Prepared remarks
Good morning, everyone, and welcome to the Perma-Fix Fiscal First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode and the floor will be open for questions following the presentation. Please note this conference is being recorded. I will now turn the conference over to your host David Waldman of Crescendo Communications. David, the floor is yours.
Thank you, Jenny, and good morning, everyone. Welcome to Perma-Fix Environmental Services First Quarter 2025 Conference Call. On the call with us this morning are Mark Duff, President and CEO; Dr. Lou Centofanti, Executive Vice President of Strategic Initiatives; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing first quarter 2025 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) 671-1030. 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. Perma-Fix believes that such information provides an additional measure on 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.
All right. Thank you, David, and good morning, everyone. We ended the first quarter facing a number of temporary challenges largely related to delays in procurement and project activity tied to the federal administration transition. While these factors weighed on our revenue growth, we still delivered a modest year-over-year increase in revenue. More importantly, we exited the quarter with momentum and improving visibility across our key growth initiatives. Our Treatment segment showed improvement in the first quarter. After a slow start, waste receipts began to improve toward the end of the quarter, contributing to a backlog that grew to more than $10 million by quarter end, up approximately 30% from where we were in 2024. Revenue in the Treatment segment increased modestly year-over-year, and we did achieve gross profit improvement supported by higher waste volumes, reduced variable costs, and efficiency initiatives.
We also made targeted investments to support the receipt of new waste, including staffing, training, and facility readiness activities that we expect will translate into throughput gains. Our waste receipts and treatment production at our Perfect Northwest facility from Hanford have increased with disposal occurring locally to on-site landfills. Within our Services segment, revenue was down slightly due to delays in federal procurement activity, particularly in early-stage projects. However, gross margins improved significantly compared to the prior year reflecting proactive cost reduction initiatives and improved alignment of resources with our revenue backlog. As we move forward, the team continues to focus on disciplined indirect cost management while maintaining the flexibility needed to support larger project opportunities expected later this year. Our PFAS program continues to advance on multiple fronts.
We received our first commercial shipments from the federal government with additional approvals pending. We've also made meaningful upgrades to the system including the integration of chemical recycling, which is already reducing costs and improving efficiencies on a per-gallon process. Our Gen 2 unit remains on track for Q4 deployment and should expand our processing capacity by at least three times. As more states adopt stricter regulations around PFAS destruction, we see this business as a promising long-term growth driver. We continue to develop strategic partnerships with large quantity generators and have aligned our technology with the PFAS market segment that continues to highlight our technology as superior based on cost, simplicity, and efficiency for the total destruction of PFAS. We are also tracking legislative activity in more than half a dozen states, which is expected to drive demand for full-scale PFAS destruction technology like ours.
In addition, we're encouraged by the recent press release from the new EPA Administrator Zeldin announcing that the Trump administration's position to ensure PFAS remediation policy is a priority through the development of an agency lead for PFAS and continued assessment of effective and available treatment technologies for the industry to consider. We also remain optimistic about our role in supporting the U.S. Department of Energy's Direct-Feed Low-Activity Waste, or DFLAW program in Hanford. The project remains on schedule for an August 1 start, and we're fully prepared to support multiple waste streams as the operations ramp up. This program, part of the broader Hanford Tank remediation mission, has the potential to generate very significant high-margin recurring revenue beginning in Q4 through the next decade at a minimum. On the International front, we saw improved activity during the quarter with growing international waste receipts.
We received approximately $7 million worth of waste that we anticipated from Canada, Mexico, and Germany over the past two months, with the remaining portion scheduled for May and June. We also continue to pursue a robust pipeline of federal and commercial projects. These include previously discussed opportunities at West Valley, where transition activities are ongoing and will continue through June, with initial operations expected to begin in July. While the BWXT-led team finalizes its performance strategy with DOE, we remain optimistic about our role in supporting this decade-long program, though revenue contributions are not expected to be defined for several more months. We continue to actively pursue subcontracting opportunities under the DOE's integrated tank disposition contract at Hanford. While DOE is still finalizing its broader tank waste remediation strategy, we remain well-aligned with the technical requirements of this program and have begun to participate meaningfully through increased waste receipts at our Perma-Fix Northwest facility beginning in March to support the tank closure mission.
