Q3 2024 Perma-Fix Environmental Services Inc Earnings Call
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Speaker Change: Good morning and welcome to the Permafix Fiscal Third Quarter 2024 Earnings Conference Call. At this time all participants are in a listen-only mode and we will open for questions following the presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Mr David Waldman of Crescendo Communications. David, the floor is yours.
David Waldman: Thank you, Jenny. Good morning everyone and welcome to Permafix Environmental Services third quarter 2024 conference call. On the call with us this morning are Mark Duff, President and CEO, Dr. Lou Senefani, Executive Vice President of Strategic Initiatives,
and Ben Naccarato, Chief Financial Officer.
David Waldman: The company issued a press release this morning containing third quarter 2024 financial results.
Speaker Change: which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020. I'd also like to remind everyone that certain statements contained within this conference call may be deemed forward-looking statements within the meaning of the Private 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.
Speaker Change: 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 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.
Speaker Change: In addition, today's discussion will include references to non-GAP measures, permafixed beliefs, and such information provides an additional measurement consistent historical comparison of its performance. A reconciliation of the non-GAP measures to the most directly comparable GAP measures is available in today's news release on our website.
Speaker Change: I'd now like to turn the call over to Mark Duff. Please go ahead, Mark.
Mark Duff: Okay, thank you David and good morning everyone. This quarter has been both challenging and rewarding for Permafix as we continue navigating industry headwinds and seizing transformative opportunities.
Mark Duff: For Q3, we reported revenue of $16.8 million, reflecting a continued market challenge. In response to these challenges, we reduced expenses and streamlined operations outside of R&D to improve our future profitability. Additionally, performance within our services segment and treatment plants
Mark Duff: showed steady improvement in the latter part of the quarter, which is expected to continue into Q4, giving us a renewed confidence as we move forward.
Similar to last quarter, we faced operational disruptions.
particularly at our Permafix of Florida facility.
Mark Duff: hurricane-related outages impacted productivity along with delays in repairing our thermal treatment system which caused six weeks of downtime in Q3. These repairs are now complete and our team is working through the backlog that accumulated during this period.
Mark Duff: A significant milestone this quarter was the launch of our first commercial Permafast system for PFAS treatment at our Florida facility.
Mark Duff: This achievement is the culmination of extensive R&D investments and months of focused work from a dedicated team of scientists, engineers, and key personnel who redirected their efforts
Mark Duff: to this priority project. We assembled a team of 15 people who took this technology from pilot scale to commercially, fully commercial unit within six months. A monumental feat for a firm of our size.
Mark Duff: This accomplishment has had a short-term impact on other areas of our business, including sales and engineering, but it also allows us to reallocate some of these resources back to core programs as we move forward.
Mark Duff: The Permafast system is capable of treating approximately 650 gallons of PFAS liquids including AFFF in about an eight-hour cycle. For now cycles are limited to two to three per week as we continue ongoing analytical campaigns to test variables and optimize its performance.
Mark Duff: These cycles will increase as we complete the testing programs. Our current inventory backlog includes about 6,000 gallons of PFAS material, with commitments for an additional 20,000 gallons in the coming months.
Mark Duff: We're also actively pursuing partnerships that we expect will bolster our sales and further enhance our capacity to process PFAS-contaminated waste.
Mark Duff: We have invested heavily in PFAS technology deployment both in capital and in our team's time.
Mark Duff: with about $930,000 allocated this quarter and a total of $1.6 million year-to-date. We anticipate a similar level of investment over the next three quarters as we push forward our strategy to benefit the PFAS market and broaden our offerings with new technologies and systems.
Mark Duff: Our next steps in the Permafast program involve engineering optimizations to improve margins and efficiency while we continue through Q4 and into 2025.
Mark Duff: The data we gather will also guide the development of a second generation unit planned for deployment in the latter part of 2025.
Mark Duff: This continuous improvement by our engineering team will also support our goals to continue to develop a broader application to include granulated activated carbon, also known as GAC, biosolids, and soils.
Mark Duff: This level of functionality could set us apart as a leader in PFAS treatment and destruction in an area of increased importance due to the regulatory pressures and environmental needs in the market.
including Canada, Mexico, and Germany.
beginning in Q4 and running through Q2 of next year.
Mark Duff: These shipments are expected to generate nearly $7 million in revenue over this period, marking a strong international revenue stream for Permafix.
Mark Duff: Moreover, our discussions for a European facility that will deploy the thermal technology from our Northwest facility into England are progressing well.
Mark Duff: This type of expansion would increase our value to clients abroad and grow our total addressable market. Our 50 million euro contract with the Joint Research Council in Ispra, Italy is also progressing steadily with permitting and document preparation underway to support remediation activities expected to start in late 2025 or early 2026.
Mark Duff: Other significant developments this quarter was our selection as an integrated subcontractor by a U.S. government agency for a 10-year, $3 billion project. This award reflects the strategic direction we have pursued for years and places us within a team known for its excellence in the nuclear services industry.
Mark Duff: As defined in the request for proposal, the contract is structured as an end-state contract, which is common for large-scale procurements where a comprehensive management and technical approach is outlined in the initial proposal.
