Perma-Fix Environmental Services - Earnings Call - Q1 2022

Transcript

Speaker 0

Good afternoon, ladies and gentlemen, welcome to the Perma Fix Environmental Services First Quarter twenty twenty two Conference Call. At this time, all participants have been placed on a listen only mode and we'll open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, David Waldman, Investor Relations. Sir, the floor is yours.

Speaker 1

Thank you, and good morning, everyone, and welcome to Perma Fix Environmental Services first quarter twenty twenty two conference call. On the call with us this morning are Mark Duff, President and CEO Doctor. Lou Senefani, Executive Vice President of Strategic Initiatives and Ben Naccaratto, Chief Financial Officer. The company issued a press release this morning containing first quarter twenty twenty two 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) 671-1020.

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 to today's discussion, we'll include references to non GAAP measures. Periphix believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. I'd now like to turn the call over to Mark Duff.

Please go ahead, Mark.

Speaker 2

All right. Thanks, Dave, and good morning. Results for the quarter, while disappointing, we're very much in line with our expectations as we discussed in our recent year end conference call. We continue to experience weakness in January and February related to the pandemic and the delays in both our services and treatment segments. That said, we started to see things pick up in March and saw a significant increase in production, which has continued at the start of the second quarter.

While the Services segment excuse me, within the Services segment, recently commenced several important projects that are mostly fully operational at this point. In turn, we expect these projects will contribute to improved revenues and profitability in the second quarter. As a result of these latest project awards, we anticipate growth in our Services segment revenues of roughly 50% in the second quarter alone. As we sit here today, our Services project backlog is approximately $58,000,000 which bodes well for the balance of the year. In addition, we anticipate the federal government will be procuring new projects in the second and third quarters that we expect will further contribute to our revenue growth going forward.

As I mentioned on the last call, we've been selected on several IDIQ or multi award task order contracts that include large funding ceilings and open up new markets with the approved federal budget. These contracts provide us the ability to bid on task orders among a select group of companies. With the limited competition and the scope of work that they provide, we have a good sense of the potential opportunities going forward. We anticipate the government will begin awarding these related task orders in Q2 and Q3. We're also bidding on some much larger service projects within DOE as part of larger teams that will begin to be announced later this year.

If we're successful on one or more of these projects, they could contribute meaningful recurring revenues and cash flows on multiyear projects. As I've stated in the past, the federal government has been slow to procure new task orders due to the pandemic. However, these projects have not gone away. We've received information regarding numerous opportunities that we expect to be bidding over the next two quarters. There is significant pent up demand and we look forward to capitalizing on this opportunity in a very meaningful way.

Within our Treatment Segment, we're also seeing strong demand for waste treatment capacity as evident in the steady increases in recent requests for quotes from our clients. In addition, we've expanded our treatment services to the commercial utility sector, which has broadened our market base and has resulted in several new shipments in Q2 that will likely represent sustainable revenue for several years. We have completed startup and testing of our new vacuum thermal desorption system and continue to see strong market demand for the system overall, which will be an important component to DOE's mission as well as waste generated by utilities and the oil and gas industry. Overall, we've built a solid foundation for growth and we're confident the momentum and profitability we've achieved prior to COVID will be realized again as a result of our increased bidding activities, expansion of our waste capabilities and treatment capabilities and the improved federal budgets. Also, it's worth reiterating the importance of the new 2022 federal spending bill, allocates $900,000,000 of incremental funding within DOE's Office of Environmental Management.

These increases over prior year funding typically support increased waste treatment and other projects which align with our core competencies. We also remain highly encouraged by the outlook of the Testbed Initiative or TBI, also known as the Low Level Waste Off-site Disposal Project in support of the DOE Hanford Tank Disposition Mission. The second phase of the TBI project to include the extraction, shipment and transportation of 2,000 gallons of tank waste to our Perma Fix Northwest facility located in Richmond, Washington is anticipated to occur in late Q3. To put this project in perspective and the potential that it holds for Permafix, the DOE was directed by the National Defense Authorization Act or also known as the NDAA to enter into an agreement with the federal Funded Research and Development Center, FFRDC to conduct an analysis to evaluate approaches for a supplemental treatment of the low activity waste in addition to the current DUE vitrification strategy. The current DOE strategy includes vitrification of the low activity waste in a new plant that they're currently constructing called the Direct Feed Low Activity Waste Plant or DSLaw Plant under construction currently scheduled to operations in December 2023.

