Perma-Fix Environmental Services - Earnings Call - Q1 2017
May 10, 2017
Transcript
Speaker 0
Greetings, and welcome to the Permafix Environmental Services First Quarter twenty seventeen Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.
David Wohlman of Crexendo Communications. Thank you, Mr. Wohlman. You may begin.
Speaker 1
Thank you. Good morning, everyone, and welcome to Perma Fix Environmental Services First Quarter twenty seventeen Conference Call. On the call with us this morning are Doctor. Lou Senifani, CEO Ben Macarado, Chief Financial Officer and Mark Duff, COO and Executive Vice President. The company issued a press release this morning containing first quarter twenty seventeen financial results, which is also posted on the company's website.
If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1021. 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, 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. In addition, today's discussion will include references to non GAAP measures. Permafix 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 and on our website.
I'd now like to turn the call over to Doctor. Lou Sinafani. Please go ahead, Lou.
Speaker 2
Thank you, David, and welcome, everyone. I'm very pleased to report solid year over year improvement in the first quarter. Overall, revenue increased 27% to $12,700,000 compared to $10,000,000 for the same period last year. Also achieved $835,000 of adjusted EBITDA, an increase of $3,100,000 from the same period last year. We achieved these results despite severe winter weather in the Pacific Northwest, which impacted waste shipments and despite the fact first quarter is typically seasonally our weakest period.
But the most dramatic is the balance sheet. And you can't really see it in the issued earnings, but because of the eight ks event issued last week, today we sit with over $3,000,000 in cash, no revolver debt and, also entering the strongest period of the year. Over the last two years, we worked very hard to reduce operating costs and reposition the company and you're now seeing the effects of that. As I said, our balance sheet is in the strongest position we've been in a long time. And in addition to the positive cash flow, change has also resulted freeing up $5,900,000 of cash by replacing the closure policy at our Northwest Richland facility with a new bonding mechanism.
We used the cash to pay off our entire revolver line of credit And, we're very, very good. The balance sheet we also think the balance sheet should continue to improve. Within the Treatment Segment, we experienced a 39% year over year increase in sales and we expect this trend to continue as evidenced by the improvement in our backlog. As we indicated on our last call, a lot of the delays that impacted 2016 have been resolved following the election. We are also encouraged by the 2017 budget within Department of Energy's Office of Environmental Management, which oversees the remediation of nuclear waste at the various DOE sites around the country.
Speaker 3
Current
Speaker 2
budget for 2017 is more than 6,000,000,000 a significant increase over last year. In the past, increased budgets has usually led to an increase in discretionary spending for waste treatment, especially at the end of the government's fiscal year, which coincides with our fiscal third quarter. We continue to pursue a variety of major initiatives associated with expansion of our market base and look forward to discussing them further as they materialize. Within the service segment, this was a very active quarter for new project bids and we continue to grow our sales pipeline. We're also focused on improving our win ratio as a result of the recent initiatives Mark Duff has Mark Duff has put in place and which should begin to bear fruit later this year.
Mark will provide some additional color on our service pipeline and new business opportunities in this segment later in the call. Turning to our P and L, we continue to carefully manage expense, identify new areas for cost savings. We are on track to complete the closure of our M and EC facility by January 2018, after which we believe we will save an estimated 4,000,000 to $5,000,000 in fixed costs annually. Given the growth in revenue, improved liquidity, the strength of our balance sheet, we believe that the company is dramatically undervalued and well positioned to move forward. Lastly, we are continuing to work towards trying to finalize a definitive agreement with a private investor subsidiary and hope to have an update in the near future.
Now let me turn the call over to Mark, our Executive Vice President. Mark? Thanks, Lou.
Speaker 4
I'm very pleased to report that Perma Fix has made meaningful progress this quarter and the implementation of improvements needed to strengthen our offering in both the Waste Treatment and the Nuclear Services segments. These improvements are reflected in increased receipts of waste at our treatment plants throughout the past five months, which has resulted in significant backlog and high productivity rates in our processing facilities. This increase will support our goals for the plant expansion opportunities and the addition of new capabilities and capacity for the treatment of new waste streams we plan to implement within the next three quarters. We continue to see increases in our waste receipts through continued focus on innovative approaches that allow our clients to realize new value in using our waste treatment services versus the direct disposal approaches of our competitors. First quarter sales receipts were just below $10,000,000 which is about $2,500,000 above both prior year and this year's expectations.