Mark Duff: Once awarded, the government will provide non-competitive task order requests which require detailed cost estimates and technical proposals as work progresses.
Mark Duff: We recognize our investors are eager for more details on this award, but as this contract is in a mandatory protest period, we're limited in what we can disclose until a final notice of receipt is issued for transition.
Mark Duff: Once we are clear to begin, we'll enter a four-month transition phase to respond to task order requests for the broader long-term scope. This will be followed by a notice to proceed to initiate operations and project work and assume contract responsibilities from the incumbent.
Mark Duff: We're also optimistic that additional opportunities to work alongside the awardee of the ITDC contract at Hanford, particularly in supporting their very ambitious small business goals, is forthcoming. We anticipate these opportunities to be more clearly defined as we enter Q1.
Mark Duff: Our work at Hanford also continues to advance as we prepare for the Direct Feed Low Activity Waste, or DF, law program, which is anticipated to start receiving tank waste for high commissioning activities in the summer of 2025.
Mark Duff: The DOE recently adjusted their coal commissioning timeline by approximately four months, but it continues to reaffirm that hot commissioning, which includes testing with actual tank waste, is on track.
Mark Duff: Our Permafrost Northwest Facility is positioned to receive DF Law effluent based on anticipated volumes, and we're beginning to design the expansion programs that will support the full-scale operations of up to 8,000 cubic meters annually, a volume outlined in DOE's January 23 Record of Decision.
Mark Duff: This expanded capacity is expected to come online gradually as the DFLO plant ramps to full capacity in the coming years.
Mark Duff: Our Permafix Northwest site, uniquely located near Hanford, not only supports efficient waste processing, but also mitigates environmental and logistical risks by reducing the need to transport to out-of-state disposal and treatment.
Looking further ahead, we may...
Mark Duff: highly engaged in pursuing new government and commercial opportunities. While the Department of Energy announced award of the OSMS procurement to a competitor of ours last Friday, this project offers significant opportunity for innovative waste treatment alternatives over the next several years, particularly for small businesses such as Permafix.
Additionally...
Mark Duff: We are targeting several new procurements expected over the next two quarters that could potentially bring in over 100 million dollars in annual revenues
to be awarded in 2025.
Mark Duff: The USS Enterprise procurement is a key focus with the proposals due in early January and we're confident in the strength of our team's ability.
a proposal for this competitive and innovative contract.
Mark Duff: Beyond that, we're pursuing projects at Y-12, Lawrence Livermore National Laboratory, and several new commercial client opportunities with projected awards and Q2 of next year.
Mark Duff: While our nuclear services backlog appears lighter in Q1, we believe this is temporary, supported by a robust pipeline of significant opportunities to fuel growth through the first half of 2025 and beyond.
To summarize...
Mark Duff: While we've faced market softness, we're seeing the trends subside as recovery begins to take hold. We're focused on strengthening revenue, generation, improving productivity at our plants, as evidenced by our increased waste receipts and operational upgrades.
Mark Duff: With the successful deployment of our PFAS technology and our role in a new large contract award, we've established a strong foundation for sustained growth and stability through the second half of 2025.
Mark Duff: Our strategic investments and commitment to expand both domestically and internationally are creating a clear path forward, positioning us to deliver long-term value for our investors. On that note, I'll now turn it over to Ben who will discuss the financial results in more detail.
Ben: Thank you, Mark. Let's start with revenue. Our total revenue from continuing operations was $16.8 million in the third quarter compared to last year's third quarter of $21.9 million, a decrease of $5.1 million or 23.2 percent.
Ben: revenue decreased in both our segments as the treatment segment was down 1.7 million and the services segment was down 3.4 million. In treatment the biggest impact to our revenue was lower volume however we also saw a lower average price.
Ben: impact from on volume was from both reduced waste receipts primarily from our government customers and also from production disruptions at our plant due to weather and equipment failure.
Ben: Lower average price can generally be attributed to waste mix. However, we did see encouraging price increases in both our industrial waste streams and our true waste or transuranic waste streams.
Ben: Our lower overall average price was down mostly from waste mix, but also was impacted by the equipment breakdowns, which pushed processing towards lower-priced waste streams.
Ben: In the services segment, the decrease is due primarily to the significant completion of two large projects, which were replaced by smaller projects in 2024.
Ben: On the gross profit side, per quarter was $1.3 million compared to $4.5 million in Q3 of 2023.
Ben: Gross profit in the treatment segment dropped by 1.1 million as the lower revenue negatively impacted gross profit and we did see higher fixed costs of about $285,000 mostly from higher payroll.
Ben: Our gross profit was positively impacted by approximately 369,000 processing of more profitable waste which had higher incremental margins.
Ben: In our service segment, gross profit was down $2.1 million. Lower revenue again impacted the gross profit by $1.2 million, and lower margin project work resulted in a negative impact of about a million.
and this was offset by lower fixed costs of $170,000.
Ben: According to SG&A, our costs for the quarter were $3.6 million compared to $3.9 million in 2023.
That's a decrease of about 301,000.
