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spk04: Good morning, ladies and gentlemen, and welcome to the Permafix third 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, Mr. David Waldman. Sir, the floor is yours.
spk00: Thank you, and good morning, everyone. Welcome to Permafix Environmental Services third 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 third 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, 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. Permafix believes that such information provides an additional measurement and consistent historical comparison of its performance. reconciliation of the non-GAAP measures to the most directly comparable GAAP measures 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.
spk01: All right. Thanks, David, and good morning. We are very proud of our managers and staff that have worked extremely hard the past few quarters to continue our journey to reach the growth we established before COVID and position the company for the growth trajectory our shareholders expect. Specifically, we continue to realize improvements in our performance As the pandemic impacts continue to subside, which was evidenced by our results over the last two quarters, I'm pleased to report we achieved a 17% increase in revenue to $18.5 million for the third quarter of 2022 versus a $15.8 million quarter for the same period last year. In addition to our revenue growth, gross profits increased by 38%, and gross margins increased from 14% to 17%. Turning first to our services segment, we reached full operational status on several projects that have been delayed due to the impact from the pandemic, which contributed to our revenue growth within our services segment in the third quarter of 2022. As we stated previously, the federal government agencies, including DOE, DOD, and the EPA, have been slow to procure new task orders due to the pandemic. However, these projects have not gone away. In fact, the federal government has begun announcing new projects that have been on hold. As a result, we realized an increase in procurement since September of 22, which we believe will continue in the fourth quarter of 22. And moreover, we're encouraged by the bidding pipeline, with many of these contracts expected to be awarded over the next few quarters. Specifically, we have over $100 million in defined opportunities targeted to be released in the next few quarters that directly align with our core competencies. This is on top of the $39 million in funded nuclear services contracts already in place, which bodes well for the balance of this year and the following year. There is significant pent-up demand, and we expect to benefit from improved budgets and carrier spending from the last year as well. Turning to our treatment segment, our revenue remained stable despite delays in waste shipments from certain customers at our Florida facility due to Hurricane Ian, excluding the one-time request for equitable adjustment under a government waste generator contract in the third quarter of 21, our treatment segment revenue would have increased by approximately 1.3 million or 17% in the third quarter of 22. In addition, we're seeing improvement in all our waste receipts overall, including our new clients in both the commercial and international waste markets, which has increased 46% overall to 9.1 million. In addition, our waste treatment backlog is approximately 7.1 million. We're also seeing strong demand for waste treatment capacity as evidenced by a steady increase in requests for proposals or RFPs received for bidding within the waste treatment segment. With over 80 bids requested, excuse me, we received over 80 bid requests in the third quarter of 22 alone compared to 60 in the first quarter of 22 this past year. This is a result of our efforts to broaden our client base in the commercial utilities, the oil and gas industry, as well as other industrial markets. Another example is our new vacuum thermal desorption system, where we completed startup in Q2. We're now starting to see strong demand for this system and services with receipts from several new clients, including government and commercial clients within the oil and gas industries. At the same time, we remain highly encouraged by the outlook of the Testbed Initiative, or TBI, also known as the Low-Level Waste Offsite Disposal Project, in support of the DOE Hanford tank disposition mission. The TBI initiative, which is based on grouting technology, will continue to be a focus of Permafix moving forward as a means of saving tens of billions of dollars in taxpayer dollars, as well as eliminating significant carbon emissions and reducing the schedules for Hanford cleanup actions. Grouting has been recognized as a preferred supplement to the current DOE strategy, which is currently based on vitrification of tank waste at Hanford through their new facility called the Direct Feed Low Activity Waste Treatment Plant, or DFLAW, which continues to experience delays in its startup. Our TBI program continues to move forward, albeit much slower than