The subsequent draft report by the FFRDC was developed by four national laboratories and concluded that the grouting technology appears to be the only alternative that is technically viable, affordable and flexible enough to implement under assumed constraints budget constraint scenarios without significant impact to the waste treatment plant, high level waste petrification facility and its mission and schedule for completion. The report further states and I quote, The DOE should expeditiously implement multiple pathways for off-site grout, solidification and mobilization and disposal of low level waste in parallel with the DFLaw facility. That's the direct feed low activity vitrification process. According to this report, the implementation of off-site grouting to address the 56,000,000 gallons of tank waste at Hanford would potentially save the DOE as much as $95,000,000,000 with a B, even if it's assumed just a modest percentage of that overall savings comes to Permafix, you can see that what this project holds in regards to its revenue potential. And Permafix maintains the only capability to provide this treatment in the vicinity of the Hanford site.

So we'd invite you to look this report up on the Internet and you can see the executive summary is summarized pretty well. The team that prepared this report is led by DOE's Savannah River National Laboratory along with the Pacific Northwest National Laboratory, the Los Alamos National Laboratory and Sandia National Laboratory, a multi university consortium along with the Institute for Defense Analysis and Parsons. As I mentioned in our last call, the recently enacted federal spending bill includes additional $7,000,000 specifically allocated for the Testbed initiative in 2022. This funding line item underscores the visibility and recognition within the U. S.

Congress for commercial grounding approach to supplement the current DFLaw program while providing significant cost savings and schedule reductions to support the hampered mission. So to wrap up, it's clear to us that there's a solid federal budget and significant backlog of demand that we expect to capitalize on going forward. As a result, we remain confident the balance of 2022 will see significant improvement over 2021. As I mentioned earlier, we are already seeing signs of this improvement in our March performance. We continue to invest in our capabilities and facilities.

We have highly scalable infrastructure and we've maintained a solid balance sheet as well. We are currently excuse me, we're already seeing the turnaround in Q2 and have a much better visibility for the balance of the year. As a result, we believe we're well positioned to resume ultimately and significantly exceed the performance and profitability we had maintained prior to the pandemic through our increased bidding activities, waste treatment capability, expansion and the federal budget support. On that, I'll now turn it over to Ben, who will discuss the financial results in more detail. Ben?

Speaker 3

Thank you, Mark. I'll start with revenue. Our total revenue from continuing operations for the first quarter was $15,900,000 compared to last year's first quarter of 23,100,000.0 that's a decrease of $7,200,000 or 31.2%. The decrease in the revenue was entirely due to a drop in our revenue from our services segments as new projects that were counted on to replace completed contracts were slow to start up. And this is basically because of COVID related to COVID in the early months of the year.

Delays also occurred for government funding and consumer and customer administrative reasons. While our waste treatment revenue was consistent with first quarter, we continued to see delays in waste shipments due to the impact of COVID on our customers and our staff. Turning to cost of goods sold. Our total cost of sales was $14,300,000 for the first quarter compared to $20,800,000 in prior year. That's a decrease of $6,500,000 or 31.3%, which is consistent with the decline in revenue.

Much of the reduction in cost of goods sold comes from reduced labor, travel and subcontract expenses in the Services segment and that relates to the lower amount of project, while we did see plant expenses increase due to higher labor materials and utilities. Our gross profit for the quarter was CAD1.6 million compared to CAD2.4 million in 2021. The reduction in gross profit of approximately CAD720000 was a result of the lower revenue in the Services segment and the higher labor costs and plant costs in the Treatment segment. Our G and A costs for the quarter were $3,400,000 compared to $3,200,000 in the first quarter of last year. This increase of 217,000 relates to higher outside service costs, audit and stock option expenses, offset by lower consulting expenses in the sales group related to lower bid proposals.

