Perma-Fix Environmental Services - Earnings Call - Q4 2019
March 19, 2020
Transcript
Speaker 0
Good day, ladies and gentlemen, and welcome to the Perma Fix Environmental Services Fourth Quarter and Fiscal twenty nineteen Business Update Conference Call. All lines have been placed on a listen only mode and the floor will be open for your questions and comments following the presentation. At this time it is my pleasure to turn the floor over to your host for today Mr. David Waldman. Sir the floor is yours.
Speaker 1
Thank you. Good morning everyone and welcome to Perma Fix Environmental Services fourth quarter and twenty nineteen conference call. On the call with us this morning are Mark Duff, President and CEO Doctor. Luci Nafani, Executive Vice President of Strategic Initiatives and Ben Naccaratto, Chief Financial Officer. The company issued a press release this morning containing fourth 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 Crescendo Communications at (212) 671-1020. I'd also like to remind everyone that certain statements contained within this conference call may be deemed forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and include certain non GAAP financial measures. All statements on this conference call other than a statement of historical fact are forward looking statements that are subject to known and unknown risks, uncertainties and other factors, which could cause actual results and performance of the company to differ materially from such statements. These risks and uncertainties are detailed in the company's filings with the U. S.
Securities and Exchange Commission as well as this morning's press release. The company makes no commitment to disclose any revisions to forward looking statements or any facts, events or circumstances after the date hereof that bear upon forward looking statements. In addition, today's discussion will include references to non GAAP measures. 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 Duff. Please go ahead,
Speaker 2
All right. Thanks, David, and good morning. 2019 was a successful year for Perma Fix, which can best be described as a year of solid execution that resulted in the transformation of our company, setting the stage to achieve even higher performance over the long term. This transformation has been realized through the integration of our treatment segment with our services segment and has positioned Permafix provide a unique offering for radioactive waste management to all our clients. This performance is reflected in nearly 50% increase in revenue for 2019.
At the same time, we're staffing up to support our anticipated growth, including the addition of strong industry leaders and additional technical talent. Let me take a minute to recap some of the financial highlights from the fourth quarter relative to the same quarter in 2018. And later, Ben will discuss the financial results in a little more detail. Overall, revenue increased 88% to $22,000,000 over the fourth quarter last year. Services segment revenue increased 340% to nearly $12,000,000 Our Treatment Segment revenue increased 13.5% to $10,300,000 We generated an adjusted EBITDA of $1,700,000 compared to a loss of $167,000 for the same period last year.
And lastly, we achieved net income attributed to common shareholders of $930,000 or $08 per share for the 2019 compared to a loss of $2,400,000 or loss of $0.20 a share for the same period last year. Sharpening our focus within the Services segment, we delivered growth from $13,300,000 in 2018 to $33,100,000 in 2019, which is an increase of 149% increase for the year. While this accomplishment is very exciting to our management team and our employees, our company views this as only the beginning based on our sales pipeline, backlog, and our new client relationships over the past year. Over the past few years, PermaMix management team has reconfigured the company around a new growth strategy that has established a solid backlog of contracts that we believe will provide sustainability while increasing our opportunities for new contracts and market expansion. This multiyear process, which delivered these results, has also shaped our 2020 business plan in order to provide the optimal services and technologies to meet the needs of our clients in our overall waste management market.
The focused execution of this business strategy has resulted in strong financial and operational performance over the past two years and is expected to continue into 2020. More specifically, both segments performed well in 2019, contributing to a year of strong organic growth with an adjusted EBITDA increase of 162%. Notably, most of this increase came in the second half of the year or the last two quarters. It is also important to note we achieved this performance despite a slowdown in waste receipts within the Treatment Segment due to the government continuing resolution and shortened work months due to the shutdown of the projects and treatment plants around the holidays. This temporary weakness in the treatment segment did not continue so far in 2020, as we expect improved performance in Q1.
However, we're also monitoring the potential impacts of COVID-nineteen, which I'll discuss more in just a moment. Meanwhile, we continue to identify new opportunities to reduce the cost, schedule and safety risks that radioactive waste impose on our clients through the application of new and innovative engineering and the use of technology in a cost effective manner. A recent example is the start up of our newest facility located outside Oak Ridge, Tennessee called the Environmental Waste Operations Center, or EWOC. The EWOC facility received its radioactive radiological materials license in February to support receipt of radiologically contaminated equipment, materials, waste for processing, packaging, and shipment to permanent disposal facilities. The new facility is highly synergistic with our existing operations and allows us to add new capabilities that are in high demand among our customers, including the ability to handle and dismantle large components such as turbines and other reactor equipment, as well as receiving demolition rubble for handling prior to final landfill disposal.
Specifically, the EWOC facility is configured to handle very large equipment that will support size reduction and shipping directly to landfills using our both rail access we have at the facility as well as trucking. In addition, the EWOC facility is located near the Dewey Oak Ridge Reservation, which has a cleanup mission expected to support sustainable waste generation for many years. This facility is ideally situated with an adjacent rail spur, making low cost transportation alternatives convenient and efficient. While we are not yet able to define the anticipated revenues for EWOC for 2020, we have submitted several bids already to support near term processing objectives. Importantly, unlike our other facilities, EWOC is not designed to treat hazardous or mixed waste at this time, and therefore, we believe we can ramp up our throughput in a very low cost and efficient manner with limited initial capital investment required.
In addition, an additional example of our ability to apply the newest technology to meet our needs of our customers' waste management challenges is our Perma Sort system. This latest technology will be applied to removing radioactive soils following dewater operations and dredging applications. This is a strong backlog of similar work in our industry, which can benefit from this technology over the next several years. And our engineers and health physicists are developing applications through the procurement process. As the Department of Energy continues to release large site cleanup procurements, PERMIS has been successful in providing innovative solutions that discriminate our team within the waste management missions of the scopes of work within those procurements.
