the year, we would definitely expect to see some increased.
Revenue based on those objectives.
There can always be delays or the other.
We also have a number of other initiatives that are in Gulf run in parallel with those that I briefly mentioned in my notes.
And so the back half of 'twenty forward, it really looks like the ramp up period with 25 being the operational period for some of these big initiatives.
Both our operational.
<unk> 25.
Based on the research report out there would that imply certain margins.
If I use those margins for what we're talking about in terms of VF law.
Fully operational and 1 million gallons and tbi.
My number comes out and I'd like to comment.
We're talking about.
Thanks, Ernie roughly $5 a share just from this project.
Yes.
There is.
A number of variable cost variables are not yet defined relative to defying EPS for these things for these initiatives.
But in general.
That would be in the range.
Would assume as well given the anticipated revenue and the cost and the margins as we.
Would anticipate them a lot of things can change in regards to rates.
And other other components.
But thats generally in the range I would agree that certainly in the range of EPS.
Our targets.
Mark and Lew Thank you congratulations.
Another time.
Alright, Thanks hour.
Your next question is coming from Brian Russo at Sidoti.
Hi, good morning.
Brian .
Hey, just wanted to clarify is the tbi ramp up whether its full production or phase III.
100000 is that at all contingent on deep floor being fully operational or are they two completely separate tracks for the OE.
So that's a really good question, Brian because.
It gets back to the <unk> roadmap and Thats about the only reason that we're the only way they are really tied to each other there are two different programs two different objectives. The waste can come from the same source the same tank.
Working from.
From different things in other words D of law is going to is hard wired by plumbing.
Vic tanks.
Tbi could get waste from those tanks or other tanks. So.
But the Roadmaps important roadmap is <unk> strategy of how it's all going to fit together our funding is going to cover everything how theyre going to close tanks.
On an optimal basis.
Between the use of VF law and the use of grouting.
So they are they are tied together.
And not so much physically necessarily.
As it is strategically.
And does he looks at it.
As the program.
The <unk>.
Tbi programming branding program will be a supplement to DF law as it is.
<unk> said on other calls.
The calls.
Said repeatedly.
Their goal is to get <unk> operating and then.
Supplement that with Tbi, which means core routing, which means one could say they want to get that facility operating first having said that if there is delays.
Additional delays if theres other.
Continued pressure on.
Getting movement grouting that would accelerate the tbi program with the <unk> program.
They are tied in some instances, but not not necessarily physically.
Okay got it and then assuming that the <unk> facility is on schedule.
For a quote unquote start.
Of operation in the second half of 2020 for how long do you think it would take to actually ramp up to full production or capacity.
That's really hard for me to say this.
<unk> two <unk> at the <unk> facility.
And.
I know they will get the first enrolling as I mentioned, a late 'twenty for the other one would anticipate to be coming right behind that one I don't know how far behind it is.
But one would anticipate.
Any of that complexity that it would take.
Six months to 12 months to be fully operational to get to the full 1 billion gallons a year, but I am speculating I don't I don't know the schedule is I don't think it's been published.
So im not sure exactly when the second melter will come online.
But the first one is as I mentioned is scheduled for.
Late 'twenty four.
<unk>.
One could assume that sometime it 25, it will be fully operational.
Okay, Great and then can you talk about some of the larger opportunities that you've discussed in the past.
The OS in mass.
In Ohio, and Kentucky, or the JRC, which I think you mentioned earlier and in Italy.
Then the soil sorting.
With the EPA I assume the award you won was with not the Navajo.
But are there are others that are close to.
Being awarded.
Yes.
<unk>.
We have a significant role in <unk> is due to be announced in a minute.
And by the Kentucky and Ohio.
Lexington.
Job orders valued at about $3 billion.
And so we are waiting here on that.
<unk>.
That's.
Due to be implemented in other words to get through transition a four month transition and to implement by the end of September so they'd have to make an award.
In may to meet this goal based on the old schedule.
The JRC, Italy job, but that's correct. We are we can hear about that we've gotten some indication from that we should hear literally any day now so we're expecting to hopefully get announcement together soon as that contract assai, which will likely require some negotiation, we'll get there but.
That would be starting this summer.
And Thats.
<unk>.
$40 million range 40 to 50.