In addition, we're pursuing several other large-scale DOE and DOD contract opportunities expected to be awarded in 2025, including at sites such as Y-12 here in Oak Ridge, Lawrence Livermore National Labs, and Lawrence Berkeley National Lab in California. We're also awaiting the outcome of our USS Enterprise decommissioning bid, which remains a highly competitive opportunity with an award expected around mid-year. As part of our long-term strategy to diversify revenue, we are expanding our presence internationally through strategic partnerships. This includes the JRC Italy project; we just submitted our final permit documentation in Q4 of last year and remain on track to initiate treatment operations in late '26. Our broader international expansion efforts include Europe and Latin America and continue to focus on engaging established generators of radioactive and hazardous waste that can benefit from our treatment capabilities.
Internally, we've continued to apply disciplined cost management while maintaining flexibility to support incoming contract activities. Our nuclear services team has aligned our indirect expenses with near-term backlog visibility and the operational readiness steps we took during the quarter are already contributing to an improved throughput at our key facilities. Looking ahead, we anticipate stronger performance in the second half of 2025. Our outlook is supported by five key drivers, including our growing waste treatment backlog, improved visibility on federal procurement activities, the ramp-up of the DFLAW program in Hanford, continued PFAS technology advancement and commercial traction, and execution of large-scale domestic and international opportunities, including the DOE and DOD awards and the European partnerships. With that, I'll turn the call over to Ben Naccarato to walk through our financial results in more detail. Ben?
Thank you, Mark. Starting with revenue, our total revenue from continuing operations for the first quarter was $13.9 million compared to last year's second quarter of $13.6 million or a slight increase of $302,000 or 2.2%. Revenue in the Treatment segment increased by $477,000 or 5.5% compared to the prior year as we saw an increase in our waste volumes received and processed offset by lower pricing, which is reflective of waste mix. In the Service segment, revenue was down $175,000 as new projects in '25 mostly offset completed projects from Q1 of last year '24. Gross profit for the quarter was $657,000 compared to gross loss last year of $620,000 in Q1 of '24. Treatment segment's gross profit increased by $302,000 compared to the prior year based on higher revenue and lower variable costs related to waste mix and improved productivity. This increase was partially offset by higher fixed costs, which were predominantly from higher labor expenses as we ramp up for anticipated increases in production.
In the Service segment, gross profit increased by $975,000 which is primarily impacted by lower variable costs due to the improved profitability of the project performed in '25 as compared to last year. Our SG&A costs for the quarter were $4 million which is higher than prior year by $471,000. This was the result of higher labor costs, primarily at the executive level, higher legal expenses and higher marketing expenses related to our user conference and other labor-related expenses. Our net loss for the quarter was $3.6 million consistent with last year's loss of $3.6 million. Our total basic and diluted loss per share for the quarter was $0.19 compared to a loss per share of $0.26 in the prior year. Our EBITDA from continuing operations for the quarter, as we defined in this morning's press release, was a negative $3.3 million compared to a negative $4 million last year. Turning to our balance sheet.
Our cash on the balance sheet was $25.7 million compared to $29 million at year-end. Our net accounts receivables were lower by $2.3 million related to improved collection of outstanding receivables. Our current liabilities were down approximately $1.2 million reflecting decreased costs associated with production, timing of vendor payments and changes in our deferred revenue. Our waste backlog at March was $10.2 million, up from $7.9 million at year-end and consistent with $10.6 million a year ago. Our total debt for the quarter at quarter end was $2.3 million most of which goes to PNC Bank. Finally, with our cash flow, I'll summarize cash was used by continuing operating activities of $2 million, cash used by discontinued operations $56,000, cash used for investing in continuous operations was $571,000 of which $523,000 was related to capital and the remainder to permits and other investments.
Our cash used for investing in discontinued operations was $15,000. Our cash used in financing was $396,000 consisting primarily of payments to our term and capital loans of $157,000, payments for finance leases of $71,000, and payments of $194,000 relating to the public offering we completed in December of '24. This is offset by some proceeds from option exercises of $41,000. With that, I'll turn the call over to the operator for questions.