anticipated, despite continued pressure on DOE from the U.S. General Accounting Office, GAO, to make progress. As stated in the GAO report, recently published, 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. We can do this grouting today with our existing capabilities. Moreover, the National Academy of Science continues to request the DOE to expedite initiatives for grouting as well. As it stands now, DOE stated in a September industry conference in D.C. that their intentions to submit the RD&D permit to the state is currently planned within the next six months of this government fiscal year or by the end of our first quarter. This submittal will trigger review and approval by the state of Washington and support shipment of the 2,000 gallons as well. Also, we've seen continued support by Congress, including a bill recently introduced by Senators Paul and Hassan in September of this year to push DOE into making progress on grouting, and specifically the off-site low-level waste disposal program. Permafix maintains these grouting capabilities today at our Permafix Northwest facility, which is in Richmond, Washington, right near Hanford, and is permitted and outfitted to safely and compliantly treat up to 30,000 gallons per month, with the ability to expand to well over a million gallons annually, while dramatically reducing the cost compared to vitrification. In addition to the TBI initiative, our teams continue to work very hard on securing transformative opportunities and wins that could lift Permafix to a new level of revenue and income. These opportunities include participation in large procurements, such as the $45 billion integrated tank disposition contract and the operations and site mission support contract valued over $3 billion. Both of these opportunities are Department of Energy procurements that we are participating in as a team member. However, both of these are completely aligned with our strengths and our innovations in radiologic protection and in waste management. We are well positioned for several additional upcoming procurements and initiatives as well with the U.S. Army Corps of Engineers as well as the U.S. Navy Ship Decommissioning Program and several other DOE sites that are going to be procured in the next few quarters. Turning back to our financials for a moment, just as EBITDA improved to a loss of $374,000 compared to a loss of $798,000 in Q3 of 2021 last year, we believe we've weathered the worst of the storm due to COVID-19, and we expect improved activity from the federal government to procure new task orders as well very soon. To further enhance our competitive position in the market, we've made several adjustments to our budgets for the next year to trim general and administrative costs and to lower our overall indirect costs. These adjustments will reduce our overall operating costs while continuing to meet our ESG objectives and increase our competitive edge. Overall, we've witnessed a solid year-over-year revenue growth and saw a meaningful improvement in gross margins based on current backlog and have identified opportunities over the next several quarters that we basically remain optimistic that we can achieve these growth goals and stability that we've realized prior to the pandemic. At the same time, we continue to invest in our capabilities and facilities. We've built a solid foundation of growth and a highly scalable infrastructure. As a result, we believe we're in a great position to take advantage of the pent-up demand. And as we continue to increase revenues, we expect to benefit from the predicted cash flows within our services segment and high incremental margins within our treatment segment. Additionally, qualifying for the employee retention credit helped with offsetting some of the losses incurred from the pandemic. As a result, we believe we're well positioned for the balance of $22 million and we believe we're sufficiently capitalized to execute our business strategy in order to achieve profitability and positive cash flow in 23. We believe this foundation, coupled with expansion of our treatment capabilities, increased bidding opportunities, and improved federal budgets, will continue to support our ambitious growth objectives. On that note, I'll turn it over to Ben, who will discuss the financial results in a little more detail. Ben?
