Perma-Fix Environmental Services - Earnings Call - Q1 2025

Transcript

Operator (participant)

Good morning, everyone, and welcome to the Perma-Fix Fiscal First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode, and the floor will be open for questions following the presentation. If anyone should require operator assistance during the conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, David Waldman of Crescendo Communications. David, the floor is yours.

David Waldman (President and CEO)

Thank you, Jenny, and good morning, everyone. Welcome to Perma-Fix Environmental Services First Quarter 2025 Conference Call. On the call this morning are Mark Duff, President and CEO, Dr. Louis Centofanti, Executive Vice President of Strategic Initiatives, and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing First Quarter 2025 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. 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. Perma-Fix believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available on today's news release on our website.

I'd now like to turn the call over to Mark Duff. Please go ahead, Mark.

Mark Duff (CEO)

All right. Thank you, David, and good morning, everyone. We entered the first quarter facing a number of temporary challenges, largely related to delays in procurement and project activity tied to the federal administration transition. While these factors weighed on our revenue growth, we still delivered a modest year-over-year increase in revenue. More importantly, we exited the quarter with momentum and improving visibility across our key growth initiatives. Our treatment segment showed improvement in the first quarter. After a slow start, waste receipts began to improve toward the end of the quarter, contributing to a backlog that grew to more than $10 million by quarter end, up approximately 30% from where we were in 2024. Revenue in the treatment segment increased modestly year-over-year, and we did achieve gross profit improvement supported by higher waste volumes, reduced variable costs, and other efficiency initiatives.

We also made targeted investments to support the receipt of new waste, including staffing, training, and facility readiness activities that we expect will translate into throughput gains. Our waste receipts in treatment production at our Perma-Fix Northwest facility from Hanford have increased, with disposal occurring locally to on-site landfills. Within our services segment, revenue was down slightly due to delays in federal procurement activity, particularly in early-stage projects. However, gross margins improved significantly compared to the prior year, reflecting proactive cost reduction initiatives and improved alignment of resources with our revenue backlog. As we move forward, the team continues to focus on disciplined indirect cost management while maintaining the flexibility needed to support larger project opportunities expected later this year. Our PFAS program continues to advance on multiple fronts. We received our first commercial shipments from the federal government, with additional approvals pending.

We've also made meaningful upgrades to the system, including the integration of chemical recycling, which is already reducing costs and improving efficiencies on a per-gallon process. Our Gen Two unit remains on track for Q4 deployment and should expand our processing capacity by at least three times. As more states adopt stricter regulations around PFAS destruction, we see this business as a promising long-term growth driver. We continue to develop strategic partnerships with large quantity generators and have aligned our technology with the PFAS market segment that continues to highlight our technology as superior based on cost, simplicity, and efficiency for the total destruction of PFAS. We're also tracking legislative activity in more than a half dozen states, which is expected to drive demand for full-scale PFAS destruction technology like ours.

In addition, we're encouraged by the recent press release from the new EPA Administrator, Lee Zeldin, announcing that the Trump Administration's position to ensure PFAS remediation policy is a priority through the development of an agency lead for PFAS and continued assessment of effective and available treatment technologies for the industry to consider. We also remain optimistic about our role in supporting the U.S. Department of Energy's Direct Feed Low Activity Waste, or DFLAW, program in Hanford. The project remains on schedule for August 1 start, and we're fully prepared to support multiple waste streams as the operations ramp up. This program, part of the broader Hanford Tank Remediation Mission, has the potential to generate very significant high-margin recurring revenue beginning in Q4 through the next decade at a minimum. On the international front, we saw improved activity during the quarter with growing international waste receipts.

We received approximately $7 million worth of waste that we anticipated from Canada, Mexico, and Germany over the past two months, with the remaining portion scheduled for May and June. We also continue to pursue a robust pipeline of federal and commercial projects. These include previously discussed opportunities at West Valley, where transition activities are ongoing and will continue through the end of June, with initial operations expected to begin in July. While the BWXT team finalizes its performance strategy with the DOE, we remain optimistic about our role in supporting this decade-long program through revenue contributions, though revenue contributions are not expected to be defined for several more months. We continue to actively pursue subcontracting opportunities under the DOE's Integrated Tank Waste Disposition Contract at Hanford.

While DOE is still finalizing its broader tank waste remediation strategy, we remain well aligned with the technical requirements of this program and have begun to participate meaningfully through increased waste receipts at our Perma-Fix Northwest facility beginning in March to support the tank closure mission. In addition, we're pursuing several other large-scale DOE and DOD contract opportunities expected to be awarded in 2025, including at sites such as Y-12 here in Oak Ridge, Lawrence Livermore National Labs, and Lawrence Berkeley National Lab in California. We're also awaiting the outcome of our USSX Enterprise decommissioning bid, which remains a highly competitive opportunity with an award expected around mid-year. As part of our long-term strategy to diversify revenue, we are expanding our presence internationally through strategic partnerships.

