管理層發言
Good morning, everyone, and welcome to the Perma-Fix Fiscal Third Quarter 2025 Earnings Conference Call. Please note that 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. Welcome to Perma-Fix Environmental Services Third Quarter 2025 Conference Call. On the call with us this morning are Mark Duff, President and CEO; Dr. Louis Centofanti, Executive Vice President of Strategic Initiatives; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing third 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) 671-1020. I'd also like to remind everyone that certain statements contained within this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and include certain non-GAAP financial measures. All statements on this conference call other than a statement of historical fact are forward-looking statements that are subject to known and unknown risks, uncertainties and other factors, which could cause actual results and performance of the company to differ materially from such statements. These risks and uncertainties are detailed in the company's filings with the U.S. Securities and Exchange Commission as well as this morning's press release. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events or circumstances after the date hereof that bear upon forward-looking statements. In addition, today's discussion will include references to non-GAAP measures. Perma-Fix believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. I'd now like to turn the call over to Mark Duff. Please go ahead, Mark.
All right. Thanks, David. Good morning, everyone, and thank you for joining us today. We're pleased to report another quarter of solid financial and operational progress for Perma-Fix. Our revenue increased to $17.5 million compared to $16.8 million in the same period last year, while gross profit more than doubled to $2.6 million, up from $1.3 million a year ago. Gross margin expanded to 14.6% from 7.9%, driven primarily by higher waste volumes and a more favorable mix within our Treatment operations, partially offset by increased fixed costs. Gross margin also increased by 38% from Q2, reflecting continued operational progress and a stronger overall mix. We achieved a significant improvement in EBITDA compared to the prior quarter, highlighting stronger throughput and continued execution discipline. Overall, these results demonstrate consistent progress in margin expansion, backlog growth, and positioning Perma-Fix for long-term sustainable growth across our Treatment, PFAS, and nuclear services programs. Our Treatment segment continued to perform well, with segment revenue increasing 45% year-over-year to $13.1 million, up from $9.1 million in Q3 of '24. The segment gross margin improved to 17.3% from 4.5%, driven by higher waste volumes, increased throughput at our plants, and solid performance across both commercial and DOE projects. Waste sales totaled $14.6 million, up from $8.4 million in the same period last year, marking a 74% increase. Our Treatment backlog ended the quarter at $15.4 million, up from $7.9 million a year ago, providing strong visibility through year-end and into 2026. Automation, digital scheduling, and plant optimization initiatives are all enhancing productivity and throughput while maintaining safety performance overall. We're now realizing significant benefits from these investments, contributing to higher throughput and sequential margin improvement. We are also continuing to support international waste shipments, which remain on schedule and are expected to continue into the first half of 2026, adding backlog, stability, and revenue diversity. We are processing waste streams from Europe and North America and evaluating new shipment requests associated with upcoming 2026 European Union programs. Turning to Hanford, this represents one of the most significant and long-term growth opportunities in our company's history. The Department of Energy's direct feed low activity waste facility, known as DFLAW, initiated hot commissioning in early October, ahead of the October 15 milestone in the tri-party agreement. Melter 1 is now converting tank waste into stable glass, marking a major milestone in the DOE's environmental cleanup mission. Under the DOE's record decision for the Hanford DFLAW program, Perma-Fix Northwest is the designated commercial treatment pathway for secondary waste streams generated during the vitrification operations, including process liquids and solid residues that require off-site treatment at licensed facilities. This designation opens the door for multi-decade, high-volume revenue opportunities for Perma-Fix as DFLAW works towards achieving the cleanup objectives for Hanford over the coming decades. We expect to begin receiving affluent waste shipments from DFLAW later in Q4 or early Q1 of 2026, following the DOE's initial production phase and necessary waste characterization. Although the tri-party agreement allows up to three years to reach design capacity for throughput, internal DOE goals suggest an earlier ramp-up, and Perma-Fix Northwest is fully prepared to meet those goals. Earlier this year, we completed the union transition under our UA Local 598 agreement in the Tri-Cities area for our Perma-Fix Northwest plant. This transition has led to improved labor stability, enhanced hiring efficiency, and allows for multi-shift operations to meet DOE throughput requirements while maintaining excellent safety performance. Collectively, the record decision designation, DOE progress, facility upgrades, and a stable workforce position Perma-Fix as a crucial commercial link in the DOE's waste treatment chain, offering long-term recurring revenue as the DOE's cleanup mission advances. Our PFAS destruction initiative continues to progress technically and commercially. At our Florida facility, the first-generation PFAS system operated reliably throughout the quarter, achieving complete destruction of PFAS compounds at a 10% to 20% cost advantage to incineration, with zero air emissions. System performance improved month-over-month following upgrades in Q3 and increased throughput. I'm not sure where I got cut off; I was talking...