We also have another one we haven't mentioned in Croatia that we're bidding on that.
That is in the $20 million range that.
And that would also start the summer we should hear about that in June .
And we have been in uranium mines, which is often running its transition towards mobilizing now as I mentioned, that's only about $1 million job, but once we're expecting once you get rolling that it will continue.
All indications are that the correct assumption I don't have a good revenue projection on that are like that there is not any other task orders that we've seen come.
Come out from that IV Iq.
But we are expecting some action on that through the summer.
We also have several new bids.
We're preparing right now for the Navy for some facilities for a facility demolition as well as origin decontamination as well as the submarine.
B D card and then the enterprise.
Aircraft carrier and the Nimitz is right behind that so both of those are our $1 billion jobs or in that range.
Sam Rayburn is the submarine.
Near term that should be starting in the summer we're in procurement space now on that.
Lot of really good job like Alpharma autonomous has a number of very exciting jobs coming out that were.
Coming out through our <unk>. So in other words, there's limited competition all to be awarded this summer.
Really good backlog Brian .
<unk> opportunities.
That include some.
Summer mobilization this summer that will allow us to really bolster our Q3 and Q4 numbers.
Into next year, if we if we win our share so hopefully we'll win our share hope we win more than our share.
And there's a number of other ones too small where they havent mentioned and another number of other ones that I don't know about yet that will be coming up.
As procurement the procurement process starts getting back into full swing after the <unk>.
Impacts from Covid.
Okay, and then just lastly, the $15 million of revenue from the new contracts that you noted earlier did you realize any of that revenue in the first quarter.
Very little of it Theres, probably a couple of hundred K not much.
<unk>.
The way our projects typically start out as.
This particular service project is about a month six weeks of document development typically about 100, K, a 100, K, there where youre, putting together procedures and planned in and we've got to get approval from the client on Thats, what typically happens that got underway in March.
We're starting to see the real revenue pick up now in May.
And really hit full stride in June July so.
Very limited there was a little bit of waste receipts associated with one project in March of maybe.
505, <unk> hundred K, but again everything is really kind of starting in Q2.
Okay. So is that in your $9 million of backlog, which was flat.
Versus last.
Last quarter or is it going to be incremental.
In theory.
Yes.
Within the.
The backlog number I gave you.
But but yes.
Well, let me explain that.
This particular project, we're talking about the shipments kind of come and get treated fairly quickly.
So.
There is very little of what's left of the one project in it so I would probably say.
A small part of it.
Okay, great understood. Thank you very much.
Thank you Brian .
Your next question for today is coming from Ross Taylor.
<unk> investment partners.
Thank you gentlemen, and congratulations on real nice quarter and also.
Amazing.
Outlook I wanted to ask a couple of questions first you talked a little bit about Europe , and you mentioned, Germany in your prepared remarks can you talk about the German opportunity it would seem that given the nuclear organization program it might be something that could.
Could be a fairly lucrative opportunity on a number of them.
Yes, Germany has been really good for us for US we have been receiving waste from a commercial.
Over there for about 18 months now.
That makes sense.
Sources for medical industry, and all kinds of manufacturing industries.
Receiving.
Shipment about every three or four months.
Thats.
We're going to continue on a long term contract with them for that to continue.
The thing with Germany as they're building.
National storage facility.
And to support.
All the countries.
So it's not it's not a repository.
Lance or anything like that it's a storage facility is still under construction.
To get waste in there has to meet certain.
Characteristics as to be treated.
Number of cases, thats been great for us folks were shipping us as ways to treat it. So they can put it in that facility. Once it gets it gets open which is in next year or two.
But in addition to that what you're describing is the decommissioning of the reactors.
There is significant opportunity to support that and that.
There is a couple of brokers.
Our companies have been hired by the power utilities are the commercial activities.
Managers reactors that were working with.
To support large scale treatment initiatives.
And those are just unfolding, we're just starting to work with the regulators.
To get the paperwork in place to provide treatment services.
Once we get.
If we if we do get our facility up and operating in the UK that I've mentioned before in press releases.
That would support the German markets in a big way.
But even before that we anticipate.
Being able to start trading in the U S.
And about 10 to 12 months.
These other arrangements.
Moving forward, so big big opportunities in Germany.
