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PERMA FIX ENVIRONMENTAL SERVICES INC (PESI)·Q4 2021 Earnings Summary

Executive Summary

  • Q4 2021 revenue was $17.1M (down 39.6% YoY) and the quarter posted a net loss of $2.5M, or ($0.19) EPS; the decline was driven entirely by Services delays, while Treatment revenue improved versus prior year .
  • Management emphasized a strong recovery setup for 2022: Services backlog rose to ~$66M, Treatment waste opportunities and bidding activity increased (28 bids in March), and DOE budgets/carryover support rising volumes .
  • The Medical segment exit closed in late December; related SG&A and a non‑cash loss tied to deconsolidation/minority interest were noted, impacting reported results for Q4 2021 .
  • Key near‑term catalysts: DOE’s Test Bed Initiative shipment of 2,000 gallons to PFNW targeted for late summer 2022 and broader task orders under new IDIQ/MATOCs (government awards expected to pick up in Q2–Q3 2022) .

What Went Well and What Went Wrong

  • What Went Well

    • Treatment segment resilience: “Treatment Segment revenues increased 9% for the year and approximately 57% for the fourth quarter of 2021 compared to the same period last year” .
    • Pipeline/backlog strength: Services backlog grew to ~$66M; projects are mobilized and progressing ahead of schedule with favorable margins (e.g., Norfolk Naval Shipyard, Princeton Plasma Physics Lab) .
    • Strategic initiatives: TBI (Hanford) gained federal/state momentum and $7M in specific funding; DOE manager and state regulator publicly prioritized swift execution; shipment targeted late summer 2022 .

  • What Went Wrong

    • Services revenue contraction: Q4 Services revenue fell sharply due to start‑up delays on three large projects (COVID/funding/customer scheduling), driving the YoY revenue decline and lower gross profit .
    • Profitability pressure: Q4 gross profit fell to $1.3M (vs $3.2M prior year) and Adjusted EBITDA was a loss of $1.7M (vs +$0.709M prior year), reflecting lower Services activity .
    • Accounting/internal controls/AR: A material weakness (SOX attestation requirement) and elevated AR tied to a Canada contract were flagged, though management expects remediation and no material write‑offs .

Financial Results

  • Consolidated results vs prior periods
MetricQ4 2020Q2 2021Q3 2021Q4 2021
Revenue ($USD Millions)$28.3 $16.1 $15.8 $17.1
Gross Profit ($USD Millions)$3.2 $0.966 $2.2 $1.3
Net Income (Loss) ($USD Millions)$0.01 $3.0 $1.4 ($2.5)
Basic Diluted EPS ($USD)$0.00 $0.25 $0.11 ($0.19)
Adjusted EBITDA ($USD Millions)$0.709 ($1.7) ($0.798) ($1.7)
  • Segment dynamics (Q4 2021 vs Q4 2020)
SegmentYoY Revenue Change ($USD Millions)
Treatment+$3.2
Services($14.4)
  • Balance sheet and operating KPIs
KPIQ3 2021Q4 2021
Cash ($USD Millions)$7.2 >$4.0
Waste Backlog at Treatment ($USD Millions)$7.1 $7.1
Services Backlog ($USD Millions)~$30–35 funded ~$66
Total Debt ($USD Millions)$1.2 $1.1
Working Capital ($USD Millions)—$4.1
Bids Submitted (Treatment, March)—28
  • Actuals vs Wall Street estimates
    Consensus estimates via S&P Global were unavailable for Q4 2021 due to retrieval limitations; management did not provide formal quantitative guidance ranges for revenue or EPS .
MetricActual (Q4 2021)Consensus (Q4 2021)
Revenue ($USD Millions)$17.1 Unavailable
EPS ($USD)($0.19) Unavailable