Mark, I think it was around when you talked about the waste shipments in 2026 in the tri-party agreement. After the union discussion try it from there.
All right, give me one minute here. All right. We're going for at a few sentences. I'll jump in right after the union agreement. Discussion taken together, the record decision designation, DOE progress, facility upgrades and workforce stability position Perma-Fix Northwest as a critical commercial link and waste treatment chain, a role that provides long-term recurring revenue as DOE's cleanup mission advances. Our PFAS destruction initiative continues to advance both technically and commercially. At our Florida facility, the first-generation PFAS system operated reliably throughout the quarter, achieving complete destruction of PFAS compounds at a 10% to 20% cost advantage to incineration and with our program, it has 0 air emissions as well. System performance improved month-over-month following Q3 upgrades, the increased throughput and uptime. We currently have 20,000 gallons of backlog under contract and anticipated commitments for another 25,000 gallons expected before year-end, keeping the unit fully utilized through early 2026. Construction of our second-generation PFAS unit near Oak Ridge, Tennessee is nearing completion with commissioning expected in Q1 of 2026 following some minor supply chain delays. The system should process 1,000 gallons per shift, which is also scalable to 2,000 gallons per shift, tripling capacity and lowering unit costs. We're engaged with multiple industrial, municipal and federal customers for multiyear destruction programs, and we expect demand to grow as regulatory requirements tighten. Perma-Fix remains one of the few companies with proven commercial scale non-incineration PFAS destruction capabilities, positioning us as a leader in this rapidly expanding market. Our Services segment reported $4.3 million in revenue compared with $7.7 million in Q3 of '24. That decline was primarily driven by DOE and DoD project delays and slower award timing, which paused some procurements and project activities. We also continued collaboration with BWXT on the DOE's West Valley end state contract, where our waste management scope remains central to the site's long-term remediation strategy. Our federal bid pipeline remains strong with multi-agency opportunities representing over $200 million in potential contract values. We expect a rebound in field activity in Q4 as DOE and DoD programs resume under approved funding. Looking ahead, we entered the fourth quarter with strong visibility and positive momentum. Our Treatment segment continues to perform at record levels, supported by DOE and commercial demand and steady international shipments. Our PFAS business is scaling rapidly in capacity and customer adoption, and our Hanford operations are poised to benefit from one of the largest and longest-running environmental cleanup programs in U.S. history. While the temporary government shutdown may impact services timing, we expect higher DOE project activity as funding normalizes. We also expect to benefit from DOE project starts and pent-up demand created by the temporary shutdown, which should contribute additional backlog realized in Q1 of '26. Across the company, our priorities remain clear: convert backlog efficiently, scale PFAS commercialization, capitalize on DOE opportunities such as those at Hanford and maintain a disciplined cost management program. Perma-Fix today is financially stronger, operationally efficient and strategically aligned with multiple long-term growth programs that will drive performance for years to come. It's also worth noting that given the high fixed cost nature of our business, each incremental increase in revenue and throughput drives substantial operating leverage. As we continue to grow volumes across treatment and PFAS operations, we expect to realize meaningful economies of scale that will translate into expanding margins, accelerating profitability and increasing cash generation in the quarters and years ahead. We're proud of the team's execution this quarter and confident in our ability to build on this momentum as we move into 2026. I thank you. I'll turn it over to Ben.