And Ah.
Very limited capacity very limited competition.
Very few alternatives for those folks as they start to decommissioning process.
You actually just answered my next question, which was let's say European component environment look like.
Can you also you mentioned the Navy can you talk about and the fact that they are moving ahead with early steps on the NIM. That's can you talk about.
How you see this playing out.
In the past about there being about a limited number of firms that can do what you do.
You have submarines you have multiple carriers I would believe are these going to be multiple year projects and programs for each ship.
What's that look like and when do you need to see.
More concrete steps out of the Navy.
Yes.
In the enterprise, which is obviously at famous.
Aircraft carrier has eight reactors on it.
It's kind of the model, we're assuming it's kind of the model.
Defined as is through their environmental impact statement.
They see a five year program.
Two.
Decommission.
That carrier.
What they're basically asking you to do is to decontaminate it removes the waste and radiological contamination off the ship and then scrap it.
And and.
And all of that has to be done in a five year period, it's a fixed price job.
High risk.
And they are asking pretty much.
The bidders to prioritize it in other words, you have to take the ship off their site, which is currently.
And in Norfolk Naval shipyard.
And one of those covenants.
Slips there.
Your facility.
And do all that work.
And there's very few places that you'd do that there's only a few ship breakers in the country.
There's only a few.
Firms that would take this kind of risk and there's only a few firms that have these capabilities. So the.
The way that things are going in the enterprise and I'm speculating now Ross.
There'll probably be three bidders.
Three big teams.
We're working with.
Several of those right now too.
To define our developed teaming arrangements with them on the enterprise.
<unk> is due out here in the summer and draft.
Supposed to be final in Q4 for award.
The summer of 2004 so.
And to really get Rolling 25, so the NIM is right behind it the same railroad as I mentioned is this summer which is much much smaller.
And.
It.
There is.
About a dozen other.
Nuclear shifts.
<unk>.
In waiting so these old ships are taking up as I mentioned very expensive of.
Slips and maintenance and security requirements.
Not providing any value to the navy. So they are really starting to make a push to get them out of their hair.
That expense out of the way so it's an exciting program.
Four.
The business we're in.
Okay, and you mentioned that you are working with several teams and you said, they're basically to meet player. So I assume several means more than one and less than four or is there something youre not working with in this process.
No we've met with or casually talk to all of that I think all the companies are.
Our dancing in this.
Each one of those.
Each one of those bids that I've mentioned three bids will probably include three or four companies.
So.
It's pretty close to the same folks that are doing decommissioning and the type of work we're talking about now.
And that we're in so it's the same group of folks.
They're getting their feet wet on this again as I mentioned, because we are doing the USS Mckee.
Which is really like.
It's one of the three shifts that have been done recently in the last five years.
A really good qualification our clients very happy we're right on schedule.
It's quite a complicated project.
It puts us in a good position to really help the team as we grow we are not priming will be.
Our primary sub.
The Big Boys.
Or.
That's a great place to be on this and this goes down to these efforts.
Quick D S law and the like would you expect a new contract for that or do you see that operating.
Under contracts you currently have and just basically being fit into those contracts.
Yes, Ross, we do have existing contracts two that can be used one with bowie out of Cincinnati, which is a national contract and <unk> contract, which covers most of this kind of waste.
That can be used or we have one with the incumbent for the ITC contracted one that just got awarded although we're not unfortunately with.
And the one where the incumbent on worthy incumbent on would likely be no weighted over it has been in the past we'd anticipate too.
And we.
We just roll it right over to them.
Being able to support that.
So I would anticipate that would be the case that our contract would be Nevada.
Okay, and so in essence, it's not the situation we will we'll be looking for a press release that you've won a major contract, but what we'll see is.
Change in revenues and profitability and things of that nature cash flow all of that comes with that.
That's correct and I'm glad you mentioned that because that's exactly right, we will likely receive a task order.
RFP.
That will be.
Bert.
Just hand, it over to us and under that contract.
We put a proposal together for.
A certain amount of units.
Depending on the characteristics of the ways you are talking about.
And they would make the award and we have very minimal visibility.
But pretty much be as you said, we'd see that increase.
Okay, and then I just have two.
