Prepared remarks
Good morning, everyone, and welcome to the Perma-Fix Fourth Quarter and Fiscal 2025 Business Update Conference Call. Please note, this conference is being recorded. I will now turn the call over to your host, David Waldman of Crescendo Communications. David, the floor is yours.
Thank you, Jenny. Good morning, everyone, and welcome to Perma-Fix Environmental Services Fourth Quarter and Year-end 2025 Conference Call. On the call with us this morning is 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 fourth quarter and 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) 671-1020. I'd 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 statements 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 measurement and consistent historical comparison of its performance. A reconciliation of 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.
Thank you, David, and good morning, everyone. I appreciate you joining us today. 2025 was a significant year for Perma-Fix as we concentrated on strengthening our operational foundation and preparing the company for its next phase of growth related to the Department of Energy's Hanford cleanup initiative. For the entire year, we achieved approximately $61.7 million in revenue, which indicates a robust performance in our Treatment segment alongside rising waste volumes at several treatment facilities. Although the timing of certain government programs influenced activity levels throughout the year, we made remarkable strides in readying our facilities, workforce, and infrastructure for the higher waste volumes anticipated as the Direct Feed Low-Activity Waste program moves into its operational phase. Throughout the year, we made targeted investments in personnel, infrastructure, and plant capabilities to ensure we are fully equipped to support the upcoming activities at Hanford and across other DOE cleanup initiatives. As many of you are aware, the DFLAW program and the Hanford tank waste initiative represent one of the largest environmental remediation efforts currently underway in the U.S., and we believe Perma-Fix is ideally positioned to assist in this mission, owing to our specialized treatment capabilities and our extensive history of supporting DOE waste management programs. A key milestone this year was the renewal of the permit for our Perma-Fix Northwest facility. This renewal significantly boosts our permitted processing capacity to around 1.2 million gallons of liquid mixed waste annually, effectively tripling our liquid processing capacity and authorizing treatment of up to 175,000 tons of waste annually through macro encapsulation. Coupled with our investments in automation, facility improvements, and workforce expansion, these enhancements greatly strengthen the role Perma-Fix Northwest can play in supporting multiple Hanford-related waste streams and other DOE mission objectives as activity increases in the coming quarters. In a recent press release, the DOE announced the need to extend the DFLAW hot commissioning phase. Nevertheless, we anticipate processing liquid waste through the DFLAW treatment processes at our Northwest facility starting in May, with dry waste expected to commence in April. The anticipated liquid waste streams are expected to exceed initial estimates by as much as 20%, as per DOE’s adjustments to the process flow, which now includes grouting a portion of the effluent waste instead of relying on the originally planned DFLAW vitrification processes. Our regulatory supplemental analysis, currently under review, includes proposals to utilize Perma-Fix Northwest's grouting capability to treat the effluent, thereby enhancing production levels at the DFLAW facility. To date, the DFLAW facility has processed around 50,000 gallons of tank waste through February, and the melters are still functioning, generating steam, which in turn produces waste to be included as effluent to Perma-Fix Northwest. For investors looking to understand the timing of the DFLAW opportunity better, DOE's planning documents suggest the system is expected to ramp up gradually through hot commissioning, which began in October 2025. Within 12 to 18 months of that start date, the facility plans to reach operational status at approximately 40% capacity, with aspirations to increase towards 80% capacity as additional systems come online. This progress is mandated to occur within three years, according to the tri-party agreement at Hanford. We view this as a crucial indicator of the size and sustainability of the opportunity ahead, while acknowledging that the exact pace of this ramp-up relies entirely on DOE execution and site operational conditions. Initial revenue estimates are projected to be between $1 million and $2 million monthly starting in the second quarter and increasing throughout the year. At a recent Waste Management