Perma-Fix Environmental Services - Earnings Call - Q2 2020

Transcript

Speaker 0

Greetings, and welcome to Perma Fix Environmental Second Quarter twenty twenty Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms.

Azandra Boddy, Investor Relations. Thank you. You may begin.

Speaker 1

Thank you. Good morning, everyone, and welcome to Permafix Environmental Services second quarter twenty twenty conference call. On the call with us this morning are Mark Duff, president and CEO, doctor Lou Centifani, executive vice president of strategic initiatives, and Ben Naccaratto, chief financial officer. The company issued a press release this morning containing second quarter twenty twenty 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 revision 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 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, Ali, and good morning, everyone. We achieved profitability in the 2020, reflecting the resilience of our employees and managers to stay focused on the implementation of our corporate safety plan to minimize the impact of the COVID-nineteen virus. As a result, revenue increased 29% over 2019 and we achieved adjusted EBITDA of approximately 847,000 despite several negative impacts on waste receipts associated with generator shutdowns. As we enter Q3, we're realizing sustainable revenue in our Services segment with rates receipts beginning to increase, although a bit slower than anticipated due to the continued impact of COVID on our clients.

Our sales pipeline for the Services segment remains robust with a number of ongoing and significant bidding opportunities and a backlog approaching $50,000,000 for the remainder of 2020. In addition, there are several larger bids worth pursuing to support sustainable revenues, and we've submitted over $40,000,000 in proposal values in the past several months. This flurry of proposal activity in the services sector will support revenue opportunities over the next several quarters if we're successful in these competitions. As recently announced, we're especially pleased that our team led by Jacobs was selected by the DOE Office of Environmental Management to participate in a sizable ten year multiple award IDIQ contract to provide nationwide deactivation, decommissioning, and removal of facilities and waste management program support. I will now take a moment to address a few financial highlights from the second quarter relative to the same quarter in 2019 and later Ben will discuss the financial results in a little more detail.

Overall revenue increased 29% to $22,000,000 Services segment revenue increased 102% to 14,200,000.0 The Treatment Segment revenue was $7,800,000 compared to $10,100,000 for the same period last year due to the impact of COVID, which I'll discuss further in a moment. We generated adjusted EBITDA of approximately $850,000 compared to $1,000,000 for the same period last year. And lastly, we achieved net income attributable to common shareholders of $204,000 or $02 a share for the 2020 compared to $289,000 or $02 a share for the same period last year. Before COVID-nineteen was beginning to unfold in Q1 of this year, we were energetic and enthusiastic about our growth strategy for 2020, which included continued expansion of our plants and broadening our base for nuclear services as well. The impact of working from home for a few months and the limited communications with our clients through a significant wrench into our strategy and required adjustments that subsequently demanded real creativity and innovation by our team.

I am very pleased to say that PermFix succeeded in not only sustaining our business, but identifying new initiatives and opportunities to further expand and increase our market share in the coming quarters. These initiatives include developing a broader offering to the commercial sector through several permit modifications and treatment approaches that increase value, deployment and expansion of our soil sorter technology throughout Q2, and continuing operations on several time sensitive cleanup projects in the field during the height of the pandemic. This was all accomplished while our internal COVID-nineteen safety committee drove the implementation of rigid requirements into all our operations, both in the field and in our business side functions to ensure that the health of our staff remained our highest priority. We're very pleased to confirm that Perma Fix has had only one COVID-nineteen case to date within our company, and we continue to monitor, isolate and manage potential cases to limit impacts to our workforce and families. By limiting the potential cases of COVID within the company, we've been able to continue with our project work and processing of our waste backlogs.

As with most firms, Q2 saw changes in our working environment on a daily basis that made it difficult to plan and communicate with the effectiveness that we're accustomed to in the waste management business. We were fortunate, however, that we had several clients that continued to ship waste or plants from essential operations, including within DoD and at the Hanford site. And we had several projects that continued to be supported ongoing operations in the field and cleanup operations, which underscored the trust of our clients in our project leadership and in our safety program in the field. These relationships had a positive impact on our Q2 results and have provided the opportunity to generate tangible value to our clients during this difficult period in our country when most field service operations were shut down due to COVID. As discussed in the last quarterly call, Perma was successful in securing a promissory note through PNC Bank in excess of $5,000,000 under the Paycheck Protection Program.

These funds allow Fix to recall all of our staff, avoid future furloughs and layoffs, and assist in maintaining stability through Q2. The availability of this PPP loan allowed Perma Fix to continue the implementation of our strategic plan for growth by holding onto all our trained workforce who are highly trained and experienced in complex nuclear operations and radiological environments. While we continue to remain optimistic about our ability to get through the pandemic, we're beginning to see the impacts from increases in the COVID cases in our primary states of operations, including Florida, Tennessee, Washington, California, all of which have resulted in slower waste generation, slower procurement actions and limited communications with the generators and our clients. This is particularly applicable on the waste treatment operations and yet we have seen a modest increase in receipts through the month of July with anticipated increases in August and September. Our Nuclear Services segment completed most of our remobilization activities before the end of Q2, which should result in increased revenue in Q3 with sustainable revenue through the next two quarters at least.