As we enter the midpoint of the second quarter today, we remain encouraged by this indicator relative to the sustained growth for the year. While our Nuclear Services division realized lower than anticipated revenue in the first quarter, our success for the quarter was defined more by creating a foundation for future sustainable growth. The enhancement of our business development organization identify and position us for more opportunities and generate high quality submittals to increase our run rate is the success of the quarter. And that resulted in 11 wins this quarter out of a total of 14 proposals that were announced during that same period. This is an unprecedented win rate for the company.
The full impact of these improvements may not be recognized for a few quarters while proposals are under review as part of the process. However, with 17 additional bids submitted during the quarter that have not been announced yet, that represent over $30,000,000 of potential annual revenue, we're encouraged by the volume of bids that directly align with our core competencies. We continue to expand our geographic reach through these recent wins in Canada, including new opportunities in both the services and the treatment segments. This growth will be realized through the third quarter and provide additional stability to our overall services organization as we continue to build a critical experience in Canada. Based on our current market expectations and the strength of both sectors, we remain confident that 2017 will be a strong year for the company and set the stage for sustainable growth for the foreseeable future.
With that, I'll turn the call over now to Ben Naccaratto, our CFO.
Speaker 5
Thank you, Mark. I'll begin with revenue. Our total revenue from continuing operations for the first quarter was $12,700,000 compared to last year's first quarter of $10,000,000 an increase of $2,700,000 or 26.6%. The increase was primarily from the Treatment Segment where increased waste volume resulted in a revenue increase of $2,800,000 compared to last year. This increase more than offset the small $161,000 reduction in revenue in our services segment.
Turning to cost of goods sold, our total cost of sales was $10,000,000 which was equal to last year's cost of sales even though we did have increased revenue. Our treatment segments variable cost of sales were down $263,000,000 as the waste mix provided for lower treatment and disposal costs even with the higher revenue. This variance was offset by higher fixed costs at the treatment facilities as we have increased our depreciation expense as a result of shortening the depreciable lives at our MNEC facility, which as you know is scheduled for closure in January 2018. So these costs our total costs in the service segment were relatively flat and despite a small reduction in revenue. Turning to gross profit for the quarter, it was $2,700,000 compared to just $34,000 in 2016.
The improvement was entirely from the Treatment segment where gross profit increased by 2,800,000 due to both increased volume and increased margin brought about by more profitable waste mix. This was offset slightly by a drop in the gross profit in the service segment of $140,000 resulting from the lower revenue. Our total G and A costs for the quarter were $2,900,000 down a little bit from the 3,100,000.0 last year. Our lower costs related to salaries and bid and proposal spending were the as the primary drivers for this reduction. Loss from continuing operations for the quarter was $675,000 compared to a loss of $3,800,000 last year.
Included in this loss are approximately $200,000 and $438,000 related to our Medical segment for Q1 twenty seventeen and 2016 respectively. Our loss applicable to common shareholders was $727,000 compared to last year's net loss of 3,800,000.0 And the loss per share for the quarter was $0.06 compared to a loss of $0.33 in the prior year. Our adjusted EBITDA from continuing operations as we defined in our in this morning's press release was $835,000 compared to a loss of $2,300,000 last year, a year over year improvement of $3,100,000 I'll now discuss a few changes in the balance sheet compared to year end. Our current receivables, both billed and unbilled were down $778,000 which reflected improved collections. Our other current assets were up 6,600,000.0 primarily reflected by the current finite risk receivable of $5,900,000 related to the replacement of our bonding mechanism at the Northwest facility.