Conference in March, DOE leadership specifically highlighted the necessity of implementing a grouting program to supplement DFLAW efforts in meeting the department's goals for tank closures by 2040. DOE indicated that this program aims to treat up to 200 million gallons of waste from the Hanford tanks by 2040 through the DFLAW program, complemented by the grouting program set to begin in 2026. This figure has surged from an initial estimate of 56 million gallons due to the expectation of generating 1 to 3 gallons of wastewater for each gallon retrieved, necessitated by the need to add liquids to the tanks for waste retrieval. Over the past few months, Perma-Fix Northwest has continued to invest significantly in automation, information systems, and personnel training to ensure the facility operates efficiently at high throughput levels while meeting or exceeding expected production rates as a wider variety of waste streams commence. The Hanford remediation programs are poised to create sustainable waste streams over time, potentially generating consistent long-term treatment demand and recurring activity for our facilities. In addition to our role in the DFLAW program, we expect to engage in various other Hanford-related waste streams and site programs that will drive additional treatment demand moving forward. These increases in receipts encompass providing solidification and treatment support for high-volume contaminated water from the Hanford site, as well as doubling our Transuranic Waste Processing program starting this month, aided by extra shifts at Perma-Fix Northwest. As waste receipts rise, we anticipate leveraging our expanded capacity to accommodate the growing volume of treatment activity associated with both the Hanford Mission and other DOE programs. Operationally, our Treatment segments showed substantial improvement throughout the year, with increased waste volumes, enhanced plant throughput, and a stronger waste mix collectively leading to significant year-over-year growth in treatment revenue. Consequently, treatment revenue surged by approximately 29% year-over-year, driven by both heightened activity levels and favorable pricing dynamics tied to the waste streams we processed. Notably, our treatment backlog grew by roughly 51% year-over-year, reaching approximately $1.9 million in revenue, thereby providing enhanced visibility as we approach 2026. This backlog growth reflects the rising demand for our specialized treatment capabilities across both government and commercial waste streams. We also made advances in international activity, with revenue from foreign entities increasing by about 163% year-over-year to approximately $6.4 million, indicating a growing global demand for our specialized waste treatment services. Our international markets continue to present an appealing growth opportunity for us as numerous countries encounter similar challenges related to complex nuclear and hazardous waste management, and we see an expanding pipeline of potential treatment projects in Canada and beyond. Looking at productivity more broadly, we have observed several promising developments over the past months that we believe will bolster our growth outlook for 2026. These include opportunities associated with Soil Sorting, work for a commercial uranium mining client, additional treatment activities linked to Canada and other international markets, our waste treatment programs related to weapons production, and remediation work assisting a significant university laboratory environment. Some of these opportunities are already advancing into execution, while others are nearing final discernible stages and their start-up phases, which collectively enhance our confidence in improved activity as we progress through the year. We also want to set realistic expectations for the first quarter. Although Perma-Fix typically refrains from offering formal guidance, it is essential to recognize that several factors may lead to a softer performance in the first quarter compared to the stronger activity anticipated for the second quarter. These factors include recent delays in receiving DFLAW effluents, which have pushed expected waste receipts back by several months, along with normal seasonal weaknesses in field activity during January and February, and ongoing efforts at Perma-Fix Northwest to manage stored waste and prepare our resources for the anticipated increase in Hanford-related activity expected in the coming months. While the first-quarter figures remain preliminary, we anticipate losses exceeding $4 million in negative EBITDA on around $13 million in revenue. Despite these short-term impacts, we've experienced robust activity in March, and I believe the second quarter should mark an inflection point as additional waste receipts and project efforts start to ramp up. The focus on managing