We will continue to position Perma Fix for upcoming procurements anticipated to be published over the next few months as the fiscal year closes. Meanwhile, we continue to identify new opportunities to reduce costs and schedule and safety risks that radioactive waste present to our clients through the application of innovative engineering and the use of technology in a cost effective manner. Last quarter, we discussed the launch of our newest technology, the Perma Sort system, which has been deployed in San Diego through Q2. This latest technology has been developed to segregate radioactive soils following dewater operations in dredging applications. The performance of the system has exceeded expectation and has provided tremendous value to our clients, processing nearly 9,000 cubic yards a week and over 18,000 tons in just a few months.

Our engineering team is moving quickly to fabricate and deploy a second Perma Sort system in the coming months to support increasing demand. Our growth strategy has not only involved our services segment as we continue to realize strategic progress in our treatment segment as well. While we've discussed increasing delays in shipments, our waste management team has increased our attention to the commercial sector to resolve several unique challenges in the utility industry and broaden our offering during the quarter. Overall, we've added over 10 new clients during this period in both the services and the treatment sectors together. When you take a step back and really evaluate the quarter, I couldn't be more proud of our team.

We've delivered and advanced our strategy rather than just sitting back while at home and waiting for the storm to subside during this unprecedented period. Achieving all this while increasing revenue over 2019 and teeing up Q3 with positive momentum underscores the strength of our company and our ability to adjust our vision to meet the market needs and changes. On that note, I'll turn the call over to Ben, who will discuss the financial results in a little more detail. Ben?

Speaker 3

Thank you, Mark. I'll start with revenue. Our total revenue from continuing operations for the second quarter was $22,000,000 compared to the prior year of $18,100,000 or an increase of 28.1%. This increase of $4,900,000 was driven by our service segment where revenue increased from $7,000,000 in the 2019 to $14,200,000 in the 2020. That's an increase of 101.8%.

Year over year improvement in project activity of course is the main driver for this improvement. In the treatment segment our revenue decreased $2,300,000 or 22.3% as the COVID related closures of our customers impacted waste receipts in the quarter with most customer sites either restricted or closed throughout most of the quarter. For the six months ended 06/30/2020 our revenue is at $46,900,000 compared to $28,800,000 or an increase of $18,100,000 or 62.6% growth from prior year. Looking at cost of sales in the quarter, they were 18,700,000 compared to $13,900,000 in prior year, an increase of 4,900,000.0 The increased revenue from the service segment was the main driver of this increase which accounted for 5,700,000.0 increase in direct costs related to project work. While fixed indirect costs also went up about $509,000 These increases were partially offset by a drop in our cost of sales in the treatment segment, where lower revenue resulted in a reduction of $1,400,000 of variable expenses, while the fixed facility costs went up marginally.

As mentioned in our revenue discussion, the treatment segment saw a significant negative impact on our waste receipts due to the COVID-nineteen. As a result of the payroll protection loan program loan, the company was able to avoid layoffs and keep all employees employed despite a significant productivity drop. Since we will recognize the benefit of the PPP loan if or when it is forgiven, it should be recognized that the quarter includes payroll costs incurred totaling about $800,000 that would likely have been cut without the loan. Turning to our gross profit, the quarter was the gross profit for the quarter was $3,300,000 or 15% of revenue compared to prior year gross profit which was also $3,300,000 but 19.1% of revenue. Gross profit in the service segment increased about 971,000 but that was offset by a similar drop in the treatment segment.

The gross margin decrease was impacted by the lower mix of treatment revenue as compared to service revenue, as well as the $800,000 I just mentioned for maintaining labor made possible by the PPP loan. Excluding these additional labor costs, margins year over year for the second quarter would have been comparable. For the six months ended June 30, our gross profit is at $8,000,000 or 16.9% compared to $5,800,000 or 20% in prior year. Looking at our G and A costs for the quarter, we were at $2,700,000 which is in line with prior year. We saw lower subcontract expense, lower travel and lower bad debt expenses in the sales and admin groups and that was offset by higher salaries in the corporate and admin departments.

For the six months ended June 30, our current year's SG and A expenses are at $5,600,000 or 12% of revenue, which is consistent with prior year 5,600,000.0 which was nineteen point four percent of revenue. Our income from continuing operations net of taxes for the quarter is 260,000 compared to 373,000 in the prior year. Year to date income from continuing operations net of taxes sits at $1,600,000 compared to a loss in the prior year of 177,000 We had net income attributable to common shareholders of $204,000 compared to last year's net income of $289,000 And year to date net income attributable to common shareholders is at $1,400,000 compared to a loss in the prior year of $383,000 Our net income per share for the quarter is $02 which is consistent with prior year. Net income per share for the year to date sits at 12% as compared to a loss of $03 per share for prior year. Our adjusted EBITDA from continuing operations for the quarter as defined in this morning's press release was $847,000 compared to 1,000,000 in the prior year.

On a year to date basis, our adjusted EBITDA is $2,700,000 compared to $1,100,000 in the year to date prior year. Turning to a few balance sheet items as compared to December, our cash balance at the end of the year, I'm sorry, at the end of the second quarter was $5,600,000 which is up $390,000 up from $390,000 at year end. This increase is entirely due to the PPP loan we received in April. Our accounts receivable and unbilled receivables cumulatively are up about $700,000 reflecting increased revenue at the end of the quarter. Our current liabilities were up approximately $524,000 reflecting timing of payments.