spk03: Thank you, Mark. I'll start with revenue. From our continuing operations for the third quarter was $18.5 million compared to last year's $15.8 million. That's an increase of $2.7 million or 17%. The revenue improvement came from the services segment with our two large projects finally being fully operational. At this time last year, they were just beginning to ramp up. In the treatment segment, revenue was flat the prior year. However, last year's third quarter included a one-time request for equitable adjustment, or REA, totaling $1.3 million. When you exclude that, it provides for a $1.3 million increase year over year in the treatment segment as well. So we saw growth there as well. Year-to-date, through September 30th, revenue is BELOW PRIOR YEAR BY 1.2 MILLION OR 2.2%. THIS DROP IN REVENUE COMES FROM THE SERVICE SEGMENT, AS REVENUE WAS DOWN 1.9 MILLION VERSUS LAST YEAR. AND YOU'LL RECALL THE FIRST COUPLE QUARTERS OF THIS YEAR WERE DOWN DUE TO THE DELAYS IN THE TWO LARGE PROJECTS, AND THAT WAS THE MAIN REASON FOR THE SHORTFALL. OUR GROSS PROFIT for the quarter was 3.1 million compared to 2.2 million in 2021. This improvement came, this improvement which totals about 846,000 came from 1.4 million improvement in the services segment resulting from both increased revenue and increased profitability on the projects compared to last year. Offsetting this was a reduction in treatment segments gross profit of $520,000. However, if you exclude the impact of the REA I mentioned earlier, treatment segments gross profit improved year-over-year by about $766,000. For nine months, and in September 30th, gross profit was $7.6 million compared to $5.5 million last year. As with the quarter, this increase came from the services segment with improved margin from projects, offset slightly by lower gross profit in the treatment segment, and again, due to the impact of the REA. As with the quarter, if you exclude the REA, treatment segments showed an improvement of about $609,000. Total G&A, SG&A for the quarter is 3.9 million compared to 3.3 million in the third quarter last year. This increase of $581,000 relates primarily to increased payroll, travel, audit fees, and stock compensation. For the nine months ended September 30th, SG&A expenses were at $11 million compared to $9.6 million in prior years. Again, higher costs in marketing and payroll and benefits, audit fees, stock compensation, and other general office costs were the main drivers. Our net income attributed to common shareholders for the quarter was $664,000 compared to last year's net income of $1.4 million. Included in this year's net income is the retention, employee retention credit, Mark mentioned earlier, of $2 million, and included in last year's was a tax benefit adjustment of $2.4 million related to the release of a tax valuation allowance. Our total basic income per share for the quarter is $0.05 compared to income per share of $0.11 in prior year. And our year-to-date basic loss per share at this point is 16 cents compared to income per share of 27 in 2021. Our adjusted EBITDA from continuing operations for the quarter, as defined in this morning's press release, was a loss of 374,000 compared to a loss last year of 798,000. Adjusted EBITDA year-to-date stands at 2.2 million compared to a loss of three last year Turning to the balance sheet, our cash on the balance sheet was $1.9 million compared to $4.4 million at the year end, reflecting the current year's losses, capital spending, and debt maintenance. Our waste backlog at the end of September was $7.1 million, which is consistent with $7.1 million at the end of the year. and $7.1 million in September of 2021. Our total debt at quarter end was $1.3 million, excluding debt issuance costs, which is primarily owed to PNC Bank. Next, I'll summarize our cash flow activity for the year. Our cash used by continuing operations is $334,000. Our cash used by disc ops is $559,000. Cash used for investing of continuing operations was $922,000, and that's primarily capital spending. And finally, cash used for financing was $694,000, representing our monthly payments on the term loan and capital line of $375,000 and payments related to finance, lease, liabilities, and other debt of $297,000. With that, operator, I'll now turn the call over to questions.
spk04: Thank you, ladies and gentlemen. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset, if listening on speakerphone, to provide optimum sound quality. Please hold while we poll for questions. Thank you. Our first question is coming from Howard Brouse with Wellington Shields. Sir, please go ahead.
spk06: Just a few questions. Mark, Ben, Lou, I hope everybody is well with the family and with the firm. Anything new with the EPA contract with Navajo?
spk01: Yeah, what you're referring to, well, good morning, Howard. It's good to hear from you. The EPA contract you're referring to is the abandoned uranium mine contract. and it was an IDIQ, so it was basically three bidders. We submitted, I want to say, in Q2, and we were told when we submitted that it was going to be a rapid turn on announcement and startup. It was a fully funded project, and we've heard nothing from the EPA. And I wish I had a better answer for you. This is falling into one of those many contracts that we bid on, that have just slowed dramatically from, as I've referred to as the four lethargic procurement processes within the government. So no indication, plus or minus or anything, about that whole procurement. But it's not canceled. It's still happening. It's just stuck in the procurement process, I'm afraid.
spk06: All right. You mentioned possible contracts with the Department of Defense, in particular the Navy. Can you give us more details? granularity as to what kind of ships, how big the contracts are, how long they last?