Questions and answers
Thank you very much. At this time, we will be conducting our question-and-answer session. Your first question is coming from Howard Brous of Wellington Shields. Howard, your line is live.
Thank you. Mark, Ben, first question, talk about the 2026 federal budget and how this can impact you in 2025 and 2026.
Yes, Howard, there's been a lot of press releases and announcements the last few days in regards to the White House proposed budget, obviously has to get through both markups, but we look at that as kind of the baseline and it was quite favorable. We get a significant portion, probably 60-plus percent of our revenue comes through DOE and the EM program is a big portion of that segment. And the EM budget was proposed with only about a $300 million reduction out of $8.5 billion. We're very encouraged by that. I'm not sure where that $300 million is going to come out of yet, we haven't seen that detail. Most of it is going to be some of the smaller sites, there's 14 of them, and that will come out here in the next few weeks. But most importantly on that, it specifically said, the budget, that there would be no reduction in Hanford for '26 and that there would be a significant increase, a dramatic increase on the NNSA side of the house, that's the weapons production side of house, where we also get quite a bit of waste and opportunities for some remediation projects that they clear out as they're upgrading their infrastructure and building new buildings, and so there's opportunities there that will be accelerated mostly on the services side but also on waste.
So we're very encouraged by the budget overall. We're holding our breath like everybody else. We didn't know really what was going happen. We've talked to several people in DC, on the Hill, and DOE headquarters and the common theme was that this administration has a lot of respect for re-industrialization activities that the EM program supports. The sooner they clean up, the quicker they can re-industrialize some of the smaller communities, but along with that the weapons program upgrades as well. So we're all encouraged by it. We don't see any impact from that or any impact at this point to some of the bids that are in our pipeline for the next 18 months.
So in reference to Hanford, are you receiving any waste from Hanford currently?
Yes, we are, Howard. As we mentioned, our backlog looks much better, about $10 million right now, which is a good place to be. We're also seeing significant increases in overall waste sales. But to answer your question, we're seeing a significant increase in Hanford to this point of about $2 million to $3 million a month in waste coming from Hanford, which is dramatically more than we've seen in the past, at least for the last 10 years, and that's coming from the tank closure mission as well as the other plateau, what they call plateau remediation contract, which is the non-tank work that's going on out there as well. At least 50%, maybe closer to 100% increases in waste receipts at our Perma-Fix Northwest facility directly from Hanford.
Mark, are you comfortable in discussing what kind of margins you're getting from Hanford?
Not at this point, Howard. I will say that they're pretty traditional margins and we're focusing very much on keeping our costs down. Our new COO who started in January has spent a lot of time out there working with our team and our other executive that's local out there and our general manager to make sure that we've got the staff that we need to support this bigger backlog along with DFLAW starting soon. As I mentioned earlier, I'm not sure how clear it was, what it comes down to is we had to hire a lot of people to support this increased backlog and production, and it took several months to get people hired, trained and actually productive in this business. It just takes a while to get people ready. So we spent a lot on that last month, or excuse me, March and part of February. They're rolling now beginning mid-April and getting very close to our overall production goals to make sure we're keeping up, and that's going to have a big impact on the rest of the year with these guys rolling.
The waste we're receiving from Hanford is very notable, Howard. These are sustainable waste streams, it's not one-offs. We expect these waste to be continued to be treated for several years and we're really developing more of a strategic partnership with the new tank waste contractor to provide more innovation than we have in the past and ways that they can reduce their costs while we're maintaining our productivity and our indirect costs.
Is it a fair comment that the contract that exists today is a 10-year contract, but that the transformation of Hanford is going to start on August 1, 2025 for you, but it continues to 2060 when everything should be finished by that time? Can you comment about the additional X number of years? It's basically a 35-year contract, is it not?
