Perma-Fix Environmental Services - Earnings Call - Q2 2019
August 8, 2019
Transcript
Speaker 0
Good day, ladies and gentlemen, and welcome to Perma Fix Environmental Second Quarter twenty nineteen Business Update Call. All lines have been placed on a listen only mode and the floor will be opened for questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to your host, David Wahman. Sir, the floor is yours.
Speaker 1
Thank you, Kat. Good morning, everyone, and welcome to Perma Fix Environmental Services Second Quarter twenty nineteen Conference Call. On the call with us this morning are Mark Duff, President and CEO Doctor. Lou Santofanti, Executive Vice President of Strategic Initiatives and Ben Macarado, Chief Financial Officer. The company issued a press release this morning containing second quarter twenty nineteen 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 Crexenda 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. Permafix believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website.
Now I'd like to turn the call over to Mark Delft. Please go ahead, Mark.
Speaker 2
Great. Thanks, David. I'm very pleased to report solid financial results for the quarter. Our revenue increased 30% to $17,100,000 and gross profit increased by 60%. We achieved adjusted EBITDA of $1,000,000 and we generated a positive net income.
But more important, we anticipate an even stronger second half of the year. Turning first to the Services segment. Revenue increased by 75% to $7,000,000 This improvement reflects the success of our business development initiatives, including the recent award of several substantial contracts commencing in the 2019. These wins will include remediation work in Canada as well as several Department of Energy locations throughout The U. S.
It's very important to note that we did not recognize the full benefits of these contracts in the second quarter, which could add an incremental 2,000,000 to $3,000,000 of revenue beginning in the third quarter of 'nineteen. We're aggressively also bidding on additional contracts, which we believe will require significant upside potential in 2019 as well, second half of the year and potentially beyond into 2020 as well. Within the Treatment Segment, revenue increased by 10% to $10,100,000 due in part to our efforts to diversify our revenue streams. While we're pleased to see both year over year and sequential revenue growth, we experienced some continued delays by certain customers, but most of these delays have largely been resolved to support an improved third quarter inventory and backlog for waste processing at each of our facilities. To support our ongoing growth initiatives within both the treatment and the services segments, we recently announced the addition of three senior executives with significant experience in the nuclear environmental industry.
Specifically, we appointed George Taylor as VP of Waste Services and Business Development and Sales Chris Reno is director of nuclear services and business development, and Brian Wood as director of commercial and utility business development. Each of these individuals bring extensive relationships with government and business leaders as well as proven track records within their respective areas of expertise. The addition of this new core voice management executives will directly support our growth strategy focused on growth in commercial markets as well as a broader nuclear services application for our market base. I'm also pleased to report we completed the closure of our M and EC facility, which consolidates waste treatment capabilities within three remaining facilities. Closure activities continue to create a drag on performance throughout the first few quarters of 'nineteen while also creating major distraction to our resource base as well as our management team.
As a result of the closure of the facility, received $5,000,000 in cash previously held as collateral for the facility under our financial assurance policy. At the same time, we've undertaken steps to upgrade our facility and deploy new technologies that we believe position us to support procurements within the Department of Energy. As discussed previously, the GML vitrification unit at our PermaFace Northwest facility has commenced commercial operations through our partnership with Zoe Nuclear Solutions, where we recently completed our tenth of milking event, including the efficiency of that system on every mill. This new capability allows us to address large inventory of reactive waste currently in stable storage at several government locations and provides us a substantial multiyear backlog from a new incremental waste stream. The inventory of this waste stream is estimated to be in excess of a $100,000,000, including large inventories of waste, at Idaho, as well as at Hanford and Oak Ridge.
This past month, we began treating very rapidly contaminated water at our Arlington's Florida facility and are receiving water treatment backlog inventories from both commercial and government clients. While the storage tank farm remains under construction, our initial operating results of the unit there have exceeded productivity expectations regarding efficiency and performance through use of totes and temporary storage tanks. Increasing operational capacity and sales will be a primary focus of our team in the next few quarters to broaden our market reach and provide a low cost alternative to waste generators for large quantity water disposition. So to wrap up, we're starting to see the benefits of our strategic initiatives over the past few years, including the expansion of our treatment capabilities, enhancing our marketing sales program and broadening our market base for our waste receipts. However, the Nuclear Services segment has seen rapid expansion of momentum that has generated strong backlog well into 2020 through over $20,000,000 new awards in the past three months alone.
