Perma-Fix Environmental Services, Inc.

Good morning, ladies and gentlemen, and welcome to the Permafix second quarter 2022 conference call. At this time, all participants have been placed on a listen only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, David Waldman, Investor Relations. Sir, the floor is yours.

Thank you. Good morning, everyone, and welcome to Permafix Environmental Services' second quarter 2022 conference call. On the call with us this morning are Mark Duff, President and CEO, Dr. Lou Senefani, Executive Vice President of Strategic Initiatives, and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing second quarter 2022 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 and 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-GAP measures. Permafix believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non-GAP measures to the most directly comparable GAP 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, Dave, and good morning. I believe we are finally starting to realize improvements in our performance as evidenced by our results this quarter. I can't understate enough the challenges we've had to overcome. Government agencies, including DOE and DOD and EPA, have been quite lethargic in distribution of task orders under our existing IDAQ contracts and have been slow in the procurement process still due to the impacts of the pandemic. On July 25th of this year, just a few weeks ago, the GAO released a report with recommendations for the Department of Energy, Office of Environmental Management, and the NNSA, the National Security Administration, to improve their management of excess carryover balances. At the end of 21, FY21, GAO found that EM carried over around $3.2 billion, equivalent to around 42% of their funds appropriated in fiscal year 21. NSA carried over about $11 billion, equivalent to 62% of its appropriated funds. These statistics underscore the fact that the government has not been moving funds into projects as planned, which directly results in delays in field projects and specifically waste disposition activities. Perfix is well-positioned to remain competitive when these task forces begin to make it through the procurement cycle through our existing portfolio of IDIQs with DOE as well as DOD and other federal agencies. And despite these challenges, I'm pleased to report we achieved a 20.5% increase in revenue, $19.5 million for the second quarter of 2022 versus $16.1 million for the same period last year. Importantly, we saw growth in each of our segments, both sequentially and year-over-years. In addition to our revenue growth, gross profit nearly tripled and gross margins increased from 6 to 15 percent. Turning first to our services segment, we were able to reach full operational status on several projects that have been delayed due to the impact of the pandemic. In March of 22, we began to see increases in activity as the pandemic impacts began to subside, which continued into the second quarter. As a result, revenue increased approximately 31 percent to $11.1 million in the second quarter of 22 versus the same period last year. we saw a similar increase in sequential growth of 31% compared to the first quarter of 22. We are hopeful the federal government will be awarding additional projects in the third and fourth quarters. However, we are realistic that the DOE and DOE have been slow to award new projects. While we remain well-positioned and competitive, there is a risk the government could continue to carry over large projects in their budgets, which could potentially have an impact on firms like Permafix. Nevertheless, our ability to To provide innovative solutions for both waste management and radiological contamination, we've been fortunate to be able to secure formal teaming arrangements with large Tier 1 prime firms on large strategic bids within the DOE market. Assuming we're successful on some of these, some of these projects are quite material to our business, contributing meaningful recurring revenues and cash flow over multi-year contracts. We're also seeing increased activity on the commercial and international fronts. Last month, we were awarded a four-year framework contract worth up to 41 million pounds across three suppliers for the treatment and conditioning of radioactive waste in the UK. This award represents an expanding market in Europe for our services and defines the lack of treatment availability and options to stabilize radioactive waste for long-term storage and disposal. Turning to our treatment segment, revenue increased by roughly 9% for the second quarter of 22, as compared to the same period last year, primarily due to higher volume waste. Sequentially, our treatment segment revenue increased 12% over the first quarter of 22. In addition, we're seeing improvements in our waste receipts, which increased 54%. So we had a 54% increase in our waste receipts through the quarter. Given how we recognize revenue on percentage of completion basis, This is a good leading indicator for the second half of the year. In addition, treatment backlog increased to 7.2 million compared to just 6.1 at the end of the first quarter of 22. We continue to expand our waste treatment offering to the commercial sector and utility markets, which has broadened our market base and resulted in several new shipments