Our net loss attributable to common shareholders for the quarter is CAD1.3 billion compared to last year's net loss of CAD1.1 billion. As with the gross profit delays in the start up of our large projects in the Service segment had the biggest impact on our results. Our basic loss per share for the quarter was $0.10 compared to a loss per share last year of $09 Our adjusted EBITDA from continuing operations for the quarter as we defined in our in this morning's press release was a loss of $1,400,000 compared to a loss of $522,000 last year. Turning to the balance sheet. When comparing with year end, cash on the balance sheet was $3,900,000 compared to 4,400,000.0 Unbilled receivables were down $3,700,000 This is due to timing of billing, but also an indicator of lower project revenue in the quarter.

Our current liabilities were down $3,700,000 and again, this is a result of timing of payments and reduced project work. Our backlog at the March was $6,100,000 down from $7,100,000 at the end of the year and also down slightly from the $6,200,000 in March 2021. Our total debt at quarter end was $994,000 exclude and this excludes debt issuance costs of which $960,000 is owed to PNC Bank. Finally, I'll summarize cash. Our cash provided by continuing operations was 148,000 Cash used by discontinued ops was about $142,000 Cash used for investing of continuing operations was $321,000 and that's primarily capital spending.

And cash used for financing was $189,000 representative of our $106,000 of payments on our term loan and finance lease payments of about 83,000 With that operator, I'll now turn the call over to questions.

Speaker 0

Thank you. Ladies and gentlemen, the floor is open for questions. Questions. And the first question is coming from Howard Brous with Wellington Shields. Your line is live.

Speaker 4

Thank you. Mark, Ben, Lou, I hope you all are well and your families are well.

Speaker 2

Thanks, Howard. Hope you're doing well as well. Thank

Speaker 4

you, So let's get to the FFRDC. So the question is given appropriate permits, can you confirm that the State of Washington Department of Energy are finally in agreement to do grouting for low level waste?

Speaker 2

Yes, Howard. I do believe both are supportive. The regulators have recently commented numerous times that they will make the resources necessary available to DOE to review any permit or any request for shipping the waste for TBI from the tanks support that initiative. And it's interesting because they're not in support of a lot of different things associated with alternatives to the DFLaw plant. For example, they're not supportive of pretty much any waste treatment to be disposed of on-site except for vitrification.

So again, plan is to grout this waste and ship it to off-site disposal, commercial disposal outside of the state of Washington, specifically for the TBI, it's WCS in Texas. And they are supportive of that approach. As far as the DOE is concerned, it's also supportive. As a supplement to DFLaw, again, don't they're very sensitive to making sure DFLAW is not as distracted from TBI or by TBI, but have been supportive through the regulatory process, getting the WIR document and the NEPA environmental assessment through the system to support moving forward with the treatment, hopefully by late summer.

Speaker 4

Secondly, let's get to beyond the 2,000 gallon test. And you're talking about sometime in 2023 a second excuse me, third test of 300,000 to 500,000 gallons. Where do we stand on that?

Speaker 2

Well, Howard, lots changing along the way on this program in that regards. The TISGR, which is the Tankside Cesium Removal System has been removing waste from the tanks right now, doing a pretreatment to it and putting the waste in storage in another double cell tank. So far, think I've done 200 or 300,000 gallons. I'm not sure where they are exactly. But that waste is perfect for us to conduct our grouting on for the either for the final phase or for long term production.

So we're hopeful that DOE will do 2,000 gallons and see the value in us treating and disposing of the Tisker waste that they're continuing to pump. And hopefully that will make it much simpler. It is low level waste and by definition, at least that's our view. And that would be a great candidate to continue the grouting operation and ship that off-site to demonstrate a production level of value from the grouting approach.

Speaker 4

So when we talk about off-site, it's off-site from Hanford to your site. Please let me understand that other people can do routing. But what's necessary for them to do it? And how long would it take?

