Perma-Fix Environmental Services, Inc.

Greetings. Welcome to the Permafix Fiscal First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, David Waldman, Investor Relations. You may begin.

Thank you, Holly. Good morning, everyone, and welcome to Permafix Environmental Services' first quarter 2023 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 first quarter 2023 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 Security 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 or forward-looking statements that are subject to known and unknown risk, 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. 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, and good morning. First, let me take a moment to address the issues associated with the postponement of this earnings call yesterday. As you know, All relevant information related to the company's filing period must be considered up to the filing of the 10-Q or 10-K. That said, we received certain new information late on Monday evening that required us to review for potential financial impacts. We were able to complete the review on Tuesday and are happy to be able to report our earnings today. We apologize for any inconvenience or impacts. associated with this delay, but deemed the delay necessary to ensure the accuracy of our financial statements. While 2022 was a challenging year due to the lingering effects of COVID-19 pandemic, we believe we're back on the growth trajectory that we were working so hard for. We are finally starting to realize improvements in our performance and the momentum we had prior to the pandemic, as evidenced by our results this quarter. I'm pleased to report we achieved a 26.3% increase in revenue and an 83.9% increase in gross profit for the first quarter of 2023 compared to the same period last year. Importantly, we also achieved sequential growth of 20% compared to the fourth quarter of 2022, even though the first quarter tends to be traditionally a seasonally weak period for us. We saw steady improvement throughout the quarter, including a strong march, which has continued into the second quarter. It's also worth noting that revenue increased both within our treatment and our services segment. The growth in revenue reflects the initiation of several new projects in the first quarter of 23 that support the backlog in both segments and provide growth opportunities in the 24. As we've recently announced, we were awarded eight new contracts over the past few months, totaling approximately $15 million of revenue that's expected to be recognized in 23 with additional optional option phases that have a potential value of over $14 million moving forward. These projects include the deployment of our soil sorter technology for providing a remediation solution to the abandoned uranium mine program through the EPA, as well as the remediation of dredging sediments for the Department of Defense in San Diego. Other new contracts have been initiated in support of the Los Alamos National Lab and providing innovative technology for on-site decontamination support for the decommissioning of a nuclear power plant. In addition to this new backlog, we've realized significant increases in bidding activities, with recent opportunities requiring our core competencies in support of the DOE remediation programs, as well as the Army Corps of Engineers cleanup initiatives, U.S. Navy decommissioning projects, and several international projects with sustainable revenue potential. Within our treatment segment, we benefited from a steady improvement in waste receipts. This was a result of increased waste shipments from DOE and expanding our current waste treatment offering to the commercial utility sector, along with the oil and gas markets and the growth in our industrial waste programs as well. We recently received a new IDIQ contract with a regional power utility to provide waste treatment services over the next five years. Once this contract is signed, this will open the door for new opportunities within utility markets that we've not seen in the past. We expect to see continued improvement in waste receipts and an increase in project work through existing contracts, recently won contracts, and bids submitted in both segments that are waiting for awards now. We expect this positive trend to continue over the next several quarters as lingering effects of the COVID-19 pandemic continue to subside. At the same time, we're rapidly advancing several initiatives that we believe have the potential to significantly enhance our revenues and our long-term backlog. Towards this end, we have realized two important steps toward the Department of Energy, or with the Department of Energy, in the pursuit of the Hanford tank remediation mission. These include the amendment of the Record of Decision for the Direct Feed Low Activity Waste Facility, DF law, and the approval of the Waste Incidental to Reprocessing or WEIR report, which represent opportunities to provide large-scale waste treatment services at Hanford. These announcements underscore the importance of our role in DOE's strategy for the treatment of Hanford tank waste through the vitrification program that is currently in the final construction phases and startup. This waste, estimated by DOE to be over 8,000 cubic meters annually, will be more than double our current annual production rate at our plants combined. And given the fixed cost nature of our business, we have a significant positive impact from this on profitability over the next 10 years. The outlook of the testbed initiative, what we refer to as TBI, which also is known as the Low-Level Waste Offsite Disposal Project, in support of the DOE Hanford Tank Disposition Program, continues to be recognized by DOE as a potential supplement to the vitrification mission to provide a solution for the 59 million gallons of tank waste stored at the site. The TVI program, which is based on grouting technology, continues to progress and we expect to receive the next 2,000 gallons of tank waste within the next few quarters. Permafix maintains these capabilities today at our Permafix Northwest facility, which is permitted and outfitted to safely and compliantly grout up to 30,000 gallons per month with the ability to expand to over a million gallons a year. while dramatically reducing costs compared to vitrification. We're also pursuing several additional international waste opportunities that we believe will provide sustainable revenue in the latter half of this year in both the services and treatment segments. We remain optimistic about the announcement, which could be any day now, of a key procurement in Italy that would support our expansion program throughout Europe. This announcement, in addition to the near-term opportunities we have in Slovenia, Croatia, Mexico, Canada, and the UK, and Germany will provide an increased market potential that will leverage our technologies and our core competencies. In addition, we're pursuing several large waste processing opportunities at large DOE sites that could include waste inventories that have been backed up due to COVID, as well as the lack of available technologies to provide high-efficiency processing. These wastes are expected to provide sustained receipts through the next three or four quarters, providing an opportunity for from $10 to $20 million potential annual revenue. Turning back to our financials, for a moment, EBITDA in Q1 of 23 improved to an income of $171,000 compared to a loss of $1.4 million in Q1 of 2022. Aside from our expectations for revenue growth having a positive impact on our EBITDA going forward, we continue to focus on a reduction in our SG&A expenses and billable and direct operating costs. As a result, we anticipate a meaningful improvement in profitability and cash flow going forward. So to wrap up, it's clear to us there is a solid federal budget and a significant backlog of demand that we expect to capitalize on going forward. As a result, we remain confident the balance of 2023 will see a significant improvement over 2022, And as I mentioned earlier, we're seeing continued momentum heading into the second quarter. We continue to invest in our capabilities and our facilities and have a highly scalable infrastructure and believe that we're in a great position to take advantage of this pent-up demand. As we continue to increase revenues, we expect to benefit from the predictable cash flows of our services segment and high incremental margins within our treatment segment. As a result, we believe we're well-positioned to exceed the performance and profitability we had attained prior to the pandemic through increased bidding activities, waste treatment capability expansion, and improved federal budgets. On that note, I'll now turn the call over to Ben, who will discuss the financial results in more detail. Ben?