This is particularly relevant to ongoing procurements at Hanford, Savannah River, and Idaho that may include on-site services for waste management, as well as the potential for providing waste treatment off-site using our proprietary technologies that represent significant value. Permafix has realized sustainable growth in several important nuclear services markets that should continue to generate backlog over the next several quarters. Specifically, we've seen growth in supporting several national laboratories, including cleanup missions directly associated with the revitalization initiatives and legacy contamination cleanup. These labs include the Lawrence Berkeley Lab, Lawrence Livermore, both in California and Los Alamos as well in New Mexico, as well as the Canadian Nuclear Laboratory in Ontario. Our growth strategy has not only involved our Services segment, as we've continued to realize strategic progress in our Treatment segment as well.
For the full year, our Treatment segment revenue increased 11% as we continue to identify new waste streams that require innovative and technologies to obtain disposition while leveraging our engineering team to provide additional value to our clients. As an example, in the past few quarters, we developed a solution to stabilize lithium hydride shields in Oak Ridge to passivate uranium traps from Paducah and continue to treat radioactive water from sources throughout the country. Each of these waste streams have been the result of our strategy to provide more comprehensive solutions to our clients in the disposition of their most complex waste problems. This innovation will support further growth with strong margins in concert with our services offerings. As we approach the end of the 2020, we've been fortunate to secure several new contracts that will support a similar trajectory of growth through 2020, assuming the impact of the COVID-nineteen is only temporary.
Once we return to normalcy, we anticipate 2020 will be rich in new opportunities within both the Treatment and Services segment, which will further enhance our backlog and provide stability for the company. And even though we have seen minor budget reductions in the President's budget for 2021, our largest waste management client or less waste treatment client, which is Department of Energy Environmental Management Division, the impact of waste shipments should only be limited in 2020 with minimal impacts the following year. Our Nuclear Services segment has limited exposure to the EM budgets within DOE with less than 5% of our revenues coming directly from EM in 'nineteen. The majority of our Nuclear Services funding is through projects within DOE from the Office of Science and from the NNSA divisions to support their infrastructure improvement missions, which should counter any impact that we see on the EM side of the house. On one final note, as I mentioned earlier, I'd like to discuss the potential impact related to the COVID-nineteen pandemic.
It is our desire at Perma Fix and our clients to maintain safe working environments while minimizing impact to our operations within our nuclear facilities. Within our nuclear services segment, we are beginning to realize suspension of several projects as our federal clients have halted on-site operations at government facilities. And as a result of these impacts, we will likely realize reductions in revenues for Q2. The magnitude of these impacts will be directly dependent on the duration of the suspensions. However, the loss of revenue in both the waste treatment and the services projects will likely be recognized in Q3 and Q4 if these suspensions are lifted later this spring.
Within our waste treatment segment, our treatment plants have seen some impacts to shipments to include some delays in waste from Q1 or the end of Q1, I. The last couple weeks into Q2. But again, these could increase depending on client shutdowns and other impacts as they're realized going forward. To date, our plant operations have not been impacted by the COVID-nineteen virus, as we have not seen any cases of the virus amongst our staff. So production has been maintained so far.
Our backlog within each plant is good right now, with approximately two to three months of waste inventory for processing within each plant. If we begin to realize changes that will materially impact Perma we'll be sure to keep our investors informed. While Perma Fix has directly benefited from government stimulus packages in the past, it's premature to speculate if that would be the case again this year. But we will continue to monitor every aspect of the COVID-nineteen as it's evolving and to find ways to best respond. Most importantly, Perma Fix is a safety driven organization with lots of experience in unusual environments.
We're committed to the safety of our employees and will stay on top of the situation as it unfolds. I'd also like to extend our best wishes to our shareholders and citizens across the country that have been impacted by the virus. As Americans, I'm certain we'll pull through this and emerge stronger as a nation. So to wrap up, 2019 was an exciting year for the company as we more closely aligned our nuclear services and waste treatment capabilities. And we are realizing the benefits of our business development initiatives.
This is best illustrated by the fact that we've been awarded over $65,000,000 in new contracts since the beginning of 2019. At the same time, we're advancing a number of significant opportunities to leverage our fixed waste treatment facilities, providing innovative treatment options for a variety of nuclear waste streams that will broaden our market base. Overall, we're extremely encouraged by the outlook for our business. We continue to enhance our balance sheet and have a solid backlog to help sustain us in the event of temporary disruption. On that note, I'll now turn the call over to Ben, who will discuss in further detail the financial results.
Ben?
Speaker 3
Thank you, Mark. Starting with our revenue. Our total revenue from continuing operations for the fourth quarter was $22,100,000 compared to last year's fourth quarter of $11,700,000 an increase of ten point four percent $10,400,000 or 88.1%. Our Services segment increased by $9,000,000 compared to prior year as the company continued to operate on numerous projects in both The U. S.
And Canada. In the Treatment segment, our revenue increased by $1,300,000 in the quarter compared to prior year, primarily from improved pricing related to the mix of waste we processed. For the year ended 2019, our revenue was $73,400,000 compared to $49,500,000 in 2018. Service segment revenue increased by $19,800,000 or 149.4% as again our projects won in the 2019 began to produce revenue in the second half. Our Treatment Segment revenue increased over prior year by CAD4.1 million or 11.3% as a result of the higher average pricing resulting from our mix our waste mix.