You ask questions both should be reasonably quick how closer are you to generating meaningful positive EBITDA you kicked up a real nice quarter here it sounds like youre going to start to kick up some meaningfully.
More powerful quarters as the year progresses more profitable quarters, how far away can we see positives are meaningful EBITDA next quarter the quarter. We're currently in Q2.
Yes.
Obviously halfway through Q2 right now it looks like where we're sitting at this point in time, we're expecting Q2 to be.
Profitable with a positive income.
And.
As I said take advantage of the trajectory we've been on from Q1. So yes. This quarter, we are expecting to be.
Sure.
To be to use your phrase meaningful profitability.
Profitability.
Congratulations on that that's a real big positive step and my last question is given the uniqueness of this company given the role you play in these opportunities I mean quite honestly right now I would think that your company to a strategic player would be thought was far more.
More than $9 and change and it's trading at in the marketplace have you been approached by strategics.
The idea is to come.
As stated that's interested in being bought.
But have you been approached by them at this stage.
Inquiring as to whether this is a time and while it might take to get you to sell the company now.
Yes Ross.
Get that question frequently we pretty much have to say we can't comment on.
Folks approaching us.
As far as the acquisition goes but the standard answer is we're always for sale.
I do think that.
Folks have watched us for quite some time through the Covid period.
To see if we can get profitable again.
And to get over it and I think now that we're demonstrating that.
There'll be more interest, but I can't comment on.
And he was talking to us now.
What I will say is the fact that there isn't the answer if you could give that that's now so the fact that youre not saying, though will tell me that yes.
Well.
Well. Thank you very much you guys are doing a real knockout job I think this is a story that honestly advanced deals too good to be true, but you've worked hard at it so congratulations.
Thanks Ross.
Your next question for today is coming from Anthony harmful a private investor.
Hey, guys good morning.
Ben Hope you both are well and congratulations on the quarter.
Thanks Anthony.
So.
Can you please give us an update on the status.
Treatment facility in the UK you are partnering with Westinghouse on.
Yeah.
Yes, Anthony I know, it's kind of complicated.
What it comes down to is we put that agreement together with with Westinghouse.
And really spent a lot of time on it.
The way it's written it.
<unk>.
Primarily contingent on award of the JRC contract.
That was important to us so we had a base contract base revenue.
<unk> margin that would generally be generated to cover our cost for.
For that facility.
And so the.
The arrangement we have right now is we have a term sheet with.
Westinghouse.
Initial designs developed that we're working with them today on designs by regularly.
So modifications of different types.
Of technologies, we will be deploying in the facility.
And.
We are waiting here on the JRC bid so if we win the JRC bid.
Sit down with Westinghouse again.
Since.
A couple of years is gone buys as we did agreement make sure it's all still feasible.
And the numbers all work, well, which we expect them to.
And then make a decision to move forward with capital investment and then the clock starts and the clock is basically.
Westinghouse is saying that.
We should be able to get through the construction.
And the permitting phase.
In the 18 months.
24 months so.
Then will be should be fully operational.
Over there in the UK and again. This again this is at Springfield sites, just north of <unk>.
Manchester in the UK.
So you just answered one of my questions, so permitting and construction would take 18 to 24 months.
That one in.
In until you receive confirmation of the JRC contract Award show what is the timing of the JRC contract Award announcements.
Any minute.
Any minute, so yes, theres been informal.
Discussions with them.
Our.
Planning to make an award at anytime it towards that repeatedly to some questions.
That.
We will send to the winter.
And.
Hopefully that's us and Watson.
The winner will have some time to.
This question and then they'll make an announcement that's my understanding of the process.
And what might be the size of that contract.
It's in the $40 million range for the initial.
Actually closer to 45.
The initial scope of work.
The RFP.
RFP.
As for <unk> or the project is for seven years within the contract.
They've requested in the RFP that that'd be extended for 10 years to.
To provide.
Capacity for other waste.
Backlog and inventory they've got on site. So it would it would likely grow from that.
Really not start generating revenue.
For us.
For about a year and it would be about $1 million a year for the first year. So.
<unk>.
And then way starts to ship.
About 18 months.
So the 40 to 45 days.
That does that.
<unk>.
If you.
