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PERMA FIX ENVIRONMENTAL SERVICES INC (PESI)·Q2 2021 Earnings Summary

Executive Summary

  • Q2 2021 revenue fell to $16.1M, down 26.8% year over year, driven by Services segment delays and completion of a large project; Treatment segment was roughly flat. Adjusted EBITDA declined to a loss of $1.7M, and operating loss was $2.2M .
  • Reported net income was $3.0M ($0.25 basic EPS), boosted by $5.4M PPP loan forgiveness; underlying operating results were weaker due to COVID-related procurement and shipment delays .
  • Management indicated activity was picking up into Q3 and expressed confidence in an improved second half 2021, citing a robust bidding pipeline and the new Therma-Fix Gen3 system as catalysts .
  • Near-term stock narrative likely centers on Services award timing (DOE/EPA/Navy), Treatment receipt normalization into fiscal Q3, and potential Hanford TBI progress; PPP-driven EPS is non-recurring and should be discounted in quality-of-earnings assessments .

What Went Well and What Went Wrong

  • What Went Well

    • “We were able to report a net income of $3 million for the quarter. We have $7 million of cash on the balance sheet and have lowered our bank debt to under $1.5 million,” underscoring liquidity and deleveraging; PPP forgiveness materially aided the quarter .
    • New Therma-Fix Gen3 vacuum thermal desorption system launched in June 2021 with backlog and sales pipeline secured even before operations, indicating demand for expanded Treatment capabilities .
    • Management sees “activity pick up heading into the third quarter” with a robust bidding pipeline valued in “hundreds of millions of dollars,” supporting H2 recovery potential .

  • What Went Wrong

    • Revenue dropped 26.8% YoY to $16.1M; Services revenue fell from $14.2M to $8.4M due to delayed awards and the completion of a large project, pressuring gross profit to $0.97M and leading to a $2.2M operating loss .
    • Adjusted EBITDA swung to a loss of $1.7M from $0.85M in Q2 2020, reflecting lower volumes and margin compression, especially in Services .
    • Government procurement cycles were “very slow” across DOE, Corps, and Navy, with delays attributed to COVID and administrative appointments, extending award timelines and project mobilization .

Financial Results

MetricQ4 2020Q1 2021Q2 2021
Revenue ($USD Millions)$28.3 $23.1 $16.1
Gross Profit ($USD Millions)$3.2 $2.4 $1.0
Operating Income (Loss) ($USD Millions)——$(2.2)
Net Income attributable to common ($USD Millions)$0.01 $(1.1) $3.0
Basic EPS ($)$0.00 $(0.09) $0.25
Adjusted EBITDA ($USD Millions)$0.71 $(0.52) $(1.70)

Segment breakdown (Q2 2021):

SegmentRevenue ($USD Millions)Gross Profit ($USD Millions)Segment Profit (Loss) ($USD Millions)
Treatment$7.706 $1.433 $0.468
Services$8.439 $(0.467) $(1.302)
Medical (R&D project)$0.000 $0.000 $(0.072)

Key KPIs (Q2 2021):

KPIValue
Cash and equivalents$7.312M
Total debt$1.3M
Unbilled receivables$7.332M
Current liabilities$23.321M
Treatment backlog (end of June)$6.7M
Services funded backlog (end of June)~$30–35M

Comparisons and drivers:

  • YoY: Revenue decreased 26.8% (Services -$5.8M; Treatment -$0.1M), gross profit down to $0.97M; net income benefited from PPP forgiveness ($5.4M gain) .
  • Sequential: Revenue declined vs Q1 2021 ($23.1M) as Services awards lagged and shipments slipped late in the quarter; management highlighted receipts shifting into July/August .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueH2 2021None formalExpect improved second half 2021 (qualitative) —
Activity/awards cadenceQ3–Q4 2021None formal“Begun to see activity pick up heading into the third quarter” —
Treatment receiptsQ3–Q4 2021None formalAnticipate receipts returning closer to normal into September/Q4 —