Our cost of goods sold for the quarter was $17,400,000 compared to $10,500,000 in the fourth quarter of prior year, an increase of $6,900,000 or 66.5%. Our Treatment Segment costs of sales increased 7 and $73,000 compared to primary prior year, primarily due to $1,000,000 reduction in our closure expense at M and EC, which closed in the 2019. I might have said increased a decrease $773,000 Cost of sales from our service segment increased $7,700,000 as a result of the significant increase in revenue compared to the prior year fourth quarter. Our gross profit for the quarter was $4,700,000 compared to $1,300,000 in 2018. The Treatment Segment gross profit increased $2,000,000 due to the improved waste mix and the elimination of the closure expenses at our now closed M and EC facility.
Our service segment gross profit improved by $1,400,000 primarily as a result of increased volume of project work. For the year ended '19, gross profit was $15,600,000 compared to $8,500,000 in 2018. The Treatment Segment earned $5,100,000 more gross profit than the prior year, primarily due to higher revenue and lower closure related expenses at M and EC. The Service segment gross profit increased by $2,100,000 primarily from the higher volume of project work. Total SG and A costs for the quarter were $3,300,000 compared to 2,700,000.0 last year, an increase of approximately $634,000 Higher employee related expenses for wages, incentives and outside consulting and also higher bad debt expense were offset by lower commission and legal costs.
For the year ended 2019, SG and A costs were $11,900,000 compared to $10,700,000 in the prior year. As with the quarter, employee wages and incentive expense were up as were travel, consulting, audit fees and bad debt. And these were partly offset by lower commissions, legal expenses and relocation of office expenses. Our research and development expenses for the quarter were down $555,000 and $620,000 for the year respectively as the company wrote down certain assets in its Medical segment in the 2018. Our income from continuing operations net of taxes for the quarter was $1,000,000 compared to a loss of $2,400,000 last year.
Included in last year's loss was $1,000,000 of additional closure reserve recorded at M and EC, the continuing operating expenses at M and EC of $308,000 and the write off of certain medical assets in the Medical segment of 465,000 Net income from continuing operations net of taxes for the year ended twelvethirty onenineteen was $2,700,000 compared to a net loss last year of 1,100,000.0 Our net income attributable to common shareholders for the quarter was $930,000 compared to last year's net loss of $2,400,000 For the year ended twelvethirty onenineteen, our net income attributable to common shareholders was $2,300,000 compared to a loss of $1,400,000 in the prior year. Our total income per share for the quarter was $08 compared to a loss of $0.20 in prior year, and our income per share for the year ended December 3139 was $0.19 a share compared to a loss per share of $0.12 in the prior year. Adjusted EBITDA from continuing operations for the quarter was as defined in this morning's press release was $1,700,000 compared to a negative $167,000 last year. And for the year ended 2019, our adjusted EBITDA was $5,200,000 compared to $2,000,000 last year. Some balance sheet items compared with the 2018, our current receivables and unbilled receivables collectively were up $10,300,000 primarily from the increased revenue in the Service segment.
We had an operating lease right of use asset of $2,500,000 which represented the present value of our operating leases as a result of implementing ASC 42 this year. Our intangibles and other assets were down $4,600,000 representing the release of $5,000,000 of restricted cash previously held as collateral under our closure policy tied to the closure of our M and EC facility. Our current liabilities were up $3,600,000 primarily due to increased operations in the Service segment. Waste backlog was $8,500,000 compared to $11,100,000 at the 2018. Our long term liabilities were 2,400,000.0 primarily up primarily from the inclusion of our long term operating lease liability, which again relates to the implementation of ASC eight forty two, of which $2,300,000 represented the present value of our operating lease liability.
Current debt, including capital leases and excluding debt discount and debt issuance costs was $2,000,000 with $427,000 due to our primary lender, PNC Bank. Total debt at year end was $5,200,000 including capital leases, excluding debt issuance and debt discounts, with $2,200,000 of that due to our primary lender, PNC Bank, 2,000,000 due on the loan from a private lender received in May 2019 and $937,000 from other debt. Our working capital was $26,000 a $6,800,000 improvement from the working capital deficit at the 2018, 6,800,000.0. And finally, I'll give some cash flow information. Our cash used by continuing operations was $4,000,000 Our cash used by discontinued operations was $660,000 Cash used for investing was $1,500,000 of which most was for capital spending.
Proceeds provided from discontinued operations was $121,000 which was primarily from the sale of certain discontinued operations property. Cash provided by financing was $992,000 which represents our monthly payments to our term loan of $824,000 net payments to the revolver of $318,000 $2,000,000 representing the note received from a private lender net of payments made and $133,000 from option exercise. With that operator, I'll now turn the call over
Speaker 4
to questions.
Speaker 0
Thank you. We'll go first to Bill Naskowitz at Heartland Advisors.
Speaker 5
Good morning, gang. Congratulations on a good year.
Speaker 3
Thank you. Thanks, It's nice to see
Speaker 5
a profit. So could you talk a little bit of you mentioned $65,000,000 worth of new orders this year. Could you maybe I missed this, I came on late, but what our backlog is in treatment and service?
Speaker 2
Bill. That $65,000,000 represents the wins we got in 2019 that are pretty much rolling from 2019 into 2020. That does not include some of the joint ventures that we've been in or pretty much as one joint venture. So that's just where we're prime and it's very pretty much a pesky alone. So you another can 5,000,000 to $10,000,000 in 2020 on top of that.
So that represents the project backlog we've got going into 2020. We're already starting to chew on that through the first quarter and hope to add to that in the next two quarters as additional field projects are awarded. So we submitted a significant amount more this year that we're waiting here on in projects to be awarded. So I think right now we probably have about 40,000,000 in projects that we're waiting here on. So that represents our services backlog.