spk01: Yeah, there's a lot going on right there right now. They've been slow to define specific ships with one exception. That is the Enterprise. The Enterprise, which most people have heard of, is a large aircraft carrier that they are going to have commercially be commissioned. And they've laid that out in great detail in their EIS, Environmental Impact Statement, including their procurement approach. So we know that's coming out. We're meeting with team members right now in great detail, and we're anticipating a draft RFP sometime in the early summer, probably a request for information maybe between now and then, and a final RFP within about a year. That project, as stated in the EIS, is valued – About $650 million. I would anticipate it would be well over a billion with everything included. There is going to be a good bit of competition, but as you know, we are in this business in a big way doing one of the few current radioactive or radiologically contaminated ship decommissioning projects right now at Norfolk. That step project is going well. We have good relationships with the client. We're making margin, and we're very well positioned for uh, being a key team member, uh, on the enterprise when that comes out next year. Uh, so there, as I mentioned, I think on a, on a few calls ago, uh, the Navy had announced, uh, in a report, I believe it was a GAO report actually, uh, that they have 48 ships coming out for decommissioning in the next four or five years. Uh, 12 of those are nuclear. Uh, they have not defined, uh, what's coming up next, uh, and outside of the enterprise. So, uh, I wish I had more detail for you, but I think the Navy is still working through the priorities on which ship is going to come out next.
spk06: Let me address the tank disposition contract. My understanding is it's to be released at $45 billion contract first quarter of 2023. Is that a fair comment?
spk01: That is a fair comment, Howard. In talking to you, and also in a recent A conference I referred to a few minutes ago in September, DOE said that they're shooting for the end. They haven't done it by the end of the year, but it may be close. So we expect it late December, early January.
spk06: If I can be facetious, the end of this year as opposed to another year.
spk01: It is.
spk06: That's correct. We've been waiting and getting older. And also, my understanding about the vitrification plant in doing some interesting investigations This is going to be fueled by diesel fuel to the tune of six, seven, or eight rail cars every day. Isn't that an EPA issue with basically fuel oil being a dirty fuel?
spk01: You know, it is their design basis to heat and power those vitrification units with diesel the way it's been designed from the beginning. So it is an issue. It's obviously going to get much more expensive. It's a significant carbon emission issue. There's all types of other considerations associated with that. That's one part of the selling point for grouting is that there's almost zero carbon emissions and there's no heating even involved. So there's a lot of advantages associated with that that are really important. DOE is built a $15 billion facility. They want to see it operate. Their position has been very vocal that they don't want anything to distract them to get it operational. Right now it is being delayed again. We're optimistic that based on the GAO push as well as the National Academy of Sciences push and, as I mentioned in the notes, recently the congressional push with the senators drafting a bill to push it, that eventually DOE is going to make it a priority to supplement the DF law facility with a grouting program. I think Congress is going to want to start seeing progress as well, and DOE could certainly start the closure of some of the tanks that they can right now in parallel with the DF law startup process. So we're putting a lot of pressure on for this, working our congressional delegations, and everything we possibly can to get that visibility there, and hopefully DOE will be shipping the TBI waste and then following that quickly in operational mode to start closing tanks.
spk06: For discussion purposes, let's assume the contract is let out first quarter. There's a 30-day hiatus where the contract can be appealed. Is that a correct statement?
spk01: Yeah, it's not exactly 30 days. I think it's a 10-day protest period or something like that, 10 days after debrief. So that depends on when you get your debrief. I think that works, but I'm certainly not an expert on that part. But to answer your question, there is a debrief period and a protest period that has to transpire. If there's no protest, then you begin transition. So one could assume that it would be several months before transition could be started if there's no protest, and then all bets are off if there's a protest in regards to how long it might take to secure the contract and start transition. So, yeah, we would expect that to happen in Q1 and probably into Q2.
spk06: Assuming that the contract is awarded, when would you, either winning or losing in terms of your team, have business in terms of revenue?
spk01: One could assume that if it's awarded around the first of the year, that whoever wins would start generating revenue in probably the June timeframe, maybe May in regards to transition. And transition, I can't remember how, but I believe it's a 120-day transition, and then your full bore after that. So probably Q3, you'd really be seeing the revenue for the winning team. if there's no protest.
spk06: All right. Let me back away and come back after other questions are asked.