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2022 outlookNo formal quantitative guidanceManagement expects significant improvement vs 2021 given backlog, DOE budget/carryover, and project mobilization Qualitative raised
Treatment volumesFY 2022No formal quantitative guidancePent‑up demand, increased waste opportunities; bidding metrics improving Qualitative raised
Services task ordersQ2–Q3 2022No formal quantitative guidanceGovernment expected to award tasks under new IDIQs in Q2/Q3 Qualitative timing specified
TBI shipmentLate summer 2022Demonstration planning ongoingDOE targets 2,000‑gallon shipment to PFNW by late summer 2022 Schedule affirmed
Medical segmentQ4 2021In development; no revenueDiscontinued; deconsolidation/minority interest non‑cash loss anticipated Exit completed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2021)Current Period (Q4 2021)Trend
DOE Test Bed Initiative (TBI)EA/WIR process; 2,000‑gallon demo anticipated next summer Late‑summer 2022 shipment targeted; $7M funding; public prioritization by DOE/state Momentum improving
Services awards/mobilizationLarge bids/IDIs delayed; robust pipeline; Princeton win; NAVY opportunity Backlog ~$66M; delays resolving; Q2–Q3 award cadence expected Recovery set‑up
Treatment activity/biddingDiversification; new VTD unit; bidding ramp 28 bids in March; evidence of pent‑up demand Accelerating
Supply chain/COVID impactVTD parts delayed; government slower to resume ops Continued Q4 Services delays; staff back in offices improving procurement efficiency Improving operations
Regulatory/legal (SOX/internal controls)—Material weakness noted; remediation in progress Being remediated
International expansionEarly shipments from Germany/U.K.; bids up to ~$20M Additional EU streams; transportation costs rising; U.K. JV planning with Westinghouse Building pipeline
Naval decommissioningMarket sizing $40M–$150M per ship; potential >$2B over 5 years Nine ships coming in next 18 months; limited near‑term visibility but strong positioning Opportunity intact

Management Commentary

  • “Treatment Segment revenues increased 9% for the year and approximately 57% for the fourth quarter of 2021 compared to the same period last year.”
  • “Our project backlog increased to approximately $66 million, which bodes well for our performance in 2022.”
  • On TBI: “DOE officials have stated the shipment of this waste to our facility should occur by late summer 2022… We have TBI as a priority… funds are now available…”
  • Cash: “We’ve maintained a solid balance sheet with a cash balance right now of more than $4 million as of December 31, 2021.”
  • Bidding traction: “We’ve seen our number of bids go up from… about 15 in December of ’21 to 28 in March.”

Q&A Highlights

  • Award cadence and recovery: Management expects a “very good second quarter and onwards,” citing employees returning to offices, improving procurement, and rising bid volumes .
  • TBI path: Phase 2 (2,000 gallons) targeted for late summer 2022; Phase 3 could scale to 300k–500k gallons in 2023, subject to regulatory comments and DOE decisions .
  • Naval decommissioning: Near‑term procurement visibility limited, but nine ships expected in 18 months; positioning remains strong with seasoned teams, scarce competitors .
  • Internal controls and receivables: Material weakness (SOX attestation) highlighted; AR tied to a Canada contract negotiations, but no material write‑offs anticipated .
  • Medical exit: Segment removed from books; only immaterial cleanup dollars remain .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2021 revenue and EPS was unavailable due to data retrieval limits; management provided no formal numerical guidance ranges, limiting beat/miss analysis .
  • Given the Services delays and Treatment resilience, estimate revisions (if any) would likely hinge on award timing in Q2–Q3 2022 and TBI execution milestones .

Key Takeaways for Investors

  • The quarter’s weakness was Services‑driven; Treatment demonstrated strength and bid momentum, positioning PESI for a multi‑quarter recovery in 2022 as awards mobilize .
  • Backlog and government funding/carryover provide improved visibility; watch for Q2–Q3 task orders under IDIQ/MATOCs as the principal near‑term revenue catalyst .
  • TBI shipment (2,000 gallons) in late summer 2022 is a key catalyst; successful execution could support a rapid scale‑up and become a meaningful incremental revenue stream .
  • Balance sheet stable with low debt (~$1.1M) and >$4M cash; working capital improved to $4.1M, supporting ramp in projects and Treatment throughput .
  • Expect margin recovery as Services projects mobilize and Treatment mix/volume improve; monitor Adjusted EBITDA and gross profit trajectory into Q2–Q3 .
  • Risks: procurement timing, regulatory milestones for TBI, and internal control remediation; management indicates remediation is underway and awards are trending positively .
  • Trading lens: catalysts in Q2–Q3 (awards/mobilization) and late summer (TBI shipment) likely drive sentiment; any 8‑K updates on awards or TBI permitting would be stock‑moving .

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