On the waste treatment backlog, it's about $10,000,000 overall. As I said, it's about two to three months of backlog if we receive no more waste receipts as a result of the virus issue. So we're feeling pretty good for a couple of months with nothing more received. And certainly hope that it's not going to extend much more beyond that. And we feel really fortunate to have that kind of backlog right now.
Speaker 3
Bill, just let me clarify real quick. It was 8.5 at the end of the year and marks 10,000,000 in treatment he's talked about is kind of where we are today.
Speaker 2
Okay. That's correct. And then
Speaker 5
service a year ago, the backlog was only was it around $20,000,000 I can't remember.
Speaker 3
No, probably lower in that.
Speaker 2
It was a lot less. Yes,
Speaker 3
was less than 20,000,000 less than 15,000,000 I think.
Speaker 2
Yes, was going to say 12,000,000 or $13,000,000 Bill.
Speaker 5
Okay. And then you've got a service backlog today of $40,000,000 Is that what I heard?
Speaker 3
Coming into the year, yes, coming into the year about that amount, yes.
Speaker 5
Okay. Could you Mark, you also mentioned trying to broaden the service sector. What type of deals are you working on? I mean, just broadly speaking in terms of broadening the business?
Speaker 2
Yes, the specific ones I'm most excited about, which I mentioned very briefly, the EWOC. The EWOC facilities provides a really unique service here locally in Oak Ridge for high volume transfer of waste. And that's just getting along. We just got our license in February. We're waiting to hear on a couple bids before we really get it up and running to full speed.
That has a real potential to be transformative for us, Bill. The sole source I mentioned, I talked about that like two years ago. You might remember, we had several bids out for that. And then it got real quiet because we lost a couple. But then we actually won a few.
And that's really starting to kick up now. We're going to be doing some operations in San Diego to support some dredging that's going on. They're finding some radioactive soils. And we'll be separating those. And that has a real potential to grow over the next couple of years and be a very sustainable revenue stream for us.
So we're excited about that. We're also excited about these big DOE bids that we talk about every quarter. We've been able to hire some really good waste engineers that are very seasoned at solving complex problems. And what we're being able to do is find solutions for each one of these sites in association with their waste management challenges and get on teams with the larger companies, the Tier one companies, to provide specific solutions to them, to the overall project. So those are exciting for us.
It's much like the tank closure job, not quite as large as that for us, but certainly transformative and could add some good chunks of sustainable revenue for over ten year contracts. We're saying things going on. Go ahead.
Speaker 5
Mark, when you say large or big DOE contracts, what size are you possibly talking about?
Speaker 2
These are the large DOE MNO type procurements, the Savannah River and Idaho. I think Savannah River is in the $20,000,000,000 range for ten years and Idaho is in the 10,000,000,000 Those big large ten year contracts that we won't prime will be a critical subcontractor or a team partner on, so at a much, much smaller level.
Speaker 5
5% to 10% or something less?
Speaker 2
Probably a little bit less depending on the project, but still when talking about numbers that big, significant.
Speaker 5
Yes. Okay. Thank you very much. Congratulations.
Speaker 2
All right. Thanks, Bill.
Speaker 0
We'll move next to Avi Fisher at Long Cast Advisers.
Speaker 6
Hi, good morning. Thanks for taking my questions.
Speaker 2
Good morning, Avi.
Speaker 6
We've seen some significant growth in the G and A side. How sticky is that? Is this sort of year end bonus stuff or is this, you know, 3.3, above three, the new norm?
Speaker 3
I think the year end bonus is a pretty healthy chunk of that year over year. You know, you have kind of cost of living increases as well. But we saw some offset costs. So it was probably the incentives some of the employees are going to get a well deserved bonus this year.
Speaker 6
On a sort of a normal run rate basis, you know, this crisis pandemic, what's the right way to think about G and A? Is it back under three or are we sustainably over three?
Speaker 3
Over 3% or a million? A million. For the quarters you mean? For the quarters?
Speaker 6
Yes, on a quarterly
Speaker 3
basis. I think it'll be coming down as revenue goes up. Our target is to try to be in the 10% to 12% range for the year. So, you know, a little bit less than probably 3% is a good starting point though.
Speaker 6
And then just a second question, you know, I don't have we don't have the segment details here yet. But can you just, you know, and this is more of a general question. In the past and I'd say years ago, the services business had some issues in terms of, you know, getting underwater on contracts. And I believe that we press released a promotion for someone who was running the services business back in 2011. I'm just trying to get a sense
I mean this business, the services business makes profit on how good you estimate a project and how good you manage the project. Just the numbers of estimators and project managers you have now compared, you know, how many of them were running the business also in 2011 when you had these issues? How do we make sure that these project managers and estimators are comped on project profit, not just project revenue? Any color you can provide around that would be helpful. Thank you.
Speaker 2
Yeah, Avi, we have a completely well, not completely. We have several people from twenty eleven from the SEC group that are very seasoned and experienced project estimators. We do have a lot of new ones as well that are supporting the team. So we have a team of folks that develop proposals. It's not just project estimators that result in a project being successful.
It's implementation, it's contract terms, it's leadership of the project, it's changed conditions and client reasonableness. There's a lot of things that go into it. Certainly estimating is one of them. But we've implemented a different QA program than we had back then, so that we have very stringent, what we call green team reviews of our costs before we send them in. We have risk committees that look at the different risk each project takes on.
And unlike 2011, we have a lot fewer fixed price contracts. Most of our contracts right now are T and M. From a percentage basis of a $50,000,000 revenue stream, less than 20% will be fixed unit rate or fixed price, which obviously have various degrees of risk associated. So 80% of our services group is T and M, which is a much lower risk level associated. And we do have some smaller fixed price contracts with DoD.