Yes, the contract with H2C for the tank closure is 15 years, the other one is about 10; they're already several years into it. So those will come back around eventually, but the overall baseline for the closure of Hanford continues to go up. I think the last estimate that was published is $400 billion to $600 billion for the next 50 years or so. So it continues to get more and more expensive. It's going to take a lot more higher funding levels than they're getting now to reach those points, to reach those goals. And so it's somewhat uncertain; they are making progress on the grouting. There's been some press release last few days on that, and they're positioning for deploying their strategy of how they're going to do grouting on-site, which as everyone knows that we're a big part of that and will hopefully play a major role in that once it's defined. Looks like it's going to be several years out. I'm not sure exactly the timeline, DOE really hasn't shared that publicly, but they have to get through a couple of regulatory documents and some hurdles and they'll start putting the baseline together for their commitments on the grouting program which will cover the 22 tanks that they have to have grouted in the next 15 years.
That's all I have. Mark, congratulations on moving forward. Thank you.
Thank you, Howard. Appreciate your support.
Thank you very much. And our next question is coming from Aaron Spychalla of Craig-Hallum. Aaron, your line is live.
Yes. Good morning, Mark, Ben and Lou. Thanks for taking the questions. Maybe just on the grouting, Mark, you touched on most of what I wanted to cover. But could you just give an update on the recent news there, what kind of the near-term priorities are, and just maybe size, how you potentially see that opportunity for you in the coming years?
Yes, the situation is still developing, and there hasn't been much communication from the Department of Energy. My understanding is that they are committed to informing the state about their strategy by December 2025 through their tri-party agreement. This will depend on whether they decide to build a facility on-site, utilize local regional grouting capabilities we provide, or transport waste out of state as they did with the TBI initiative, or possibly a mix of these options. We are confident they will take a risk-based, best-value approach in selecting their method. However, they need to make this decision within the next six to nine months. I speculate they will likely consider a few alternatives to ensure redundancy and a backup plan. Regardless of the outcome, we are positioned to play a significant role due to our capabilities, including a $100 million facility located right at Hanford, which can handle all necessary grouting.
To give you an idea of what this entails, to close these 22 tanks within 15 years, they need to process about 3 million gallons of waste annually. If they don’t start moving soon, they will fall behind. Their commitment, per the tri-party agreement, is to meet the 2040 deadline, and I understand they are making progress in evaluating options. While we still don't have complete data on their final decisions, we remain very optimistic about our key role in this process.
Understood, I appreciate the color there. And then second on PFAS, great to see the commercial shipments from the government starting. You talked about lower operating costs and higher margins. Can you just talk about how you see the contribution from that second gen unit as we move into year-end and into next year, just kind of revenue, margin assumptions? And then just a little bit on your rollout plans. Is there enough backlog, feedstock in the market? Just unpack that a little bit for us, please.
Sure. Gen 1 is we're constantly doing demonstrations and testing it and reengineering some of the components to optimize them. It's a prototype really. While it's generating revenue, we are planning right now. It looks pretty good that we'll do about $300,000 this quarter in revenue and approach 50,000 gallons of treatment this quarter based on our backlog and some of the agreements we're signing. When the new system comes on, we expect that number to be pretty close to $1 million a month initially, again with some tuning and with Gen 1 also working, so we'll have the new unit and the existing unit. So it's going to start off pretty slow. Our goal has long been to design the system to support $5 million a quarter, $20 million a year, but we're seeing really significant interest in our technology itself. Lou, our founder, is working very hard on partnerships with large companies that generate extremely high volumes and want consideration for field deployment, in other words, a smaller unit.
We're working with large commercial industry partners that have a sustainable generation of PFAS and they're still not finding, we're still not finding, or them, a lot of destruction outlets outside of incineration. And the thing I'm probably most excited about in regards to PFAS is the engineering we're doing. We've got our destruction costs down around or below most of the incinerators. So we're very cost competitive, if not the cheapest, and the destruction levels are exceeding expectations and meeting expectations of all of our clients and it's just a matter of getting more volume through the system, getting these partnerships signed so that we're getting bigger backlogs and getting a new system developed. We're doing lots of tours with our clients. They want to see how it works and how it operates. And overall, there's extreme optimism on the whole front. We've hired some other key people, a PhD chemist and a number of other folks to bolster our capability and keep things moving.