This receivable, as Lou mentioned, was collected on 05/01/2017. The remaining $700,000 increase was from normal operating prepaid expenses. Our intangibles and other assets decreased by $6,100,000 primarily from reclassifying the 5.9% finite risk sinking fund from long term to current as we just discussed. Our waste backlog was up, it was $5,900,000 compared to 5,200,000.0 at year end and higher than the $4,900,000 in March. Our current closure accrual increased seven twenty nine, which was the result of reclassifying the final piece of the closure accrual at M and EC to current from long term.
Our current debt is $1,200,000 which is consistent with year end and lower than a year ago by about $642,000 And our total debt at the quarter end stands at stood at 7,100,000.0 all due to the primary lender, PNC Bank, 4,900,000.0 representing our term loan and $2,200,000 representing the revolver balance. Finally, I'll give you a couple of a quick summary of our cash flow. Our cash provided by continuing operations for the quarter was $2,000,000 Our cash used by discontinued operations was 139,000 Our cash used for investing was $57,000 of which $22,000 was for capital. And finally, our cash used for financing was $1,900,000 $1,600,000 of which was to reduce our revolver balance. With that operator, I'll now turn the call over to questions.
Speaker 0
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. And you may press star two if you would like to remove your question from the queue.
Our first question comes from the line of Sam Rebotsky of SER Asset Management. Please proceed with your question.
Speaker 6
Morning, gentlemen. Lou, one of the things you didn't address is the accident that happened. Could you sort of address what capability you could handle relative to Hanford and what's your thoughts about this tragic event?
Speaker 2
Well, have as you know, there's a tremendous amount of opportunity there in Hanford. The event yesterday was, you know, the roof collapsed on, several railcars and probably have sat there for seventy years. We continue to see a great opportunity in working at Hanford. It's a major source of waste for us. In fact, in the first quarter, as we've mentioned, it somewhat hurt us because of the weather, but we still did fairly well and we expect that waste then to come in the remainder of the year.
There's just a tremendous opportunity at Hanford as we've talked in the past. That event, I think, will have a you know, it's was a dramatic event short term, and don't see, you know, at this point, a lot of repercussions coming out, from it at this point. There was no release, no major,
Speaker 4
event. There's still I think it's still just to mark that. There's still a lot of investigation has to occur before before they come up with a remedy or any type of understanding of the next steps for recovery if there is any in the near term.
Speaker 6
But it would appear that this would be encouraged to create funds to treat the waste sooner than later? And if this did occur, how much more waste can you treat in increasing your revenue relative to hemp?
Speaker 2
We see a lot of opportunity and a lot of initiatives we have going on there in terms of different waste streams. And at this point, we're not sure much have come out of that event for us in the short run as it will be a recovery effort on the part of the contractors. So but it continues to be our main focus and our Northwest facility continues to evolve really into our flagship facility as we continue to reposition the company. Okay. It's hard to give you any real numbers at this point because like like Mark had said, we're they're still in a trying to figure out what really happened.
Speaker 6
Yeah. No. No. I I understand it's it's it's it's a cat it it appears to be a catastrophic event. But from my judgment, it would appear, unfortunately, this creates the desire and ability to create funds to do something where if this didn't happen, they'd be waiting more longer.
That's just my judgment. As far as the medical, we expect the event to happen in the next next quarter or what is the timetable for the medical event to happen, financing, etcetera?
Speaker 2
Again, I'd hate to give any direction because I probably have missed most of the predictions up to this point. It it is progressing, and we've made a lot of progress. And we'll we'll just see how it evolves. You'll you'll be be the first to know when if we can reach some sort of agreement.
Speaker 6
All right. Good luck, guys.
Speaker 0
Our next question comes from the line of Bill Noskovitz Please proceed with your question.
Speaker 2
Yes, good morning. Good morning, Bill.
Speaker 7
I also had a question on Hannaford. So we have a high radioactive test going on there, a test for rehabilitating high level radioactivity. What what's what's the status of that?
Speaker 2
I I'm really still restricted on my ability to talk about it. I guess though there have been several reports come out recently on it and, you know, there's a major GAO report that's available if anyone would like to read it. It's a couple 100 page document, but it does focus on Hanford and various options there. I really can't talk much more about where we are or what we're doing there at this point under a very strict lockup.
Speaker 7
And just to refresh our memory, the the issue there is well over a million gallons of high level radioactive waste. Is that the issue?