spk01: Thank you. If I could, Howard, let me just expand on ITDC a little bit. I did want our investors to know that our growth plans, our infrastructure, our budgets and expectations are all have all been developed irrespective of that award for the tanks. While that award will obviously be extremely transformative to us, if we are not awarded that, we do have our plan set up, assuming we have it. So in other words, all of our marketing initiatives, all of our other growth initiatives are all moving along. So we're hopeful that irrespective of that win, we're going to be seeing the growth that we saw in the prior to the pandemic. And we've been very intentional on that, and we're very optimistic about that overall. So hopefully we are selected. There's only two bidders, but I just want folks to know that we are well-positioned, if we don't, to continue with that growth strategy, and we're making every effort to make that happen as well.
spk06: So let me add on to this discussion. Assuming your team loses, is there not a significant number of pieces of the business that you will get over time, even if your team loses?
spk01: That's exactly right, Howard. Specifically, for example, the DF Law Facility, which will be operated by this contractor. So when the DF Law Facility is up and running, it will transition from construction over to operations. The ITDC contractor will fire it up and operate it. and it'll generate, when it's full capacity, several million gallons of waste a year, different types of waste. One of those is about a million gallons a year of effluent liquid that we would likely be the ones to treat. Now, again, we don't have a contract signed. However, it's low-level wastewater, and that's what we do. They're just off-site. So one could speculate we would be treating that waste, and there will be other wastes as well from ITDC that we anticipate to be treating and discuss those opportunities with the incumbent contractor now. So, yes, to answer your question, we expect a significant amount of work from that operation as well as the other operations that are ongoing for the incumbent tank contractor or whoever wins the new one, irrespective of whether we're awarded or not.
spk06: All right. Thank you. I'll get back in line. Thank you. All right. Best of luck. Thank you. Mark, Ben, Lou, thank you. Howard.
spk04: Once again, if there are any remaining questions or comments, please press star 1 on your phone at this time. Our next question is coming from Ross Taylor with ARS Investment Partners. Please go ahead.
spk05: Thank you. Gentlemen, Like to go over a number of kind of initiatives. Will you talk about obviously the tank project hampered is a huge opportunity for the company. But I'd like to come back to that in a moment. Before that, talk about the various others scale wise, you got your initiating in Europe, you've got the Navy, you've got these other projects, dollar wise. I don't ask you to tell me how many dollars you see in each, but kind of in order of magnitude, how important are these others relative to each other and relative to Hanford?
spk01: Yeah, Ross, I'm glad you asked that because I do want people to have a perspective of Hanford. While Hanford has a high visibility and a very quick impact, we do have a number of other initiatives that are following in line with that. For example, we've just submitted a bid in Italy that will be between $40 million and $50 million in your $40 million, $50 million euros over a seven-year period. We're waiting to hear on that, which should be announced in the next several months. And we'll provide good, solid backlog with good margins and really leverage our plants here in the U.S. as well as potentially, as we mentioned before, with Westinghouse in the U.K. And open some markets in Europe as well that will come directly from that. We have the enterprise I mentioned, which I'm just speculating, Ross, but that would probably be about a $100 million type of opportunity for us out of that billion, and a very sustainable workload. As EIS says, they expect the enterprise to be decommissioned from 2025 to 2029, so basically four or five years beginning in 25. So that process is going, and they are moving forward with that, and that's just going to be something that will be awarded in the near term. The other bid we put in was referred to as OSMS. That's also an ongoing procurement, so we can't provide any details. but we're providing a significant waste management solution to that, and that would add almost as much revenue as the tank closure would, and that one is, as I mentioned, ongoing in procurement right now, but should be awarded next summer or next Q3 timeframe. So we have about a half a dozen other jobs that we're putting together right now in the $10 million to $20 million range. Some we've already submitted. some we're working on right now with clients directly. We are making an inroads on the commercial decommissioning side as well, which is a big opening market for us, which is just beginning to start, so I can't speculate on what the values might look like in the next several quarters. But a lot of other opportunities are coming along. DOE is going to be kind of flat for a while, but DOD is picking up, and the Corps of Engineers also has four big jobs coming out of Buffalo District Those range from $10 million to $150 million. So a lot of other good jobs coming that are directly aligned with radiological waste management, which there's not a lot of players involved in that, so we should win our share of those. We're optimistic that we'll have a good backlog outside of Hanford.