Ben: Reductions in legal fees, trade show expenses, board expenses, incentives and health costs, health insurance costs, offset some increases in wages for sales people and commissions related to our international operations.
Ben: Our net loss from continuing operations was $8.8 million compared to $246,000 income last year.
Ben: And, of course, this includes a non-cash tax expense of approximately $6.4 million as the company provides a full valuation allowance against our U.S. deferred tax asset.
Ben: Our net loss for the quarter was $9 million compared to last year's net income of $341,000. Again, this includes the tax expense of approximately $6.4 million related to the valuation allowance.
Ben: And our total basic loss per share was approximately $0.57 compared to basic income per share last year of $0.03.
Ben: EBITDA from continuing operations for the quarter was a negative 2.1 million compared to prior year income of 1.2 million.
Ben: Turning to the balance sheet in comparison to 2023 year-end, our cash on the balance sheet is at $10.6 million compared to $7.5 million at year-end. Our accounts receivable and unbilled receivables were down $2.1 million primarily from the lower revenue.
Ben: Intangibles and other assets were down 3.3 million primarily due to the impact of the valuation allowance which reduced our net deferred tax asset by 4.3 million.
Ben: and this was offset by increases to our finite risk sinking fund and an increase to our permits.
Ben: Our current liabilities were down approximately $3.3 million, reflecting lower operating costs, timing of vendor payments, and other liabilities.
Unearned revenue was down approximately 1.4 million compared to year-end.
Ben: At September 30th, our treatment backlog was $7.8 million, compared to $8.7 million at the end of December 2023, plus an additional $2 million for a direct ship waste stream that we had at the time.
are dead.
Ben: at quarter end. Total debt at quarter end was approximately 2.6 million. This excludes debt issuance costs and is mostly owed to our lender, PNC Bank.
Ben: Next and finally, I will summarize cash flow for 2024. Our cash used by continuing operations was $11 million.
Cash used by our discontinued operations, $468,000.
Ben: Cash used for investing of our continuing operations consisted of approximately $2.2 million for capital spending and $577,000 for additions to our permit and other intangible assets.
Our cash for investing in Discontinued Ops was $49,000.
Ben: The net proceeds from the equity raise of 18.5 million less monthly payments to the term and capital loans
Ben: of $667,000, payments to related finance, leases, and other debt of $287,000, and receipts from options and warrant exercises of approximately $264,000.
Speaker Change: With that, operator, I'll turn the call over to the questions.
Speaker Change: Thank you very much. We will now be conducting our question and answer session. If you would like to ask a question please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For any participants that are using speaker equipment it might be necessary to pick up your handset before you press the keys.
Please wait a moment whilst we poll for questions.
Speaker Change: Thank you. Your first question is coming from Howard Brouse of Wellington Shields. Howard, your line is live.
So, specifically addressing those opportunities, it's...
Speaker Change: a myriad of them, PFAS, the effluent starting and I guess it's no later than August 1st of 2025 from the first VIT plant
West Valley Margins, USS Enterprise
Speaker Change: Grouting. Can you discuss all of those in terms of, one, opportunities in terms of revenue and margin? I'm not looking for obviously any EPS guide, but revenue or margins would be helpful. And also the opportunity in the ITDC contract.
Speaker Change: Okay, there's a lot in there, Howard. Let me see if I can get all that. So let me know if I leave something out. Okay, so let's bring up PFAS. You know, PFAS is, as we've talked in the past,
Speaker Change: is still developing, but it's generating revenue now. And, you know, we've been very cautious about.
Speaker Change: for taking too much because we're still in a learning stage for the operations. We have projected...
Speaker Change: Revenues at 25 to be in the 3 to 5 million range. I feel that's pretty conservative
It also assumes that we'll have another unit.
Speaker Change: In the latter half of the year of some type and working through that right now what that's going to look like where it's going to Be deployed
Speaker Change: how big it's going to be, how much it's going to be able to take.
Speaker Change: We are encouraged by sales Again, now that we have a unit that we can actually treat waste in sales takes a different spin as to Make a commitment on our on our facility. It's not operational now. We're operational
Speaker Change: We're in a better negotiating position with our partners and getting lots of attention in the industry. So that's going to continue to unfold. I hope we can do better than that, but that's pretty realistic for the first 12 months as we focus on optimization.
Speaker Change: on the effluent. Again, we don't have a lot of information other than the DOE continues to reaffirm the schedule, and that schedule has been that they begin hot commissioning this summer.
Speaker Change: They haven't given exact dates, but we anticipate it to be before August. Hot commissioning, they recently defined as very specifically receiving tank waste. So they have...
Speaker Change: About 800,000 gallons they pumped from the tanks that had been pre-treated ready for DF law and so they've got the backlog there and they're ready to go as soon as coal commissioning is over which is again anticipated to be late spring.
Speaker Change: and in hot commissioning, they'll start treating it. Once they introduce the actual tank waste into DFLaw, they'll start generating effluent.
Speaker Change: and we'll begin to receive waste sometime after that. It's very difficult to define how much we're going to get of each type of waste stream.