Speaker 2
There's we see a great opportunity if the project goes forward, but I really can't talk about numbers or anything at this point.
Speaker 0
Our next question comes from the line of Anthony Marchese, a Private Investor. Please proceed with your question.
Speaker 8
Hi, guys. It's nice to see a turnaround. Question revolves around regulatory climate that you see. I guess you mentioned in your press release. Could you just maybe and I missed the very first part of the call, I apologize if you've mentioned that already.
But, Lou, could you talk a little bit about what you see at the EPA or whoever regulates you know, your your segment in terms of Oh. Budgeted opportunity?
Speaker 2
What what we see, you know, and I and this has been, you know, a theme I've talked about over and over again is that, our regulations governing our business are all in place. And so, number one, the changes at EPA, do affect the regulations, but we see little or no effort trying to change the regulations that exist today. In my experience with the Republicans have always said this is, you know, they actually do a better job of managing the existing regulations which control us. And that's number one. Number two on the and that's more on the EPA side.
When you look at Department of Energy, you when you look at all the comments that have been made by the incoming people and and and the discussions we've had with the transition team and with the initial and the people now in, they're very focused on on nuclear and they're very focused on improving the process for, cleaning up the, waste at at Department of Energy. And the initial budget, the proposed budget that came out of the White House for, '18 was fairly aggressive on, accelerating, work in in the nuclear cleanup field. Now there weren't a lot of details. So it's a little hard to judge it, but, the top line number was, would have been will if it holds, will be one of the largest budgets the environmental cleanup has had over the years. So everything we're hearing and seeing and their and also their approach is much more from a on a commercial approach, looking for better ways to do things more efficiently and not following the same old past lines that you've heard.
So from a big picture point of view, we're optimistic in terms of where our programs are going.
Speaker 8
Okay. And okay. And
Speaker 2
we don't see lots of changes on the regulatory side.
Speaker 8
My second question relates to competition. What and again, obviously, I'm preaching to the converter, but obviously, I feel the stock is significantly undervalued. In the past, you've mentioned there has been movement or activity in the private area in terms of acquisition. Have you seen any further consolidation or activity in that respect?
Speaker 2
Over the last three months, there's not been a lot of activity. The two big events were the Energy Solutions attempting to buy WCS, which is now in court. Justice Department has filed legal action against them. And the second has been the Veolia acquisition of Curion, a small technology company. We see a lot of interest, a lot of people right now, much more focused on nuclear especially on the decommissioning side.
We see that as a very large opportunity going forward. We have some very strong assets there in terms of our facilities, in terms of past work we've done in decommissioning both small reactors sites. So we see a lot of activity going on. And as Mark mentioned, a lot of effort going on in Canada where we've had a pretty good success in both treating waste and in providing services. The competition side, we continue to see ourselves as having a very unique niche, very unique facility that can just about do anything and dramatically save costs at DOE for or at various clients, Department of Defense and the commercial sector.
And Mark has put in place a program to really go after a lot of these new programs. And we're very excited about that because we see opportunities on the commercial side that we haven't been able to touch in the past. We see opportunities in all the areas. So right now, we're very excited about where we are, where we're going and our position. And now with the stronger balance sheet, it will have a very significant effect in helping us bidding and partnering and working with some of the larger clients here.
Speaker 8
And final question, Lewin, I appreciate the time. You mentioned earlier a GAO report. Could you be a little more specific? I mean, I'd like to if I'm on a Google page, what am I looking for?
Speaker 2
The GA report out of on on options at Hanford. Okay. Very good. Yeah. On the Hanford tanks.
It's it's a GA report on the Hanford tanks.
Speaker 8
Great. Alright. Thank you very much.
Speaker 3
K.
Speaker 0
Our next question comes from the line of Jim Brown, a Private Investor. Please proceed with your question.
Speaker 3
Yes. I have a couple of questions. First of all, I don't know if I missed this, but what what's going on with your isotope project? You one thing I'm confused about, you're you're referred to it as a majority owned medical. That's the isotope project.
Correct. You don't you don't have a majority interest anymore. You have a minority interest. Right? Like, 25% or something?