Speaker 2

Yeah. Our facility is located about 11 miles from the actual tanks. So it's right at the edge of the Hanford reservation. And what that makes it possible to do a very easy shipment to us, which we do all the time for Hanford waste now. We do all different types of waste from the Hanford site.

We're the only ones that have the permits and facility established right now. So we could take to get the permits that we'd need to do this type of thing commercially off-site would be somewhere between five and ten years estimating depending on the resources the state would have. And then the capabilities themselves would have to be developed. So we have those capabilities right now to do about 300,000 gallons a year and with some minor upgrades and minor permit mod, we could get to 1,000,000 and be at a production level very efficiently to do that grouting at a very reduced cost from the current program.

Speaker 4

So as a result of the start up of the vitrification plant, there will be almost a one for one. If they treat 1,000,000 gallons, they're going to have 1,000,000 gallons of I think the word is effluent. It starts in basically 2024. Where do you stand in your ability to one get the contract and two process it routing of course?

Speaker 2

Yes. There's a number of different effluent streams that would come off the DFLO once it starts. Again, as you said in December 2023 is the current start up plan. We are in line for that to provide that support to DOE. We don't have a contract with them.

We have spoken to them, but we don't currently have a contract. But that would be a perfect solution for that effluent waste, that liquid that would come off of that from that plant for grouting and we're pretty confident that Permafix will be in a position to treat that waste as soon as they start processing. And you're right, it's about one for one from a gallon that goes in out of waste out of the tank, they'll produce about a gallon of that effluent water. There's some other effluents or other waste streams that come off as well that have some other decision passed, but we're looking at that water that they use in that process.

Speaker 4

Basically one more question and I'll come back later. You're awarded a contract from the EPA along with two other general contractors to remediate uranium mines on Navajo Nation territory. It was a $220,000,000 contract if my memory serves it correctly. So two questions. One, how much of that contract will you receive over what period of time?

And thirdly, when do you plan on starting?

Speaker 2

Sure. We have a pretty long list of IDIQs, Howard, as I mentioned in the script. And they're all slow to get moving. They were all waiting for the federal budget to be approved, which was done in March. And now they're wrapping up their task order RFPs, which we have been told we should start receiving by mid May.

We have some big ones with the Army Corps of Engineers as well as Los Alamos and the Navy. The one you mentioned, the EPA, we have had informal notification that there is our first task is coming. There will be three bidders that hold that IDIQ for that Benningeranium mine IDIQ. We're teamed with two other companies on that. And but our role is significant.

It's to basically manage the waste and the radiation protection program, which is a significant portion of the project, particularly waste disposition and is also a component of sorting that as we talked in prior calls, have a technology that's very advanced on that. So we're highly confident that we'll be competitive on that. You never know how these things goes, but I don't know the value on that initial task order Howard, but I've been told there's over 20 uranium mines that are on the near term list that they've characterized and putting together task orders on underneath that IDIQ. So it seems like there's going to be a good backlog of that work out there. It's been funded by Congress I know and it's highly visible in the Southwest.

So hopefully we'll start seeing that program get some traction and getting those mines cleaned up out of those areas in the Arizona and Mexico region.

Speaker 4

That's all I have. Best of luck on getting these things done. Much appreciated.

Speaker 2

All right. Thanks. Thanks, Howard.

Speaker 0

Your line is live.

Speaker 5

Can you hear me? Good morning. Good

Speaker 2

morning, Stephen. Good morning, Stephen.

Speaker 6

First question is, when you said there was you mentioned there's a $58,000,000 backlog. How much is service and how much is treatment?

Speaker 2

Well, that's all services, Stephen. Treatment the treatment backlog is about I want to say between seven percent and eight Isn't that right, Pat?

Speaker 3

6.1%.

Speaker 2

6.1%, okay, at this point. Yes.

Speaker 6

Okay. All right. Obviously, as the rest of the world you're being impacted by costs. So with new bidding, are you able to pass on your extra costs?

Speaker 2

That's a good question, Stephen. It's our variable costs are not dramatic because most of our costs are running the facility. We're obviously seeing some costs in labor increases and fuel and trucking and containers. But to answer your question, we have been able to pass on some waste streams it's been no problem at all. On other waste streams that are highly competitive, it's been less.