I was very encouraged by the Zeldin press release, if you haven't seen that yet. It's very encouraging to see that EPA is putting an emphasis on it. I do still believe the states are going to drive most of this, but at least the Trump administration has recognized the importance of it. And I think once we get a little bit more data on our performance of our system we'll be able to get the EPA and some of the DOD folks to adopt this technology as one that is preferable for total destruction.
Great, thanks for the color on that. And then just maybe on the services side of the house, you talked about a temporary suspension of mandates as the administration changed over. Just can you give an update of where we are today with that base business? It sounds like West Valley we'll get some more clarity here in the coming months. But are you still expecting progress on those RFPs with kind of the current government situation? Just maybe talk about that a bit, please.
Yes, we have experienced a downturn in our service sector related to the Department of Energy, particularly regarding task orders and project opportunities. The major management and operations companies overseeing these large sites are doing more of the work in-house, leading to fewer bidding opportunities. However, this trend is reversing, and the demand for larger small business projects is increasing outsourcing efforts. We are now seeing more projects in the $20 million to $40 million range emerging over the next couple of years, which is ideal for us. We have several bids in progress that are expected to be released in the coming weeks, including some with the Corps of Engineers. After an 18-month period with minimal projects above $10 million, we are observing a promising pipeline, and we anticipate this trend will continue. Regarding West Valley, we are uncertain about their final budget since it is subject to adjustments, but we expect it to be around $100 million for the upcoming year.
We are collaborating closely with BWXT on a specific scope, which will develop further in the third and fourth quarters and be executed in the first quarter of next year. Our path forward is becoming clearer, and we understand the team members we need to engage and the innovations we plan to present. Although we cannot yet set a revenue target or fully grasp the financial implications, the outlook is quite positive. Additionally, there are numerous other bids we are actively pursuing, and we are collaborating with other companies that will also receive awards within the next 12 months.
That's helpful, thanks. And then maybe just last on CapEx, I think Ben you talked about, I think, $500,000 in the quarter. Just maybe outline some of the priorities there for the next handful of quarters, areas of the business, and just how you're thinking about CapEx for the rest of the year?
Yes, Aaron. We're looking like probably going to be in the $5 million to $6 million range and that's pretty much from our usual $2 million to $2.5 million of sustenance and then a reactor, second Gen 2 reactor that would be in the 3 plus range. So that's kind of what we're looking at for this year. I would think from a cash flow standpoint, it will trend probably upward in the latter part of Q2 and Q3 and then sort of back down to the sort of average of $500,000 a quarter after that.
Thanks for taking the questions. I'll turn it over.
Thanks, Aaron.
Thank you very much. Your next question is coming from Aaron Warwick of Breakout Investors. Aaron, your line is live.
Hey, good morning, guys. I wanted to ask about some commentary that you had in the press release about the second half of the year being strong, but it sounds to me like the second quarter could be off to a good start as well if you're getting $2 million to $3 million a month from Hanford. Could you comment about the start to the second quarter?
Yes, second quarter, we're still working through some production improvements. It gets better every day. As I mentioned, our COO is very focused on that. We got the team in place now. The waste is coming in; it's in backlog. Now we just have to get efficient and meet the production goals safely without any hiccups or any contamination issues and those kinds of things, so. But we're doing that and it's getting better on a daily basis. So it's kind of ramping up, it's pretty close to where we need it to be, notwithstanding any kind of surprises. So Q2 is looking much better, we don't like to speculate specifically on it, but I can say it's going to be much better than Q1. And that with those types of receipts, along with the fact that our sales backlog or sales receipts we have for Q2 is significantly higher than we've seen in quite a while. So in other words, have the backlog but sales just halfway through the quarter are already above our quarterly goals for the quarter.
So waste receipts are going very well and all indications are if everything stays in the same path it's on right now for production, we should be very close to being profitable in Q2. And like I said before, it is sustainable. These are waste streams that have been generated for years that will continue to be generated and as long as we meet our production goals and the client continues to generate them, we should be in good shape through the year with that sustainable backlog.
Excellent. Is this work coming from Hanford? Is this under the ITDC, meaning you're being subcontracted? What does this fall under?
Exactly. Mostly, new waste streams are from H2C, the ITDC contract.