spk05: Well, you walk me right to my next question, which is the competitive environment. When you're looking at things like the enterprise or you're looking – I mean, in Hanford, you're one of two. How many legitimate competitors are there for what you would be doing, for example, in the enterprise? How many other players are out there? And also, do you think the Navy, I mean, they've got a lot of ships sitting around at this stage. They've decommissioned a fair number of ships, as you mentioned before, including nuclear ships. How many ships do you think could or do they intend to be decommissioning on a run rate? You said 25 to 29 for the enterprise. I would doubt that would be the only nuclear ship they would be decommissioning in that period. So looking at the competitive environment and the capabilities, how competitive is this? I mean, are you competing against one or two other firms, or are you competing against 35 other firms that compete in your space?
spk01: Yeah, right now, the GAO report defined about a dozen shifts in the next five years, 48 months, I think it was. That was written a year ago, I think it was. So the clock's ticking on that. So there's a good backlog overall besides the enterprise. The Sam Rayburn's coming, I think it's a sub, and there's a couple other that they've mentioned are in the queue but just aren't procured yet. But to answer your question specifically, There's two other primary firms that have done the two other ships that have been procured that are in this space. However, firms that have done nuclear decommissioning in the past will be entering the market. We've met with several of them. There's a number of what they call ship breakers that are in this market who do non-radiological ships most of the time and scrap them. They've done a number of aircraft carriers in the past down in Texas, and the shipbreakers have done the ships for a dollar each and made good money off the scrap. So there's a lot of competitors out there. However, to answer your question specifically, there's a lot to a radiological ship in regards to how you do it, decontamination, nuclear waste, radiological considerations, training, and all kinds of other things. and facilities that might be required as well. So that limits the overall market significantly. So to answer your question, and it's total speculation, Ross, we don't know since we haven't been through, no one's been through this big procurement like this yet, but we would anticipate three to five teams putting bids together on this. You know, it will be, it's anticipated, Ross, to be a fixed price task. And so not everyone's going to have a stomach for a billion dollar fixed price decommissioning projects. So I'm sure that'll limit some folks as well. And everyone's going to want to, you know, dampen the risk overall.
spk05: Would you be limited to playing with only one team in this process or are your skill sets and your capabilities unique enough that you might find more than one team wanting you on it?
spk01: Yeah, typically it doesn't work to be on multiple teams, particularly if you have an innovation project. or a skilled workforce and a project description like we do in this situation where you're so intimately involved in the development of the bid and there's so much proprietary information relative to costing and technical approaches and that type of thing that it's very seldom, I won't say never, but very seldom we see someone be, quote, non-exclusive. And so I would not anticipate that to be the situation.
spk05: Okay. And so you said, basically, if you look at it, if you're figuring there could be 12 ships in the next five years, including enterprise, um, you're likely looking at the fact that there'll be more than enough business in this area for every team.
spk01: I would certainly anticipate that, you know, it, um, there's, there's a startup here that has to start becoming very obvious that we haven't seen a lot of yet. Uh, and I don't know if it's COVID issue or priority issue within DOD, But I think once it gets rolling, then you'll start to see them moving ships out for commercial decommissioning quickly. So, yes, to answer your question.
spk05: Could you talk a little bit more about how you see Europe coming together? It's obviously a new area of initiative for you guys. It seems to be a pretty interesting one. You've talked about Italy, but can you talk about the competitive environment? Who's doing what you guys do in Europe right now? How big and how powerful can that market be for you?