But overall, we have not seen an impact on our margins at this point overall, our gross profit. Ben keeps very close Ben, our CFO, keeps very close tabs on supply chain issues and inflation issues to make sure that we're maintaining the gross profit that we had planned for the things that we're treating specifically. On the services side, it's much less because it's mostly labor. And several clients have been very supportive of the impacts in letting us do mods and apply fuel surcharges along the way. But we haven't seen a real impact overall to the operations at this point.

Ben, is there anything else you want to add to that?

Speaker 3

Yes. The only thing that really stuck out in the quarter was natural gas costs at our plants. That was a good chunk. But otherwise, trends the fuel surcharges is in the trends, but really our product line varies. Sometimes we use a lot of trends, other times we don't.

And when disposal increases are at our end disposal facilities, we're usually able to pass that on to the customers.

Speaker 6

Does the relative to increased cost, will that impact if you get the TBI, do you have a set price where that will be your cost will be more expensive there now? Or is that not a factor?

Speaker 2

Our prices yes, I would say that's Yes, a they're not set either at this point, yes. But it's just

Speaker 6

All right. That answers the question. There's a big contract out for the operation of the plant and the plant maintenance. And I'm presuming you're part of somebody with that. If that's correct, when do you have any hearsay on when that's supposed to be awarded?

Speaker 2

Yes, Stephen. We are a part of that procurement. We obviously can't talk about it because we are participating in it. But all indications are that DOE is on track for the October timeframe for announcement. There's no reason to believe that that's changed any recently.

So that's kind of what we're assuming at this point.

Speaker 6

And in that contract, if you're able to say something, participation is as part of the group, right?

Speaker 2

Yes. We're a critical subcontractor on the team.

Speaker 5

All right.

Speaker 6

What was the $673,000,000 the tax thing? It was $673,000,000 that you had added in relative to tax? Yes.

Speaker 3

That's if you remember back in the third quarter, Steve, eliminated our valuation allowance and that's kind of like a reserve on your NOLs. And so now we book taxes one way or the other. And so because we had losses that's effectively a negative tax.

Speaker 6

Yes. But if that wasn't there you'd have a greater loss right?

Speaker 3

Correct.

Speaker 6

Okay. All right. Final question is, I keep reading I keep hearing that industry is being impacted by the inability to find people. Are you having those problems to find people?

Speaker 2

We are not yet, Steve. We are having some turnover, but we've able to find people. And we're not a work from home company for the most part. And that's hurt us a little bit because we have such a team oriented office and the work we do requires to be at work. So we've lost some folks there, but we've been able to replace them.

The places, the locations that we're in have been supportive of that and the labor market hasn't been quite as bad as some other places in the country. But to answer your question, it hasn't impacted us significantly. We did we've lost some people. Probably the thing that has impacted us if anything is the DOE sites that we're located near are hiring enormously. So we're fighting the pressure for people to join other contractors at the DOE sites as these budgets go up.

But so far we've been able to replace our personnel and with a few exceptions out of Hanford, we have seen limited impact.

Speaker 6

So I guess connected to that question is, so if you progress with the TBI and you got went to the larger amount, is it reasonable to ask that you'll have you'll be able to get people to be able to scale up?

Speaker 2

We believe we can, Steve. I think that that will not be where our risk lies. I think that we'll be able to move the folks around that we've got. And we've been successful so far in recruiting. We've lost about a dozen people in Q1, early Q1.

And we replaced them by the end of the quarter. And that's not what we want to be spending our time and resources on. And we don't want to lose trained people believe me. But we've been able to recover and I think it's a little bit more stable now. So to answer your question, I don't see that as a significant risk to be able to meet TBI goals.

Speaker 6

All right. Well, thank you very much and Thank best

Speaker 2

you. To Steve. Appreciate it.

Speaker 0

Okay. The next question is coming from Aaron Warwick with Breakout Investors. Your line is live.

Speaker 5

Hey, guys. Thanks for taking the call.

Speaker 2

Good morning, Aaron.