This is not only supporting our bottom and top line financial goals, but broadens our client base and market base to full service, our radioactive boots management services offering and that aligns Perma Fix for a wire offering to some of the larger DOE procurements that are forthcoming in the next few quarters. Heading into the second quarter or excuse me, second half of the year, we're extremely encouraged by the outlook for the business given our existing contracts and growing sales pipeline. And on that note, I'll turn the call over to Ben, who will discuss the financial results in more detail. Ben?
Speaker 3
Thank you, Mark. I'll move to revenue. Our total revenue from continuing operations for the second quarter was $17,100,000 compared with prior year revenue of $13,200,000 Our Services segment revenue increased by $3,000,000 a 75% increase over prior year as a result of our increased project work, which was awarded late in the first quarter and early in the second. Our Treatment Segment revenue increased as well by $948,000 or 10.4% as a result of primarily improved pricing for the waste received, processed and disposed. For six months ending June 30, our total revenue is at $28,800,000 compared to $25,800,000 in the prior year.
Both our segments have increased compared to prior year with Services segment increasing by 14.7% it began as a result of the increased project work in the second quarter, while our Treatment segment is up 10.5% primarily due to higher average prices. Our cost of sales 900,000.0 is dollars compared to $11,100,000 in the prior year. Costs in the Treatment segment decreased by $156,000 from prior year due to the decrease in closure expenses at our M and EC facility of about $1,000,000 The decrease was offset by increased variable costs relating to higher revenue and waste mix totaling $754,000 and in addition, fixed facility costs increased by $140,000 Our service segment cost of sales increased by $2,900,000 as a result Our gross profit for the quarter increased from $2,000,000 in the 2018 to $3,300,000 in the 2019, an increase of $1,300,000 or 60.1%. Excluding the $1,000,000 reduction in closure expenses at M and EC, our gross profit increased by $178,000 or 5.5%.
Gross profits were impacted by higher revenue in both segments, but offset by lower margin projects and waste streams. Our year to date gross profit was $5,800,000 compared to $5,400,000 last year. This increase is the result of higher revenue and a reduction in closure expenses at our M and EC facility offset by higher fixed costs. Our SG and A for the quarter was 2,700,000 up slightly from $2,600,000 last year, and that's due to higher labor and property expenses. Similarly, our G and A costs year to date were $5,600,000 or 19.4% of revenue compared to $5,400,000 or 21% in 2018.
Again, payroll and property taxes accounted for this increase. Our income from continuing operations net of taxes for the quarter was $373,000 compared to net income of $788,000 last year. We had net income attributable to common shareholders of $289,000 compared to last year's net income of 610,000 and we had net income per share for the quarter of $02 compared to net income per share of zero five dollars in the prior year. I do want to note that in the 2018, the company recognized a $1,600,000 gain on the exchange offer of the MNEC preferred shares preferred stock, which positively impacted the net income from continuing operations net of taxes, the net income attributable to common shareholders and the earnings per share. Our adjusted EBITDA from continuing operations for the quarter as we defined in this morning's press release was $1,000,000 compared to $846,000,000 last year.
Turning to our balance sheet compared to year end. Our cash balance at the end of the second quarter was $384,000 down from $810,000 at year end. Our unbilled receivables increased by $3,100,000 due to increased project work in our service segment. Other current assets increased by $4,600,000 due to the reclassification of the $5,000,000 finite risk sinking fund from long term assets to current. This reflects the current nature of the 5,000,000 of M and EC collateral, which was collected on July 22.
The offsetting reduction of this $5,000,000 is evident in the drop of the intangibles and other assets of approximately $4,500,000 Our operating right of use assets totaled $2,700,000 representing the present value of our operating leases as a result of the implementation of new lease accounting guidelines ASC eight forty two. Our total current liabilities increased by $974,000 reflecting an increase in accounts payable and other operating liabilities, but offset by a drop in our unearned revenue. Our backlog of waste at the end of the quarter was approximately $9,400,000 which was down from 11,100,000.0 at year end, but up from $7,400,000 at the end of the second quarter last year. Our total debt at the end of the quarter was $5,100,000 and this excludes debt issuance and debt discounts, of which $2,100,000 was due to PNC Bank, 2,500,000.0 was to our shareholder loan, which we borrowed in April 2019 and $500,000 for other equipment loans. Our working capital was a negative $480,000,000 a considerable improvement from year end 2018 when it was a negative $6,800,000 This improvement was the result of the reclassification of the finite risk funds and the reduction of our monthly term loan payment to PNC Bank from $102,000 per month to $35,000 per month.