stored waste has resulted in a timing-related shift in revenues from the first quarter to the second quarter due to applicable revenue recognition rules, leading to an approximate movement of $2 million in revenue generated at Perma-Fix Northwest to be acknowledged in the second quarter while it was actually processed in the first. We also continued to advance the development and commercialization of our PFAS destruction technology. During the quarter, our engineering team concentrated on completing the construction and installation of our new generation 2.0 PFAS Destruction System at our Oak Ridge facility. This upgraded system is designed to enhance our PFAS destruction capacity by up to three times our current rate while incorporating engineering improvements aimed at reducing operating costs and improving reliability and production rates. PFAS contamination is garnering increased regulatory and environmental attention globally, and we believe that technology capable of permanently eliminating these compounds will be crucial for future remediation efforts. We're also observing strong interest in our technology as an alternative to incineration, with our PFAS Perma-FAS system offering permanent destruction of PFAS compounds at a lower total cost while minimizing air emissions. We hold the view that the capability to permanently destroy PFAS compounds and eliminate long-term environmental liability provides a compelling advantage for our clients considering alternatives to conventional disposal methods. Over the last several months, we have secured multiple field projects supporting PFAS remediation at regional airports and see additional airport-related opportunities currently progressing through procurement processes. Collectively, we believe these developments equip our PFAS platform to meet the rising demand for affordable, permanent PFAS destruction solutions as remediation efforts continue to grow. In our Services segment, revenue decreased during the year, primarily due to the timing of project mobilizations and procurement cycles, including earlier delays connected to the transition to the new administration and related policy adjustments. The partial federal government shutdown in October also impacted procurement timing for government-related customers. Furthermore, we have experienced the usual seasonal timing challenges related to weather and the delay of project mobilizations in the first quarter. Importantly, our Services business is project-focused, making quarterly activity levels vary according to project timing and scope. Nevertheless, we continue to identify opportunities in this segment related to nuclear services, decommissioning efforts, and government remediation programs, and we believe that the advances we've made during the year prepare us well as activity levels increase. I am pleased to report that we have secured over $30 million in new services backlog and submitted over $40 million in new bids just in the first quarter. We look forward to providing further updates on our bid pipeline in the future. Finally, I want to stress what we consider one of the most substantial long-term opportunities in front of us. In December, the Hanford tank contractor released a request for proposals related to the tri-party agreement to retrieve 22 tanks over the next 12 years for commercial grouting and offsite disposition of the waste as part of a long-term remediation effort focused on the retrieval and stabilization of tank waste at the Hanford site. This RFP anticipates that the contract will begin in January 2028, involving a total volume of tank waste up to 50 million gallons to be grouted at commercial facilities. Perma-Fix Northwest is exceptionally well-positioned for this opportunity owing to its proximity to the Hanford site, its current permitting profile, and its expanding processing capabilities. While this opportunity is still a while off in the development cycle, we believe it highlights the scale and long-term nature of Hanford-related work currently taking shape and the strategic advantage Perma-Fix can deliver, which is recognized by DOE. When we reflect on the broader landscape, we see the recent delays in DFLAW effluent receipts from hot commissioning activities as relatively minor compared to the magnitude of the opportunities ahead. With the DFLAW ramp, additional Hanford-related waste streams, the grouting program developing for up to 200 million gallons of waste treatment, expanded international work, a growing treatment backlog, and ongoing PFAS and remediation initiatives, we’re convinced that the potential for Perma-Fix to achieve significant growth and improved profitability beginning in the second quarter and continuing in the years ahead has never been greater. Thank you, and I will now hand the call over to Ben for the financial discussion.