Speaker 2
No. No. We have we have, at this point, a majority ownership. Now if we raise the amount of money we've we've been pursuing here, we we will no longer have a majority that'll be very close.
Speaker 3
Okay. So And it's
Speaker 8
Go ahead.
Speaker 2
We we sell stock in it and in a placement, then it but we have not yet, completed the placement. So it's still a a majority owned company depending how you add somewhere it between 6068% depending how you add it up. Yeah.
Speaker 3
So I'm a little confused about this. Now you started off selling stock in the Polish market and that was a certain percentage of the of that operation. And then you got and then you put the company put its own money in and then you found another company that was gonna take it over. And and then I think last quarter you said that they had stopped investing and you were talking to them. I mean, this this is a really confusing issue here.
Speaker 2
No. Well, here the series of events was we raised money in Poland. Yeah. We the company, Environmental, has partially funded it through just receivables that are owned because we're we do most of the research, continue doing the research on it. And that's where it stands.
At at this point, we have another investor who's looking at coming in. And and we're in the process of trying to complete a definitive agreement. And that's been going on for quite a while now. And, we are optimistic it will will work. But, until it's done, it's not done.
So that's where we are.
Speaker 3
Okay. The the last that I heard about this was you were on a certain scale, you were able to create this product, but then you had to scale it up to a high level. In other words, you you were able to I I don't and I don't know all the technical details, but it worked at up to a certain level, and you had to get it going crank it up to a higher level. Whatever happened with that? Did you did you ever prove the thing out totally that it was totally capable of doing the ice what was
Speaker 2
What we've demonstrated is that our process without using uranium can produce commercial quantities of technetium 99 for use in in medical systems. What we've got to do is is then the next step is really finalized, and this is where we we we we ran out of money so we have stopped the most of the work is the next stage is really to build a generator that, could be used commercially and that would then be submitted to FDA for FDA approval as a device. So, we're still at that same point. We we we need to finalize a design, a size, and, for the system and then build that unit and run it through various tests that the FDA FDA will require and then submit that data to FDA for approval.
Speaker 3
So So let me ask you
Speaker 2
And that same were a place we were about a year ago. I mean, we haven't made, we've made a little bit of progress in our in the little bit of work we've been doing, but it's it's stalled at that point because you need significant money to go to
Speaker 3
How much are we talking about to build a generator like that? What what does that take?
Speaker 2
Well, you'd the the cost to build and do that work would be about 10,000,000.
Speaker 3
K. But, you know, I mean, considering the size of the market and the opportunities, that wouldn't seem to be a lot of money for most companies. And I I can understand if you have something that's really viable, okay, and and then it's seems like there's a lot of people that would come forward with $10,000,000. I mean, that isn't a lot of money for any any normal sized company. I mean I mean, if you if they if this if if you had really been able if you were really able to prove out the viability of this this design and and the way you envision it, I I don't see where you
Speaker 2
It's venture capital. That's at this point, you're talking about venture capital and it's because you you you have to build a device. You have to prove it to FDA. So you you do have a lot of steps in between. And in in this industry, the the major players have other focuses that their focus paths they're going down.
So I it's
Speaker 3
How about somebody outside? And what about a General Electric or somebody somebody outside the industry that I mean, that's that's jump change for most companies, $10,000,000.
Speaker 2
I I've raised a lot of money and it's been I can tell you it's it's been a very difficult, we're in a we're in a spot that it's, very difficult. So
Speaker 3
Okay. So this is basically you haven't really moved forward from here, which you're saying in the last you've been you've been negotiating with this company for, it seems like, forever. Right? This investor. You've been
Speaker 2
Correct. Yeah. Yeah.
Speaker 3
And okay. Okay. I wanted to ask you about what you know, okay. So your, you know, you were your EBITDA was was positive. Okay.
So I maybe I missed this, but what are your projections we're in the May now. What are your projections? Do you expect to become profitable or cash flow positive in the next quarter or two?
Speaker 2
Well, we have been. That we had a positive EBITDA. And
Speaker 3
I mean, your profitability, I'm talking about.