Speaker Change: six to ten different waste streams that we would anticipate getting from this but we'd definitely see several million dollars in revenue beginning in late or probably sometime in Q3.
Speaker Change: and that will be sustained, excuse me, sustainable and increasing as the facility gets gets rolling and they go full operational.
Speaker Change: on the West Valley. I can't say anything about West Valley right now. It's real important to understand that it's in a protest period.
We can't do any type of...
Speaker Change: Press releases are discussions outside of what's already been in the press release, so I'd refer you to the press release that the Department of Energy put out for any information. It's pretty much an ongoing procurement.
Speaker Change: until that protest period is over, as I mentioned in the notes, so we can't get into that too much. On the Enterprise, that's also an open procurement right now. The RFP finally came out. It was delayed for a long period of time, like nine months.
and it came out in September, due January 6th.
Speaker Change: and we're working very actively on that as we speak. It looks like there's going to be two or three competitors that we know of, but we have a very strong team and we're very well positioned for that, but it is a competition. And as far as grouting is concerned,
Speaker Change: As we've talked before, the Hanford Systems 10 document that was published I believe in January of 24 this past year specifically said that they anticipated beginning routing in January of 26.
Speaker Change: That's the most current information we've got is that document along the way they have put out a procurement for the very large extraction system
It's about a $100 million type of system.
Speaker Change: That's not going to be in place for a couple of years.
Speaker Change: But we're not able to understand from DOE what they plan to do in the interim before that system is available. And so it's difficult to really project when grouting is going to begin at this point, other than what they've said in the systems document overall.
Speaker Change: We did begin meetings with ITDC just, I believe it was last week, in Hanford.
Speaker Change: Trying to get a sense of what's going on They are going through transition, which is a very crazy time out there with the new team taking over a whole different contract with all kinds of different scope So it's very difficult to understand. What's
Speaker Change: coming and going in regards to opportunities but just in just
Speaker Change: Informal chats, they are looking at about $500 million a year in small business.
Speaker Change: goals in regards to revenue and the contract. They do have several small businesses on their team that were part of the procurement which will have first crack at some of that. However, they're not in our space. They do other types of services. They're not waste management.
So we remain optimistic, but...
Speaker Change: They will be competed because we're on the team, but we do have, as we said before, a very significant advantage to have our facility out there and to be part of the community in a big way with our facility. So, a lot of that remains to be seen and will unfold here as soon as transition is over sometime after the first of the year.
Speaker Change: So I think that covers most of what you asked for. Howard, did I miss anything?
Speaker Change: I know you didn't, but I'd like to be a little bit more specific.
Speaker Change: My public understanding is that the USS Enterprise is going to be torn apart and the radioactive material is going to be sent to Hanford for, quote, commercial treatment.
Speaker Change: I don't think there's anybody else other than you that's located at Hanford.
Speaker Change: Yeah I think it's a little it's a little different than that Howard. The reactors have been defueled at this point. Right. So the RFP states so it won't necessarily have to go to Hanford. It'll go to it can go to a commercial facility.
Speaker Change: somewhere between wherever the ship is dismantled in Hanford so that that is remains to be seen in regards to the technical approach and will not necessarily have to go to Hanford
So that's really undetermined at this point.
Um, um,
Speaker Change: Did I answer your question, Howard? Yeah, just two more items. You discussed Germany, Mexico, and I think two conference calls ago. Can you be a little bit more specific as to the opportunities there? Yeah. That's it.
Speaker Change: We did win a job with the Laguna Verde reactor in Mexico several months ago, I think it was probably six months ago by now.
We're going through the shipping.
Speaker Change: administration part of it right now, which is quite complicated, but it's on track for
Speaker Change: I believe it's second quarter, late first quarter to start shipping.
Canada, we've also secured a larger waste stream.
for shipping some waste to us as well, down to...
our DSSI facility here in Oak Bridge.
And as far as Germany goes, we'll continue to...
to put several large shipments in queue.
Speaker Change: We're expecting the first shipment in December, it could bump into January, but in that time frame. And another one next year as well. We are working with them on other...
Speaker Change: brokering, and that looks promising for that to begin sometime in the summer of 25, but still is in the negotiation stages. So, as I said in the notes.
Speaker Change: All that totals about $7 million in revenue between Q4 and Q2. So, through the period of time that we typically have, less receipts.
It does also
Speaker Change: address the risks that we've seen in the past for an extended CR by getting international way so
Speaker Change: We are optimistic that if those things happen on time, as expected, that it'll help support a stronger Q1 and Q2 that we've seen in the past.
Mark Duff: That's all I got. Mark, thank you kindly. Good luck. Thank you. Thank you, Howard.
Speaker Change: Thank you very much. Just a reminder there if anyone does have any questions you can press star 1 on your phone keypad now to join the queue.
Speaker Change: Thank you. Your next question is coming from Aaron Spatula of Craig Hallam. Aaron, your line is live.
Aaron Spatula: Yeah, good morning, Mark and Ben. Thanks for taking the questions. Maybe first, you know, sounds like, you know, you're understand that you're working through some some near term challenges. And you kind of addressed it a little bit, because you just elaborate on how you're thinking about the near term kind of fourth quarter and kind of starting 2025. You know, you just mentioned some of the international ops and just thinking about, you know, potential for another CR and just how things are shaping up over the next handful of quarters for you.