This includes the JRC Italy project, where we just submitted our final permit documentation in Q4 of last year and remain on track to initiate treatment operations in late 2026. Our broader international expansion efforts include Europe and Latin America and continue to focus on engaging established generators of radioactive and hazardous waste that can benefit from our treatment capabilities. Internally, we've continued to apply disciplined cost management while maintaining flexibility to support incoming contract activities. Our nuclear services team has aligned our indirect expenses with near-term backlog visibility, and the operational readiness steps we took during the quarter are already contributing to an improved throughput at our key facilities. Looking ahead, we anticipate stronger performance in the second half of 2025.

Our outlook is supported by five key drivers, including our growing waste treatment backlog, improved visibility on federal procurement activities, the ramp-up of the DFLAW program in Hanford, continued PFAS technology advancement, and commercial traction and execution of large-scale domestic and international opportunities, including the DOE and DOD awards and the European partnerships. With that, I'll turn the call over to Ben Naccarato to walk through our financial results in more detail. Ben.

Ben Naccarato (CFO)

Thank you, Mark. Starting with revenue, our total revenue from continuing operations for the first quarter was $13.9 million compared to last year's quarter of $13.6 million, for a slight increase of $302,000 or 2.2%. Revenue in the treatment segment increased by $477,000 or 5.5% compared to prior year, as we saw an increase in our waste volumes received and processed, offset by lower pricing, which is reflective of waste mix. In the service segment, revenue was down $175,000 as new projects in 2025, mostly offset completed projects from Q1 of last year, 2024. Gross profit for the quarter was $657,000 compared to gross loss last year of $620,000 in Q1 of 2024. Treatment segment's gross profit increased by $302,000 compared to prior year, based on higher revenue and lower variable costs related to waste mix and improved productivity.

This increase was partially offset by higher fixed costs, which were predominantly from higher labor expenses as we ramp up for anticipated increases in production. In the service segment, gross profit increased by $975,000, which was primarily impacted by lower variable costs due to the improved profitability of the projects performed in 2025 as compared to last year. Our SG&A costs for the quarter were $4 million, which is higher than prior year by $471,000. This was the result of higher labor costs, primarily at the executive level, higher legal expenses, and higher marketing expenses related to our user conference and other labor-related expenses. Our net loss for the quarter was $3.6 million, consistent with last year's loss of $3.6 million. Our total basic and diluted loss per share for the quarter was $0.19 compared to a loss per share of $0.26 in the prior year.

Our EBITDA from continuing operations for the quarter, as we defined in this morning's press release, was a negative $3.3 million compared to a negative $4 million last year. Turning to our balance sheet, our cash on the balance sheet was $25.7 million compared to $29 million at year-end. Our net accounts receivable were lower by $2.3 million related to improved collection of outstanding receivables. Our current liabilities were down approximately $1.2 million, reflecting decreased costs associated with production, timing of vendor payments, and changes in our deferred revenue. Our waste backlog at the end of March was $10.2 million, up from $7.9 million at year-end and consistent with $10.6 million a year ago. Our total debt for the quarter at quarter-end was $2.3 million, most of which goes to PNC Bank. Finally, with our cash flow, I'll summarize. Cash was used by continuing operating activities of $2 million.

Cash used by discontinued operations: $56,000. Cash used for investing in continuing operations was $571,000, of which $523,000 was related to capital and the remainder to permits and other investments. Our cash used for investing in disks was $15,000. Our cash used in financing was $396,000, consisting primarily of payments to our term and capital loans of $157,000, payments for finance leases of $71,000, and payments of $194,000 relating to the public offering we completed in December of 2024. This is offset by some proceeds from option exercises of $41,000. With that, I'll turn the call over to the operator for questions.

Operator (participant)

Thank you very much. At this time, we'll be conducting our question and answer session. If you would like to ask a question, please press Star 1 on your phone keypad now. 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 anyone using speaker equipment, it may be necessary to pick up your handset before you press the keys. Please wait a moment whilst we poll for questions. Thank you. Your first question is coming from Howard Brous of Wellington Shields. Howard, your line is live.

Howard Brous (Analyst)

Thank you. Mark, Ben, first question. Talk about the 2026 federal budget and how this can impact you in 2025 and 2026.