Okay. Yeah, the work coming from Hanford is mostly related to the ITDC contract, specifically new waste streams from H2C.
We usually generate about $1 million a month from general Hanford waste receipts, although this can vary slightly. This increase has mostly come from the ITDC and the new contractors that have been implemented.
And you seem to indicate that the Trump administration, I know there was some concern I heard expressed among investors about whether there would be cuts to the EPA and not a priority of PFAS and not a priority with just in general cleaning up. But it sounds to me like what you're saying is that there is a priority in large part due to the fact that they want to clean up these sites to be able to re-industrialize the nation and other priorities they have. So is that accurate?
It is challenging to predict the EPA's leadership decisions regarding PFAS. The press release indicated they will appoint an agency lead on PFAS. I speculate this will likely be directed down to the states or provide guidance to ensure a level of consistency across state actions. Some states, like Michigan and New Jersey, are ahead of the curve, while others, such as Tennessee, are currently developing regulations, and New Mexico recently took action. As these states adopt and implement their policies, enforcement will begin. We're optimistic about this. It would be beneficial if the EPA established cleanup regulations and standards, but I don't expect that to happen in the immediate future. Should it occur, it would significantly influence enforcement and the market. Additionally, as I mentioned earlier, we received our first shipment from the federal government, which is significant for us, as various sites are feeling the urgency to address PFAS.
Another crucial aspect for PFAS management is reporting requirements. The more businesses are compelled to report their PFAS levels, the more we observe the market developing. There is a growing impetus among facilities to assess their PFAS presence and take action. We're witnessing an increase in companies replacing their old fire suppression systems with newer, PFAS-free options, resulting in larger inventories due to these upgrades. Overall, the market is performing well, and we are encouraged by our position in the competitive landscape, thanks to the simplicity of our technology and its adaptability to various applications.
Good, good. Back to Hanford, I guess, what you said in the press release and I may have missed any other comments on it, but you mentioned that the August 1 is still the goal there and the deadline. But I mean, what is it looking like from your perspective? I mean, is that something that looks like it's actually going to happen? Is it something that even if it's slightly delayed would be minor, like talking in terms of a month or two versus another year? What's kind of your qualitative commentary there?
Yes, it's really hard. We're not privy to specific data, but what we do know is that the operational readiness review team has been there for quite some time. They continue to work off findings and there's a lot of integration of resources at Hanford supporting that progress. But the thing that is very encouraging to us is that support has been recognized by the new Secretary of Energy, Chris Wright. He had some hearings yesterday with the Senate and specifically addressed his optimism for the DFLAW facility to get started and for him to be at the ribbon-cutting. And that demonstrates to us that the visibility is there DOE is seeing this as one of their higher priorities, to get that facility working and having it be successful. So DOE hasn't changed that date and there's lots of opportunities. They have lots of public meetings and they continue to reiterate that they're on track for August 1.
So they might delay some, Aaron. I don't know. We don't know, anything can happen in the last couple of months, but they're three months away from that and they haven't had a significant issue that has been publicized. I know they're struggling with a couple little things, but write it off guys and some other things, but they're working through it and the optimism within the department spending time in D.C. or at the field office is very high. We're optimistic that it will be very close to August 1. Again, just to clarify, if it starts August 1, we won't see any waste for probably six or eight weeks, maybe six or so. By the time they get it packaged and characterized everything, we should see some receipts in Q4, early Q4.
I believe part of my inquiry is due to recent headlines regarding cuts at Hanford, similar to what we've seen from the Department of Energy and other priorities of the new administration. However, upon further examination, it seems that the employees affected by these cuts are likely not directly involved with the DFLAW facility. Many are in administrative roles or are handling claims related to harm experienced by workers at Hanford. Therefore, it appears these cuts are not significantly impacting the progress of DFLAW. Is that your interpretation?
I would agree with that, Aaron. I don't have any numbers in regards to the federal staff reductions at the Hanford field office, but I think it's pretty typical from most of the field offices as far as percentages. And I think you nailed it. The Hanford office has, I believe, six major contracts that they manage and I don't see this impacting Bechtel who's getting everything running along with H2C and Atkins and a number of other companies' momentum. And they're all very focused on getting this facility operating and I haven't heard any reductions from any of those organizations. They're not public at least.