Speaker 2
Well, one, remember you got the cost from the medical and other things in there that affect the but if it continues to go as we expect, yes, we should you should see us turn profitable from an earnings point of view later in the year.
Speaker 3
Okay. And another thing I'm curious about is has any of your people has anybody in management there bought stock on their own in your company? I mean, normally, when when insiders buy stock, it it reflects a a level of confidence.
Speaker 2
You could see the filings that the during the periods when we're allowed, we've been buying stock. Yes.
Speaker 3
You have been in recent like, in recent months?
Speaker 2
Yes. Late March. Late March when we had a a open period, you saw buying going on. You can see it in the Alright.
Speaker 3
And then the other thing I was gonna ask you about, you have this closure of this plant. When it's that is that like was that like half of your your capacity? Was that like 50% of your capacity? That's the the one you're closing in January?
Speaker 2
Our plants are redundant. So what we've done is moved technologies into the other facilities. So, we'll basically lose, very little capacity and yet dramatically drop our cost. You know, we we basically will go from four facilities, to three facilities with pretty much the same capacity. And in fact, what we're really focused on is expanding the capacity beyond where we are today of the existing facilities in the new waste streams.
So you'll see an expanding opportunity here in terms of the type of services we will offer through three facilities instead of four. And that facility was an extremely expensive facility. And removing it will dramatically reduce our operating costs.
Speaker 3
Okay. And then the other thing I was gonna ask you about is your employment. I'm just wondering your your you mentioned something about personnel reduction here. I I just wondered, you have what like, what is your purse what is your level of personnel currently versus, say, a year ago? I just wondered.
Speaker 2
No. We have not reduced over the last year personnel. In fact, if anything, we're growing because of our
Speaker 3
So you are you are adding people?
Speaker 2
Yeah. We're adding we've been adding people over the last year.
Speaker 4
Pretty flat over the year. Yeah. Three two eighty or so.
Speaker 2
Yeah. Around 280 people.
Speaker 3
Yeah. It it doesn't seem like I mean, in the field like yours, it doesn't seem like you can you can readily pick up people that have this kind of expertise.
Speaker 2
No. You're looking it's actually the opposite is that, you know, Permafix has a is at the cutting edge of the business. So and we're a highly technical industry, highly technical company. So the technical people, you know, we we have almost no one ever leaves. This is a, you know, if you want to work in a highly technical cutting edge business, you don't have a lot of opportunities in the nuclear business and we're the exception.
So no, we don't have any problems adding people.
Speaker 3
Okay. I guess that's all my questions. That's fine. That's all I was going to say.
Speaker 2
Appreciate it. No, your interest.
Speaker 0
Our next question comes from the line of Sam Rebotsky of SER Asset Management. Please proceed with your question.
Speaker 6
Yes. Yes, Lou and Mark. As far as we did 12,000,000 sales. What how much with the facilities we have, how much waste in dollar value? What percentage of capacity are we working at?
And how much can we do at the facilities we're having? Could we do a $100,000,000 or how much can we do?
Speaker 2
On the waste treatment side, we have a tremendous capacity that's easily expandable if the volumes are there. So even by closing the, one facility, the other facilities could readily expand with almost little or no capital. So the technologies are readily adaptable to expansion, multiple shifts. You've seen it at times when we ramp up. If we could bring in another 10,000,000 or $20,000,000 in revenue on the treatment side, and we're hoping to do that with these new markets we're going after is it will dramatically affect the bottom line.
It's our incremental margin is, as I've said in the past, 7080%.
Speaker 4
Yes. Would say and generally describe our productivity is we're working our standard shift and we're pretty much
Speaker 8
at
Speaker 4
just about 80 or 90% capacity when it comes to labor. And same if you look at the gram quantities of nuclear material as well, we're pretty much right up near the edge and juggling that all the time. As Lou said, we would our next step would be to add additional hours and expand our shifts at the plants to accommodate more volume.
Speaker 5
But we're
Speaker 4
pretty close. If we can sustain this through the year, then we'll have a great third and fourth quarter because right now our backlog is very good.