Those just ironically are the projects that have not been affected by the virus and continue to be ongoing at military bases. And so they're running very well. And just to of give you a sense, Avi, overall, we do our project reviews every month and we have 12 or 13 services projects. And our Executive Vice President, Andy Lombardo, and his team spent a lot of time going through each project. And we are generally at proposed margins on 12 of the 13 projects.
In other words, we may have one or two projects that slip below the margin that we bid and the rest are pretty close to being right on. So overall, I'm real proud of our services group and how they've been tracking the margins. And to your point, how we're estimating these margins in the proposal. So I think it's a strong point for the company. You can have a bad project at any time.
I'm saying we're never going to have one because they are complex and you can miss things here and there. But I think our QA program and our estimating has been very strong.
Speaker 6
What's the average or normal duration of a services project? Is it in the months or years?
Speaker 2
They range dramatically. We're doing some small projects at DOD facilities that are 300 or 400 ks that are literally in the field three or four weeks. And we have several right now that we're doing that are eighteen months in duration and 20 to 30,000,000. And then we have one that could be several years on top in addition to that. So they really range, but between three months and eighteen months generally.
Speaker 6
By the way, Mark, and I'll just let you go. Last year in 2018, just based on your segment breakout, about 80% of your services projects were T and M. But this year, year to date, services T and M, you know, just 1Q to 3Q, 76%, 60%, 57%. So we're seeing a growth in fixed price work on the services side, and that's what's really driving my question. It's changing from that historical norm of 80% down to 57%.
Speaker 2
Yeah. And there's some gray areas in there, Avi. For example, fixed unit rate contracts don't have the same risk that fixed price contracts do. And we have a number of those that are in the fixed price category, but they're not fixed price. They're fixed unit rates, which means your quantities can vary and you don't carry the same risk.
But we've done a pretty good job, I think, in managing that risk and meeting our goals on the proposal side.
Speaker 4
All right.
Speaker 6
Thanks for taking the question.
Speaker 2
Sure.
Speaker 0
We'll go next to Sam Rebotsky at SER Asset Management.
Speaker 7
Good morning, Mark and Ben. It was nice meeting you in New York. I'm happy to see that the profitability going forward. And hopefully, with with you know, once the corona gets straightened out, you could be consistently profitable. My question relative to the February 28 press release, could you talk about how much you're spending and what your expansion is and what kind of sales this could produce and the cost, etcetera?
Speaker 4
We race to
Speaker 2
Sam, I'm not sure I understand your question. February 28 press release
Speaker 7
You said you would you announced a a low level radioactive waste processing and treatment addition of a highly specialized facility located in Oak Ridge. So you're expand you're making an expansion at Oak Ridge. What are you spending? What how much more revenue could it produce? And when do you expect that to be complete?
Speaker 2
Okay. I understand what you mean now, Sam. Yes. So the EWOC facility right now is in a very low capital requirement project. We have a lease to buy arrangement.
And so we've kind of moved into that direction very slowly. But we are committed to this facility, making it work.
Speaker 6
Basically,
Speaker 2
the overall revenue associated with what we can bring through that is not defined yet because we have so many bids we're waiting here on. I think it's just a goal in my mind that if we can do 10,000,000 a year out there in coming years, that would be a good goal for it. But it could go up from there depending on the role it plays at the Oak Ridge Reservation itself. And right now, it requires very limited capital investment. We've got our license, our radioactive material license to get rolling.
We have to make a number of improvements to be able to handle the waste streams we've just been on. And we'll be making those improvements here in the next couple of months. So it's really it just depends on some of the procurements that are coming out of DOE here locally and whether there's an opportunity to process the waste to ship it out West. So it's really still in the planning and development stages at this point.
Speaker 7
And with your $65,000,000 backlog and the other 40,000,000 it seems you have the ability to be profitable once the corona is straightened out on a quarter to quarter basis. Is that appear that based on the amount of revenue you could put through your facility, could be profitable on a quarter to quarter basis?
Speaker 2
Sam, it really depends on how long it goes, but we are hoping for that. If it's a four week impact or six week impact beginning last week or so, then yes, I think we'll be fine. And we may have a dip in Q2, but we'll make up for it in Q3 kind of thing. And we feel like we positioned ourselves in regards to planning on our projects and in our treatment plans to withstand that four to six weeks without too much problem. If it goes much beyond two months, it will have more of an impact like it will on everybody.
When I say beyond two months, that means our facilities, the DOE facilities are shut down or not operating. Again, we can make it two or three months with backlog on our treatment plants and our projects are working from home at this point and keeping projects moving forward so that when we can get back in the field, we can hit the ground running upon release.
Speaker 7
Okay. Do we attribute the backlog, increased backlog to a better bidding process, more jobs available, the fact that we're better at able to do what has to be done, and do we see more or what kind of how many or or is the, you know, the DOE, is there more jobs they're putting out? What is the what what would you attribute the increased backlog? And and how much more do we expect it to increase going forward?
Speaker 2
It's tough to project how it's gonna increase going forward, Sam, but a couple of things. Number one, what I failed to mention with Avi's question was that we are being much more methodical on what we bid, which also takes the risk out of contract overruns and those types of things that Avi mentioned in regards to fixed price. We're very focused on bidding projects that we have core competencies in, which is radiological component and waste management. And making sure we have the staff that can do the jobs that we're bidding and do them well. So that's been putting us in a position that so the ones we're bidding, we have high wind probabilities, and we can do the job with high confidence and minimal risk.