Mark Duff (CEO)

Yeah, Howard. There's been a lot of press releases and announcements the last few days in regards to the White House. Proposed budget, obviously, has to get through both markups, but we kind of look at that as kind of the baseline, and it was quite favorable. We get a significant portion, probably 60+% of our revenue comes somewhere through DOE, and the EM program is a big portion of that segment. The EM budget was proposed with only about a $300 million reduction out of $8.5 billion. We are very encouraged by that. I'm not sure where that $300 million is going to come out of yet. We haven't seen that detail. Most of it's going to be some of the smaller sites. There are 14 of them, and that will come out here in the next few weeks.

Most importantly on that, it specifically said in the budget that there would be no reduction in Hanford for 2026 and that there would be a significant increase, a dramatic increase on the NSA side of the house. That's the weapons production side of the house, where we also get quite a bit of waste and opportunities for remediation projects that they clear out as they're upgrading their infrastructure and building new buildings. There are opportunities there that will be accelerated, mostly on the services side, but also on waste. We are very encouraged by the budget overall. We were holding our breath like everybody else. We did not know really what was going to happen. We have talked to several people in D.C. on the Hill and DOE headquarters, and the common theme was that this administration has a lot of respect for reindustrialization activities that the EM program supports.

The sooner they clean up, the quicker they can reindustrialize some of the smaller communities. Along with that, the weapons program upgrades as well. We are all encouraged by it. We do not see any impact from that or any impact at this point to some of the bids that are in our pipeline for the next 18 months.

Howard Brous (Analyst)

In reference to Hanford, are you receiving any waste from Hanford currently?

Mark Duff (CEO)

Yeah, we are, Howard. As we mentioned, our backlog looks much better, about $10 million right now, which is a good place to be. We're also seeing a significant increase in overall waste sales. To answer your question, we're seeing a significant increase in Hanford to this point of about $2 to $3 million a month in waste coming from Hanford, which is dramatically more than we've seen in the past, at least for the last 10 years. That's coming from the tank closure mission as well as the other plateau, what they call plateau remediation contract, which is the non-tank work that's going on out there as well. At least 50%, maybe closer to 100% increases in waste receipts at our Perma-Fix Northwest facility directly from Hanford.

Howard Brous (Analyst)

Mark, are you comfortable in discussing what kind of margins you're getting from Hanford?

Mark Duff (CEO)

Not at this point, Howard. I will say that's pretty traditional margins, and we're focusing very much on keeping our costs down. Our new COO, who started in January, has spent a lot of time out there working with her team and her other executives that's local out there and her general manager to make sure that we've got the staff that we need to support this bigger backlog along with DFLAW starting soon. As I mentioned earlier, I'm not sure how clear it was, but what it comes down to is we had to hire a lot of people to support this increased backlog in production. It took several months to get people hired, trained, and actually productive in this business. It just takes a while to get people ready. We spent a lot on that last month, excuse me, March, and part of February.

They're rolling now, beginning mid-April, and getting very close to our overall production goals to make sure we're keeping up. That's going to have a big impact on the rest of the year with these guys rolling. The waste we're receiving from Hanford is very notable, Howard. These are sustainable waste streams, so it's not one-offs. We expect these wastes to continue to be treated for several years. We're really developing more of a strategic partnership with the new tank waste contractor to provide more innovation than we have in the past and ways that they can reduce their costs while we're maintaining our productivity and our indirect costs.

Howard Brous (Analyst)

Is it a fair comment that the contract that exists today is a 10-year contract, but that the transformation of Hanford is going to start in August 1, 2025 for you, but it continues to 2060 when everything should be finished by that time? Can you comment about the additional X number of years? It's basically a 35-year contract. Is it not?

Mark Duff (CEO)

Yeah. The contract with H2C for the tank closure is 15 years. The other one's about 10. They're already several years into it. Those will come back around eventually. The overall baseline for the closure of Hanford, it continues to go up. I think the last estimate that was published was $400 billion to $600 billion for the next 50 years or so. It continues to get more and more expensive. It's going to take a lot more funding level, higher funding levels than they're getting now to reach those points or reach those goals. It's somewhat uncertain. They are making progress on the grouting. There have been some press releases the last few days on that. They're positioning for deploying their strategy of how they're going to do grouting on site, which, as everyone knows, we're a big part of that.

We'll hopefully play a major role in that once it's defined. It still looks like it's going to be several years out. I'm not sure exactly the timeline. DOE really hasn't shared that publicly, but they have to get through a couple of regulatory documents and some hurdles, and they'll start putting the baseline together for their commitments on the grouting program, which will cover the 22 tanks that they have to have grouted in the next 15 years.