Speaker Change: Yeah, the, you know, Q4 is certainly much better than Q3, the direction it's going right now. It's much more stable in regards to waste receipts, you know, as we've discussed before we have
Speaker Change: Pretty soft waste receipts in Q2 and Q3, coupled with just a lot of...
came to it at one time, it seemed like.
Really are behind us
Speaker Change: It doesn't mean we won't have anything else coming, but right now we certainly don't see it. And so we have a good stable backlog at all of our plants. And DSSI has been the one that's been a little bit back on its heels in regards to backlog with the Canadian project that we see coming here in the next couple weeks.
Speaker Change: that'll that'll give us good backlog there. So answer your question, waste your seats.
Speaker Change: Very good for Q4, which will get us into Q1. Again, we try to keep waste backlog in the $8 million range, which is enough to get us through the next quarter.
Speaker Change: So, we're sitting there right now, so that looks really good on waste.
Speaker Change: receipts. Again, something good out of any plant. There's always a risk of that, but right now we're chugging along pretty well with some pretty good stability.
Speaker Change: On the services side, we are a little bit light, as I mentioned, in Q1.
Speaker Change: We can move up and down with our cost of goods sold, with services. In other words, we don't carry a lot of people on the bench when revenue goes down or project backlog goes down.
Speaker Change: We do have a number of bids we're waiting on, as well as a number that are waiting to mobilize. So, if all this happens on time, we think we'll be in good shape.
Speaker Change: Q1 always takes a dip in revenue because the winter months make it tough for working in the field.
Speaker Change: But we're pretty optimistic that with the new award that we're hoping to get through the protest period on...
Speaker Change: That will provide some good, stable foundation for work when transition is over, and hopefully by May.
Speaker Change: So, the next two quarters look better than last year, you know, with most of our investments now are big investments on PFAS.
Speaker Change: are behind us. We still have some ahead of us. Obviously, we want to keep pushing hard, but we put a lot of resources on this program, as I mentioned.
Speaker Change: and I spent a lot of time on it. It was all our management team.
Speaker Change: And now we've got a good path forward and can start generating revenue, the impact from those investments.
Speaker Change: should subside some, but we definitely have the pedal to the metal moving forward on sales and operations now. Does that kind of answer your question, Aaron?
Speaker Change: It does. Yeah, no, thank you for the caller. And then, you know, maybe just second on the balance sheet, can you just talk about how you're feeling there and an update on where you're at kind of with CapEx and capacity initiatives as you prepare for Hanford starting next year and just some of the other opportunities you've discussed.
poof
Speaker Change: The working capital is in a good range, so it really kind of comes down to the next phase of initiatives from a cap spending standpoint, and that's what we're kind of working with Mark's group, with the operations guys and the R&D guys.
Speaker Change: But right now, you know, we're pretty comfortable with our general numbers.
Speaker Change: And just, I mean, as Hanford ramps kind of 2025 and 2026, just, you know, how are you feeling about the capacity there at Richland and, you know, just expanding that?
Speaker Change: Yeah, right now we're in a good position to handle the at least the first
Speaker Change: six to eight months of capacity without any problem at all.
Speaker Change: The way we anticipate that those melters come online is that we can handle it getting rolling and we have enough time to ramp up with the receipts that allow us to make those investments.
for the most part.
as they're coming.
Speaker Change: So, as we see it ramping up, we do have a design of our facilities pretty much complete conceptually and some formally that we know what we need to invest in, and once we see the melters coming online, we'll start making those investments. So, we're in good shape for 6 to 8, 12 months, more like 6 to 8 months.
Speaker Change: After we start receiving waste in the summer, and as we see it going, we can make those adjustments and continue to.
Speaker Change: to add capabilities within the existing buildings we've got. So we don't see having to build anything new. We really see the need to go to multiple shifts initially and then to add.
Speaker Change: New equipment to be able to handle the whole 8,000 cubic meters a year based on when they're fully operational.
Speaker Change: Understood. Thanks. And then, you know, maybe could you just touch on, I think, Ben, you mentioned the true waste, you know, been seeing more headlines on transuranic waste out of Idaho. Just, you know, maybe talk about what that opportunity broadly looks like for you with true waste in that market.
Speaker Change: The Trueways from Idaho, Aaron, can you elaborate on specifically what you're referring to in the Trueways from Idaho?
Speaker Change: Yeah, well, just starting to see broadly in the market, you know, pick up in that type of a waste stream and just curious how you're positioned there to help address that.
Speaker Change: Yeah, the TRU, if you're referring to the TRU waste, which is a specific kind of waste, right now
Speaker Change: that's beginning to see a lot more funding and visibility as DOE works off their backlog towards the closure of all their sites. Some of the harder wastes are remaining to be dealt with and those largely include the TRU waste, which is, as I said, a different classification of waste.