Thank you, Mark. Our total revenue for the quarter was $17.5 million, which represents an increase of $642,000 or about 4% from the $16.8 million reported in the third quarter of 2024. This growth was solely due to improvements in our Treatment operations, although it was somewhat balanced by decreased activity in the Service segment. The Treatment segment's revenue rose by approximately $4 million compared to last year, driven by higher waste volumes, increased average pricing, and better throughput at several facilities, with support from both commercial and international waste customers. Meanwhile, revenue in the Services segment fell by about $3.4 million compared to the same quarter last year, largely due to fewer active projects and the timing of new contract initiations. Our gross profit for the quarter was $2.6 million, accounting for 14.6% of revenue, compared to $1.3 million in the same period last year, representing an increase of $1.3 million, or 91.7%. This increase was entirely due to the Treatment segment, which experienced higher revenue and improved margins, while the Services segment saw a decrease owing to lower revenue and diminished project margins. We remain focused on optimizing plant performance, controlling costs, and ensuring efficient project execution, all of which contributed to our year-over-year margin improvement. SG&A expenses reached $4.1 million, reflecting an increase of approximately $451,000 from last year, primarily due to higher personnel costs at the executive level and increased professional services expenses, including legal and consulting fees. These costs were partially offset by cuts in other administrative and marketing expenses. We are dedicated to managing overhead while investing in areas that foster long-term growth. Our EBITDA from continuing operations showed a loss of $1.5 million, an improvement of around $600,000 from a loss of $2.1 million in the same quarter last year. The net loss for the quarter was $1.8 million, down from a loss of $9 million last year, which included a $6.4 million noncash tax expense related to the valuation allowance on our deferred tax assets. Consequently, our net loss per share improved to $0.10, compared to $0.57 in the previous year. In terms of our balance sheet, we ended the quarter with $16.4 million in cash, about $18.4 million in working capital, and total debt of around $1.9 million, primarily owed to our key lender, PNC Bank. Cash used from operations was $8.3 million, and cash used in investing activities from continuing operations amounted to $2.7 million. We continue to prioritize a strong liquidity position with manageable debt, giving us the flexibility to support strategic initiatives and future capital needs. With that, I'll turn the call back to the operator for questions.
分析師問答
Our first question comes from Howard Brous of Wellington Shields.
Mark, Ben, a good quarter. Let's start with the government shutdown. How long will this shutdown impact your business, if at all?
We have seen very minimal impact on waste treatment. The Department of Energy has provided guidance to halt shipments of waste not driven by compliance, resulting in some delayed shipments. However, the waste remains, and we expect operations to resume right after the shutdown ends. We are encouraged by recent progress. I want to emphasize that this situation has not affected Hanford or any of our projects with them, especially DFLAW. Nevertheless, some projects have experienced delays, and mobilizations have been impacted. We cannot visit sites for which we need travel reimbursement, adding to the overall influence of the situation. We anticipate the effects to be limited due to our strong backlog, which is the best we’ve had in years. We expect demand to surge in December, allowing us to strengthen our performance for the first quarter, typically our slowest time. We are optimistic about our backlog and sales, which are strong, and we believe we can navigate any challenges posed by the shutdown effectively.
So I guess the status of the grouting program at Hanford is effectively not going to be affected. Is that a correct comment?