When that award would that $40 to 45 slow to you and Westinghouse entirely or would the amount of revenues that would flow to you and Westinghouse be some portion of that $40 to $45 million over time.
And is this is this is still in procurement space, So I'm getting a little uncomfortable talking too much about the bid itself.
So.
Probably should withhold answering that question.
Till announcements made.
And then I can explain it to you for selected for that contract but.
Anytime you're in a procurement spot certainly don't want to.
Assume that.
We don't have competitors listening in that type of thing.
Okay.
You comment on what would likely be the production capacity of the CK plant.
You go ahead and build it.
Yeah.
If there is a lot of variables in regards to that.
<unk> Anthony relative to the size of the final design.
Backlog, all those types of things, but I would anticipate.
Our portion of revenue again, it would be.
A partnership with Westinghouse.
Between $10 million to $20 million at full capacity.
Annually.
And what about though just in terms of the amount of waste that this facility could treat.
Yes, I couldn't answer that at this point because it all depends on on the types of streams of receiving and whether it's a combustible way stream of sludge or or some other process waste.
It would be a complete variety of different types of waste.
It basically is going to be and this is in our press release, it's going to be the same technology that we have at our Richmond facility.
We will be deploying at this facility so it will be.
Two.
Incinerators.
And.
But there'll be.
Obviously brand new the latest technologies of an upgrade from what we've got now and we will make sure that we've already made some engineering modifications to those to be super efficient.
And.
A lot less expensive to operate.
So.
We're excited about what this but this is always going to look like.
And it sounds like.
Designs are still a work in process that you. Both if you do win this award haven't settled on.
With the final design might look like do you have.
Our sense at this point.
What.
Would likely cost to build this facility if you get the business that you're expecting.
Yes, I really can't get into that either at this point.
It would be such a.
There's just too many variables at this point to define.
Because a lot of it depends on the Westinghouse component of it we're providing the technology for treatment they.
They are providing a facility in the permit.
And.
Thats whats changing a lot and whether we use an old facility are newfield put a new facility in whether they add other.
Capacity or or <unk>.
Capability set facility those questions haven't been all worked out yet.
Okay, Alright, well, then I'll stop there.
And then just one other question related to.
One is the <unk>.
Data points that you did provide in this call which was your backlog.
Believe the number was $9 4 million how much of that is treatment versus services.
Hi, Anthony I'll clarify the $9 four is all treatment.
It's our waste backlog our service backlog.
Well at the quarter it sat at $25 3 million, but that's because we had about $5 million of these new awards, we talked about that were on site.
Our now sign so.
To this date.
Proximately 30.
In services.
Okay, Alright, thank you gentlemen, great job keep up the good work.
Okay.
Your next question is coming from Aaron Warwick at breakout investors.
Hey, guys. Thanks for taking the call.
Aaron I think pretty much pretty much everything has been covered just add two quick things I wanted to confirm with you.
First of all as it relates to the DS facility.
It's my understanding.
See if this is correct that.
The Doa can't really continue operating that facility without you guys taking care of the secondary rates because they have no ability to store or take care of it themselves on site is that accurate.
Oh.
That's a pretty.
Definitive.
Statement.
Right now I would say there is no other.
Treatment capacity available.
For the secondary waves coming off the floor, which is why the rod we've written.
The way it was the amendment to the Rod.
So there is very very limited capacity to treat that waste that would come off I don't know, what what else what else they could possibly do with it or they would have defined it.
And.
That.
Broad amendment.
So I think Thats a true statement.
Yes, very diplomatic way for you to say what I said.
Yeah.
As it relates to Tbi the only other thing I wanted to ask about its my understanding that there is about five to 600000 gallons.
Waste that could be treated using tbi that wood.
Obviously, there has to be the permitting and all of that but let's say that that all came due tomorrow.
They would be able to send that to you in other words. Once you complete this test of the 2000 gallons.
Successfully that.
It's just a matter of getting that permitting going et cetera. There is waste ready to be sent to you. If they chose to go that route is that accurate.
That is completely accurate.
They have what they call the <unk> CR and <unk> is pulling waste out of those tanks now stripping the cesium.
Hi.
In iodine off.
That waste so thats.
Considered low level.
And.
Our strong Seo actresses even strontium.
And.
That waste is being accumulated in the <unk>.
Separate tank.