Speaker Change: that is alpha-emitting. Sprue in New York, near Albany, Schenectady, as well as West Valley, as well as Idaho and Hanford in Los Alamos.
Speaker Change: all have significant quantities of TRU waste and are all struggling with, we're not struggling, we're working towards reducing that waste volume. We deal with a lot of that, and we're the really only commercial company that does
Speaker Change: Reduce the amount of waste that has to go to very expensive disposal down in Carlsbad, New Mexico at the WIP facility So that that's a real burgeoning market for us and We see that growing significantly in next couple years
Speaker Change: with some of the other sites, especially smaller sites, beginning to ship TRU waste to a commercial facility for...
Speaker Change: for processing. So it's already a backbone of our Northwest plant now. We do anywhere between 500K and a million dollars a month in TRU waste processing for Hanford. We see it only increasing at the other sites.
For more information visit www.FEMA.gov
Speaker Change: Great, thanks. And then just maybe last for me, can you kind of touch on, you know, the election and some of the administration changes and just how that might or might not impact you moving forward?
Speaker Change: over. Sure, yeah I was expecting that question Aaron. A couple things and giving a lot of thought to this and talking to our lobbyists and some other colleagues in the industry, three points I'd like to make. First is
Speaker Change: The first Trump administration was quite good to the EOE-EM division. Budgets grew, they were stable at least, but they did grow.
Speaker Change: group of leaders from industry that were quite aggressive in seeing progress.
Speaker Change: and particularly at the assistant secretary levels, which is the most important ones for us.
Ian.
That change should help.
Speaker Change: overall for our goals. And the reason I say that is because what Permafix has to offer is
Speaker Change: commercialization of waste treatment along with our services group. But commercialization of waste treatment is a strong selling point for the first Trump administration. We expect it to be for the second.
Speaker Change: especially in light of cost savings that they're looking for and outsourcing to an organization that already has the building's permits and capabilities to do that. We will be pushing very hard on commercialization as an offering.
Speaker Change: and we expect that to be well received by the new administration. So we see it very positively. You know, it's always frightening to hear about, you know, looking at budgets and those types of things, but I think most of the commitments that the department's in that we are focused on
Speaker Change: are driven by regulatory requirements for progress in moving waste and permits that drive that as well as state agreements.
Speaker Change: So I think most of those will stay stable, and we expect commercialization to be a broader theme that will get some good traction with the new administration, particularly within the Department of Energy.
Speaker Change: Got it. Appreciate all the color. Thanks. I'll turn it over. We appreciate it, Aaron. Thanks.
Speaker Change: Thank you very much. Your next question is coming from Aaron Warwick of Breakout Investors. Aaron, your line is live.
Aaron Warwick: Hey guys, thanks for all the detail you've provided on today's call. I wanted to ask about the PFAS and you mentioned some partnerships.
Aaron Warwick: Sounds like there's some discussions going on there. I think the last time we talked, you know, you said there had been.
Aaron Warwick: some conceptual discussions, but it hadn't gone too far. It sounds like maybe that's progressed now that you have an operational plan. I was just wondering if you could comment more on the state of those discussions and what the partners would be wanting to see from you now before potentially closing on a deal.
Speaker Change: It's been difficult with this whole industry is defining where we fit where our technology fits into the TAM
Speaker Change: and knowing that there's other competitors that are all developing systems, they're all at different phases of deployment and operations, but the ones that seem to be farther ahead of everybody is
The technologies we call concentrators.
Speaker Change: They don't destroy PFAS, but they take large volumes of PFAS-contaminated water, like leachates from large landfills.
Speaker Change: And they concentrate those, in other words, they clean up the water so it can be released and they end up with a concentrated solution.
vessel of PFAS-contaminating liquids.
Speaker Change: destruction, complete destruction. So we're not going to do as well with 250,000 gallons of surface water or leachate that's very low concentration because we just keep, like I mentioned, we're doing 650,000...
Speaker Change: 650 gallons a day but we can take the highest concentration of PFAS that comes in a form that looks like Jell-O and we can run it through our system and it works fabulous.
Speaker Change: So, that's really where we are in the market, partnering with firms that have some concentrators out there, that are operating now. That's one component to where we are. There's other components that also...
Speaker Change: out there, but that's just one example of a partnership with firms that do that and have developed these technologies for concentrating to do alignment. We're also looking at
at doing what we call change-outs.
firefighting foam into their system, compliant foam.
Speaker Change: that do that type of work, which would support sending the foam directly from the plants.
Speaker Change: that have those systems to our facility for treatment. So those are the types of partnerships we're putting together at a high level for each one of those.
Speaker Change: and will lead to a sustainable waste receipts at our facilities. Now that we're operational, we can start moving forward on making those things happen.
Speaker Change: Are those the types of partnerships that you would would be announcing or those just something that would be the normal course of business?
Speaker Change: It would depend on which companies we align with but I would definitely hope that we could do announcements and would pursue that as long as it was mutually agreeable.
Speaker Change: And when are you expecting that to be like, you know, those types of things to be finalized? I guess I just don't know what they would be looking for, if it's like you've got to be running it every day of the week. I think you said right now you're doing two to three days a week, if it would be a bigger plant and what, you know, kind of what they're looking for to.