Speaker 5

Hey, good morning. You've guided sort of generically that you expect the revenue this year to return to or potentially exceed pre COVID revenue. Looking at the numbers then it looks like your pre COVID would have been just over $100,000,000 So is that sort of the expectation that you would be over $100,000,000 this year in revenue?

Speaker 2

Well, Aaron, we certainly want to be tracking to that level on a quarterly basis. Q1 was not supporting that goal very well. But we are looking at the next several quarters that are getting towards that $25,000,000 a quarter level and hopefully exceeding it with just a few more wins over the next two quarters, should be able to exceed it by the end of the year. So that is our goal. I don't want to speculate that we'll be able to make up for Q1 at this point, but we certainly are thinking that we'll be in the $25,000,000 a quarter position by the end of the year.

Speaker 5

So sort of on a run rate level?

Speaker 2

Yes.

Speaker 5

Okay. Good. Good. And then you had mentioned on the last call about bidding activity in March and how it was at I think you pretty much indicated the highest levels you had seen for that month. How do things look in April?

And has that kind of continue into April?

Speaker 2

It has continued. March was a pretty big month, but we've been I think I mentioned in the last call that we did 28 bids in March. I don't have the number for April, but it's in the mid-20s, low to mid-20s overall. I would speculate. Again, I'd have to verify that.

So it's doing pretty well. Our revenues or excuse me, the values of those bids were increasing pretty linearly along with the numbers of bids. We're seeing a lot of activity in the commercial sector that are making up for some of the delays from DOE and the government work on the waste treatment side of the house. So we're very optimistic about that, that we'll continue to see that number be in the mid to high 20s on a per month RFP basis.

Speaker 5

Fantastic. Thank you, guys. Appreciate it.

Speaker 2

All right. Thanks, Aaron.

Speaker 0

Okay. The next question is coming from James Godfrey with Godfrey Consulting Group. Your line is live.

Speaker 2

Good morning, gentlemen. Thank you for taking my call. Good morning. So I just wanted to follow-up in greater detail to some of the prior discussion here. One of the things of course that's imperative let's face it Hanford and treatment Hanford so huge in the test that initiative.

And you suggested that hopefully by late Q3 we could actually see the next 2,000 gallons come in as part of the test that initiative second phase. To that end this week last week actually there was a tri party three day or two day three day meeting I guess. And from that weapons complex monitor indicated that the speakers certainly were hinting that a deal was clearly in the works with the State of Washington. So that's kind of validating what you represented and I appreciate that and just put that out there for whatever it's worth. Now there's one final permit necessary from the State of Washington.

And I want to know how encompassing is that permit going to be? Is that going to be kind of a huge event that gets us over the hurdle? Or are we going to have to continue to grovel with the state of Washington going forward for the next phase of the testbed initiative? Well, it's a complicated question James. But just in a nutshell, the permit that you're referring to is the RD and D permit.

And the RD and D permit is what DOE applies for with the state to ship the 2,000 gallons and any additional waste that they'd want to ship could go underneath that RD and D permit. The RD D permit comes in after the WERE Oasis Incidental to Reprocessing Report is approved along with EA being approved. Then they apply for the RD and E permit and states stating it should be less than ninety days to grant that permit. So to answer your question, it's not typically over onerous permit request. They certainly have already written deal.

We've already drafted the permit application for the most part and ready to go with it. So we expect that to go in anytime now in the next few weeks, my understanding, and see the state turn that around to meet that Q3 goal or at least schedule I should say. So we don't expect it to be too bad. There's a couple of things that can change things along the way depending on what waste they want to ship us and there's some debate out there. They shipped us the waste and the that the TISCORE has generated they wouldn't even need that permit.

But we're leaving that up to DOE to decide and work with the state on directly. And but at any rate, we're it looks good for the end of Q3. Fantastic. Well, that's very encouraging. It's been so long in coming and of course COVID delayed everything, but that's exciting.