And to specifically answer your question, we're seeing a revitalization occur within, particularly within the Department of Energy and with DoD as well, where both entities are removing facilities and legacy risks associated with contaminated facilities so they can build new infrastructure. So I see that continuing at all the DOE sites and the DOE sites. And when they do that infrastructure upgrade, they generate waste and provide opportunity to do the projects in the field. So both support our core competencies and I expect that to at least be flat, if not increase again through the year. I do think there might be a blip from the virus here for the next month or two.
But I do expect to see a surge following that as waste begins to be generated again and operations get back to normal.
Speaker 7
And further, are we beating out our competition to win these jobs when we weren't doing it before? Or there is less competition for the jobs?
Speaker 2
I can clearly say that the competition levels have been somewhat flat. So it's typically the same numbers that we've seen in the past two years. I think we're doing a better job of bidding and preparing for the bids before they come out and tying in some technology where possible to cut costs on the waste management side of house particularly.
Speaker 7
So thank you. It was very nice to meet you in person with Ben, and, you're doing a good job. And, hopefully, we could get a quarter to quarter consistency of of earnings and sales that's that's not beyond our control. Good luck.
Speaker 2
All right. Thanks, Sam. Appreciate it.
Speaker 0
We'll go next to investor Steven Fine.
Speaker 8
Good day, guys.
Speaker 2
Good morning, Sam. Good morning, Steve.
Speaker 8
Congratulations on great year.
Speaker 4
Thank you.
Speaker 8
Presuming we didn't have this coronavirus thing in front of us, would it be reasonable to say that, you know, if things were all smooth and you didn't have disruptions that, you know, dollars 100,000,000 this year would not be out of the question based on your backlogs and so forth?
Speaker 2
That is a safe assumption, Stephen. And we projected the same type of performance we had for the last two quarters to flow right through the year with the backlog we have. And we're hoping that we could win a few more additional projects on top of that to see even growth higher than that. But yes, that was the trajectory we were on.
Speaker 8
Okay. When I looked this morning at the numbers that came out, the one thing I saw on your balance sheet is that, you know, even though your current assets were up, your cash was down. But you had a tremendous amount of receivables at the end of the year, which I would expect. Can I ask the question that during the first quarter, has that smoothed out a bit so that you do have more cash on hand?
Speaker 3
It has, Sam or excuse me. We the a particular contract had some work to be done which we've resolved and that was what sort of elevated at the end of the year. But yes, our cash will be improved from the year end.
Speaker 4
Okay.
Speaker 3
It should be.
Speaker 8
Fine. Thank you. All right. Let's talk about the EWOC thing. Am I to understand that this is a separate facility that you've rented?
Speaker 2
That is correct. We have a lease to buy on it. It's a facility that was previously operated at the East Tennessee Technology Park by another company and kind of been quiet. It hadn't been used in many years that we saw some value in potentially deploying some new capabilities.
Speaker 8
Okay, great. So does the existence of that facility relative to the bids out put you in a unique position?
Speaker 2
It does, Steve.
Speaker 8
Okay. You've given us some ideas. I know after following you guys for two years, particularly you Mark, I know you don't do things unless there's opportunities. I'm just going to make the presumption that, you know, you see some business.
Speaker 7
Yes.
Speaker 8
All right. Let's go to the big elephant. You know, we've been talking about this. I'm talking about the tank closure. So, you know, I understand what's going out there.
There's some contracts on appeal. But my understanding is that with the tank closure, that Perma Fix is part of a consortium in its bidding. Is is that correct?
Speaker 2
That is correct, Steven.
Speaker 8
Okay. So the question I have is, you know, when we when we think about the tank closure, it had always been, you know, that you guys would treat. So the real question is, the question I have is presuming at some time that that is, the bid is awarded, Do you got are you guys a partner in that wherein you would get, you know, revenue brought in irrespective of whether, you know, you were treating in your own facility?
Speaker 2
Yes, Steve. It's an ongoing procurement, so I have to be careful about what we say about it. But let me just say this. We are a critical subcontractor, to answer your question. So we're on a team team agreements and other agreements supporting that to provide value to that team in operations space.
And we are part of the solution for what's proposed in that procurement for treating waste as well. I'll leave it at that, we're waiting to hear on it. And we're sensitive to our teaming partners to keep that quiet until it's announced at this point. I also want to mention too that if we were not successful on this procurement, that we would still remain very optimistic that if we don't win, that we will still be a part of the treatment solution for the Hanford tanks, irrespective of who is awarded.
Speaker 8
Well, you know, I think that the, you know, that you guys should be congratulated because clearly what you've done is you've diversified the business in an amazing way in the last year. And clearly, you know, without what's going on right now in the world, you know, there was it would seem like you're unfettered and moving ahead and so forth. But, you know, I've always felt that, you know, the the stuff out in Hanford, like the town closure and so forth, should be like ice cream on the cake. And then even if you got it, you know, your attitude should be it's ice cream. And then you complete on the diversification.
But you Because the one thing I'm observing is you never know where things are going. So, you know, I congratulate you on diversifying.
Speaker 6
All right.
Speaker 8
Okay. Let's talk about the coronavirus. You know, obviously you mentioned it, Mark, and it's realistic. But I guess my real question is because, you know, I'm in my 70s and I've never seen anything
Speaker 0
Sorry. I believe we lost connection with Mr. Fine. We'll move next to investor Jim Brown.
Speaker 4
Hello. Good afternoon. Can you hear me?
Speaker 2
We can hear you, Jim.
Speaker 4
Oh, okay. I just had a couple of questions. First of all with the things that the government is doing right now is there, you know, in the way the interest rates have been going is there any chance for you to refinance some of your debt to save money on interest costs?
Speaker 3
We do look at that. We were in close communications with our credit facility and other opportunities. So that is something we do. We work closely with our audit committee as well. So there is that kind of an opportunity, yes.