Our backlog of waste at the end of the quarter was approximately $6,400,000 which is down from $8,500,000 at year end and down from $9,400,000 at the end of the second quarter of 'nineteen. Our services backlog at the June was approximately $48,000,000 Our total debt excluding debt issuance and debt discount costs at the end of the quarter was $9,400,000 and this is made up of $1,700,000 owed to our primary lender PNC Bank, dollars 5,700,000.0 due to PNC Bank for the PPP loan received in April, dollars 1,200,000.0 owed to our private shareholder on our private shareholder loan and $845,000 for other finance leases. I'll now summarize quickly our cash flow activity for the first six months of twenty twenty. Cash provided by continuing operations was $3,000,000 Cash used in discontinued operations was 259,000 Our cash used in investing of continuing operations is $1,400,000 Cash provided by investing of discontinued operations was $13,000 Cash provided by the financing was $4,000,000 representing the receipt of the PPP loan of $5,700,000 Offset by our monthly payments to the term loan of $212,000 Net payments to the revolver of $321,000 payments on the shareholder loan of $832,000 and other lease financing payments of $3.00 $1 With that operator, I'll now turn the call over to questions.

Speaker 0

One moment while we poll for questions. The first question comes from the line of Howard with Wellington Shields. You may proceed with your question.

Speaker 4

Thank you. Mark, I just want to come back to some of the contracts we had talked about in the past. The EPA contract with Jacobs as a prime and as a sub for the remediation of the Navajo Mines. Have you heard anything new about that?

Speaker 2

Well, Howard, as you know, I've talked, it went silent for a good year. But we did actually see something in the press recently that said they planned on making an announcement before the end of this quarter. So that's the first we've heard anything. That was like a week ago that they to made a make that award. That's all we've heard at this point.

Speaker 4

Have they put out any other RFPs for additional contracts?

Speaker 2

No, they haven't, Howard. And we do expect some for different components of scope, but right now we've seen nothing. Program The had a lot of fanfare and hype and then went quiet for like eighteen months to two years. But it looks like it's kicking back up.

Speaker 4

I'm glad to hear it. I'm glad to hear it. Secondly, the Navy contract, has that been expanded or are still just working on a few sites?

Speaker 2

Well, have several Navy contracts. One, we're a subcontractor at both, one is in San Diego with the source order. Have other contracts in the San Francisco Bay Area that are also getting rolling. So they're all rolling pretty well. So they're all growing and seem to be doing pretty good.

Whether there'll be significant contract mods, that still remains to be seen at this point, but they're going very well.

Speaker 4

All right. I want to address one issue. Jacobs lost the tank closure contract to BWX Technologies. And the other bidder was AECOM. Am I correct on that?

Speaker 2

The other bidder was Atkins was the prime. AECOM was on yeah. AECOM was on her team.

Speaker 4

Right. Okay. The DOE Office of General Counsel wrote a letter July 22 and I'm quoting from the letter. Following our investigation and addressing other issues as appropriate, DOE will make a new award determination. And it goes on.

Can you comment if you can about one, what that status is in terms of I know the appeals were all canceled. But do you have any comments about that?

Speaker 2

No, that's actually all the information we have too, Howard, at this point. DOE did say in another meeting, informally that they said they would notify all the proposal offers once the corrective actions were completed, with no indication of schedules or anything. So far, our team has not been notified of any of those corrective actions. So we're all just anxiously waiting to hear what the phrase, as you stated, new award determination means. And we're just standing by.

So yeah, we no other information besides what's public in that letter.

Speaker 4

All right, fair enough. So let me continue just if we can comment further on this. From my understanding at the DOE, historically they would not give to say Atkins the large contract that they got from last year and an additional $10,000,000,000 to $13,000,000,000 this year. That's usually not done. Is that a fair comment based on your knowledge?

Speaker 2

I don't know if it is a fair comment, Howard. It is not traditionally done. However, keep in mind that the plateau was awarded to AECOM, and Atkins was a minority member. And this was led by Atkins with AECOM as a minority member. So I really sincerely think that they will award to the best proposal at this point.

And I would hate to speculate on any other objective on behalf of DOE at this point.

Speaker 4

I thought yours was the best proposal.

Speaker 2

We'd like to think that too. Unfortunately, we haven't seen any other proposals. We'd be speculating.

Speaker 4

All right. Appreciate it. I'll go back into queue. Thank you.

Speaker 2

Okay. Thanks, Howard.

Speaker 4

My pleasure.

Speaker 0

Our next question comes from the line of Steve with Big Rock Research. You may proceed with your question.

Speaker 5

Thanks. Good morning everybody.

Speaker 2

Good morning, Steve. Good morning.

Speaker 5

Just a question on the revenue that was delayed. Has all the work been performed? Is there product going out? Or is this something that'll take a few quarters to ultimately, be able to recognize?

Speaker 3

Well, Steve, this is Ben. I guess the the way that we recognize revenue is in a three phase, upon receipt of revenue, upon processing, and then upon disposal. And so what we saw in the second quarter was a pretty significant drop in the receipt portion. We did have a backlog that was recognized. But the way we operate is we're kind of constantly replenishing that backlog.

And that's why you saw a bit of a smaller number, a bit of a drop in our backlog. So, you know, the work that we recognize as revenue is actually work done. So if we see a pickup in those receipts in the third quarter, then ideally we'll have the receipt portion and additional processing that will catch up the year.

Speaker 5

Okay, got it. Thanks. Then on the soil treatment, it sounds like your equipment is successful. They want another one. Does that give you an opportunity to show it off at all?