spk01: It's still unfolding at this point. I will say the UK specifically has really started to move radiological waste out of storage and with the desire to stabilize it and destroy it for disposal there's very few treatment plant and treatment opportunities treatment capabilities in Europe as a whole and if there is there's a few here and there that have that capability but they're booked so that's why it's open to up to us so much is to have our capabilities over here that's permitted and And we built an infrastructure, which has been a big investment for us to ship over here, process and ship back. There's a lot of permitting, a lot of logistic capabilities and partners. And we've proven that we can do it efficiently and safely and compliantly. So as reactors are coming offline, as cleanup initiatives start moving forward, that we're starting to see that grow. And it's taken us a while to get our capabilities out there so that potential clients know who we are and what our capabilities are. We've made those investments, which has supported our growth. And this year, I think we'll close the books probably around $2 million in international shipments, but that's going up significantly for next year, particularly if we win that other job. But even notwithstanding that win, if we are selected, we do expect that number to go up at least twice and maybe three times. So it's really starting to move based on where Europe is in their cleanup process, which is way, way behind the U.S., probably 20 years behind the U.S., maybe 25.
spk05: Interesting for them to be behind on an environmental issue.
spk01: Yeah, it is.
spk05: Listening to all of this talk, I'm really struck by the fact that you're talking about a lot of long-term programs, a lot of four-year, five-year type programs. Programs are going to evolve to be decades or longer. Quite honestly, obviously, Hanford has the potential to be almost a perpetuity type scenario. Are we really waiting for something like Hanford to fall before we see consolidation in the industry?
spk01: I don't have a good answer for that, Ross. Overall, you know, I think there's a few consolidation moves that are occurring here and there, but not much. And one reason is DOE is demonstrating, this is just my opinion, is that they're spreading some of the wealth around as far as their awards. If you look at the awards that have been made and the players that are involved, I think DOE sees it's important to And sure, there's a number of competitors. Each one of the big boys that are bidding on these big jobs have something different to offer DOE in regards to key people and infrastructure and innovations and cultures and those kinds of things. I think DOE wants to maintain that. Now, obviously, DOE doesn't have any control over the overall market in regards to M&A and that type of thing. But as long as it keeps spreading around here and there, I think that there'll be four or five big players, maybe six, that are well positioned to play in the market and maintain the bench that you need to have to win these big jobs. So I don't see it changing a lot at the big level. At the smaller level, like our level, there has been some consolidation movement in regards to waste, and I think that that will continue in the future with healthy companies.
spk05: Has anyone approached you guys?
spk01: Well, we can't talk about that specifically, but we're always for sale. We're a public company, and our focus has been squarely on getting our EBITDA back up into positive numbers after the COVID impacts. If you look at our 19 and 20 numbers, we grew by 50% revenue a year for two years, and we were looking really good for the remaining years, and then COVID. COVID had a big impact on us. We're just now getting our feedback under us. We're expecting 23 to look a lot better and to get back on that track, and then I think we'll be more attractive. Certainly, it's no secret that a $100 million market cap company has a difficult time, you know, with making the EBITDA you would have relative to being larger or being private or being a bolt-on to somebody else. So, But our focus clearly is just on getting our EBITDA back positive again.
spk05: Well, and it does seem, first, anyone who knows me knows I take no comments as confirmed yeses unless otherwise denied. But I think that what I'm hearing you say is that you guys, that really the core business, having been derailed, is, you know, the train is being put back on the tracks and really in the neck. year, we should have visibility to some really powerful top and bottom lines and free cash flow drivers that they might not be generating free cash flow by the end of 23, but we should have a really good view on the power they're going to produce as we move into 24 and beyond.
spk01: Would that be? I think it's a safe statement, Ross.
spk05: Okay. And I think you guys are, you know, it's been, it's been tough. You guys are doing a great job. And I think we're kind of sitting here with a market that is focused, kind of staring at its toes and not looking out very far. But it strikes me as that if you look out much on the horizon at all, you know, six, nine months, you're going to see a totally different, different company than you see today.
spk01: I hope so.
spk05: Yeah, definitely. Well, keep up the good work. Keep up the, you've done a great job opening up opportunities that weren't there before. And it looks like pretty much you should be able to do nicely given the setup. I see. Thank you.
spk01: Thank you.
spk05: Take care.
spk01: Thank you.
spk04: Thank you. Our next question is coming from Bill Naskowitz with Heartland Advisors. Please go ahead.
spk02: Yes. Good morning, Mark. Congratulations on profitability.