Good. Last one for me then about West Valley. What type of impact are you expecting in 2025 and when?
I can't give you a number at this point, Aaron. I hope we can do a press release where I can address the specific numbers in the next earnings call. I just don't know. We know what our scope is, as I mentioned. What we don't know, Aaron, is based on the funding profile as to whether what we're providing is funded in '26 or is it pushed out a little bit. I would expect it to be in '26 but there's still an uncertainty as to how it all fits together within the funding profile.
Okay.
There's two or three major projects that are funded for that facility that are performance-based and I don't know if DOE's even come out with their understanding of how it's going to be funded across each one of those projects. So just not able to address that at this point.
It seems there won't be much, if any, contribution in '25, so that would likely be an opportunity for '26.
We are anticipating that it will not be material overall. There will be more planning and documentation, and then it will kick off in 2026.
Okay. All right. Thank you, guys. Appreciate it.
Thanks, Aaron.
Thank you very much. And your next question is coming from Stephen Fein of So Fein, LLC. Your line is live.
Good day, guys.
Hello, Stephen.
Hi. You don't sound happy to hear from me, Mark. But anyway...
I'm always happy to hear from you, Steve, always.
Oh, I'm kidding you. I'm kidding you. Number one, I want to applaud you on your presentation. I think your approach, your positiveness is just fabulous. And that's number one. All right. My first question is, on the financials, so this goes to finance, what was the $340,000 in interest about?
We raised the money in December, so we have a significant amount of cash in an investment account.
I'm reading it wrong. So that was a positive cash flow.
That's right.
Okay. All right. Good. Okay. All right. Number one, when you mentioned, Mark, that somehow DFLAW program has to get up to 3 million gallons. Well, my understanding is that you got about a 35%, 40% efficiency rate there, which means that if they get up to 3 million gallons, there's going to be 2 million gallons of waste. So how are going to handle it?
Yeah, I think there's some confusion there, Stephen. There's two different programs, you know, DFLAW and Grouting. And between those two, DOE in their holistic agreement with the state and the federal regulators agree that that would address 80% of the tanks, the other 20% being high level. So DFLAW is designed to operate at a million gallons a year for vitrification. And the grouting program to meet the 2040 goal is estimated to be about 3 million gallons a year out of the tanks for grouting. So it's not the DFLAW component, the grouting component that's 3 million gallons. So it's unlikely that the DFLAW would be at a million gallons a year production rate for several quarters at least to get perfection in their system and everything else. But the system that they've designed, Stephen, for the extraction and pretreatment of the waste for grouting at the west tank farms versus the east tank farms.
The east tank farms is the DFLAW, the west is for grouting. That system is designed to do 2.5 million to 3 million gallons a year extraction from the tanks. So we would have to ramp up. We've made presentations to DOE that with our design very specifically where we could do 3 million gallons a year; we'll have to get a permit modification which is not a heavy lift. Right now I think it's 400,000 gallons, have to increase that to 3 million gallons. We have existing facilities and the conceptual design and equipment to do that. So if that was to be turned on, we're very comfortable at that rate and would make the capital investments very quickly to make sure we're there.
Thank you. You noted that there are other competitors that are getting or that are in the game. Can you comment on that?
Yes, like any government agency, the department's goal is to make sure they have redundant backups and competitiveness when they're talking about this level of revenue particularly from a safety perspective. They don't want to shut down because their one plant shuts down, which is why they've been very focused on this TBI to include our two competitors out of state. And they represent capable facilities that are out of state so there's some additional risk to be considered in transportation, but they can do this work. They have the same ramp-up requirements that we would have. Have to modify their permits most likely and build facilities and those kinds of things. So we're all kind of there, and so I see them as being outlets. However, at the end of the day I do expect Perma-Fix Northwest to get a significant portion, at least half of that waste because we're local and we've committed to a union agreement for unionizing our facility when that starts and with the local building trades and we're part of the community in keeping jobs local, but also reduces the transportation risk, there's a value there.