Speaking of COVID delays, at one point you had represented that the government had been stockpiling a lot of waste and that you were hopeful that at some point you would see not only a return to normal levels, but a surge that also you were receiving in effect some of this built up waste that hadn't been shipped. Is that still your expectation? And do you have any kind of just general guidance as far as how much stacked up waste is there out there that we might potentially see? Yes, James, it's really hard for us to understand what they've got what their inventories are that they're going to ship. We know that from meeting with several of the larger generators at a conference in March out of Phoenix that there is spreadsheets of waste that they've accumulated through cleanup activities or other things over the last couple of years that they haven't shipped.

And that waste will begin to be moving. We have put in some bids for several of those larger waste streams. We're waiting for Silver Oak Ridge here to get through their system. The primes are negotiating with the UE on those now as far as what priorities are next and which should be funded with the current budget that's approved. We met with Los Alamos last week at their facility in New Mexico.

They've got a big list as well and we're working with them on some specific ones. So we do know there's the list out there are much longer than it is typically seen in a year. What they're funded to do, what their priorities are and what shows up in task orders, we can't speculate on because we don't know which ones we could address versus direct disposal versus something else. So it's difficult to say. But we do know there is a pent up demand and we meet with the waste managers for each of these sites frequently and they convey to us they've got good backlogs to keep moving with their surplus and funding.

So we're optimistic. Great. So I mean, it just kind of looking at the overall business, we've survived on the services side, but not only do we see revenue increasing, but also high margin treatment business is going to become a more important mix going forward. And that's just critical as we all know. So that's certainly encouraging and I appreciate your answer.

Thank you, Mark. As far as the $45,000,000,000 Hanford integrated tank disposition contract embedded in that meaningful work must be done by small businesses. And we're in there bidding as a group and that's fine. Even if we don't win the bid though, doesn't our facility on location open the door for just a huge surge in potential business activity at Hanford as this $45,000,000,000 contract gets integrated especially since we still fall under that small business umbrella? You're correct, James.

We do fall under that umbrella. And the answer is absolutely. Win or lose on that team, we do expect to be supporting Hanford in a big way on several of the process waste streams that come off their plants at the tank farms and D. F. Law facility as well.

So as that program is rolling, we do see significant opportunity and we've been involved heavily with the incumbent contractor who is continuing to meet milestones on the DFOL startup as well as other field activities to get a good understanding of what this waste stream will look like in the coming years. So to answer your question, absolutely, we're very confident that win or lose, it will be a big impact to our Purpose Northwest plant when those programs get rolling. Fantastic. Fantastic. Just a couple of other questions.

In the past you've talked about you have multiple transformative initiatives in various stages of incubation. And I think you define those as like 20,000,000 or $25,000,000 revenue streams hopefully going forward if you were successful. Give us an update on some of those initiatives. How much work have we been able to accomplish kind of through this COVID phase? And are some of those incubated products or platforms starting to show some light at the end of the tunnel where they might actually kick in above and beyond our platform established business lines?

Yes, Jim. That's a good question. The just a couple of those initiatives include our international program, our commercial program and our Navy program. International has moved very quickly. We've been awarded a framework contract in U.

K. To do waste treatment services over there. As you may have seen in the March timeframe, we had an announcement that we put together an arrangement with Westinghouse to consider building a new plant in The U. K. In support of a big project out of Italy.

And this plant in U. K. Would support the waste that would come out of that Italy project. That Italy project RFP came out three weeks ago, due in July, likely be awarded by the end of the year. That's a very large project in the $40,000,000 range and it's been going on for many years.

It's anticipated to be two competitors, us and another team. So that program is making progress. We continue to work with different companies in Germany and Slovakia and The U. K. For shipments.

So The U. K. The international work is going well. It's taken a little bit of a hold based on all the activity in Ukraine, but not significant. Things are still moving, but the shortage of containers and some other things have slowed things down a little bit in the international world, but we expect them to pick back up.

The commercial side, as I mentioned, is going very well. Two different fronts there. One is on the waste treatment side, which I mentioned our sales team has been revised and we have a new leader who comes from TVA, very familiar with the commercial world. He's done a great job and really launched that program in the last six months. That's going great.