Finally, I'll summarize cash flow from the second quarter. Cash used in the continuing operations was $863,000 Again, I'd like to note that this included approximately 1,300,000 of spending related to the M closure. When we exclude the M and EC spending, cash from continuing operations would have been a positive $452,000 Cash used in discontinued operations was $334,000 Cash used in investing in continuing operations was 280,000 Cash provided by investing activities from discontinued operations was $44,000 and cash provided from financing activities was $1,200,000 and this is represented by the $2,500,000 shareholder loan and 120,000 in equipment financing offset by payments of $610,000 to our term loan and $639,000 to our revolver. So with that, operator, I'll turn the call over to questions.
Speaker 0
Thank you. The floor is now open for questions. And our first question comes from David Newton from Heartland Advisors. Go ahead, David.
Speaker 4
Yes. This is Bill Naskowitz at Heartland. So congratulations on a nice improvement. That's fantastic, isn't it, to have a profit for the quarter?
Speaker 2
Great. Thanks, Bill. It was a big quarter. Appreciate it.
Speaker 4
Well, could you be a little bit more specific? These are three, it sounds like pretty significant hires here. Could you talk a little bit more in terms of what they might be involved in, in markets that you're targeting in terms of their expertise and their focus?
Speaker 2
Sure, Bill. We each each one of these guys come from a different area in our business that most of them knew each other, but it's or we had relationships with them. But the first one is taking over for the overall sales shop. So he's a VP coming from a transportation company that transports radioactive waste. So very familiar with the the industry, a longtime leader, a very, very bright guy from Rice University.
And he's, like, a good grasp on programmatic sales and marketing. The other guy, Chris Reno, is has been with our competitors for a long time. I retired, going back out of retirement to lead the polls and lead large initiatives, large larger bids for us, where we a couple of myself and a couple of other guys used to do that. So it allows us to do more management and better quality poles. And the third guy, I'm really excited about Ryan Wood, comes from TVA.
And most of his career is spent in the commercial or power utility world, which we don't do a lot of. And most of the folks that are in our industry will tell you that the commercial decommissioning market. It's starting to heat up with a 100 reactors in the country right now, and they're they're taking down a couple of year or at least moving in that direction. He's he's gonna be big he's already been a big help in us getting on teams and find how we can be a value added partner for commercial demolition and commercial waste management. So impacts already to the company.
And, you know, we needed a little bit of headspace in our revenue generation and our and our margins so we could afford to to staff up this way. And, fortunately, with these new wins, we've we've got a little more comfort now that we can bring on senior guys like this and be able to have sustainable margins.
Speaker 4
How big could that latter market be, that commercial power utility market decommissioning?
Speaker 2
These reactors are going to being awarded for probably between 600,000,000 and $800,000,000 for each project through the contract current contracting approach. And there's 100 of them over the next thirty years. So that's just kind of the decommissioning cut of it. There's a lot of other operational opportunities, particularly in water. Most of these reactors generate some water and along the way, even outside of decommissioning this in operation and the market we want to be in.
Speaker 3
Thanks, Bill.
Speaker 0
Thank you. And the next question comes from Steve Levinson from Big Rock Research. Go ahead, Steve.
Speaker 5
Thank you. Good morning, everybody.
Speaker 3
Good morning.
Speaker 2
Good morning.
Speaker 5
You mentioned sustainable margins there. I'm just curious about potential for margin expansion. Is there something you can do with costs, or is it really dependent more on volume?
Speaker 2
What is the there's a different answer depending on which area we're talking. In the the waste treatment world, you know, we we do better on margin with volume because we pay down our pay off our fixed cost for keeping our facility compliant and operating. So the more ways you get, depending on the type of ways, the more opportunity you have for expanding margins over a certain amount each month. On the services side, it's typically you bid on a project one at a time, and that's a more sustainable or I should say more level margin. I mean, it's basically competitive on each project.