And are there other people looking at it? And I think I asked once before, but I'll ask again if this is something you plan to continue to own and operate or if it's something you could sell as a turnkey device. Are you thinking

Speaker 2

differently about that? Yes, Steve. Right now, it's a second client that we're building it for, its second application. And we're very confident that we've been able to identify some other opportunities as well. So we see being able to turn these things over and keep them working.

Until we get to three or four, we kind of see ourselves with three of them and maybe a backup or something like that in the next eighteen months or so. We don't foresee leasing these out to anyone at this point in time. We see us operating them with some of the expertise we have. It does take quite a bit of engineering skill to keep these things moving. The software is proprietary, And that's really the trick of the whole thing is the software and the radioactive source that runs the gate system on the conveyor.

So I really would doubt that we would lease it out and not just run it ourselves.

Speaker 5

I guess three to four over the next eighteen months is better than one or two now. I guess, is this something where you see dozens of them out there at some point? You think there's

Speaker 2

No, there's always so much going on in this industry There's a limit to applications. It doesn't sort everything. It only sorts a certain source term. We've been doing some R and D actually, Steve, to broaden that so we can sort new, even non radiological contaminants. And if we can break through on that, then it'll expand further.

Speaker 5

Okay. But at the very least, you see a continued revenue stream

Speaker 2

over the long Absolutely. Term from the

Speaker 5

Okay. Thanks very much.

Speaker 2

Thanks, Steve.

Speaker 0

Our next question comes from the line of Howard Landis. You may proceed with your question.

Speaker 6

Thank you. Mark, it looks like you're in the $100,000,000 run rate range, give or take a little bit. And just trying to get a sense of what is this a 10% EBITDA business after everything? Or do you think you can do better than that over time?

Speaker 2

Howard, that really depends on if our waste receipt or waste treatment segment can catch up. We believe it can. We're expanding it rapidly to the extent of adding a lot more commercial waste and expanding what we can take and process on the DOE and DoD side as well. So to answer your question, yes, 10% is our goal. We're probably going to be a little short of that because we don't make the same margin on the services.

And services right now is such a high percentage of total revenue that that's going be tough to get to 10. But 10% certainly is our goal. And as we can increase the waste treatment segment, we'll get closer to it.

Speaker 6

Okay. And on the services side, what percentage of those revenues would be either fixed price or time and materials not to exceed where there's some risk to the margins?

Speaker 2

Yes. Right now, we have a few fixed unit rate contracts where we're getting paid on, for example, for a cubic yard of soil removed and disposed of. But overall, I think we're probably for the services, just the services segment of let's say it's around 70% of our total revenue, we're probably in the 90% to 95% T and M. All of our California projects, our Seattle project, and all of our smaller projects are all T and M. So the risk is less than usual.

We do have a few small demolition jobs for the core and some of our cleanup work in Canada. Our fixed unit rate or fixed price, I would say total revenue this year would be in the 5,000,000 to $7,000,000 range total at most for the fixed price component as a range. You agree that, Ben?

Speaker 3

Yes, through this year, yes.

Speaker 6

Is there much in the way of T and M not to exceed, at some point that gets hard to differentiate from the fixed price. Is that an issue or is mostly T and M just T and M?

Speaker 2

Just T and M, yes. We don't have a lot of hard dates because the remediation business, there's so many surprises. You find things as you're chugging along or you're doing demolition. So those dates typically slip with change notices. And so you work with your clients through those.

So we don't have a lot of not to exceed the HAMRS on our projects. Great.

Speaker 6

Thank you.

Speaker 2

You bet.

Speaker 0

Our next question comes from the line of Stephen Fine. You may proceed with your question.

Speaker 7

Hi, guys. Congratulations. I think, you know, with the world as challenging as it is, I was shocked to see you did that well. But, you know, what's even more, you know, what's even more fantastic is when Ben says you got a four when you guys say you got a 48,000,000 to $50,000,000 service backlog, that means you're talking almost $100,000,000 this year when you did 70,000,000 last year. You know, I understand service has different issues.

But that's quite impressive. Now Ben made a comment that you have a backlog of 48,000,000 in service. What's the backlog in treatment? You know, understanding but is there a backlog in treatment presuming flows were, you know, coming right?

Speaker 3

Yeah, Steve, it's about 6,400,000.0. Yeah, and that's a quarterly number we monitor all the time. And that is down a little bit and that's reflective of the slowdown in the receipts.

Speaker 4

All

Speaker 7

right, fair. But you know, I presume you're in a rare environment because of COVID. The $5,000,000 that you got from the government, how much of that has been used?

Speaker 3

It's all used.

Speaker 7

Okay. All right, so my question is if you didn't have the $5,000,000 how would that impact how would that have impacted the financials?

Speaker 3

If we didn't have the $5,000,000 we, you know, we would have had a lot harder decisions to make with labor. You know, I mentioned just the cost of sales number of 800 ks and that's conservative. That's really reflective of the significant slowdown in the treatment side. But we would have also had a lot of decisions. And we had talked about a lot of decisions in the, from a corporate standpoint to maintain.

And so, you know, easily between $1,000,000 and 1.5 impact on the quarter.

Speaker 8

All right,

Speaker 7

all right. But you know, you had it and you deserve it and, you know, hopefully you don't have to pay it back.

Speaker 8

You

Speaker 7

know, the one other thing that I saw in the financials going through, there was 140,000,000 for medical. So what's that for?