Speaker Change: Yeah, we're hoping to start securing those in the December-January timeframe once we got to get a little bit further along.
Speaker Change: There's some other hoops you got to jump through when working with companies like that and getting agreements nailed down at senior levels.
Speaker Change: So we hope that's the situation. We do think that by the January time frame, we'll be in efficient operations for our current unit.
what we're running every day.
Speaker Change: And we can always go to multiple shifts if we get the backlog. So, January.
Speaker Change: Through Q4, we're looking at $100,000 to $200,000 in revenue as we work through that and then significantly do better on a production scale beginning in Q1.
Speaker Change: So are you thinking, I mean, is this 650 gallons, is that going to be, do you think that that's going to be the limit for an eight hour shift, you know, like permanently, or do you think you can get more out of that? And then also you kind of alluded to potentially being able to run more than one shift. So I guess what would be, what are your, what's your thinking on those two things?
Speaker Change: We're trying to optimize that, Aaron, and a lot of it depends on...
Speaker Change: what level of destruction our clients want, in other words, where it's going to go afterwards.
Does it go into...
Speaker Change: a POTW or a wastewater treatment plant, or does it go in some other way?
Speaker Change: If we have the option to dispose of the effluent in a landfill or a deep well injection, we may not have to process it as long. In other words, it's a function of what percentage of PFAS needs to be destroyed.
Speaker Change: So we are looking at that optimization. Our next generation plant will be much larger and more efficient in regards to how much it can do a day and hopefully getting into the thousands of gallons a day. And as I said, we're hoping to have that.
Speaker Change: Okay and are there any still any thought about the licensing opportunities with your technology? There is you know and we're certainly open-minded that we're certainly focused on getting a good
Speaker Change: A good file of data on how it performs first and then pursuing interest in that, but we've already had initial discussions with large firms about it and there isn't an apparent
technology
Speaker Change: That's very mobile or Even at all trends is something you can put at someone else's location in regards to our competition This is this this technology would support a small unit. It could be deployed We're gonna have to design that and show that it works and you know fabricate one first But right now we're pretty much focused on
Speaker Change: Getting our Gen 1 up and running efficiently and consistently, and then getting the Gen 2 system designed and installed as well, hopefully in the next six months, eight months.
Speaker Change: Great, thank you. I'm really impressed with how quickly you guys have gotten to this point, so congratulations on that and thank you for your time. Thank you. We appreciate your support, Aaron.
Speaker Change: Thank you very much. Your next question is coming from Nicholas Booth of Waterford Holdings. Nicholas, your line is live.
Nicholas Booth: Hello, yeah, just a quick question about Hanford. So it's my understanding that the DOE default facility lacks the capacity to vitrify, you know, all 50 million gallons of the low-activity waste. So I'm just curious about the prospect of Permafix, you know, grouting some of that supplemental law in addition to the effluent. What the timeline on that might be? Thank you.
Speaker Change: Yeah, I appreciate that, Nicholas. And that's an important point you're making. Right now, the DF law system, as we've been told,
Speaker Change: designed to treat about a million gallons a year at full capacity.
and that's as received so you know take some
Speaker Change: some water, some liquid to mobilize the waste in the tank. So one could say that literally it takes about two gallons to get one gallon of waste out of the tank. So literally.
The amount of waste at Hanford is closer to
150 million gallons, depending on how you can...
Speaker Change: how efficiently you can get it out of the tank. Now they're developing new technologies for that, so that number could change, but the bottom line is...
Speaker Change: area tank farms, which is about half the tanks. The west area tank farms are not...
currently
Speaker Change: plumbed or they don't have the infrastructure to pump that waste to the DFL facility. They're in a separate area and DB's made the decision which we certainly applaud.
to grout.
Speaker Change: to pump those tanks and send them to off-site treatment for grouting.
Speaker Change: The procurement I mentioned was to build that pumping system, extraction system, at the West Tank Farms.
to support.
pumping the waste out of the tanks.
Speaker Change: stripping them through ion exchange for the cesium and iodine that are in it so that they can be handled at a more safe manner and then shipping that waste once it comes through that system to commercial off-site facilities including ours.
Speaker Change: As we mentioned before, we're the only one that's local, the other two are in Texas and Utah. So we have a very strong ability to make sure we get the majority of that waste, but DOE does like competition and they are looking at other alternatives out of state.
Speaker Change: So to answer your question, that whole west area, they are planning to do grouting on. That system I mentioned that they're procuring will do about 3 million gallons a year is the design spec for that system. It'll be several years before that system is completely up and running.
Speaker Change: We're optimistic that DOE will find alternative opportunities for grouting by using the existing system that's in place on the East Tank Farms.
Speaker Change: and what they call the TSCR, but DOE has not come forward with information about what they're going to do in the interim between that large system coming online at 3 million gallons a year versus the one they have in place now, which is...
Speaker Change: the Tysker system, which is the one that generated that 800,000 gallons I mentioned earlier that's currently in storage.
Speaker Change: I think a lot of that is going to be addressed by the new administration and the new secretary that is eventually nominated for that position at D.U.E.E.M.