Howard Brous (Analyst)

That's all I have. Mark, congratulations on moving forward. Thank you.

Mark Duff (CEO)

Thank you, Howard. Appreciate your support.

Operator (participant)

Thank you very much. Our next question is coming from Aaron Spicciotto of Craig-Hallum. Aaron, your line is live.

Aaron Spychalla (Research Analyst)

Yeah. Good morning, Mark, Ben, and Lou. Thanks for taking the questions. Maybe just on the grouting, Mark, you touched on most of what I wanted to cover. Could you just give an update on kind of the recent news there, what kind of the near-term priorities are, and just maybe size, how you potentially see that opportunity for you in the coming years?

Mark Duff (CEO)

Yeah. It's still unfolding, and there's not a lot of communication from DOE on this. What I can say is that DOE has, my understanding is that DOE has a commitment to inform the state through their Triparty Agreement of what their strategy is going to be by December of 2025. That's largely contingent on whether they want to inform the state as to whether they want to build a facility on site, use local regional grouting capabilities like we offer, or ship it out of state like they did on the TBI initiative, or a combination of all that. We're still confident that they'll have a risk-based, best value approach to selecting that approach. They've got to make that decision here in the next six to nine months or so.

My speculation, and it's just complete speculation, is they'll likely have a couple of alternatives to make sure there's some redundancy and backup for the program. We do expect, no matter what, because of our capability and having a $100 million facility right at the gate of Hanford that can do all this grouting, that we'll play a major role. To kind of give you a sense of what it really means, right now, for them to close these 15 tanks, excuse me, 22 tanks in 15 years, they need to process about 3 million gallons of waste a year. It's already going to be getting behind if they don't get rolling soon. 2040 is their commitment with the Triparty Agreement. They're making progress, I understand, evaluating alternatives and those types of things. It is moving.

I still have a lot of data at this point, Aaron, in regards to what their final decisions are and which direction they're going at this point. We still remain very optimistic that we play in a key role in it.

Aaron Spychalla (Research Analyst)

Understood. Appreciate the color there. Second, on PFAS, great to see the commercial shipments from the government starting. You kind of talked about lower operating costs and higher margins. Can you just talk about how you see contribution from that second-gen unit as we move into year-end and into next year, just kind of revenue, margin assumptions, and then just a little bit on your kind of rollout plans? Is there enough backlog, feedstock in the market? Just unpack that a little bit for us, please.

Mark Duff (CEO)

Sure. We're still Gen 1. We're constantly doing demonstrations and testing it and reengineering some of the components to it to optimize them. It's a prototype, really. While it's generating revenue, we are planning right now. It looks pretty good that we'll do about $300,000 this quarter in revenue and approach 50,000 gallons of treatment this quarter based on our backlog and some of the agreements we're signing. When the new system comes on, we expect that number to be pretty close to $1,000,000 a month initially, again, with some tuning and with Gen 1 also working. We'll have the new unit and the existing unit. It's going to start off pretty slow. Our goal has long been to design the system to support $5 million a quarter, $20 million a year. We're seeing really significant interest in our technology itself.

Lou, our founder, is working very hard on partnerships with large companies that generate extremely high volumes and want consideration for field deployment. In other words, a smaller unit. We're working with large commercial industry partners that have a sustainable generation of PFAS. They're still not finding, we're still not finding, or them, a lot of destruction outlets outside of incineration. The thing I'm probably most excited about in regards to PFAS is the engineering we're doing. We've got our destruction cost down around or below most of the incinerators. We're very cost competitive, if not the cheapest. The destruction levels are exceeding expectations and meeting expectations of all of our clients. It's just a matter of getting more volume through the system, getting these partnerships signed so that we're getting bigger backlogs and getting a new system developed.

We're doing lots of tours with our clients. They want to see how it works and how it operates. Overall, extreme optimism on the whole front. We've done, prior to some other key people, a PhD chemist and a number of other folks to bolster our capability and keep things moving. I was very encouraged by the Zeldin press release. If you haven't seen that yet, it's very encouraging to see that EPA is putting an emphasis on it. I do still believe the states are going to drive most of this, but at least the Trump administration has recognized the importance of it. I think once we get a little bit more data on our performance of our system, we'll be able to get the EPA and some of the DOD folks to adopt this technology as one that is preferable for total destruction.

Aaron Spychalla (Research Analyst)

Great. Thanks for the color on that. Maybe on the services side of the house, you kind of talked about a temporary suspension of mandates as the administration kind of changed over. Just can you give an update of kind of where we are today with kind of that base business? It sounds like West Valley will get some more clarity here in the coming months. Are you still expecting progress on those RFPs with kind of the current government situation? Maybe talk about that a bit, please.