Speaker 3

Not $140,000,000 $140,000

Speaker 7

I mean.

Speaker 3

Yeah, yeah. And that's just the medical segment is still active. It's in somewhat of a mothball mode right now, but there are costs of maintaining. A lot of that cost is internal for efforts by some of the folks in our shop here to maintain a public company. So it's pretty minimal.

It's probably from a cash standpoint costing us about $6,000 a month.

Speaker 7

Okay, alright, good, thanks. All right, one of the first questions I think was from Howard when he talked about the, how do I express it, the new hope, the new chance, the new chance of fresh air at Hanford where they're reevaluating the contract. And I'll just throw this out to Howard and I won't ask the question. But I've read that one of the reasons that they throw out the appeals is because the award company had an employee who supposedly worked for DOE and that's, let's put it this way, created some questions. So for me that, you know, my feeling is that makes things even, you know, more positive that that happens.

But to me, you know, what you guys are doing is fabulous. You're building a diversified company. And if that happens, it happens. When you talk about this permissort and you talk about, you know, more machines, so what are you estimating that, let's say you had three machines, that that would generate a year in revenue?

Speaker 2

Steve, it's probably a good estimate. And again, this is just an estimate that these things will run $5,000,000 to $7,000,000 a year in revenue each, depending on how long your cycle is that they're in the field for. If they're running all year long, will be higher than that, but typically they wouldn't be. So I think we could assume at this point that $5,000,000 revenue per unit is a pretty good guess at this point. I think the important thing is on these things, Steve, is that this is a real solution to a very common problem, and that is it minimizes waste that's going to a very expensive landfill.

In other words, you can put a lot the soil back because you've characterized it very quickly as opposed to shipping it to an off-site landfill. So it's more exciting to us even than $5,000,000 a year in that it's a solution that would allow us to bid on remediation projects very aggressively and put us in a preferred position for teaming with some of our partners and solving problems on larger projects. So there'll be not just the $5,000,000 revenue from those, but services that go along with that as well.

Speaker 7

And what's the pay well, for example, how much do one of these things cost?

Speaker 2

We can't get into that from proprietary at this point, but it's a lot less than $5,000,000 a lot less.

Speaker 7

Right. So in other words, your payback on this thing, your payback on the investment is quite quick so forth relative to success.

Speaker 4

Okay.

Speaker 2

That is correct. Excuse

Speaker 7

me, okay. All right, what about the TBI? Where's that?

Speaker 2

The TBI continues to be supported by DOE in Hanford and headquarters. It's kind of slowed down a little bit with all the TCC issues. It still is in the TCC scope of the contract. DOE right now is still working with the incumbent contractor, WRPS, who runs the tank farm. And they're continuing to project extraction of waste for the DBI with the $10,000,000 that was set aside for this project in 2020.

And we're still at this point until further notice, we'll get more information, still anticipating receiving that 2,000 gallons by the end of this year. So again, it could take a lot of twists and turns, Steve, but right now that's the guidance we've gotten from the folks on the project.

Speaker 7

So basically you're painting a picture that you're expanding service. You have a backlog of service of $48,000,000 You have this relationship with Jacobs where you'll be able to bid. And that was another question. When do you see are you bidding on that? Are you bidding with Jacobs as one of the nine bidders on new things now already?

Speaker 2

We do have that relationship with them. We're anticipating and DOE announced recently that they anticipated a number of task orders to come out between now and the end of the calendar year. So we're anxiously waiting those. They also stated they're going to publish the forecast or some type of schedule of task orders. We don't have that yet, so we don't know what that looks like.

But all indications from DOE procurement headquarters is that there's a number of task orders being readied to go through that contract, and we will work with Jacobs to pursue each one of them.

Speaker 7

And then you have said in past things the GeoMelt business could be $100,000,000 Where is that?

Speaker 2

We're waiting for the final permit modification from the treatability study that we did over the last year or two, year and a half with Veolia. So we melted a significant amount of sodium up there that we received from INL in Idaho. And once you do that run and you resubmit or you submit a treatability study permit mod, we're waiting for that to come back from the state now. We anticipate seeing that sometime before the end of this year. And once we receive that, then we'll be able to process sodium, that 100,000,000 that you mentioned, very rapidly after that at a full production rate once we receive that mod.

So we're in permitting space right now, Steve.

Speaker 7

Okay. All right. So when I look at Hanford, so please correct me, I mean, you have an existing there's a you know, with Hanford running, whatever it is, you have business there from Hanford as a subcontractor from somebody. Is that correct? Under normal conditions?

Speaker 2

Mr. Yeah. We a significant amount of waste on a sustained basis from the plateau and a smaller amount from the tank operations. We anticipate all those to continue on the current trajectory that they are irrespective of contract change. We'll likely take maybe take a month or two hit for receipts once transition is in full swing.

But it's all part of the overall cleanup strategy to be shipping some of that waste to our facility there at Hanford. So we don't expect that to change irrespective of who's running the contract.

Speaker 7

Right. And so we have the in other words, I'm trying there is the hope and and, you know, maybe the icing on the cake of another chance with the tank closure contract. But even if that doesn't happen, you have business at Hanford. You have the potential of the TBI. And you know, the way I'm reading as a technical person is that in theory you could be doing the TBI with a completed vitrification plant And you could be still and you could be enhancing, you know, you could be saving money.