But in addition to that, we've been successful in getting involved in some of the commercial decommissioning work as well for the reactors that have recently been slated to be decommissioned commercially. So we're working with a couple of firms there and one's moving ahead very quickly. We're excited about where that can lead us. And then the Navy, the other one is our ship project is going very well at Norfolk Naval Shipyard for The U. S.

Key, Axem Key, they call it. We've also just we finished up a demolition of a building excuse me, decommissioning of a building at the Norfolk Neighbor Shipyard and that project ended in Q1 and got just an outstanding rating from our clients, which will be very supportive and moving forward with similar type of work. Those programs with the Navy are getting significant funding increases with very large backlog of decommissioning for vessels, ships and subs to support the ones they want to build. And some of those the ones that have recently been announced, there's several nuclear ones as well that will have a play in. So we're seeing all those move forward rapidly and look forward to participating in that as a kind of a branch of our expansion.

And we have a number of other smaller initiatives that are also moving forward, But those are our primary ones right now that we're seeing an impact on this summer hopefully. Great, great. And then one final kind of difficult situation that we've encountered. We let's face it at Hanford there's folks that are promoting strictly everything get done under the gold standard vitrification and they have their own political interest in doing that. We were attacked a while ago questioning our safety platform a little bit because of a couple of very minor instances and issues.

So just in the terms of safety, kind of reassure us the management controls that are in place? Did we learn anything from those experiences? I'm sure we did. What where do we stand in terms of safety? It seems to be the one ding out there that really we could do a better job of really emphasizing that we're running one hell of a safe operation.

And as far as that's concerned going forward, we hold our head high. So that's my understanding. And just kind of speak a little bit about where we stand on our safety platform to reassure folks that these minor little situations happen with everyone. And going forward, we've completely got our arms around those situations. Yes.

James, we're very sensitive to the fact that we will not be successful if we have safety issues. And that's probably one of our biggest risks and what we look at on a daily basis with our management team. Our two Executive Vice Presidents, one for the treatment side Richard Grond and Anne Lombardo with services spend a significant amount of time with their teams revising and implementing and addressing our safety culture. So far this year, just to kind of give you a sense, we've had one recordable the entire year. That's a really good record for the type of work we're doing, way below national averages in a huge way.

We've had some minor buyers in the past. We put those have been taken care of and we've learned from those and there's not been any releases, that's the key part. And we put in corrective actions to make sure this don't happen again. And in both cases, there's no property damages either. So those are important to learn from and that we train constantly to make sure that we maintain our safety goals.

DOE has very strict safety standards. When we bid things, we have to be within those standards and or regulated with our regulators and our communities as well to make sure that we maintain safe operations wherever we're located. So we're very proud of our safety program. We believe it could always be better. It needs to be zero is our target for everything on incidence rates and recordables.

And we're we've done very well over the last three years, but we're improving all the time as well. So I think hopefully that answers your question, James. It does. And I think relative to the criticism you've had it was very lopsided and very it's coming from people that certainly have different platforms that they're attempting to promote. It isn't like it's coming from some independent evaluators.

As far as that's concerned, I think it would be interesting to see a comparison that put up our safety record against other contractors at Hanford because I'm quite confident that incident numbers per man hour we probably are right there going toe to toe if not have an exemplary record. So any further work you can do to better illustrate really how safe and how seriously we take this I think would pay huge dividends going forward especially with the tens of billions of dollars of future opportunities at Hanford. It seems to me to be one area where we really need to continue to buckle down and differentiate ourselves positively. With that, I appreciate it. I'm happy that we've seen the trough and revenues are looking forward headed in the right direction and business mix is headed in the right direction in my assessment.

And I wish you all the best of luck and thank you. Thank you, James.

Speaker 0

I'd now like to turn the floor back to management for closing remarks.

Speaker 2

All right. I'd like to thank everyone for participating on our first quarter conference call. We remain extremely confident in the outlook for our business and we appreciate the continued support of our shareholders and look forward to providing further updates as developments unfold. Thank you.

Speaker 0

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful

Speaker 2

day.

Speaker 0

Thank you.