The grouting program shouldn't be. There's 2 components to the grouting program. One is the long-term program, which is the driver to meet the compliance with the 22 tanks they have to retrieve by 2040. That's a tri-party agreement milestone. And we're expecting an RFP on that, which won't be in place for a couple of years as they build that extraction system on those tanks. However, DOE and this administration is continuing to explore other expedited grouting options that will supplement DFLAW and the objectives associated with the East Tank Farm where DFLAW is located. So no specific details on that other than that this administration really wants to focus on closing tanks within their 4 years. And that's very evident by looking at different alternatives to try to expedite some of the grounding opportunities. So there's more to come on that, not any really good solid details that have been made public, but DOE certainly is interested in grouting unlike before as a supplement to DFLAW.
So with DFLAW operating, can I ask how much waste you anticipate receiving and when?
That's a tough question, Howard. Right now, it takes several months for any government facility to generate waste, and they have to characterize it and document that characterization, which is called a profile. This profile has to be approved by both the receiving entity and the disposal site. It's also required for transport. All of this is currently happening; they need to package it and then ship it. So we expect them to start moving waste sometime in December, maybe late December or early January. Last I saw in the press a couple of weeks ago, they had received around 40,000 to 50,000 gallons of waste. I'm not sure how much they are processing versus receiving, but I heard that they got the second melter running. To answer your question, we are still confident that the original DOE estimate of 8,000 cubic meters per year is still applicable. There’s no indication to think otherwise. If you scale that back to a smaller capacity that they might be running at for the next several months, we would expect $1 million to $2 million in revenue per month starting in early '26, around January or February. This is somewhat speculative, as we don't know the exact details of the waste streams. We have had discussions with them, which provided us with some insights, but not the full range of different types of waste or the specifics regarding their characterization. So, to summarize, we are focused on $1 million to $2 million a month starting in early '26 and seeing that ramp up throughout the year.
What kind of gross margins could you anticipate from that?
We can't provide specific details about gross margins except to say that they are generally consistent with what we normally observe in our gross margins across the company for the waste treatment segment.
All right. Last question. PFAS for 2026, where do you see the program going? And going further?
Yes. PFAS, it's moving a lot slower than we'd originally anticipated, but it's making really good progress now. And the sales group is really doing well, and so is the engineering team. Right now, we're projecting about $150,000 a month in revenue through this quarter with the potential of increasing that closer to $200,000 in Q2, a little bit later in '26, we expect to get closer to $500,000 a month in revenue, certainly by the end of '26 with the new system coming online in Q2. So we'll start to see some significant contributions to EBITDA in the second quarter next year. And where we really see ourselves lining in the PFAS market, which is largely led by Louis Centofanti is that we see ourselves sticking with the liquid markets, and getting to a point where we can scale down our large systems so that we can deploy them in the field and support companies and projects that have large volumes of liquids that isn't practical to ship. And so we're going to stick with that, approach to it for the next couple of quarters and continue our R&D and engineering design work on scaling those systems down so they can be more portable, which is a market that's pretty much untouched by others. And we see that expanding as landfills begin to see more and more PFAS in our leachate and those types of things. So we're very excited about the progress. We're very excited about the technology. It's exceeding expectations. It's taking a little bit longer to get it to market than we had originally anticipated. Thanks, Howard.
And our next question is coming from Aaron Spychalla of Craig-Hallum. Aaron your line is live. Just bear with me a second. I'll see if I can get line's live. Aaron, can you hear us?
I can. Can you hear me?
Okay. Yes, it was the other line that was in the queue. So I've unmuted the other line instead. All right. So that's all good to go.
Maybe first on treatment. Backlog was quite impressive, the highest in some time. Can you just maybe talk about confidence in continued growth there and margins? You kind of talked about some commercial also international shipments. Maybe just a little bit more detail there.