Thank you, Mark. Starting with revenue, our total revenue from continuing operations in the Fourth Quarter was $15.7 million, up from $14.7 million in the same period last year, which is an increase of $1 million or 6.9%. Revenue in our Treatment segment rose by $2.6 million, while the Services segment saw a decrease of $1.6 million. The increase in the Treatment segment was due to higher volume, although it was tempered by a lower average price resulting from a change in waste mix. The decline in the Services segment stemmed from fewer new projects starting to replace those completed in the prior year. For the year ending 2025, our revenue totaled $61.7 million compared to $59.1 million in 2024, marking an increase of $2.6 million or 4.3%. In the Treatment segment, revenue grew by $10.1 million, while the Services segment dropped by $7.6 million. Similar to the quarterly performance, the Treatment segment benefitted from increased volume and higher average pricing due to waste mix changes. The Services segment continued to be impacted by timing issues related to project start-ups and awards. Moving on to gross profit, for the fourth quarter it was $1.2 million compared to $594,000 in Q4 2024. In the Treatment segment, gross profit rose by $983,000 due to increased revenue, although this was countered by higher labor and maintenance costs. The Services segment's gross profit decreased by $365,000 due to lower revenue and lower-margin projects, but some of this was mitigated by reduced fixed overhead costs. For the year 2025, gross profit increased by $6 million, primarily from the Treatment segment where higher revenue and improved margins partially offset increased fixed costs at the plants. The gross profit from the Services segment remained flat, as the effects of lower revenue were balanced by reductions in both variable expenses and fixed overhead. Our total SG&A costs for the fourth quarter were $4.2 million compared to $3.9 million in the fourth quarter of the previous year, while SG&A for the full year was $16.4 million, up from $14.4 million in 2024. The increase in SG&A expenses during the quarter was due to higher marketing costs associated with payroll and trade shows, while administrative expenses grew because of payroll and legal fees. For the full year 2025, SG&A costs rose by $1.9 million due to increased payroll in both marketing and administrative roles, along with higher trade show and legal expenses. Our net loss for the quarter stood at $5.7 million, compared to a net loss of $3.5 million last year. It is important to note that the current year results reflect a $2.7 million adjustment related to a long-term remediation cleanup from one of the company's discontinued operations. For the year ending December 2025, the net loss amounted to $13.8 million compared to $20 million in the previous year. Again, the net loss for 2025 included the $2.7 million recorded in the remediation reserve for discontinued operations. Additionally, in 2024, our net loss included about $8.2 million in income tax expenses associated with the full valuation allowance established on our U.S. deferred tax assets. Our basic and diluted net loss per share for the quarter was $0.31, in contrast to a loss per share of $0.22 in the prior year. This figure takes into account a $0.15 per share impact from the remediation reserve adjustment within discontinued operations. The loss per share for the year ending December 31 was $0.75 compared to a loss per share of $1.33 in 2024. EBITDA from continuing operations was a loss of $2.7 million, an improvement from a loss of $3 million last year. For the year ending 2025, EBITDA reported a loss of $9.7 million compared to a loss of $13.8 million in 2024. Looking at the balance sheet compared to 2024, cash held was $11.8 million compared to $29 million for the year ending 2024. Unbilled receivables rose by $3.8 million in '25 relative to '24, primarily due to the timing of waste shipments in the Treatment segment. Our net property and equipment increased by $3.5 million, primarily driven by capital spending including the construction of our PFAS reactors. Intangible assets and other assets grew by $1.4 million due to interest earned on our finite risk sinking fund and increases in permits and joint venture investments. Our waste treatment backlog at year-end was $11.9 million compared to $7.9 million the previous year. Long-term liabilities tied to discontinued operations rose by $2.7 million due to increased remediation liabilities at one of our discontinued facilities. Total debt at the end of the quarter was $2 million, excluding debt issuance costs, primarily owed to PNC Bank. To summarize our cash flow activities, cash used by continuing operations was $10.3 million, while cash used by discontinued operations was $441,000. Cash used for investments in continuing operations amounted to $4.9 million, mainly for capital expenditures and permits. Cash used for investments in discontinued operations was $54,000. Cash used for financing totaled $981,000, which included monthly payments on our term and capital loans totaling $631,000, along with payments related to finance lease and other debt of $327,000, and payment of offering costs from last year's equity raise of $195,000, partially offset by net proceeds from option exercises amounting to $172,000. With that, operator, I will now turn the call over for questions.
Questions and answers
Our first question is coming from Howard Brous of Wellington Shields.
I just have a couple of quick questions. You started talking about Q2 and the performance. Can you give us a better sense of what you're referring to?