So that will be more flat. But what it does do is that margin would have less impact. We would have less fixed cost on each one of those projects after we win because it's not linear increase in the G and A as you add projects. It's normally you add 10 projects and maybe not increase any more than if you added five. So I hope that answers your questions, Steve.
You there?
Speaker 3
Hello? Yeah. I think we I like we might have lost Steve. Okay.
Speaker 0
I'll dial him back. One moment.
Speaker 2
There's a pretty bad lightning storm here, in, Port Hope, Canada, so, Ontario. So you might lose me. I've I've been dropped off a couple times as well.
Speaker 0
And our next question comes from David Newton from Heartland again. One moment.
Speaker 4
Bill Maskowitz again here. Just you mentioned Canada as this has been an initiative now for a year or so. Can you talk about the progress in more detail in terms of the progress there and the opportunity? And then lastly, in terms of these contracts, some are fixed price. I assume what's the ratio of fixed versus variable?
And how do we control how do you control the risk of cost overruns and misbidding some of these contracts? Thank you. Sure.
Speaker 2
Yeah. Canada, I can't talk a lot about Canada because we have agreements with our clients that all press releases and information about the projects will come through them. But I can say that we're doing some remediation in Canada for some residential houses in Ontario on a fixed unit rate contract. So there is some risk. Fixed unit rate isn't quite as bad as fixed price because we have a lot of different pay items, and you could kind of spread your risk across all the pay items.
That cut the contract is is most slower starting than we had hoped or we hoped to be in in the field and working in early May, and we're just getting rolling last couple of weeks. So as our statements just went through red, they're a little slower to get rolling. We'll see more revenue in the third and fourth quarter as opposed to second and third from these projects. They're all sustainable long term contracts with lots of opportunities for additional tasks to be added, and they're working very well so far. Have good client relations and the field work has been very successful.
As far as how we manage it and our risk, we only have right now a couple, I'd say, than $5,000,000 in fixed price contracts in the field, And the remaining backlog and revenue, which is $2,025,000,000 dollars I would say, for the year, are fixed unit rate and T and M. So the ones that are fixed price, we have very senior guys on them that have been on a fixed price in the past. We we win our contracts with adequate contingency and and and a very formal risk analysis process. So we understand the risks and mitigate those risks and align funding or cost excuse me, budget for those risks. So so far, we've done very well on those, and we've met our expectations for the fixed price tag so far.
Speaker 0
And our next question comes from I'm sorry. One moment. Robert Brown. Go ahead, Robert.
Speaker 6
Yeah. I have two questions. First of all, under the proposed government budget, how much how much are they allocating for Hanford for the Hanford cleanup, you know, based on the new, federal budget that the two year budget. And then the second thing I wanna ask you about is the phase two TBI. There was I I was a little confused.
There were are they were they they saying that this would take six to nine months for for the DOE and and the state of Washington to work out the terms. How is that coming? And do you see when when do you see a, you know, resolution on that?
Speaker 2
Those are good questions, Robert. The first one, the Hanford budget, I don't have any numbers in front of me, but I know that the EM budget was total EMY was about, if I recall, about $7,200,000,000 which is pretty flat from last year. And I know the Hanford budget was pretty close to where it was last year as well. So not a lot of not a lot of change or maybe a couple of points here and there, but, it's pretty close. So the rates we're receiving from Hanford have been pretty pretty flat as well, for our Richland facility and, you know, what we're doing out there.
As far as BI goes, as usual, we can't get in a lot of detail. But I can say, you know, that that, as you know, the DOE pulled their permit back as they announced in early June and wanted to have a strategy or change their strategy to focus on what they call what they call the DOE order four thirty five revision. And what that means to us is that we're we'll continue with the funding we have to do what we have to do, on TBI, which in our case, specific to Permafix, is a demonstration of the mixer, that we'll use to to, support the waste processing, as well as the other firms that are in the PGI Group company. They'll the other companies will work and perfect the waste extraction system. So there's those activities are ongoing even though DOE pulled their permit back.
And what you read about the delays of six to nine months, what that what that's referring to is DOE's position is that TBI is, by no means dead or stopped, but they pulled their their permanent application back from the state, for six to nine months, to to pursue the revision of this DOE order. And once that order is revised and implemented, then DOE will reevaluate whether they wanna submit that permit back. Or if the review depending on how the revision is applied, it may have an impact as well. So that's why we said it's six to nine month gap until they resubmit that to the state at some point.