We've been fortunate to secure significant amounts of waste from Mexico and Canada over the last few quarters. While our activities in Mexico are mostly complete for now, we expect continued shipments from Canada. We're also starting to see an increase in shipments from Germany, and by late 2026, we anticipate waste coming from our major project in Italy, which is ahead of schedule. Additionally, we're exploring more international initiatives that will help bolster our waste backlog alongside existing contracts, especially from Canada. Regarding our confidence in the backlog, we're receiving more waste than anticipated from the H2C contract. Both the Department of Energy headquarters and site office, as well as contractors, have recognized the benefits of shipping certain waste to us rather than treating it on-site. This has led to a rise in waste receipts from H2C, the tank waste contractor, and other site programs. We're also seeing an uptick in waste associated with the National Nuclear Security Administration, which is part of the DOE's weapons programs. In summary, we see strong momentum both from the government and commercial international fronts simultaneously. We expect this momentum to continue at least through the summer. Typically, we experience a slight slowdown in receipts during the first quarter due to weather and reduced field activities, but given our backlog, this should have minimal impact this year during Q1.
All right. And then maybe on the services side of the house, how do you see that business performing in the coming quarters? Any update on West Valley and Rad Mac, and you kind of mentioned in the release pursuing some new growth opportunities in government and commercial there?
Yes, we currently have several jobs worth $30 million that we're bidding on, and they're all competitive, making it difficult to predict outcomes. However, we are in a strong position as this is the type of work we excel at. We have ongoing contracts that are starting to gain momentum, including a commercial contract that launches today, which was delayed from several months ago. This will assist us in achieving our growth targets for this quarter. We also have two large projects with the Buffalo core that are progressing, although they are likely to slow down due to the winter weather—one project is in Niagara and the other at Harshaw Chemical. These may experience a slowdown for a couple of months during winter and the first quarter. Nevertheless, we are optimistic about the number of opportunities before us, which is our usual indicator for forecasting future service potential. We continuously aim to submit competitive bids and secure a fair share of projects. We did lose a few bids we had hoped to win earlier this quarter and in the summer, but we anticipate maintaining our current performance for several additional quarters, with hopes of winning a few of the upcoming projects mentioned. Regarding West Valley, it's currently in a unique phase with limited field activity while planning is underway. Our involvement is focused on waste management, which is expected to kick in around the second quarter of next year or slightly later. We will then start ramping up to support their project schedule. While it may take a little longer than we expected to see the anticipated revenue, we are maintaining good communication with the site and are providing some services, although not at the levels initially planned. We are waiting to see progress on the project, and once our scope of work is funded, we will begin to see revenue from it.
All right. And then maybe last, just broadly on CapEx. You talked about some of the areas of investment to come in the coming quarters just given some of these areas of growth?
Yes. We expect the Perma-FAS system at Oak Ridge to finish up in the next couple of months. Capital expenditures will slow down for some time as we get those units operational and shift our focus to generating revenue. We will begin considering the smaller unit I mentioned, but I don't anticipate it will significantly impact our capital in the early stages, at least not until the second or third quarter. We still have some expansion plans for Perma-Fix Northwest to support DFLAW. We believe we can ramp up with the incoming receipts, so we are cautious about making investments until we see revenue and backlog increase. However, we continue to invest in Northwest to support DFLAW as well as in grouting and other waste streams we are receiving from them. Ben, you might have more specific figures regarding our expected capital expenditures for the next couple of quarters.
Yes, I believe that through the end of the year, our significant spending will focus on the second reactor. Total spending for the year will likely fall between $5 million and $5.5 million, meaning there will be an additional $2 million or so. Next year, as Mark mentioned, we expect to revert to our usual spending levels, which range from $2 million to $3 million annually. However, this is contingent on the requirements for DFLAW, which could lead to higher spending depending on the volume.
And our next question is coming from Aaron Warwick of Breakout Investors.
Just some clarification maybe on that West Valley. Is it accurate that the opportunity there and your expectation there still remains the same? It's just been pushed back a little further? Or are you now expecting less revenue from that project overall?