Sure, Howard. We are quite optimistic about Q2 for a few reasons. It's been about 2.5 years since our Services Group established a solid backlog of projects, which had been affected by various factors, including changes in contractors and market conditions. However, we've seen significant improvements in the last few months, and we are excited about the direction the Services Group is heading. We recently received a new contract for a demolition project at a radiological facility at a National Lab, and we expect to announce details in the coming days. Additionally, we have mobilized three new projects in the last two weeks that will generate waste for us to process, and these projects have better margins. We also have a substantial pipeline of opportunities for radiological facility demolition, remediation, and decontamination. These prospects look promising for the summer, positioning our services to contribute more significantly to our overall success. This typically boosts our treatment operations as well. Moreover, another reason we believe Q2 will be better is related to Northwest. There’s a project involving the management of surface water waste at Hanford, which we plan to start on April 1, and we will begin receiving waste shortly after. This project is expected to generate about $1.5 million a month in revenue for an extended period, making it a sustainable source of income. Regarding DFLAW, they are in high commissioning and processing smaller quantities of waste. They've been generating blowdown water from their scrubber systems, which was initially planned to be converted into glass. Instead, we've proposed to treat this blowdown water, enabling us to handle 20% more tank waste. They will start shipping this waste to us once their supplemental analysis clears the public comment period by late April, with deliveries starting in May. Lastly, the TRU waste program has expanded from one shift to two shifts, adding approximately $750,000 to $1 million a month in revenue. Combined with the $2 million expected to shift from Q1 to Q2 due to revenue recognition rules, April looks promising, and we anticipate a continued return to profitability through Q2 and Q3 based on current trends. We are excited about Q2, Howard.
Going back to grouting, it seems that the 200 East area where the waste treatment plant is located has a plan to grout the waste from the 200 West area. Can you comment on that?
It's important to understand that the Hanford site consists of two different components. The West area does not have the infrastructure included for the DFLAW plant, which is located a considerable distance away. They've decided to commercially grout all the tanks in that area, and the Trump administration has been aggressive about this initiative. The large RFP I mentioned has an estimated value of around $4 billion and offers a lot of flexibility, meaning they may use various contract vehicles that allow for multiple awards. Essentially, they are prepared to start high-volume grouting at a rate of approximately 3 to 4 million gallons per year, with potential expansion over the next 2 to 4 years. We are in a strong position as the only local facility, and they may seek backup or supplemental support from us. We expect these awards to be made sometime in the third quarter. On the East side, where DFLAW is located, the DOE has indicated that instead of sending all the waste to DFLAW, which is currently being stored in staging tanks, they can also start grouting some of that waste. With 1 million gallons of storage set aside for DFLAW, they could begin pumping some of that waste out for grouting while still processing for DFLAW. This presents an opportunity for additional grouting, and we are well-positioned to take advantage of this as well. We're looking to implement this in the third or fourth quarter, depending on the regulatory approvals they aim to secure. Both components could begin to affect us within the next 12 months and certainly over the next couple of years, creating a significant backlog opportunity for the company.
Last question, I want to address PFAS. In terms of volume and capacity, where are we headed?
Yes. With new systems have been delayed a couple of months due to supply chain issues, which we seem to be facing all the time. Everything is on site now. We're going through the installation process. We poured concrete and things are rolling. So we're really on track for late April, early May to start testing. And once that new system comes online, we'll be basically in a position to do about 3,000 gallons a day. And backlog has been pretty good at the Gen 1 system. We've made some improvements through the last quarter, 2 quarters, really, where we are able to start recycling our chemistry, and that allows us to lower our rates. As I mentioned before, our target is really to undercut incineration. We can do PFAS treatment cheaper than the incinerators can and that's been kind of the shift in the industry to total destruction. It's kind of our competition. So our sales focus is squarely right now on making sure we're getting as much incineration competitor waste as we possibly can. And it's going really well. And again, we continue to do a lot of partnering on that. And we believe once we get the capacity up to 3,000 gallons a day total capacity with the new system and the old system as well that we'll be able to get even greater backlog because we can store more and commit to higher throughput. So that's really where we're going. We're still doing some R&D on the smaller components, smaller systems to be field deployed. Right now, we're really focused on the new system and getting it operationally ready and rolling.
And our next question is coming from Aaron Spychalla of Craig Hallum.