<unk> goal is to have 800000 gallons pulled out of those out of the out of the big tanks into that.
The temporary tank.
By the end of this year.
And what we've met with several times.
Is trying to.
Convinced them that hey.
<unk> hundred thousand gallons don't start stop pulling that way said I think waiting for Dia floor. Why don't you just go ahead and grab that.
<unk> in that tank and keep the disk or moving.
And not wait for Dia flawed.
Iteration that hasnt.
In front of them.
I don't know if they'll consider that I'm not sure again, it gets back to the roadmap.
But that ways could be grounded.
Tomorrow.
And.
It could be pulled off of that.
Temporary Tang.
Yeah and to your point there was testimony by I quite in the Senate in April that indicated that they are going to be moving forward with tbi.
In addition to the <unk> facility, so that seems like a possibility.
Ah.
I guess also then.
And final thing from me.
As it relates to <unk>.
Tbi.
Would be it seems like all of the stakeholders for the first time. Since this was first proposed I think 2016.
Seem to be on the same page now, including I know there was talk of the tribes, but also the labor union seem to be.
Supportive of this I think perhaps realizing that <unk> is going to move forward in that tbi is not a competitor, but rather a supplement is that fair statement to say that <unk> seem to have changed in that direction.
It's a fair statement and it's been result of a lot of work for the folks who have been supporting PPI, particularly us and a few other companies.
To support us.
<unk>.
<unk>.
But that is true and I think.
I think it's coming to fruition that folks have realized the value of the grouting. It provides for closing some tanks.
And.
How much sense it makes.
It's been a long time getting a point across.
And we do want to emphasize that all as a supplement via floor.
Certainly respect vehicle.
Investment and that capability and the reason they're doing it.
And hopefully I think if you look at the numbers Erin hopefully deal flow August going full speed ahead, and Tbi does in parallel and then.
Certainly as a big opportunity for us.
Okay. Thank you guys. Appreciate it good luck thanks Darren.
Your next question is coming from Avi Fisher of long cast advisers.
Hi, Mark Thanks for taking all these questions just one I apologize if it's been asked but I was curious about.
Just overall availability of labor.
And what Youre seeing in the sort of industrial labor markets on your end. Thank you.
Well I'll answer your question Labor has been a risk for US I mentioned I think it was the fourth quarter call.
That.
We really I think we've described as a headwind for us.
We had.
A pretty big exited of labor.
December .
The <unk> site at Hanford.
Big hiring spree, they had they had a big.
Early retirement initiative.
<unk>.
Sure.
We lost a lot of people and that impacted our Q4 numbers, we were able to hire quickly through the month of December into January it takes about a month for someone off the street to become trained.
The technician level.
And.
So we had an impact too.
January February productivity.
Fantastic.
People are rolling we do have a few job openings now but.
The surge of Av.
Folks leaving.
Has definitely subsided.
So just a one year or two there kind of an impact so to answer your.
It looks like the labor headwinds are behind us.
And we've been able to project.
Q2, with very limited labor impact if any.
And that's one reason why we were able to get healthy.
Getting that getting that problem behind us.
And we don't see it happening any more it could at hand for particularly but right now it looks like we've got it behind us and impacts are limited.
Thank you.
Thank you Ali.
Your next question for today is coming from Chuck Dickerson, a private investor.
Good morning, just one question.
On <unk>.
Supply for doing the grouting of raw materials.
If you could do 30000, a month scaling up to 1 million gallons a.
A year and hopefully maybe you get something.
Even before the GFR, but either way you obviously have a timeline of your own in a road map of your own.
Or do you stand on that with regard to assuring the raw material supply for all this grouting youre going to need to do that is going to be a heck of a lot of material and can you speak to whether you source that supply from multiple sources and can you source it domestically as well.
Yes, we've had problems in.
In the past.
Again, I think it was the fourth quarter, we had our supplier.
<unk> had some issues getting us where we need it because we do grabbing all the time and now so it's not it's not just for Tbi.
And but <unk> certainly as you mentioned is.
The significant increase in volume we do have we do have other sources, we could get from if there was a shortage.
It's not it's basically a recipe.
Like of cement.
Based on some very defined.
Specific.
Characteristics.
And chemistry.
And.