Speaker Change: and we're hopeful that it'll be sooner than later, as recommended by National Academy of Sciences in numerous congressional statements as well.
Yeah, really appreciate it. Thank you. Thanks, Nichols.
Speaker Change: Thank you very much. Your next question is coming from Jim Gerson who's a private investor. Jim, your line is live.
Jim Gerson: Yes, just a quick one. Thank you for all the information so far. I was just wondering what the
reasoning behind the write-off of the deferred tax asset was.
Yeah, I'll take that, Jim. You know...
Jim Gerson: Gap, Rule, and it relates to your net operating losses and the ability to use them. If you're familiar, those losses typically are an asset to the company because when you make money, you're not going to...
You're not going to pay tax on that amount.
suggest
Jim Gerson: that it's possible we would not be able to utilize all those losses.
in time.
Jim Gerson: Because of the real strict guidance that's out there, the approach was to reserve it effectively. That's what we've done is we've put a reserve on that asset, no different than a bad debt allowance. And as you utilize your, as you start to make money and utilize your profits, that reverses out.
Jim Gerson: So it's a kind of a paper transaction. It just it's conservative in our opinion but it's it's the right approach right now and Again no, it doesn't really impact cash flow of the company
Thanks for watching!
Thank you.
Speaker Change: Thank you very much and your next question is coming from Ross Taylor of ARS Investment Partners. Ross your line is live.
Ross Taylor: Thank you. I just want to go back real quick, Mark, on the economics of PFAS.
Ross Taylor: You're now talking about you're basically going to treat a higher-end product or a more concentrated product, so I would assume, you know, there's been a lot of debate as to what you would get on a per gallon basis of treatment. When I kind of look at your math, it looks like you're talking somewhere between
Speaker Change: $75 and $150 a gallon is that kind of an accurate expectation for what you would be getting as you treat this?
Thank you.
Speaker Change: It's a good question, Ross. Right now it's a really hard question to answer because we're trying to show performance and the price per gallon
Speaker Change: Right now for someone to send it to Depot Injection or Incineration Which is not palatable to everybody That cost range for General Injection Is Is Is Is Is Is Is Is
PFAS contaminated liquid is
in the $15 range, $10 to $15.
But that's for everything.
Speaker Change: The higher concentration, we've seen as much as $45 to $50 a gallon.
Speaker Change: So it's somewhere, it's a really broad range as we sit right now. So if we work with...
Speaker Change: The concentrators, that number goes up dramatically as we get to higher concentration stuff.
But it's not as high as the math you're showing.
It is lower and
Speaker Change: For the very low-end stuff, it's closer to 10 and goes up to 50 for the higher concentration. But a lot of it, the reason it gets difficult to nail downraws, and I can't give you a better answer, is because it largely is associated with volumes.
You know, we can get $45, $50 a gallon for...
Speaker Change: for a pickup or a flatbed full of pallet full of...
Speaker Change: AFFF, but if you got a large quantity of it, that price would go down because it'd be a lot cheaper to handle. And the logistics...
has a big impact on it too.
Ross Taylor: It just really ranges on how big your clients are, and how concentrated it is. And we think this number is going to go up altogether, Ross, when EPA
promulgates the destruction requirements.
Ross Taylor: and begins to call this a hazardous waste under CERCLA, which we do anticipate that they'll occur sometime in the first half of next year. When that occurs and the clock starts ticking with people...
That'll change the market completely.
Ross Taylor: And that's why it's been such a rush for us to get the market so we can get this thing grandfathered And get it in places And and be ready when that happens in this Race will likely likely go up
Speaker Change: Okay, and then on an operating margin basis at run rate, should this be as profitable as...
Ross Taylor: you know most treatment or is it going to be more profitable would you think?
We are, we are...
Ross Taylor: planning on being a little bit more than as profitable as most of our waste is. We are finding that
Ross Taylor: There's an opportunity to recycle some of the chemicals and resources we're using for operation, which will lower this cost and become much more profitable than our typical margin. But for our planning purposes, we're assuming our typical margin at this point.
Speaker Change: Okay, cool. Great. Well, thank you and congratulations on the progress you've made.
Speaker Change: Thank you very much. Well, that appears to be the end of our question and answer session. I will now hand back over to the management for
for their closing remarks.
Speaker Change: Okay, thank you, Jenny, and thank you for joining us today and for your continued interest in Permafix.
Speaker Change: We do remain confident in the outlook of our business, driving...
Speaker Change: moving forward on operational improvements, the successful launch of our PFAS treatment technology, and the strategic roles for major projects like the one that was recently awarded by DOE. Additionally, our opportunities at Hanford, including the upcoming idea of flow waste processing and positions us for long-term growth.
Speaker Change: Together with our expanding international presence and robust project pipelines, these advancements lay a solid foundation for our future, and we deeply appreciate the support of our shareholders and look forward to providing further updates as these developments unfold. So thank you very much.
Speaker Change: Thank you very much. This does conclude today's conference. You may now disconnect your phone lines and have a wonderful day. Thank you for your participation.