Speaker 4
Okay. And the other thing, it sounds like well, we're almost done with the first quarter. And based on what you've said, it sounds as though and obviously you have a good handle on it. It sounds as though at least in Q1 we're going to beat last year again, right? I mean, it's somewhat Yes. Way
into the first
Speaker 2
We're definitely going to beat last year with Q1. We expect to see pretty similar trajectory as we've said from Q3 and Q4 of last year into 2020.
Speaker 4
All right. And then the other thing is you talked about hiring. And so we've got this I know you were in the process of hiring people. So now we've got this virus thing going, but are you what are you have you laid anybody off? Are you shifting people around?
Or did you put a hiatus on hiring? Or exactly what are you doing with with the hiring?
Speaker 2
Well, that's a good question, Jim. We The point of the prior talk or discussion was that we've hired about 150 people through the year. And with that 150 people, we were able to hire a lot really strong leadership and technical talent that have made an impact to the company and really have transformed the company. When you win projects like that and get that kind of backlog, you can attract people that have an impact on the company and it can really snowball. And that's really the point of that.
But along the way, as our services manager frequently says, we've also had some change of staff as well, which any good company would do along the way, where folks leave and you replace them and set your standards very high. As far as the virus impacts, we've demobilized most of our projects. DOE sites that are slowing down, we have several projects in California and the Bay Area that are in lockdown, so basically everyone's working remotely. Fortunately, most of those projects have not been mobilized for field activities yet. They're in the process of mobilizing.
So we just pushed the hiring of the field workforce out a little bit. We do have a couple projects in Seattle and Canada that have mobilized, that were in the field. And we've made the adjustments for the labor part of that along the way to support doing some training initially, which could eventually lead to a temporary layoff for some of the people. And for others, there'll be other work and reports that have to be done that will fill the gap until they can remobilize into the field. So to answer your question, we have not done a significant number yet of layoffs.
And we have been able to take care of our staff along the way. If this drags on much more past mid April, then we may have to do some along the way, but we have not today.
Speaker 4
You have a you're talking about working remotely, do you is there a decent opportunity for shifting people around? I mean, some areas of your operation I'm sure are not affected or very minimally affected. So I mean, there an opportunity to shift people around into areas that aren't affected?
Speaker 2
We have done that, Jim, actually. And we've been able to shift some of the folks on the Seattle project to our treatment plant in Hanford. And we've also shifted several other people from different projects to support proposal development and other surgeries we've had along the way this month. That will work for a while. And we hope it will work until this has died down and we can remobilize.
And then we'll have much less impact on the company overall.
Speaker 4
Okay. And I also had a question about do you have any prospective maybe impending or just prospective additional JVs in the pipeline? I mean, some maybe some things you're potentially looking at for a JV with somebody joint venture?
Speaker 2
Yes. At any given time, Jim, we have a hot list of bids that we're chasing in different various stages of when they'll come out. We may have a project that's due out in a year and we're addressing a source of salt request doing a teaming dance at that point. So we probably have at any given time 30 bids that we have that are going to occur in the next twelve to eighteen months. And we look at each one of those projects and determine what the optimal teaming relationship would be.
In some cases, JVs work well in different types of profit sharing. Share best interest and success and those types of things. You can combine your qualifications based on the procurement regs. We have two or three of those the way as well within those bids, the hot list.
Speaker 4
I was thinking more of like a long term, more or less permanent relationship like you had with this company that brought some new technology to you and and you you put it Oh. Into work in one of your plants. I I was thinking more of a
Speaker 2
Yeah.
Speaker 4
More of a longer term type of relationship. Relationship.
Speaker 2
Yeah. We do have several that are very similar. You're speaking of the Veolia relationship for the EML process of the. Yeah, we are looking at a couple more similar types of deployments like that. And we can't really get into at this point.
But we are that works so well and was so mutually beneficial to both companies as well as to our clients, particularly DOE, that we are looking at doing that a couple more times to address specific waste management challenges. But we should be able to announce something hopefully by end of this year along the way, along that line.
Speaker 0
Ladies and gentlemen, we ask that you please limit your questions in the interest of time in getting to everyone. We will move next to Robert Manning.
Speaker 9
Hi. My question also was about the tank project at Hanford and you answered a lot of it. I'm wondering if there's anything going on in the way of developing the capability to handle that waste, or is everything kind of in abeyance waiting for this next contract award, the prime contract? I recall a year ago, I think it was $9,000,000 was in the budget, which I understood was to sort of further prove the concept. And I don't know if there's anything you can tell us about that or not, but if there is, I'd love to hear it.
Speaker 2
Sure, Robert. Yeah, what you're referring to is the Testbed Initiative program, the TBI program we talked about a lot. And DOE has stated publicly that they intend to move forward with the $10,000,000 that Congress appropriated for the next phase of the TBI project. And they intend to do that this calendar year. And DOE right now, as a status, is evaluating how best to proceed with the regulatory submittals that go along with that and along with the approvals for the next phase.
And that next phase would be what we refer to as the 2,000 gallon phase where they would pull 2,000 gallons out of a tank. We would process it at our Northwest facility and ship it to WCS in Texas for disposal. The BOE is moving forward with that. Last time we heard from them in that regards, we're kind of at the back end of that. There's a lot of people that are involved in that as well.
So we don't always have the most current information, but right now that's what DOE has stated publicly that they do intend to use that $10,000,000 that Congress appropriate for this calendar year.
Speaker 9
So if I understand your answer, the $10,000,000 does not include drawing out that 2,000 gallons. The $10,000,000 is basically preparing to do that and then another decision has to be made to go ahead and actually process the 2,000 gallon batch. Do I understand that correctly?