Speaker 6
So you say you're working at 80% to 90% on one shift. If you went to three shifts, you're talking about 30,000,000 to 40,000,000 a quarter sales?
Speaker 4
If it was proportional or would just say if it was linear, yes. But I don't think I don't know if it would be that linear overall because I have experience going through a third shift, particularly in the second shift. You have to look at, as Luke mentioned, we'll be down to three plants. While they are largely redundant, they do have different expertise and capability at each plant. So you'd have to it would not be that linear, but yes, you were to just simplistically say that you went to two shifts at each of the three plants that are remaining, you could certainly double your revenue.
You could be in a position to double your revenue. Every waste stream received, they're so unique and they have different processing times, different cost of goods sold, different operating costs. It's very difficult to say because we have such a diverse waste receipt recognition in regards to what type of waste we're actually receiving.
Speaker 6
Also on this technical project that you're doing the research at Hannaford, do you think that it's appropriate to talk to partners with significantly more capital to have a plan if you are fortunate that things work out to sort of be ready to go to expand further? Or what what are your thoughts on that? And and how long does it take to sort of ramp up if this project is that you that you're working on comes to fruition and the government likes what you're doing?
Speaker 3
Well, we're we're
Speaker 2
always looking for for partners of substance. Ramping up our facilities though, as you know, the technologies require very low capital. It's not so any ramp up of any facility any on any waste stream, in general, is not really expensive. It's adding tanks, mixers, a very simple off the shelf equipment. So when we ramp up our facilities for a waste stream, we can usually do it very inexpensively.
Speaker 4
With existing capital budget.
Speaker 2
Yes, with our yes, with our even with our existing capital budget. So we've always put in in in in our capital budget for unforeseen
Speaker 6
conditions like that. Well, let's let's hope that you you get the opportunity to find a Viola or somebody who acquired Curry on at a very healthy price to increase your valuation and and and set the world on fire, guys. Good luck.
Speaker 2
Thank you. We we we think with with the way we're going and the waste streams we we anticipate seeing here over the the first way to do that is to just improve our numbers and improve revenue and income. And so that's our main focus. Okay. Good luck.
Yes. Thank you.
Speaker 0
Our next follow-up question is from the line of Bill Mascovitz of Heartland Advisors Incorporated. Please proceed with your question.
Speaker 7
Yes. It's encouraging to hear Mark talk about, I think you said unprecedented win rates and solid activity in terms of bids in the first quarter, about 17 bids and maybe $30,000,000 in revenue. In what particular areas is that? And what is our competitive advantage there? Mark?
Speaker 4
That's a great question. Basically, there's a pretty wide range of procurements we submitted last quarter. A number of bids in Canada were successful. We won a number of projects at universities and there's a number of other subcontracts we have in place through the core. So a pretty wide range between international and U.
S. Government and commercial. We continue to see good growth or sustained growth sustainability, excuse me, at Department of Energy, a couple of projects there. Our discriminators and defining our discriminators were very important to do in rebranding the last several months and that basically is to focus on what we really do best. And our discriminators are clearly, our number one discriminator is our treatment facilities with very, very high barriers to entry.
And they're very successful with staff with engineers that are very unique in the industry and can solve waste problems that other people can't. So we can take a lot of what we call orphan waste streams, which typically yield very high margins and are sought after. So those waste facilities are clearly our biggest discriminator. Secondly, we've really built a very sound reputation and experience base in the RAD protection arena. We have five certified health physicists which are very difficult to find and they're very field oriented as opposed to research oriented.
So we're able to solve a lot of problems for our clients with a strong experienced group of health physicists that can provide solutions to contamination issues. And we branched that out into different markets. For example, we just really started pushing on the scrap metal market. We had a large commercial scrap metal job last year and are now applying what we learned with that scrap company to other scrap companies nationally and are seeing a real market open up for us there that when scrap yards receive radioactive material on accident and get contamination spread. Those are kinds of things that we're expanding off.
Those are two core competencies which represent our discriminators, waste management and threat protection.
Speaker 0
Okay. That's helpful.
Speaker 7
So today, what what are we doing in high level in terms of sales? Are are we doing over a million dollars of high level radioactive waste?
