PERMA FIX ENVIRONMENTAL SERVICES INC Q3 FY2024 earnings call

Key Points:

• The quarter was challenging but had rewarding aspects, with performance in Services and treatment plants improving towards Q4.
• Operational disruptions occurred, such as hurricane-related outages and thermal treatment system downtime at the Florida facility, which has been resolved and backlog is being addressed.
• Launched the first commercial Perma-FAS system for PFAS treatment at the Florida facility, with plans for a second-generation unit in 2025. Invested $930,000 in PFAS technology this quarter with plans to continue investment.
• Waste receipts improved, and the acquisition of the EWOC facility in Tennessee enhanced operational capabilities. International opportunities include waste streams from Canada, Mexico, Germany, and progress on a European facility.
• Selected as an integrated subcontractor for a $3 billion 10-year project and made progress on a €50 million contract in Italy. Hanford DFLAW program is advancing with hot commissioning expected in summer 2025.

For the third quarter, total revenue from continuing operations was $16.8 million. The Treatment segment saw a decrease of $1.7 million in revenue, impacted by lower volume (due to reduced waste receipts from government customers and production disruptions) and lower average price (attributed to waste mix and equipment breakdowns pushing to lower-priced waste streams). The Services segment decreased by $3.4 million, primarily due to the significant completion of large projects replaced by smaller ones in 2024. Revenue contribution: Both segments experienced declines, with Treatment down $1.7 million and Services down $3.4 million from the prior year's third quarter.

Forward-Looking Statements:

• PFAS revenue projected to be $3 million to $5 million in 2025, with potential for growth as operations optimize.
• Hanford DFLAW expected to start generating revenue in late 2025/early 2026 with hot commissioning anticipated in summer 2025.
• International revenue of nearly $7 million expected from Q4 2024 to Q2 2025 from waste streams in Canada, Mexico, Germany, etc.
• Targeting over $100 million in annual revenues from new procurements in 2025, including the USS Enterprise and other projects.

Risks Identified:

• Operational disruptions such as past hurricane-related outages and equipment breakdowns, though repairs are complete.
• Regulatory and contractual uncertainties, including protests on contracts (e.g., OSMS procurement, West Valley project) and transition challenges for new contracts.
• Market volatility in waste mix, average prices, and competition in waste management and nuclear services markets.

Q: Specifics on PFAS, Enterprise, grouting, ITDC contract A: Mark Duff discussed PFAS revenue projections, stating they expect $3M to $5M in 2025 for PFAS, explained the Hanford DFLAW timeline with hot commissioning anticipated in summer 2025, provided details on the USS Enterprise RFP (due January 6th) where they are actively working, and shared uncertainties around grouting timelines and ITDC contract transition challenges.

Q: Near-term outlook, balance sheet, TRU waste A: Ben Naccarato and Mark Duff talked about Q4 waste receipts being better than Q3 with stable waste backlog, balance sheet being in good shape with low debt and good working capital, and discussed the growing TRU waste market, noting they are the only commercial company dealing with TRU waste management and it's a burgeoning market for them.

Q: PFAS partnerships, technology optimization A: Mark Duff detailed PFAS partnerships with firms that have concentrators, explaining they are working to align with these firms, and discussed technology optimization, stating they are working to get the current unit running efficiently and plan to have a next-generation unit installed in the second half of 2025.

Q: Hanford grouting, deferred tax asset write-off A: Mark Duff addressed Hanford grouting plans, mentioning DOE's intent to grout West area tank farms but uncertainties around interim steps, and Ben Naccarato explained the deferred tax asset write-off was due to GAAP rules regarding net operating losses and the company's ability to utilize them, a conservative paper transaction that doesn't impact cash flow.

Q: PFAS economics, operating margins A: Mark Duff discussed PFAS pricing ranges, stating it ranges from $10 to $50 per gallon depending on concentration and volumes, and mentioned they plan for PFAS treatment to be more profitable than typical waste treatment margins through resource recycling opportunities.