spk01: Thank you, Bill. It's good to hear from you.
spk02: Yeah, and also increased sales. I might have missed the backlog. Treatment backlog is $7.1 million, and service is how much?
spk01: $39 million.
spk02: And what was it in the second quarter?
spk01: $48 million. Is that $48 million right, Ben? Ben, do you want to look it up real quick?
spk03: Yeah, it was $48 million.
spk02: So, with all of this RFP action and bidding potential, how come our backlog is not growing on the service side?
spk01: Well, you know, we look at our last couple quarters, Bill, and in regards to services, we have submitted, I don't There's a few that we submitted that were not necessarily radiological waste, for example, just decommissioning jobs or demo jobs that were not squarely in our core competencies. Notwithstanding those, we haven't lost much. We've submitted a bunch of bids. I wanted to say we have almost $400 million in bids that we've submitted in the last year. Maybe it's closer to $500 million. Now, some of those are skewed by So you take out the big Hanford jobs, and I would say it's probably about, I'm estimating, $100 million in projects in our core competencies that have not been awarded. And that's what's been difficult. We haven't won or lost projects in Q3, with the exception of those MATOCs I mentioned. And so we're waiting on a lot of procurements to be awarded. That's why our backlog hasn't moved, and we haven't been able to have a press release. Go ahead.
spk02: Okay. Well, so possibly there could be tremendous upside here if, in fact, these contracts are ever let. Is that a fair statement?
spk01: Either let or one that we've already submitted or awarded, yes. So either let by RFP or awarded.
spk02: Okay.
spk01: Yes.
spk02: Well, fantastic. So Ben also alluded to cutting costs and your focus on profitability, EBITDA and all that good stuff. So what's the goal? What do you expect to cut for the coming year, this year?
spk01: Well, I don't know how much we should.
spk02: get into uh we're going to be careful because it's a competitive uh well let's let's put it this way let's let's put it this way so roughly for the quarter you did we did nine million in service and we did nine million in treatment roughly round numbers is that a level that we can continue to make money on at going forward no we have to we have to grow and our goal is to get to 10 million dollars in revenue in the waste treatment segment uh and a total of
spk01: of $60 million in revenue annually for services. So $100 million is our sweet spot. We make good money at $100 million. We did before. But to answer your question, you know, in reductions of SG&A reductions, we have a very well-defined plan. Let me just say it's to reduce several million dollars in SG&A costs through 2030. And that will put us in a position where even if we don't grow a bill to $100 million, that we'll see our EBITDA get quickly into the positive range.
spk02: Okay, and that's by the end of 2023. You're talking a couple million dollars in SG&A costs. Correct. Is that what I heard you say? Okay, good. Yes. All right. So do you think that – When do you expect service to get back up to roughly $15 million a quarter?
spk01: Well, our goal is to make sure we're there by the end of the year, which is $25 million a quarter by the end of 2023. But it's difficult to say because it gets back to the – By the end of 2022?
spk02: No, but we expect to be tracking –
spk01: At $25 million a quarter by the end of 2023. But again, to answer your question, it depends on the reward of your first question, and it's when are they going to start awarding these bids. Like I said, we've got all these bids outstanding that have already been submitted. Several have said that they plan on awarding for the end of the calendar year. Again, this is not the Hanford, it's the other ones. So if we're successful in just a few of those, we're there. With $39 million in backlog... which will pretty much run through the year, then we need $20 million in awards for revenue in 22, which if we just win our share and they make the announcements, we should be there. Okay.
spk02: All right. Well, congratulations on a movement in the right direction. And certainly all shareholders are anxious to see sustained profitability. It's been a long, long road.
spk01: It has. We appreciate your patience.
spk02: Okay, thank you.
spk04: Thank you. Sirs, there appear to be no further questions in queue, so I will hand back for any closing comments you wish to finish with.
spk01: All right, thank you. I'd like to thank everyone for participating in our third quarter conference call. We remain extremely confident in the outlook of our business. We appreciate the continued support of our shareholders, and we look forward to further updates and developments as they unfold through the next quarter. So thank you.
spk04: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.
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