Speaker 2
No. The we're we're again, I'd call it high activity. We do a lot of high activity waste with transuranics and and other things. But
Speaker 4
High level by definition, but we're not receiving
Speaker 2
any high level waste. What we receive is high activity waste.
Speaker 8
Alright.
Speaker 2
And that's a fairly significant market for us today.
Speaker 7
It's And and what's the size of that?
Speaker 2
Yeah. What
Speaker 7
are we doing there, and what is the size of the market?
Speaker 4
About $500,000 a month maybe or sort of both. Yes, about 7,000,000 to $8,000,000 a year, I would say, We receive liquids and some solids that have higher levels of activity, as Lou mentioned, from a fissile material to high gram quantities of special nuclear material.
Speaker 7
Okay. Just switching back to tech the '99. Is there Lou, you've talked about a possible shortage in 2017 and an increased price. Is that is that happened because of these plant closures?
Speaker 2
Yeah. The the chain Canadian reactor has closed, and it is so what has happened is you've seen tech 99 being shipped in from Australia, South Africa, Europe.
Speaker 4
So the the
Speaker 7
My question was price. My question was price. What's happened to the price of Tech
Speaker 2
99? Price is is dramatically going up because and you also have a very insecure, much more insecure chain. So but the prices continue to go up fairly significantly and will continue to do so as there's changes that are going on on the requirements to make the material.
Speaker 7
Okay. That's interesting. So how much is this nuclear medicine costing us this year? How much is it going to cost shareholders this year?
Speaker 2
What did we spend then?
Speaker 4
Roughly.
Speaker 5
Net of minority interest, $110,000 for the quarter.
Speaker 7
So about $05,000,000 for the year?
Speaker 5
If this trend continues, yes.
Speaker 7
Well, as a long term shareholder, we sure would like to see resolution here. You've been talking about this for years and we're dead in the water and it looks as if the market is moving. So if there's a buyer for this product, let's sell it. Let's focus on our key market, our core market where we've yet to make any money. Thank you.
Yes, we're
Speaker 2
very, very hard to do that.
Speaker 0
Our next question comes from the line of Anthony Marchese, a Private Investor. Please proceed with your question.
Speaker 8
Hi, Lou. Just a small follow-up question on the GAO report, which I found while we were waiting for this. For anybody on the call, it's GAO-seventeen-three06. I guess that's the May report, Lou, that you're referring to. Is your approach the again, very minor point, but just trying to understand what you guys are are doing.
Is your approach the grouting approach that they refer to in this document?
Speaker 2
That's what they call it. Yes. It's it's it's that word is disallowed at Permafix because it's it we treat waste. We don't grout waste. But
Speaker 8
I understand that. But that Yeah. But when they refer to grouting something, they're referring to your process?
Speaker 2
Yes.
Speaker 8
Okay. Great. Thank you very much.
Speaker 0
There are no further questions over the audio portion of the conference. I would now like to turn the conference back over to management for closing remarks.
Speaker 2
I'd like to thank everyone for participating in our first quarter conference call. As I mentioned earlier, we achieved solid year over year growth despite harsh weather conditions. And even though the first quarter tends to be a seasonally weak period, we generated $835,000 of adjusted EBITDA. Heading into the second quarter and balance of 2017, we anticipate continued growth in revenue and improved profitability. As I mentioned earlier, we see a better macro environment illustrated by the increased budget for DOE's Office of Environmental Management.
We see very significant opportunities both in treatment and service. On the treatment side, we look forward to implementing new waste stream treatment processes, which represent very sizable market opportunities. On the service side, as Mark discussed, we're actively bidding on a variety of large contracts and continue to make progress in our run rate for new bids. At the same time, we can carefully manage expenses including the planned closure of M and EC facility. Our balance sheet is strong as it's been in a long time having paid off our revolver and with over $3,000,000 of cash as we head into our stronger quarters.
We appreciate everyone's continued support and look forward to providing additional updates in the future. Thank you all.
Speaker 0
This concludes today's conference. Thank you for your participation. You may disconnect your line at this time. Have a wonderful rest of your day.