Speaker 0
And our next question comes from Stephen Fine. Go ahead, Stephen.
Speaker 7
Good morning, How are you?
Speaker 2
Good morning, Stephen.
Speaker 7
Good. My first question is, Ben, when you when you're talking about the 1,200,000.0 last year from the, you know, the adjustment of the preferred stock. So realistically, can that be factored out? So then if you factor that out, I mean, doesn't that improve the picture of, you know, of gross profit or profit this year versus last year?
Speaker 3
Yes, Steve. It's 1,600,000.0, and it's not gross profit because it was sort of below the G and A line, you look at the income statement. But absolutely, and that was the reason for discussing it is last year, we probably were in a loss position when you exclude the 1.6, which was really just a paper adjustment. It was noncash. So Yeah.
So absolutely.
Speaker 7
Thank you. Relative to the the, this quarter, the second quarter and, the increase in the in the service, how much of the, how much of the 17,000,000 in contracts that you signed were in the actual treatment sales.
Speaker 2
Of the 17,000,000, Steve, those were all in nuclear services?
Speaker 7
Yeah. Mean, in services. I'm sorry. I meant in services. Your services went up.
So you had said that you were in the last call, you had said you were signing 17,000,000 in contracts in services. So how much of that was in the sales for treatment in the second quarter?
Speaker 3
Don't have the exact amount, Steve, but it is a small amount. I would say I would put it in probably out of 7,000,000 maybe about $5.05 ish million We had a sort of first quarter was pre the $17,000,000 and that was about 1,800,000 of revenue. That was sort of ongoing smaller projects that we are doing. So I would say about the difference or the 4,000,000 or $5,000,000
Speaker 7
Okay. So when you say there's a $9,400,000 backlog, does that was that treatment, or does that include this too?
Speaker 3
That's just treatment.
Speaker 7
So you have a 9,400,000.0 so in so you're saying so so you have about, okay, I think you just said that. So you got 9,400,000.0 backlog in treatment, and then you have at least 12,000,000 in service. So that's where you get the 21,000,000.
Speaker 3
Correct. Well, the $20.21 what what 21,000,000 are you talking about, Steve?
Speaker 7
Well, I okay. I I thought someone mentioned I thought
Speaker 3
So I think Mark Mark may have noted 20,000,000. Yes. But no. No. We you know, there's been some other work come in as well in the second quarter on top of the 17.
So you Right. You you got about a 20 you got about close to 20 in services backlog and about nine in in your in your treatment segment.
Speaker 7
So you're you're telling me that with the, 27,000,000 that you've already done through the second quarter, in theory, you're, not in theory, realistically, you're in the high fifties for sales this year.
Speaker 3
Well, yeah, and that's assuming it's all processed in the same in the same in the year, but
Speaker 7
Okay. Because I'd like to see you get up into the 60s and really make a move forward. All right. Thank you. Nice quarter.
Congratulations. Thank you.
Speaker 2
Thank you, Steve.
Speaker 0
And our next question comes from Robert Manning. Go ahead, Robert.
Speaker 5
I'm sorry. My question was answered. Thank you. Thank
Speaker 0
And our next question comes from Todd Hellman from Huntington Bank. Ahead, Todd.
Speaker 2
Hi, good morning. Thank you for your time. Wanted to talk a little bit about the capital expenditures for the quarter. I apologize if I missed that note while you all were speaking.
Speaker 3
And then
Speaker 2
also capital expenditures going forward and how those might be financed.
Speaker 3
Yes. Capital for the quarter was 80 for the quarter, was only about $90,000 but for the year to date, we're at about $3.12 There are we as you know, we were sort of waiting on the financing related to the closure money, the 5,000,000. So we sort of had a halt on cap spending. So we are going to ramp up in the foreseeable future. The main priority is going to be the expansion of our facility in Kingston, Tennessee, which is construction related and will likely be financed through operating capital.
And then there's other equipment related that we primarily expect to finance again through working capital, potentially would look at financing opportunities depending on needs.
Speaker 2
Great. Thank you for taking my call.
Speaker 3
Okay.
Speaker 0
And our next question is from Steve Levinson. Go ahead.
Speaker 5
Thank you. Sorry about dropping off before I was on a mobile. At any rate, what I was asking was about the Florida projects. From the time you start, how long does it take, assuming everything goes as planned, to get up to your target margins?