Mark Duff (CEO)

Yeah. We have been through the whole industry that we're in on the services side on the DOE front has been in a trough in regards to task order or project types of projects. The big M&O companies that run these big sites are self-performing more, and there's been less things to bid on. That has come full circle. Some of the larger small business requirements are driving more outsourcing. We're starting to see an increase in projects that are $20 million to $40 million over a couple of years in size, which is our sweet spot. We're bidding on a couple of those right now or due out here in the next couple of weeks. We've got a couple we're working on as we speak, also with the Corps of Engineers, kind of the same thing. We're starting to see a lot more activity.

We went 18 months with very few projects over $10 million in value. Now we're seeing a good pipeline. We see that continuing. As far as West Valley is concerned, we do not know what their final budget is going to be. Obviously, it has to go through some markups, and it could move in a number of different directions. We expect it to be around $100 million for the year, for next year. We have a very specific scope that we're working with the client on, with BWXT on, and it will evolve through Q3 and Q4 and be implemented in Q1. We do have a path forward. It has become more clear. We know what people we have to put involved in. We know what people we have to find to support it and what innovations we're bringing to the table.

It's all starting to come much more clear. We're just unable to put a revenue goal on it yet or really know what it means to us financially. It is looking very good. The other projects are coming up. There are a number of other bids coming out that we're doing teaming dances with other companies that would also be awarded in the next 12 months along with those.

Aaron Spychalla (Research Analyst)

That's helpful. Thanks. Maybe just last on CapEx. I think, Ben, you talked about, I think, $500,000 in the quarter. Just maybe outline some of the priorities there for the next handful of quarters, areas of the business, and just how you're thinking about CapEx for the rest of the year.

Ben Naccarato (CFO)

Yeah. Aaron, we're looking like probably going to be in the $5 million to $6 million range, and that's pretty much from our usual $2 million to $2.5 million of sustenance and then a second-gen two reactor that would be in the $3 million plus range. So that's kind of what we're looking at for this year. I would think from a cash flow standpoint, it'll trend probably upward in the latter part of Q2 and Q3 and then sort of back down to the sort of average of $500,000 a quarter after that.

Aaron Spychalla (Research Analyst)

Perfect. Thanks for taking the questions. I'll turn it over.

Mark Duff (CEO)

Thanks, Aaron.

Operator (participant)

Thank you very much. Your next question is coming from Aaron Warrick of Breakout Investors. Aaron, your line is live.

Aaron Warwick (Analyst)

Hey, good morning, guys. Wanted to ask about some commentary that you had in the press release about the second half of the year being strong. It sounds to me like the second quarter could be off to a good start as well if you're getting $2 million to $3 million a month from Hanford. Could you comment about the start to the second quarter?

Mark Duff (CEO)

Yeah. The second quarter, we're still working through some production improvements. It gets better every day. As I mentioned, our COO is very focused on that. We've got the team in place now. The waste is coming in. It's in backlog. Now we just have to get efficient and meet the production goals safely without any hiccups or any contamination issues and those kinds of things. We're doing that, and it's getting better on a daily basis. It's kind of ramping up. It's pretty close to where we need it to be, notwithstanding any kind of surprises. Q2 is looking much better. We don't like to speculate specifically on it, but I can say it's going to be much better than Q1.

With those types of receipts, along with the fact that, I don't know if I've mentioned this, our sales backlog or sales receipts we have for Q2 is significantly higher than we've seen in quite a while. In other words, we have the backlog, but sales just halfway through the quarter are already above our quarterly goals for the quarter. Waste receipts are going very well, and all indications are, if everything stays in the same path it's on right now for production, we should be very close to being profitable in Q2. Like I said before, it is sustainable. These are waste streams that have been generated for years that will continue to be generated. As long as we're meeting our production goals and the client continues to generate them, we should be in good shape through the year with that sustainable backlog.

Aaron Warwick (Analyst)

Excellent. Is this work coming from Hanford? Is this under the ITDC? You're being subcontracted or what? I guess how are you—what's that fall under?

Mark Duff (CEO)

Yeah, exactly. It's mostly work. The new waste streams are from H2C, the ITDC contract. And some of the we typically do about $1 million a month. Sometimes a little less, sometimes a little more from just general Hanford waste receipts. As I mentioned, this is a significant increase. Most of that increase is from the ITDC and the new contractors in place.

Aaron Warwick (Analyst)

You seem to indicate that the Trump administration, I know there was some concern I heard expressed among investors about whether there would be cuts to the EPA and not a priority of PFAS and not a priority with just in general cleaning up. It sounds to me like what you're saying is that there is a priority in large part due to the fact that they want to clean up these sites to be able to reindustrialize the nation and other priorities they have. Is that accurate?