The vitrification plan could be running and you could be running. And, you know, from what I've read, if the vitrification plan is ever when finished, it's still going to take decades to do that. So therefore, a TBI initiative would really, you know, save money and get things done faster. So you're in great shape is what I'm trying to say.

Speaker 2

We would have to agree. We think so, Steve. We refer to the TBI as a supplemental treatment to the Waste Treatment Plant Commission. So yes, yes to all your statements.

Speaker 7

All right. So I'm presuming that, you know, in our very challenging world that, you know, you've mapped out scenarios relative to, you know, different things happening so that, you know, you're going to cope and so forth, you know. My last question is, I read somewhere that DEOE has extra money. Would you and you know, so my question is, it hasn't been used. So is that money being pushed into the new fiscal year?

And would that affect budgeting? Or is that just going to supplement budgeting? And could that then also push towards greater opportunities?

Speaker 2

I do think there's great opportunities, Steve, with that. I'm talking to friends of mine at different sites, not all of them, there are several of them. It's difficult to understand where they are in their spending overall because of just the unusual nature of the last three or four months. I think they're trying to figure out where they are in spending and what they're trying to get done before the end of the fiscal year. So yes, to answer your question, we're anticipating opportunities.

We're anticipating a surge in waste shipments at the September to support trying to get waste off-site, as opposed to spending extra dollars on labor. It's usually easier to accelerate spending by shipping waste off-site. And we do expect that to carry over into our fourth quarter, Q1 of the government fiscal year.

Speaker 7

Yeah. Mean, just, again, I'm saying this very calmly. I truly applaud the effort. In the midst of what we're going through, I know just I'm living this. And you know, I have a wife who, you know, she gets it, she's dead, so I'm living it.

And you know, you guys are out there and you had a good quarter. And then you have all these opportunities and so which is amazing that you've been this creative and you've gotten yourself to be this diversified and then having, you know, and you have dreams beyond that. Congratulations and, you know, congratulations. Thank you.

Speaker 2

Well, thanks, Steve. We appreciate that. And we appreciate your support. You know, I just want to note along that line is, as a company that's basically three sixty people or so right now, we've got almost 130 people in the field away from home over the last several months during the pandemic. So hats off to our staff who have been willing to travel live in hotels and live in apartments and support the field operations, which made this a great quarter.

I wouldn't have predicted that we'd have such an enormous support within the team, but everybody stepped up during a time where there's extra risk. And they're out there working in the field and making things happen while a lot of sites are shut down. So it's been our team that's stepped up. But thanks for your support.

Speaker 7

And I'll make one final comment since I didn't get a chance to talk the last thing. But the, you know, I was a chemical manufacturer and I've got very interested in this area looking for a nuance relative to the virus. After my work, I've really come down to the point that the key is ventilation. So please tell your people that when they're in these hotels to be very careful and to check on the air conditioning system because I've read many articles that, you know, this can be transmitted in a poorly, you know, run air conditioning system. So ventilation is so important, you know, aside from other things.

Right, thank you Thanks, so And again, congratulations.

Speaker 3

Thank you. Thanks, Steve.

Speaker 0

Our next question comes from the line of Tristan Barr with MTB Asset Management. You may proceed with your question.

Speaker 8

Hey guys. Kind of funny as you know I typically avoid commenting on calls at the risk of sounding like a cheerleader. But, you know, I just have to say that the turn that you guys have shown in the services business, you know, within this pandemic is is nothing short of extraordinary. I mean, that backlog number is is incredibly impressive. And that $100,000,000 run rate, which seemed like a bit of a reach, is now all of a sudden not necessarily reality yet, but certainly looks like it's going to come to pass.

And I just wanted say congratulations on that.

Speaker 2

Well, thanks, Tristan. Executive Vice President for Services, Andy Lombardo, is largely responsible for that. It's not a day that goes by where he and I don't marvel at how fortunate we are to have such a good backlog during such a difficult time. We feel like we're really fortunate because of that as well. But thank you, Tristan.

We appreciate your support.

Speaker 8

So now I'm going to switch and ask the what have you done for me lately question, which is, I mean, given the extraordinary turn in the services side, obviously, COVID is going to have an impact on the treatment segment. You know? And and, you know, I think that's to be expected, and and, you know, I certainly understand. But I was really kind of encouraged to hear, you know, at several different times during this call, it seems like you have, you know, an incredible amount of opportunities to now expand the treatment segment, which is, of course, your higher margin business. And so, you know, I I'd like to kinda tease those out a little bit and kinda get it in in one spot.

I mean, you obviously you have the TBI. You know, it's encouraging to hear that you're now in permitting stage with with Veolia, and then you mentioned you'd be able to turn that pretty quickly. What what does pretty quickly look like in in your mind? I mean, how how much longer do you think you'll be in a permitting standpoint? And then once that goes into production, what does that flow through look like on the P and L?

Speaker 2

Yes. Right now, our General Manager, Oraks, our Executive Vice President for Waste Treatment, Richard Grondin, has run our Hanford facility for many years. He's leading that effort. He tells me that due to the good relationship they have with the state, that we should see operations begin around the first of the year at the latest and begin to burn almost a weekly basis with the GeoMelt once we get through that permitting phase. That waste is sitting in Idaho, we're ready to go.