that will likely be sustainable for several years. As an example, our new vacuum thermal desorption system, or VTD for short, offers a treatment solution for problematic waste streams while providing increased efficiency and productivity as well. Specifically, this technology enables us to extract organic contaminants from soil-like materials, sludges, and non-debris mixed waste streams, and we're realizing really strong interest in this system with receipts from several new clients, including both government and commercial sectors, along with the oil and gas industry. As I mentioned in our last call, the recent and active FY22 federal spending bill included $7 million in additional funds specifically allocated for the testbed initiative, also referred to as the TBI. In that funding bill, it's referred to as the low-level waste off-site disposal program, which is called the LWOD. This funding line item underscores the continued visibility and recognition within the U.S. Congress for commercial grouting to supplement the current direct feed low activity waste program, or what we refer to as DF law, while providing significant cost and schedule reductions to support the Hanford mission. The second phase of the TBI project, which includes extraction, shipment, and transportation of 2,000 gallons of waste to our PermFix Northwest facility located in Richmond, Washington, continues to move forward with the NRC approval of DOE's Waste Incidental to Reprocess report. So basically the NRC approved of the WEIR document that was the next step of the program. This opens the door for DOE to submit the RD&D permit and ship the 2,000 gallons, hopefully before the end of this year, assuming they submit the report soon. Also, we've seen continued support by Congress and local stakeholders associated with the grouting technology as a low-cost and safe supplemental program to the ongoing DF law facility. In fact, just last week, the U.S. GAO published a report in which they stated grouting of Hanford tank waste could reduce certain risks by treating supplemental low-activity waste, defined as what we refer to as law, which makes up over 90% of the overall tank inventory at Hanford. Even with the operation of the new DFL facility, which is currently scheduled to begin in December of 23, this facility is would only address about 60% of the entire law inventory when it's running at full capacity. That leaves nearly 20 million gallons remaining to be addressed within the tank farms at Hanford without a treatment alternative defined for it. As stated by the GAO in this report, the near-term reduction of the tank waste inventory through grouting could accelerate tank closures and save the government tens of billions of dollars while reducing the risk to the environment beginning today. Permafix maintains these capabilities for grouting in our northwest facility, which is already permitted and outfitted to safely and competently grout up to 30,000 gallons per month with the ability to expand to well over a million gallons annually while dramatically reducing costs compared to the alternative vitrification process. In terms of hiring and stability of our workforce, we've recently begun to realize impacts from the availability of trained technicians and labor that have been common during these unusual economic times. While we've been successful in minimizing these impacts to date, we do recognize the potential impacts to productivity in both our segments if the job market continues to tighten in the coming months. Turning back to our finances for a moment, despite the turnaround, I am obviously disappointed we didn't deliver a positive EBITDA for Q2. However, we believe that we're well-positioned to continue our market expansion program. Adjusted EBITDA improved to a loss of $403,000 compared to a loss of $1.7 million in Q2 of 2021 and a loss of $1.4 million in Q1 of 2022. As I stated in the past, the federal government has been much slower than the commercial sector to resume normal operations. However, these projects have not gone away. We believe we've weathered the worst of the storm for COVID-19, and we expect improved activity from the federal government to procure us with new task orders in the future. So to wrap up, we've witnessed solid year-over-year revenue growth in both our segments and saw meaningful improvement in our gross margins. The federal government has begun announcing new projects, that have been on hold, and we expect to benefit from those improved budgets and carryover spending from the last year. We have projects ramping up and are bidding on increasing number of projects in our services segment. Within the treatment segment, both our waste receipts and backlog are improving. All this bodes well for a second half of the year in our performance goals. At the same time, we continue to invest in our capabilities and facilities. We've built a solid foundation for growth and highly scalable infrastructure. As a result, we believe we're in a great position to take advantage of the pent-up demand that's out there. And as we continue to increase revenues, we expect to benefit from the predictable cash flows or services segment and high incremental margins within our treatment segment. On that, I'll now turn it over to Ben, who will discuss the financial results in more detail. Ben.