Mark Duff (CEO)

It is. It's really hard to say what the EPA is really going to do in regards to leadership. What that press release stated was they're going to have an agency lead on PFAS. I do, I'm speculating, believe they'll likely push that down through the states or provide guidance to the states, have some type of commonality for what states are doing. Some states are way out in front, particularly Michigan and New Jersey. A lot of other states are coming up quickly, and Tennessee is in the process of promulgating, and New Mexico did this a couple of weeks ago. As these guys, each of the states start adopting policies, they'll start implementing them and since start enforcing them. We're encouraged by that. It'd be nice if EPA promulgated some cleanup regs, some cleanup standards.

I would not anticipate that to happen in the next several quarters at least, but it could. That will really drive an enforcement arm and really drive the market a lot. Outside of that, we are still getting, as I mentioned in the script, we got our first federal government shipment, and that is a big deal for us. Several of the sites are starting to feel that pressure to get the PFAS off their site. The other thing that is a big trigger in PFAS is reporting. The more we see folks with PFAS being forced or required to report the amount of PFAS they have, in other words, sample and analyze for it, the more we see the market really turning up.

That is what is really increasing, the drive to understand how much PFAS you have at your facility and then to do something about it. We are starting to see that increase across the board. We are starting to see more companies change out their existing fire suppression systems with newer systems that do not have PFAS firefighting foam. That is also leading to larger inventories of PFAS from the changeouts. Overall, the market is going well. Again, as I mentioned, we are very encouraged by how we are fitting into the competitive race here with the other technologies based on the simplicity of ours and how it could be adapted to different applications.

Aaron Warwick (Analyst)

Good. Good. Back to Hanford, I guess. You said in the press release, and I may have missed any other comments on it, but you mentioned that the August 1st is still the goal there and the deadline. I mean, what is it looking like from your perspective? I mean, is that something that looks like it's actually going to happen? Is it something that even if it's slightly delayed would be a minor, like talking in terms of a month or two versus another year? What's kind of your qualitative commentary there?

Mark Duff (CEO)

Yeah. It's really hard. We're not privy to specific data. What we do know is that the operational readiness review team has been there for quite some time. They continue to work off findings. There's a lot of integration of resources at Hanford supporting that progress. The thing that is very encouraging to us is that support has been recognized by the new Secretary of Energy, Chris Wright. He had some hearings yesterday with the Senate and specifically addressed his optimism for the DFLAW facility to get started and for him to be at the ribbon cutting. That kind of demonstrates to us that the visibility is there. DOE is seeing this as one of their higher priorities is to get that facility working and having it be successful. DOE hasn't changed that date. There's lots of opportunities.

They have lots of public meetings. They continue to reiterate that they're on track for August 1. It might delay some, Aaron. I don't know. We don't know, anything can happen in the last couple of months, but they're three months away from that. They haven't had a significant issue that has been publicized. I know they're struggling with a couple of little things related to off-gas and some other things. They're working through it. The optimism within the department, spending time in D.C. or at the field office, is very high. We're optimistic that it'll be very close to August 1. Again, just to clarify, if it starts August 1, we won't see any waste for probably six or eight weeks, maybe six or so.

By the time they get a package and characterize and everything, we should see some receipts in Q4, early Q4.

Aaron Warwick (Analyst)

I think there's been part of the reason I ask is there's been some headlines about some of the cuts at Hanford and so forth, just like there has been across the board kind of from DOE and other priorities of the new administration. When you read beyond the headlines, it seems to be like these are the type of employees that probably have little to do with the actual DFLAW facility. Some of them are administrative or dealing with claims that people make for harm that's been done to them from working at Hanford. It sounds like these cuts aren't really impacting the progress there in DFLAW. Is that your assessment?

Mark Duff (CEO)

I would agree completely with that, Aaron. The only cuts, I do not have any numbers in regards to the federal staff reductions at the Hanford field office, but I think it is pretty typical from most of the field offices as far as percentages. I think you nailed it. The Hanford office has, I believe, six major contracts that they manage. I do not see this impacting Bechtel, who is getting everything running, along with H2C and Atkins and a number of other companies' momentum. They are all very focused on getting this facility operating. I have not heard any reductions from any of those organizations. They said they are not public, at least.

Aaron Warwick (Analyst)

Good. Last one for me then about West Valley. What type of impact are you expecting in 2025 and when?