Speaker 2
I'm sorry. Sorry, Steve. Our target what? Margins. Oh, margin.
Wow. It's a tough question, Steve. You know, right now, as I mentioned in the notes, we are doing a little better than the design productivity was for processing radioactive water, which generates much better margins than anticipated and and is much more efficient. It's gonna allow us to lower lower our fixed unit rate that we charge for that. Right now, the thing is running pretty fast.
It's not running twenty four seven. It's only running one shift. We have some backlog. I'm not I can't can't remember how much, but we're we're bidding a lot of water right now on several different fronts. And I would I would guess that we'll be running full capacity with a couple of more wins in the next quarter or two depending on how we do on these bids.
But to be frank, you know, when you set up a new facility like this, we're competing against a couple other companies on the water. We have to feel our way through what it's gonna take to win and refine our our cost estimates as well as refine our operating margins and how much it costs to run the facility. So I would say over the next two months, next two quarters, we'll get those numbers nailed down pretty well and get a client base, that's, that's pretty stable.
Speaker 5
Got it. Thank you. Next one is on the soil separation. Can you tell us about the progress on that? I'm sorry if I missed it with somebody else before.
Speaker 2
No. We haven't talked about that in a while, Steve. We did we were unsuccessful on a couple of bids on those. We have a couple more in right now, some dredging in San Diego and a couple other projects in California Northern California. So we're still waiting here on those.
And I wish I'd I can tell you we've got a couple of wins that we're working on, but we're still waiting to hear from clients. They're going a lot longer than anticipated. So we have lost a couple, but we'll come we're still waiting here on a couple.
Speaker 5
Got it. Thanks. Last one is, I know there's some reluctance to talk about Hanford. Are you actually subject to a nondisclosure agreement or confidentiality agreement that sort of limits what you can say?
Speaker 2
We are on on several fronts, not only, you know, on the TCP, which is a tank closure contract, which is an open procurement right now. So it'd be inappropriate to discuss that. The the TBI initiative is a DOE initiative that we're a player in, and we respectfully try to limit our discussion on TBI and let DOE talk about that since it's their their initiative.
Speaker 5
Got it. Thanks very much. Good to
Speaker 2
see the progress we made. Thanks, Steve.
Speaker 0
And our next question comes from Chuck Dickinson. Go ahead, Chuck.
Speaker 5
Good morning, guys. Nice quarter. I have a question on, you know, the the thrust of the strategy here overall. If you have a budget that looks flattish, as you say, overall, although you don't have all the details. And I'm not sure if some of some of that still needs to be worked out congressionally and in committees or not, and also sort of flattish and hampered.
It seems you have two directions that you're looking at here. You wanna get a bigger piece of the same pie that is increase your market share for what's already out there without sacrificing margins, of course. And then also develop some new business, bake a new pie, I guess, would be the way to look at it. Maybe that's some of the things that you're doing commercially. Can you give sort of a feel in terms of both of those avenues?
How much effort you're putting in both sides? And what the potential you see is for both growing market share in the existing market and also the new business opportunities?
Speaker 2
Chuck, completely described our strategy, which is, as you just said, to increase our market share on what we can do now and then to add capabilities to what we can do now. You know, our goal has been, for two years now, we're very focused on on getting to a $100,000,000 in revenue and kind of saw that growth coming from the last two years of $50,000,000 to to to to have a $60.40 split on on that that that that the ratio, which was basically 40,000,000 in service to 60,000,000 in rate. I think it's gonna be more, as we're getting closer to it, more $50.50, 50,000,000 in each, and, which would which would basically answer your question, focus on your dramatic increases in the services sector while increasing the waste treatment by 20%, 25. And I think that's the way it's going. We're very, very excited about our services segment.
And as as my thirty years of doing this and seen several times, once you win a couple projects and get a few clients that are very happy with your performance, There's a lot of momentum from that, and we've seen that, in the last couple months. And we'll have, some new projects, hopefully, we can report next couple quarters, and that will be a result of that momentum and those references, and bringing on new people, strong people that have, relationships, and all that builds on each other, when you see, you know, companies really surge in this industry. Typically, what it comes from is that momentum, and bringing on, you know, new talent, that can help you grow. And so we're we're finding ourselves in that position right now, and, so it's a really exciting time for us internally. Morale is very good, and the company has a buzz about it.