Speaker 2
It could be used for that depending on timing. Yes, it would cover removal of that waste. The equipment's been engineered, designed and fabricated to remove the waste. It could be used to draw that 2,000 gallons out of the tank for processing.
Speaker 9
And I get it. We just don't really know. We're just holding our breath and at some point they'll say, Hey, go ahead, but we don't have much idea of when that will be.
Speaker 2
Yes. We are just not that well informed as to where it is in the process overall, Robert, at this point in regards to the regulatory status, particularly. We know where things are in the technology and equipment fabrication and that type of thing, where we are as a company ready for it. And it's really DOE's decision as to programmatically how it all fits together with DOE's objectives.
Speaker 0
We'll move next to investor Chuck Dickinson.
Speaker 10
Hi, good morning guys. TBI, just since I was just asked to follow-up on that, there were a couple of articles in the recent past that seemed to indicate that the regulators from the state of Washington itself may be more amenable to the idea of reclassification of that waste. Was my reading of that correct or am I off base on that?
Speaker 2
Know, Chuck, there's been a lot of discussion about what you're referring to as the reclassification based on the order four thirty five. I'm afraid I just cannot answer how that's lining up with the TBI initiative at this point. And because so much has happened over the last several months that we're not really aware of where it all lines up and how it fits together.
Speaker 10
Okay. On the accounts receivable, assume looking at the allowance for doubtful accounts, it went up from a year ago, but of course that's because the accounts receivable jumped a lot, which is a good thing. But given that most of your business is with the government, I assume those receivables are pretty darn money good. And you indicated on the previous conference call, I think that you have the ability usually to turn those fairly quickly. So you answered the generally, you answered the question that yes, the cash levels are gonna come up as those get turned and that's been happening.
But can we feel pretty close to 100% secure on those receivables, accepting the allowance for doubtful accounts?
Speaker 3
Yeah, yeah. I think the allowance There's always the exception, but we do have a very low bad debt rate generally speaking. And we do have sort of a formula based bad debt allowance. So the higher your AR is, it does kind of move up And that corrects itself when collections are made.
Yes. Okay.
Speaker 10
What is your remaining a couple more just bullet points and I'll drop out. What is your remaining total availability under the revolver and other credit lines?
Speaker 3
At the end of the year, was about $8,700,000
Speaker 10
Is there any intent to start tapping those? Or is that a wait and see sort of thing depending on projects and other financing that you might look at or how the COVID-nineteen develops? In other words, is that money reasonably assured of being there should a situation develop where, let's say, this COVID-nineteen extends longer than anticipated?
Speaker 3
Right. Well, is all supported by our receivables. So it would either be availability or cash. So generally speaking, yes. That's not anything that that is a that's a good number to be starting with going into this COVID issue.
Speaker 10
And you're not anticipating taking any of it down I know that's kind of a double edged sword. You take it down, start incurring interest expense. But if you don't want to be in a situation where if something happens, you you don't have maximum financial flexibility by having plenty of cash on the balance sheet. So there's no anticipation to tap that at this point?
Speaker 3
Yeah, it's generally for our working capital needs right now, correct.
Speaker 10
Okay. And the last question I have has to do again with this COVID-nineteen. It sounds like you're in a little bit more secure position as regards having some waste treatment backlog, as you said, to carry you through there for two to three months. Have you in place already, or are you going to consider sort of a plan B, where if this does extend beyond months, two to or if it goes away and then makes a reappearance in the fall or winter as flu viruses tend to do, do you have a plan B in place to deal with such things, not only as regards maybe downsizing staffing levels from projects to project if it gets delayed, but also trying to flange up your revenue stream so that you don't hit a situation where everything gets seized up at once, both on the treatment and the services side, so that you have at least some stream of revenues, even in a worst case scenario?
Speaker 2
Yeah, that's a really good question, Chuck. Believe me, board is very sensitive to the answer to that question overall. But I will say this, is we're meeting daily as a management team to revise and add detail to our plan. Our plan is for basically three phases, a two, four, and six month impact, and what we would do and how would we react to protect ourselves and minimize the impact, not only financially, but also from a safety perspective. When we have nuclear facilities, it's important to consider as well what the costs are, stay in compliance and those types of things.
So yes, to answer your question, we are planning that way and making sure that we have a methodical approach to each one of those phases to minimize the impact and make sure that we still viable and operating as much as we can, like you said, to keep revenue going as much as possible and reduce the impact to the employees as well. So it changes. It's amazing how difficult this has been. It just changes every morning and every afternoon. Seems like every six hours, there's new information, there's new considerations.
Our clients being the federal government law and in many cases are making decisions associated with their plants. DOE is shutting some plants down, others they're not. DOD has not shut down any of the sites we're working on. So it just changes so much, it's difficult to do planning. That's why it requires an enormous amount of communication and a lot of long hours to stay on top of it.
But I do believe we have a good plan in place that we can protect the company through the worst case scenario.
Speaker 0
We'll move next to investor Howard Landis.
Speaker 2
Operator, it's been over an hour or so. I'll hold my questions for the next call. But good quarter. Thank you very much. Thanks Howard.
Speaker 0
Thank you. And with no other questions holding, I'll turn the conference back to management for any additional or closing comments.
Speaker 2
Great. Thank you, Jess. I would like to thank everyone for participating on our fourth quarter and year end conference call. As I mentioned earlier, our strong performance in the fourth quarter and 2019 reflects the success of our strategic and business development initiatives over the past two years. And based on our current sales pipeline and accelerating bidding activity and backlog, we're highly encouraged by the outlook for the business in 2020 as a whole.
With that, thank you for joining.
Speaker 0
Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time and
Speaker 2
have
Speaker 4
a
Speaker 0
great day.