Maybe first on DFLAW, can you just kind of speak to the visibility into that waste stream starting. You mentioned some solids in April and liquids in May. And it sounds like still expecting that $3 million to $6 million a quarter as that ramps. Maybe just kind of walk through that timeline as well.
It's been challenging. The Department of Energy has not provided much information about the overall operations of DFLAW, other than confirming that it is operational. This makes it hard to gauge how much waste is being processed and the issues they are facing while moving towards full operation. Essentially, they are working through a checklist to ensure everything is functioning at capacity, which complicates projections. However, we anticipate that once the supplemental analysis is completed, the blowdown water, which I referred to as EMF water, should start coming in at about 10,000 gallons per month, increasing to four times that amount as operations ramp up. This is a significant waste stream for us and constitutes a large part of the overall DFLAW waste incineration, although it is not the entirety of it. There are also various other types of waste being generated that are currently stored at the Bechtel facility, and we expect to begin receiving those in April. At this point, we don't have clear details regarding the volumes and the overall impact. However, as I mentioned, we project revenues between $1 million and $2 million per month, especially by mid-Q2. We believe that clarity will improve as they complete some of the tasks on their checklist. The Department of Energy is fully committed to getting this facility operational as quickly and safely as possible, which makes it difficult to specify exactly when the waste will start flowing as we expect.
Understood. And then maybe on international volumes, you kind of highlighted growth there in 2025. Just how are you thinking about the opportunities there as we look to 2026 and beyond?
Yes. We just wanted some work, Aaron, from Canada again to do some liquid treatment and at our Florida facility as well as the DSSI facility here in Oak Ridge. That's going to be a pretty good backlog. That will begin here mid-April and run pretty much through the summer and could be going longer than that. We've also got several other projects for different clients throughout Canada that would be likely to begin in Q3. The Mexico waste we did last year, there'll be another tranche of that out for bid here. It's already been out for bid. That won't likely get rolling probably until Q3 or Q4. And we continue to get strong waste from Germany, and that also is expected to be sustainable here through the latter part of the year. Then our TRC project is going very well in Italy. Unfortunately, even though it's ahead of schedule, actually, the remediation process is for pulling the is for pulling the drones out of the ground that will start here in April. So all the permits are done, all the paperwork is done and now it's actually field work. That's not our scope. That's another company, another contract. Our scope will be to characterize as drums as they come out, they come out and that won't start until Q3. And we'll start seeing any of that waste probably until Q1 of '27. So to answer your question, we probably won't see the same revenue levels as last year, but they'll be close, probably 25% to 30% less than we saw last year with it ramping up in Q4 and have a stronger '27 of international waste.
All right. Regarding the permit and the capacity expansion at Hanford, can you discuss how you are preparing to manage the increased volumes there?
Yes, Aaron. We just submitted our proposal on that a few weeks ago, and we've been pretty vocal about what our capacity expectations are. Right now, as I mentioned, we can do 1.2 million gallons a year of liquids. And what we're proposing DOE is that we will be submitting a permit mod through that permit here in the next few weeks and that permit mod will include ramping that up to an additional 3 million gallons on top of that. So worth a total of 4.2 million gallons total capacity for liquid treatment. That will cover all the waste streams we're talking about, plus the 3 million or 4 million in grouting for the tanks. And that permit mod is expected to take 6 to 9 months to get through the system. And we will be beginning to install or modify our facility to support that as well with investments here beginning in the second half of the year to get to that level. So the big deal about that permit renewal is a lot of things that are important to it, but the one that's probably most important since it's approved, now we can do permit mods. While they were reviewing that permit application, renewal application. For the last 16 years, we couldn't do mods to it because they kept saying, if you want to do a mod, we're going to stall on you or put your renewal down and pick up your mods, so you won't get your renewal. Now we have a renewal, we can do mods, and they'll be quicker and more efficient because they're not that complicated and allows us to be flexible on these things and to implement some new technologies, expand our current capacities and those kinds of things. So we really feel like being at a capacity of 4.2 million gallons a year based on the fact that the new administration is looking at such a large volume of waste that we should be able to get pretty much full capacity in the future. I don't know when that will be, a lot of it depends on how fast they can get it out of the tanks. But our capacity is not going to be a critical path, and we'll be very aggressive on what we can produce and what we can treat based on our capability.