We're making the investments we needed to make for a long time on all kinds of things, management systems and those types of things as well as technology. So I hope that answers your question. I kind of rambled on a little bit.
Speaker 5
Yes. No, it does. It certainly seems like you could be at an inflection point for the business. I don't want to say you're there, but seeing that revenue pop sequentially and year over year would give the first glimmer of hope, the first green shoot that maybe you are at an inflection point. My other question, second question has to do with joint venture opportunities.
You've been reasonably successful in that so so far. Is that something that you're going to continue to focus on? And and what is the the degree of effort and emphasis on on that? Whether it be a joint venture with someone else that would involve subcontractor work or having them use some of your facility and technological capability.
Speaker 2
I think you're speaking about the GML. And, yeah, the GML is a was a great example. It was a very good relationship with Veolia. I think one of best I've had ever. And where the partnership was very minimal all the way through, you know, initial design to start up and through marketing.
So to answer your question, we do hope to have a couple more of those. We're talking to other folks now that address specific application for upcoming bids for things like mercury treatment in Oak Ridge. We're trying to tie them to specific waste streams and specific challenges, most of them in the DOE that address waste streams with very limited treatment capability now. So we we can easily define the potential return on investment and the technology that needs to be in place. So we do have a couple more in line.
They're not in the near term. They're probably a year or two away before anything can be really announced. But we certainly see that model as a win win for us and our partners and frankly, government to be able to treat waste that may not otherwise be able to treat.
Speaker 5
One other thing, I'm sorry. You had mentioned my phone had cut out earlier that you had not gotten the full benefit of the new contracts realized in Q2. And then you had mentioned a number of an incremental 2,000,000 to $3,000,000 Was that throughout the remainder of 2019 or in the 2019? We expect that to be
Speaker 2
in the third quarter for the most part, and we hope to bleed into the fourth quarter as well for expansion.
Speaker 6
Okay. Thank you.
Speaker 2
Thank you.
Speaker 0
And our last question comes from Steven Fine. Go ahead, Steven.
Speaker 7
I I think the question was answered, but I just would like to expand a little bit. On the partnership, partnering with other people for bids, is that really is that is that something that you've introduced, Mark, or was that something that the company has done historically? You know, I'm what I mean is partnering in bids.
Speaker 2
Yeah. As far as people would call it, typically, teaming, yes. It it historically done, in most of the services projects within Department of Energy and DOD, in fact, just about all of them, require very broad array of of disciplines and technical capabilities, most of which every firm doesn't have. Even large firms like Floor and Jacobs will have a need for niches. So they'll partner our team with other companies.
And we do the same to reduce our risk, for example, and and a good example is some of the projects we've won in California. We'll team with small businesses in the region that have have the equipment, for example, or a niche or a relationship that, is necessary for a specific project. So we'll we'll pretty much always will do that. There's a couple exceptions, but for the most part, we'll be teaming with with local companies.
Speaker 7
Thank you. The second question is, you know, you keep, you know, which I like, you keep talking about this $100,000,000 goal. So do you have a, do you have a a timeline goal for that? You know, let's say, two years, three years, one year?
Speaker 2
Well, I I get told that for speculating too much, Steve, on these kinds of things. I try not to to do too much of that, but we certainly would hope the next two or three years we'll be able to reach that goal.
Speaker 7
Alright. And and the one my one final question, and I guess this displays my lack of financial acumen. On the 5,000,000, Ben, physically, the cash came in. Correct?
Speaker 3
Correct.
Speaker 7
Yeah. Okay. So the cash is being used or was it is the cash physically being used, like, for example, for plant improvements and stuff like that or new stuff in the plants?
Speaker 3
Bit of both. As you know, the the closure was very expensive, and so we have some bills to pay with it related to the closure, but there is additional obviously and that money along with income positive income that we are certainly planning to earn over the next six months will go towards capital improvements.
Speaker 7
Okay. Thank you.
Speaker 0
At this time, I would like to turn the call back over to management. Thank you.
Speaker 2
All right. I'd like to thank everyone for participating on our second quarter conference call. As I mentioned earlier, we're pleased with our Q2 results and more importantly, the positive impacts from our strategy improvements that will continue to prove, provide sustainable growth while expanding our offering over the next several years. So we are confident that our best is yet to come. Thank you.
Speaker 0
Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.