Mark Duff (CEO)

I can't give you a number at this point, Aaron. I hope we can do a press release where I can address the specific numbers in the next earnings call. I just don't know. We know what our scope is, as I mentioned. What we don't know, Aaron, is based on the funding profile as to whether what we're providing is funded in 2026 or is it pushed out a little bit. I would expect it to be in 2026, but there's still an uncertainty as to how it all fits together within the funding profile. There are two or three major projects that are funded for that facility that are performance-based. I don't know if DOE's even come out with their understanding of how it's going to be funded across each one of those projects. Just not able to address that at this point.

Aaron Warwick (Analyst)

It sounds like there won't be much of any contribution in 2025 then. That'd be more of a 2026 opportunity.

Mark Duff (CEO)

We're anticipating, yes. It's not material overall. More planning and documents. Then 2026 is where it kicks off.

Aaron Warwick (Analyst)

Okay. Hey, thank you guys. Appreciate it.

Mark Duff (CEO)

Thanks, Aaron.

Operator (participant)

Thank you very much. Your next question is coming from Steven Fine of SoFine LLC. Your line is live.

Steven Fine (Analyst)

Good day, guys.

Mark Duff (CEO)

Hey, Steven.

Steven Fine (Analyst)

Hi. You don't sound happy to hear from me, Mark. Anyway.

Mark Duff (CEO)

I'm always happy to hear from you, Steve. Always.

Steven Fine (Analyst)

Oh, I'm kidding. I'm kidding. Number one, I want to applaud you on your presentation. I think your approach, your positiveness is just fabulous. That's number one. My first question is on the financials. This goes to finance. What was the $340,000 in interest about?

Ben Naccarato (CFO)

Steve, we raised the money in December, so we've got a pretty big backlog of cash, and it's in an investment account.

Steven Fine (Analyst)

Okay. So I'm reading it wrong. So that was a positive cash flow thing.

Ben Naccarato (CFO)

That's right. Yeah, that's right.

Steven Fine (Analyst)

Okay. All right. Good. Okay. All right. Number one, when you mentioned, Mark, that somehow the DFLAW program has to get up to 3 million gallons. My understanding is that you got about a 35 to 40% efficiency rate there, which means that if they get up to 3 million gallons, there's going to be 2 million gallons of waste. How are you going to handle it?

Mark Duff (CEO)

Yeah. I think it's a confusion here, Steven. There's two different programs, as you know, DFLAW and Grouting. And between those two, DOE, in their holistic agreement with the state and the federal regulators, agreed that that would address 80% of the tanks, the other 20% being high level. So DFLAW is designed to operate at a million gallons a year for vitrification. And the Grouting program, to meet the 2040 goal, is estimated to be about 3 million gallons a year out of the tanks for grouting. It's not the DFLAW component. It's the Grouting component that's 3 million gallons. It's unlikely that the DFLAW would be at a million gallons a year production rate for several quarters, at least, to get perfection in their system and everything else.

The system that they've designed, Steven, for the extraction and pretreatment of the waste for grouting at the West Tank Farms versus the East Tank Farms. The East Tank Farms is DFLAW. The West is for grouting. That system is designed to do 2.5 to 3 million gallons a year extraction from the tanks. We would have to ramp up. We've made presentations to DOE with our design very specifically. We could do 3 million gallons a year. We'll have to get a permit mod, which is not a heavy lift. Right now, I think it's 400,000 gallons. We have to increase that to 3 million gallons. We have existing facilities and the conceptual design and the equipment to do that.

If that was to be turned on, we're very comfortable at that rate and would make the capital investments very quickly to make sure we're there.

Steven Fine (Analyst)

Thank you. You noted that there are other competitors that are getting or that are in the game. Can you comment on that?

Mark Duff (CEO)

Yeah. Like any government agency, the department's goal is to make sure they have redundant backups and competitiveness when they're talking about this level of revenue, particularly. From a safety perspective, they don't want to shut down because their one plant shuts down, which is why they've been very focused on this TBI to include our two competitors out of state. They represent capable facilities that are out of state. There's some additional risk to be considered in transportation. They can do this work. They have the same ramp-up requirements that we would have. They have to modify their permits most likely and build facilities and those kinds of things. We're all kind of there. I see them as being outlets.

However, at the end of the day, I do expect Perma-Fix Northwest to get a significant portion, at least half of that waste, because we're local. And we've committed to a union agreement for unionizing our facility when that starts and with the local building trades. And we're part of the community in keeping the jobs local. It also reduces the transportation risk. There's a value there. We'll be transporting by rail, as you know, because we'll treat it locally and ship it down to those sites that I mentioned for disposal. It's a different model. I do expect we're going to have to face some competition. There's a probability that a portion of that grouting would not go to us, just to be realistic about it. We're still hopeful to get all of it.