Note: The company did not issue quantitative guidance ranges for revenue, margins, OpEx, OI&E, tax rate, or dividends in Q2 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2020, Q1 2021)Current Period (Q2 2021)Trend
Government procurement timingRobust bidding; awards expected; COVID slowed waste receipts (Q4); heavy bid pipeline and expected awards; PPP forgiveness pending (Q1) “Procurement processes are just moving really slow… DOE/EPA/Navy” delaying awards; expectation for pick-up in Q3 Persistent delays, cautious optimism for H2
Treatment segment waste shipmentsWaste receipts rising into March; normalization by June/late Q2 expected (Q4/Q1) Receipts improved month by month; some large receipts shifted from June to July/August Improving into Q3
Therma-Fix Gen3 technologyPlant/Fleet investments, EWOC upgrades (Q4); capex ongoing (Q1) Gen3 system designed/fabrication begun; backlog/sales pipeline secured pre-start New capacity poised to add receipts in Q4
Hanford TBI / TSCRTBI Phase 2 permitting; $200/gal stabilization estimate; supplemental to DFLAW; NAS support for grouting (Q1) EA process underway; DOE officials suggest shipment prior to next summer; TSCR described as enabling pre-treatment Slow regulatory progress; potential 2022 execution
Services segment opportunitiesStrong Services revenue in 2020; IDIQ pipeline; international shipments (Q4/Q1) New multi-million Tritium Systems contract; multiple bids across DOE/Navy; IDIQs pending Pipeline growing; award timing uncertain
COVID operational impactsSafety record and operations maintained (Q4); vaccination ramp; delayed shipments (Q1) ~mid-70% vaccinated; potential mandate adherence; lingering COVID slows procurement Easing; still affecting awards/mobilization

Management Commentary

  • “We were able to report a net income of $3 million for the quarter. We have $7 million of cash on the balance sheet and have lowered our bank debt to under $1.5 million.”
  • “We recently completed design and began fabrication and construction of our new Therma-Fix Gen3 system… we’ve already secured… on-site waste treatment backlog and inventory and a large sales pipeline.”
  • “DOE… preparing an environmental assessment on the next phase of the test bed initiative… shipment… should occur prior to next summer.”
  • “We have… bidding on a wide array of contracts collectively valued in the hundreds of millions of dollars… We believe these could be transformative to the company.”

Q&A Highlights

  • Award delays: Management attributes delays to both COVID (remote work, slower mobilization) and lack of confirmed assistant secretaries at agencies; similar dynamics at EPA (Navajo AUM program ~ $220M) .
  • Backlog detail: Treatment backlog $6.7M; Services funded backlog ~$30–35M at quarter-end, with durations ranging from short burn to 12–18 months .
  • Pricing and margins: Services bidding remains competitive with pressure on fees/margins; wages stable; technology differentiation used to offset pricing pressure .
  • Hanford shipments: Transuranic shipments to resume post-permit adjustments; TSCR system enables pre-treatment to classify waste for offsite treatment .
  • Vaccination policy: Mid-70% vaccinated; likely to follow government mandates for contractors if required .

Estimates Context

  • Wall Street consensus estimates (S&P Global) for Q2 2021 EPS, revenue, and EBITDA were unavailable via the API at time of request; estimate comparisons could not be performed. As a result, no beat/miss vs consensus is presented here [SPGI API error].
  • Implication: With no formal quantitative guidance and no visible consensus context, investors should focus on sequential demand signals (Services awards, Treatment receipts) and non-GAAP normalization (exclude PPP forgiveness) when updating models .

Key Takeaways for Investors

  • Quality of earnings: Reported $0.25 EPS was overwhelmingly driven by PPP forgiveness; underlying operating loss and adjusted EBITDA deterioration reflect real demand and award timing issues .
  • H2 setup: Management sees a stronger H2 as procurement resumes; monitor DOE/EPA/Navy awards and Services mobilization as key catalysts for revenue reacceleration .
  • Treatment capacity: Therma-Fix Gen3 and normalized receipts into fiscal Q3/Q4 should support margin recovery in Treatment; track backlog conversion and start-up timing .
  • Hanford optionality: TBI Phase 2 EA progress and TSCR readiness create medium-term upside if DOE advances offsite low-level waste treatment; timing remains uncertain and politically sensitive .
  • Liquidity and leverage: $7.3M cash, $1.3M debt, reduced current liabilities provide flexibility to bridge award timing; watch unbilled receivable trends and working capital as Services resumes .
  • Modeling note: Without consensus estimates, anchor to sequential run-rate from Q1–Q2, exclude PPP from normalized EPS, and sensitize revenue to Services award cadence and Treatment receipt normalization .
Sources: Q2 2021 earnings press release and 8-K exhibits **[891532_0001493152-21-019282_ex99-2.htm:1]** **[891532_0001493152-21-019282_ex99-2.htm:7]**, Q2 2021 earnings call transcript **[891532_2132827_0]** **[891532_2132827_12]** **[891532_PESI_221666_0]** **[891532_PESI_221666_17]**, prior quarter calls Q1 2021 **[891532_PESI_3346376_0]** **[891532_PESI_3346376_22]**, Q4 2020 **[891532_2132832_0]** **[891532_2132832_7]**.