So we're excited about that. I'd like to be able to think we can get between 10,000,000 to $15,000,000 a year in revenue on that along with our partners at Veolia. And we have a great working relationship with them, a really good operating agreement, and that should be very doable. We are getting other sodium waste from INL now here in Oak Ridge facility as well, but not to the extent we expect to be rolling up in Hanford. I'm not sure if I answered all of it.

The other component, Tristan, is on the commercial sector. We've spent about a year now focusing on getting our foot in the commercial segment, the utility market, power market, along with oil and gas pipeline sludges as well that have significant amounts of norm in it. That's something that we just traditionally haven't done a large volume on and we spent a lot of time and effort to increase that. And we're starting to get some real traction now, getting some wins and building those relationships, which take a year or two to do. And so we're going to see that increase as well along with the DOE sustained waste shipments along with that.

Speaker 8

So the 10,000,000 to $15,000,000 on the geo melt, is that inclusive of Veolia's take or is that Perma Fix's revenue alone?

Speaker 2

That would be the total revenue, believe, Tristan, at this point between us.

Speaker 8

Okay. And then this increased commercial business, I mean, that takes longer, but is also more stable and usually, if my research is correct, kind of a more steady revenue stream and a little less dependent on budget vicissitudes. How big do you think that can get, say, for 2021?

Speaker 2

Well, that's a tough question. Our goal is to try to get it to 10% or 20% in the next two years. It's really tough because you start out with a drummer and a drum there and hopefully you're getting up to a railcar here and a railcar there. And it all depends if you're getting operational waste or waste that's coming from maybe a demolition project or a contamination event or something like that. But I would think a good gauge.

And again, this is speculation, Tristan, is 10% to 20% of our waste segment total. So that would be 5,000,000 to $7,000,000 a year would be a good goal for 2021.

Speaker 8

And I'm going to apologize in advance because I think you guys have been pretty careful to be conservative. And again, I understand that COVID throws a wrench and, you know, waste shipments were uncertain pre COVID, and so, you know, would be exponentially more so after COVID, but or or during COVID. But, you know, you you kinda touched on something there towards the end that I, you know, I I I think is is quite material, which is so, you know, you have this, you know, rather impressive services backlog. You acknowledge that so far into q three, the treatment backlog isn't what you would like it to be, but, you know, you have this year end budget flush coming up, which would seem to indicate that you expect a fair amount of waste to be shipped towards the end of Q3, which should again, I don't want to put words in your mouth, but sounds like Q4 could be quite exciting.

Speaker 2

Yes, we would agree with that. We are, as I said in the script, a little disappointed Q3 hasn't accelerated more. I think we're all the whole country seems to be a little surprised at how this is dragging on. And most of our friends at the DOE sites are moving very cautiously. So we haven't had the receipts that we'd hoped for in July.

They are increasing, as we said. But once that starts to look a little better, we know there's backlog out there that has to go. So we're hoping that we'll start seeing that August, early September and then see a great Q4 for us.

Speaker 8

Okay. Okay. Well, was it on my end. Again, congratulations and it's a heck of a turn in the service sector and congratulations on a job well done.

Speaker 2

Great. Thanks, Tristan.

Speaker 0

Our next question comes from the line of Steve Blobinson with Big Rock Research. You may proceed with your question.

Speaker 5

Thanks again. Just wanted to hit with a follow-up on water treatment in Florida. Did COVID have an impact there? What's the outlook for that? Just an update looking forward for the rest of the year.

Speaker 2

Know, Steve, we have a couple of exciting bids out for water down there that has been held up because of COVID, and we haven't seen it awarded yet. We're not processing a significant amount of water today, but we have had some over the last two quarters. So it is coming in, not in dramatic quantities, but we're bidding on some big quantities. So we're hoping that when we have this call in another quarter, we can tell you that it's running at a pretty sustained rate.

Speaker 5

Got it. Thanks very much.

Speaker 2

All right.

Speaker 0

Our next question comes from the line of James Godfrey with Godfrey Consulting Group. You may proceed with your question.

Speaker 9

Hi, fellows. Congratulations on a great quarter and equally, if not more important, just a fantastic turnaround over the last twelve to eighteen months. It's exciting. I look back, I think, Mark, you mentioned there's now three sixty employees. I was wondering if you can recall how many there were there when you took the helm here a little while back.

Speaker 2

James, we track that every quarter for our Board meeting. I want to say it was in the $2.20 to $2.40 range, something like in that range altogether. I think we've gotten up to the three eighty before COVID hit. So, yeah, it's been good. It's been really good.

These new services projects have really helped that.

Speaker 9

Great. I mean seeing the forest through the trees, that's a really important number. And of course that workforce is highly talented, very specialized and of extreme value. So you've done a nice job of building value for all shareholders. And again, I can't thank you enough for that.

I'm looking here, a couple of comments that you made. One of them, 10 new clients that you were able to say, that's significant. Can you give a little more color on kind of the mix of that client base? And as far as that's concerned, what kind of potential future opportunities those new clients might theoretically bring to the table?

Speaker 2

I'm glad you picked up on that, James, because I kind of ripped through that. That's a real nugget to get 10 new clients during COVID during that period when you can't get out of your office or your house. I was particularly excited about that. I have to tell you, looking through the list, they're all really confidential for the most part. So I can't give you names, but most of them are commercial.