We're still pushing to get all of it, but it's something to be considered.

Steven Fine (Analyst)

I read an article, which I commented on to you guys, that as the government came out with a podcast which talks about how they're shipping this low radiation thing to some other people. Number one, that implicitly acknowledges what you guys have been saying all along, that it's low radiation. All right. Number two, they talk the story about transporting this across the country. It's not going to be a danger because it's low radiation, but they're missing the whole point because we're talking about mixed low-rad hazardous waste. The danger in shipping is not radiation. It's the hazardous waste. When that gets publicized, that, in my mind, will be the major thing to help you because as following this and as a scientist, who the hell knows what could happen in those containers with the hazardous waste?

I mean, a trunk of a car in the summer is 300 degrees. Who knows? That, to me, all it does is it affirms your reality. Yes, because if this thing ever got big, you probably need backup. The other thought that comes in here is they're going to build a grout plant out there. I would hope that you guys somehow get connected with someone bigger and you build the grout plant or get that and then keep the thing going because there's no way, even with building a grout plant, and not using you does not make sense, particularly when you talk about the liquefying of the tank waste, which then moves it up to, what, $100 million to $200 million. Okay. That's my comments there. I think you're in great shape. I commend you. It's great to hear. All right. Okay.

The next question is, what's your new COO doing? What is his role?

Mark Duff (CEO)

He's very focused. He's responsible for overseeing all the components of the company that generate revenue. He's in the treatment plants as well as the projects and not as involved in sales and some of the engineering components necessarily, but very focused on the production on both sides, both segments. He's got 27 years operating plants, a lot of it with our competitors. Very, very astute on operational efficiency. Right now, his number one priority is production at the plants. He's very, very focused. He's a very good leader, chemical engineer, and highly respected and doing a great job. His impact to the company in four months has been overwhelming. If you talk to anybody in our company, I don't think anyone would disagree that it's been a huge impact to us overall.

He brings an industry network that's really important as well and has had a great impact on productivity already.

Steven Fine (Analyst)

Wonderful. Are you guys implementing anything with AI, or is AI going to impact you in any way? No, I'm saying positively.

Mark Duff (CEO)

Not really. Yeah. We are beginning some initiatives, very limited, mostly to do with research and sales and proposal development types of things. We do see ourselves expanding to waste treatment protocols and those types of things in the future. We're starting pretty slow. We do have initiatives ongoing as we speak to do that.

Steven Fine (Analyst)

I think it's fabulous that the—I mean, I've been following you guys since 2016, and this is the first time that they've had a DOE head who is actually a scientist, an engineer, knows the industry, is very positive in nuclear. If you're pushing nuclear, which has to be pushed because we're behind the rest of the world, and secondly, AI requires nuclear, then nuclear waste has to follow. That is great. All right. Finally, my question is on PFAS. Ironically, I read an article today that the Gates Foundation is just—they're basically shutting down by 2045, and they're going to just go direct and feed. One thing that came out in the article was agricultural, that they can't plant on lands.

My understanding is that—I mean, I understand this is down the road, but as I'm reading about PFAS, I mean, basically, the fertilizer that's on these plants that came from water treatment has PFAS in it. A lot of farms have shut down. All I'm saying here is this PFAS, which everyone has to understand, it's just a separate industry. It's like, in theory, you could become another company that has nothing to do with nuclear. That, to me, is what's so exciting and then the potential of it. Anyway, I've said enough. I've watched you guys emerge. I understand it as someone that's scientific and keep on going. It's all going to work out for the positive. We got to keep the faith. That's all. Thank you.

Mark Duff (CEO)

All right. Thanks, Steve.

Operator (participant)

Thank you very much. That appears to be the end of our question and answer session. I will now hand back over to Mark for any closing comments.

Mark Duff (CEO)

Okay. Thank you. As we move further into 2025, we remain focused on executing against a clear set of strategic priorities, expanding our backlog, advancing our PFAS and Hanford programs, and maintaining a disciplined operational and cost alignment across all the organization. The investments we've made in the first quarter, combined with the momentum we're seeing across our treatment operations, our federal pipeline, and our international channels, position us for a stronger second half. While we continue to navigate timing-related challenges around the federal procurement system, we're encouraged by the pace of the progress across our core initiatives and confident in our ability to drive long-term value for our shareholders. Thank you for your continued support, and we look forward to updating you as our progress continues in the coming quarters. Thank you.

Operator (participant)

Thank you very much. That appears to be the end of the conference call. We thank you for your participation. You may disconnect your phone lines at this time. Have a wonderful day.