Yes, Aaron, that's a good question. We previously mentioned that we were expecting to start with a significant amount of scope. However, we were concerned that the waste management scope might be delayed within the overall spending profile for the site, and that is exactly what has occurred. The focus has shifted to several other priorities for the next few months, which has pushed back the waste management portion as well. We do anticipate that it will ramp up, with West Valley budgets expected to significantly increase in 2027. 2026 is likely to be relatively flat. In 2027, we expect to really begin moving dirt and generating waste as they implement their baseline objectives, including remediation, demolition, and clearing out large waste tanks, as well as transporting legacy waste off-site. Once they start moving that waste, and it is reflected in the baseline, our expectations will be met. We still believe we can achieve our revenue target, but it may take until later in 2026 for it to reach the levels we initially anticipated. After that, we expect it to be sustainable.
And then on Hanford, if I heard you correctly, there's no noticeable difference or slowdown there because of the government shutdown? Is it understood that it's funded enough so that no matter how long the shutdown lasts, they will continue the cleanup at this pace?
Yes, that is expected, Aaron. I would have said the same about a couple of other programs a few months ago that did shut down or slow down. The reason I'm confident that DFLAW won't experience the same fate is that the way the plant operates, once the melters are started, they cannot be shut down. The melters are currently operational, and there are systems in place along with waste ready to continue vitrification. Given the visibility and the funding backlog we have for that plant, I can't envision a scenario where they would slow it down due to the shutdown. It's too important, and the momentum they have must be maintained. It would be very unlikely.
Yes, that makes a lot of sense. My final question is regarding PFAS. I apologize if I missed your response to Howard's question, but could you share your thoughts on any potential licensing agreements or partnerships as you approach 2026 and ramp up operations at the larger plant?
Partnerships are essential to our future, and we are dedicating significant time to developing them. We have two or three companies that we are excited about, as our objectives align well, and they will help us build a solid and sustained backlog. These partnerships are already in progress. Currently, we will be supported by the second-generation unit. The smaller units I mentioned are still on track regarding our goal once we have the Gen 2.0 system operational. We plan to redesign it for smaller applications that could be implemented on-site. At this stage, we are uncertain whether we will sell that technology, impose a technology fee, or license it, as we need to advance further in our engineering work to assess our unit's capabilities. However, we see numerous applications for it, which would offer a sustainable, high-margin, and unique approach as the PFAS market evolves. It is becoming increasingly uneconomical to transport large quantities of water for treatment. We still have a solid backlog for the two plants we are managing, but the larger market will focus on on-site remediation. Yes. No, I don't think that's going to be a concern about giving away secrets with the license fee, that type of thing. These things operate very efficiently. So it only takes about 2 people to operate one of our large units. I'm going to ask Louis Centofanti on the phone too, if you have any want to add to that, Louis?
Yes. When we consider on-site operations, the technology will be tailored to meet the specific needs of our customers. Each unit placed on-site will require some customization based on how we collaborate with them. For example, when working with a large water treatment facility that already has personnel in place, the objective is typically to avoid increasing the workforce; instead, we will coordinate with the existing operators. Therefore, we do not foresee any issues in this regard. There will be various options that will need to be discussed and negotiated on a case-by-case basis, depending on the requirements of our customers.
All right. Thank you, Jenny. As we enter the final quarter of 2025, our focus is clear: to efficiently convert our backlog, scale our PFAS commercialization, and capitalize on DOE opportunities at Hanford. The operational improvements we implemented earlier this year are yielding measurable results. The ongoing advancements at Perma-Fix Northwest and our PFAS program across DOE engagements give us confidence that this momentum will continue into 2026. While federal procurement timings vary, our backlog, field execution, and customer activity levels remain robust and are expanding, marked by a record treatment backlog, improving margins, and accelerated PFAS adoption. Perma-Fix is well-positioned for a strong end to 2025 and an exceptional year ahead. We appreciate your continued support and look forward to providing updates next quarter as we work towards our mission of delivering sustainable environmental solutions for our government and commercial clients. 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.