So we don't see that as a problem.
There's multiple sources that we could get this from.
And.
We don't see that as.
Our primary risk at this point in time.
Okay. Thank you.
Your next.
For today's coming from Steven Fine So fine LLC.
Good day, congratulations on a nice quarter.
Got a couple of questions first question.
Is it not true in the <unk>.
The rod that came out in January that they accepted that they wanted everything shipped by truck ship short term and then in addition.
Like sections like on the treatment of the Cedar mitral.
Really ensure your.
Your position versus competition.
Yes.
Important point Steve.
The nuance with any other type of waste treatment that we do and anybody does.
Commercially and Hanford is the <unk> project requires that the waste that comes off a secondary waste goes back to the Hanford site for disposal and the local landfill that they've got which is a very large investment brand new landfill.
To support these initiatives so.
Because of that it would not make ever makes sense to ship waste off site.
Or excuse me out of the region.
For treatment and ship it back to Hanford for disposals that it does provide an additional barrier of entry for other companies in support of the <unk> program.
To have anything but a low local.
Opportunity for waste treatment.
And my second question is thank you. My second question is when you when you get the business relating.
Relating to the Tbi.
And then it's.
Simultaneously.
Getting secondary ways from deep floor.
Have you how are you have you.
Considered handling both of these or would that represent.
Extraordinary issues for you or is this something that you know.
You could do so in other words you would be.
Creating directly but also treating secondary waste.
Yes no.
We wouldnt need to make some capital improvements.
Get full capacity at both those facilities Tbi grouting and therefore, we do expect as I mentioned before the ramp up through 2025, So we don't see that being a critical path for us.
We can handle a significant amount of routing now and a significant amount of <unk> now with the capacity that we've got.
So I don't see that happening until our needing that capacity until late 25 at the earliest.
And we would worry about those capital group incentive all in I think to get full capacity for all the waste streams.
It wouldn't be more than about $5 million to $10 million of capital improvement alright.
Alright.
We're talking about some of the European stuff beyond this plant Youre talking in England, Mike When you are talking about Germany, So where where is that going to be done that can be done in Germany as it can be done here.
For example, if you did work in Germany.
Or would that be done.
The way, we're getting we're getting waste from Germany now waste, we're getting now from Germany. It goes to perfect northwest.
And.
The primary.
Think about there is about 10% that goes to our Oak Ridge facility DSI as well, but primarily.
The technology Thats needed for those.
Folks over there is the incinerator.
And we were voluntary reduce stabilize the waste.
And ship it back to them.
So we get a 7% to 8% volume reduction.
And.
Is it reduces their.
Their inventory storage inventory footprint and stabilizes as well so.
We anticipate that to continue.
Using episodes.
So I did catch when I was looking at the financials that particularly on the treatment.
Your margins were a little down.
But it definitely improves.
Significant improvement do you do you guys think as time goes on that youll be able to.
Pass on.
The extra cost or will that just be a function of.
Larger volume.
Sure.
Hi, Steve.
Yes, we expect improvement there was a mix.
Of waste component to the lower margin on the treatment side.
Our EUR facility does a little bit lower margin than our normal <unk> waste treatment.
So as we see the.
Waste treatment volumes at our traditional three facilities ramp up we expect to see that.
<unk> trend on the margins.
Okay.
Just want to make a one one last statement.
To be brief for a change.
I do applaud what you are doing I thought when you launched the contract and you came out and made the state and how.
They're going to need you and you'll be an integral part of that.
And that that is such a reality and it did it would be nice if youre, one, but you're you're needed.
Out there.
And I think the most important thing that at least I take away from this is the diversification that.
You're you're seeking and thats happening.
I envision a company here that's going to be.
The company like the 150 to 100 million plus company without hampered and then if and when hampered happens that will just be icing on the cake.
I think it's just a wonderful story I applaud you all I applaud the quarter.
Just congratulations alright.
Alright, I appreciate your support.
We have reached the end of the question and answer session and I will now turn the call over to management for any closing remarks.
Alright, I would like to thank everyone for participating on our first quarter conference call. We remain extremely confident in the outlook for the business.
We appreciate that.
The continued support of our shareholders and we look forward to providing further updates.
As developments unfold through Q2's, thank you very much.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.