And then just maybe one last one on the balance sheet. Can you kind of talk about cash flow expectations? It sounds like there's some receivables at year end? And then just how you're thinking about CapEx and investments in '26, you kind of talked about some maybe in the back half.
Yes, we still have several capital initiatives in place to support the expected increase in productivity. Our working capital is in good condition. We typically do not discuss potential cash raises at this time. Currently, we are satisfied with our balance sheet as of year-end December 31, and we will assess it as new opportunities and capital requirements arise.
Our next question is coming from Walter Schenker of MAZ Partners.
Just to get back to PFAS. The original unit is operating commercially and treating waste streams currently, while you build the second unit. That's the first question.
That's correct, Walter. It operates at about 650 gallons a day and runs consistently for about 4 days a week. There was some downtime associated with it, but our average remains around 4 days a week. We have applied what we've learned from that system and its engineering challenges to improve the next system, which will operate more efficiently. So yes, it processes about 650 gallons per day.
And as a range, not a specific number, for your ability to eliminate those PFAS chemicals, pricing is roughly where? For gallons?
Really, it depends on volume, but if we get a big volume, we typically discount, and it also depends on the characteristics of the PFAS concentrations and those types of things. But to give you a range, for bigger totes, we can do between $11 and $15 a gallon. For smaller quantities like a drum or buckets, a lot of that AFFF comes in smaller quantities, it can be above $30 a gallon. So it just depends on the quantities we're getting. As we get to the larger volumes that we can handle with the new system, we'll be pushing for larger volumes to receive, so we don't have to handle as much. But just to kind of give you a range, Walter, $10 to $15 a gallon is a pretty good range for higher volumes.
And on higher volumes with that price range, a range for some sort of operating profit margin?
We aim to design our system from the outset to align with our other waste treatment margins, targeting an average of 60% to 70% incremental margins. While some margins may exceed this target and others may fall short due to various factors, they generally align with our treatment margins across the company.
And my last question, the second unit to get you up to 3,000 gallons, the CapEx to build that was roughly what? Or is roughly what? Since it's not up yet?
Yes. It's in the $4 million to $5 million range, yes.
Thank you very much. While we appear to have reached the end of our question-and-answer session. I will now hand it back over to the management team for their closing comments.
Okay. Thank you, Jenny. And overall, we believe that Perma-Fix is entering a period where the strategic investments we've made over the past several years are beginning to translate into meaningful growth opportunities. We've significantly expanded our treatment capacity at our Perma-Fix Northwest facility, strengthened our operational infrastructure, increased our treatment backlog and expanded our international project activity. At the same time, we continue to advance our additional opportunities across government and commercial markets, including projects related to nuclear remediation, weapons production and waste treatment, international waste streams and emerging PFAS destruction solutions. Importantly, the transition of the DFLAW system into its operational phase along with several additional infra-related waste streams and long-term remediation initiatives currently under development represent meaningful catalysts for increased activity at our Northwest facility. While the timing of certain waste receipts and project mobilizations may create some variability in near-term quarterly results, we believe the second quarter should mark the beginning of a broader ramp in activity as additional waste streams begin moving through the cleanup system and new product work begins contributing to the revenue. As activity levels increase and we utilize more of this expanded treatment capacity, we believe higher throughput across our facilities should allow us to better absorb fixed operating costs and achieve meaningful margin improvement. When we consider the combined impact of the DFLAW ramp, additional Hanford cleanup programs, the tank retrieval and grouting initiatives currently under development, expanding international opportunities and the continued advancement of our PFAS technology, we believe the long-term opportunity for Perma-Fix has never been stronger. With that operator, thank you.
Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.