We'll be transporting by rail, as you know, because we'll treat it locally and ship it down to those sites that I mentioned for disposal. So it's a different model, but I do expect we're going to have to face some competition, and there's probability that a portion of that grouting would not go to us, just to be realistic about it. But we're still hopeful to get all of it, we're still pushing to get all of it, but it's something to be considered.
I read an article about a government podcast discussing the transport of low radiation materials. Firstly, this acknowledges what you've been saying—that it's low radiation. Secondly, they mentioned transporting this material across the country without posing a danger since it’s low radiation. However, they overlook the fact that we are dealing with mixed low radiation hazardous waste. The real risk in shipping lies not in radiation but in the hazardous waste itself. Once this is made public, it will significantly help your position. As a columnist and scientist, I can't predict what might happen with hazardous waste in those containers. For instance, a car trunk can reach temperatures of 300 degrees in the summer, so the risks are substantial. This situation reaffirms your reality. If your operation expands, having backup will be essential. Additionally, they are planning to build a grout plant, and I hope you can connect with a larger entity to make that happen. Building that plant is crucial, and it wouldn't make sense not to involve you, especially considering the costs of liquefying tank waste, which could rise to $100 million or $200 million. Overall, I think you're in a strong position, and I'm glad to hear that. Now, what is your new COO doing?
He's very focused. He's responsible for overseeing all the components of the company that generate revenue. So each of the treatment plants as well as the projects, and not as involved in sales and some of the engineering components necessarily, but very focused on the production on both sides, both segments. He's got 27 years operating plants, a lot of it with our competitors, very, very astute on operational efficiency. So right now, his number one priority is the production at the plants. And he's very, very focused; he's a very good leader, a chemical engineer and highly respected and doing a great job. His impact to the company in four months has been overwhelming. If you talk to anybody in our company, I don't think anyone would disagree that it's been a huge impact to us overall and he brings an industry network that's really important as well and has had a great impact on productivity already.
Wonderful. Are you guys implementing anything with AI or is AI going to impact you in any way? I'm saying positively.
Yes, we are beginning some initiatives, very limited, mostly to do with research and sales and proposal development types of things. We do see ourselves expanding to waste treatment protocols and those types of things in the future, but we're starting pretty slow. But we do have initiatives ongoing as we speak to do that.
I think it's wonderful that the deal is happening. I've been following you since 2016, and this is the first time there is a Department of Energy head who is actually a scientist and an engineer, someone who understands the industry and is optimistic about nuclear. Promoting nuclear energy is crucial since we're lagging behind other countries, and AI necessitates nuclear energy, which in turn requires proper management of nuclear waste. That's great news. Now, my question is about PFAS. Interestingly, I read today that the Gates Foundation plans to shut down by 2045, transitioning to direct and feed. An issue highlighted in the article was agriculture, specifically that they can’t plant on certain lands. My understanding is that fertilizer used on these crops, which comes from water treatment, contains PFAS, causing many farms to cease operations. So, regarding PFAS, it's important for everyone to recognize that it's a distinct industry. Ideally, it could evolve into a separate company unrelated to nuclear, which I find very exciting given its potential. I've said enough; I've watched your growth, and as someone with a scientific background, I believe everything will turn out positively. We just need to maintain our faith. Thank you.
All right, thanks, Steve.
Thank you very much. Well that appears to be the end of our question and answer session. I will now hand back over to Mark for any closing comments.
Okay, thank you. As we move further into 2025, we remain focused on executing against a clear set of strategic priorities, expanding our backlog, advancing our PFAS and the Hanford programs, and maintaining a disciplined operational and cost alignment across all the organization. The investments we've made in the first quarter, combined with the momentum we're seeing across our treatment operations, our federal pipeline, and our international channels position us for a stronger second half. While we continue to navigate timing-related challenges around the federal procurement system, we're encouraged by the pace of the progress across our core initiatives and confident in our ability to drive long-term value for our shareholders. So thank you for your continued support and we look forward to updating you as our progress continues in the coming quarters. Thank you.
Thank you very much. That appears to be the end of the conference call. We thank you for your participation. You may disconnect your phone lines at this time. Have a wonderful day.