There's some small ones and some ones that have potential for real growth, doing everything from most of it's characterization and characterizing things or areas or components. And our health physics arm of the company, again, Lombardo manages out of the New Brighton, Pennsylvania office, has done very well at marketing the oil and gas industry, as well as the mining industry, scrap metal industries, as well as power, utility and power. And what we're starting to see is some word-of-mouth, some new relationships being built, and some real payoff from those marketing initiatives. So it is an exciting component. If we can grow that much during a pandemic, you'd think we could do really well when we're back to normal.

Speaker 9

Well, there you go. And again, congratulations, because I view that as a very meaningful accomplishment and can't be more thrilled to hear Tim. That really did surprise me. As far as just a couple of other points, Hanford, TBI back on as soon as they can start shipping it. We're standing ready and pretty much ready to roll there.

Is all the permitting now in place and so once we start receiving product, we can just crank treatment up just as soon as possible? Where does that stand?

Speaker 2

Yeah, I mean there's limitations on volumes, but right now we have the ability and we're permitted to receive that waste on our current permit and we're ready to go. When that 2,000 gallons comes, we're ready for that and we have limitations that are much higher than that. So we're good to go when they start pumping it out of the tank.

Speaker 9

Great. That's exciting. Just again, the big picture at Anford is still pretty much the same, 56,000,000, 7,000,000 gallons, of which roughly 50,000,000 is low level waste. It's well documented that the vitrification plant was never designed to treat all of that waste. And really, from everything that I understand, we're the only other solution there right now.

So once they start to ramp processing, certainly we're going to get some of that. And the question is how much and how quickly we get that. So is that a pretty fair assessment of where Hanford stands right now?

Speaker 2

Yes, would like to think that, James. That's certainly our position. It's hard to speculate what will happen with DOE at Hanford, but that's our view of it as well.

Speaker 9

Right. And the vitrification plan, it's also well documented, isn't to be fully operational right now until 02/1936. And of course, they're already, what, fifteen or twenty years overdue on that schedule. So who knows what the real number is. There is my conclusion.

And the longer it weighs, the more tanks that are going to be leaking and the more necessity it is to get it be to seek out alternative solutions. And we have the cost saving solutions far superior. So I think Hanford is in fabulous shape and just over time is going to work into our hand beautifully. And then one other just question as far as our self bonding is concerned, I know we got the $5,000,000 back a year ago. Looking forward, how much is still available to us there in kind of that off balance sheet situation?

Can we just talk at where that stands today? And maybe Ben wants to grab that.

Speaker 3

Yes, Steve, just to clarify, are you asking how much of the self funding we have right now

Speaker 8

on the Yes.

Speaker 2

So proceeds

Speaker 0

proceeds?

Speaker 9

It's in effect restricted cash, right? And we theoretically could access that. We could go out and purchase bonding and access that cash just to understand how much real liquidity the company has that isn't quite apparent when looking at the balance sheet.

Speaker 3

Correct. And it's about 11,000,000 or $12,000,000 Yeah, 11,400,000.0.

Speaker 9

$400,000 You bet. So there's really a lot of cash there and the balance sheet is in fine shape when taking consideration. Well, I'll let you go. I see we've exceeded the hour mark, and I'm sure just couldn't be more thrilled with the progress over the quarter, over the last year, year and a half. It's been a wonderful transition and the future looks very bright to me.

And again, I compliment you all and can't thank you enough. Thank you.

Speaker 2

Thank you, Steve.

Speaker 0

Our next question comes from the line of You may proceed with your question.

Speaker 7

I got two quick things. What has happened you set up that plant in the middle of the country to assemble stuff which you wrote about last year. What has happened with that? You know, in other words, we bring big things in and so forth. You pad stuff out on that earlier in the year.

Do you have business there now or what?

Speaker 2

Yeah, Steve, that's called the Environmental Waste Operations Center or the EWOC. It's located here in Oak Ridge. We have, I want to say, six procurements out right now we're waiting to hear on. So we've bid a lot of things for that facility in the FebruaryJanuary timeframe in anticipation of receiving waste material in Q2. And then COVID hit and everything kind of stopped.

We did win one job, a small job doing some decontamination of equipment. And that's kind of getting us going. But it's a very limited revenue at this point. We're waiting to hear on these other bids. And hopefully by next quarter, we'll have some good sustainable revenue for that.

But it's been very limited. Very limited spending on go ahead.

Speaker 7

All right, one more quick question. So is the reason to say that as you explode in service, you know, with the understanding of service, that service could lead to treatment business? So in other words, you have a customer that you would service and that could end up bringing in treatment business?

Speaker 2

Absolutely. That's the model we're trying to implement, Steve. On each of these large DOE bids that we're participating or trying to participate in, that's kind of the sell. That's right.

Speaker 7

But even in the non DOE, that could be Yes.

Speaker 2

That's well. Exactly. And that's been our strategy since the very beginning that we started making the changes, is to integrate both those sectors together more.

Speaker 7

All right. Thank you again.

Speaker 2

Thank you.

Speaker 0

Ladies and gentlemen, we have reached the end of the question and answer session. I would like to turn this call back over to Mr. Mark Duff for closing remarks.

Speaker 2

All right. Thank you. I'd like to thank everyone for participating in our second quarter conference call. As I mentioned earlier, we successfully navigated what could have been a much more challenging environment due to COVID-nineteen, and we are well positioned heading into the third quarter. Based on our current sales pipeline, accelerating bidding activity and backlog, we remain highly encouraged by our outlook for the business.

So again, thank you everyone for participating.

Speaker 0

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.