Perma-Fix Environmental Services, Inc.

Good day, and welcome to the Permafix third quarter 2023 earnings 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 from Investor Relations, David Waldman. The floor is yours.

Thank you, and good morning, everyone. Welcome to Permafix Environmental Services third 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 Macarado, Chief Financial Officer. The company issued a press release this morning containing third 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 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 reference to non-GAAP measures. Pharmasex 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. We achieved another solid quarter as evidenced by an 18.4% increase in revenue to $21.9 million versus $18.5 million for the same period last year. In addition to our revenue growth, gross profit increased by 48.2% and gross margin increased from 16.6 to 20.8%. Importantly, we achieved net income of $341,000 and EBITDA of approximately $1.2 million for the third quarter of 2023. The growth in revenue reflects the commencement of several new projects granted earlier this year that support the backlog in both segments and provide growth opportunities into 2024. We also improved productivity on certain projects that had previously been delayed from the linear effects of COVID-19. Our services project continued to meet or exceed expected performance goals and margins due to strong leadership and good client relations. While we achieved solid year-over-year growth, we would have generated even stronger results had it not been for temporary customer delays in our treatment and services segments. Unfortunately, this is not unusual in our business and contributed to a slight decline in our sequential revenue versus the second quarter of 2023. However, these projects have since commenced and we believe will contribute to improved results for the fourth quarter of 2023 and heading into 2024. These and other awards are expected to generate significant revenue that would offset projects which will wind down in the fourth quarter. Within the services segment, we realize several new awards, including a $40 million five-year contract with our Joint Venture EnviroFix Solutions LLC by the Buffalo District of the Army Corps of Engineers for environmental remediation at the Niagara Falls Storage Site. The awards leverage our core competencies, including characterization, remediation, and disposition of hazardous material and waste management. Looking ahead, we're benefiting from increased bidding opportunities within our services segment overall, including both the government and the commercial sectors. These opportunities have included teaming on large DOE projects and procurements in addition to several U.S. Army Corps of Engineers cleanup initiatives, U.S. Navy decommissioning projects, and several international projects with sustainable revenue potential. These bids will further strengthen our backlog with awards anticipated throughout 2024. Within our treatment segment, we've experienced a steady improvement in waste receipts during the third quarter, supporting our visibility and backlog for the next year. This included increased waste shipments from within the commercial sector, along with steady sales from our industrial waste programs. We expect to see ongoing improvement in waste receipts and an increase in project work from existing contracts, new contracts, and bids submitted in both segments that are still waiting for award. We have continued to implement our growth strategy throughout the third quarter in 2023, including several new opportunities on our target list that have the potential to significantly enhance our revenues and our long-term backlog for the next year within both segments. In addition, we continue to await some very large potential strategic awards by the DOE. Some of these projects are quite considerable in size, and if selected by DOE, would represent significant increases in sustainable revenue to align with our core competencies. We're hopeful that one or more of these projects will be awarded this quarter. If we are successful, we'll participate as a team member on these large DEWI procurements, which completely align with our strengths and innovations in radiological protection and waste management. Despite delays in award announcements, these growth initiatives remain on track, including the $3 billion Operations and Site Mission Support Contract, referred to as OSMS, as well as the Joint Research Council, or JRSC, project in Italy. We anticipate both of these projects will be announced any day. In addition, several other smaller projects anticipate to be announced in the fourth quarter of 2023. The JRSC project will support our expansion program in Europe, including existing IDIQ contracts held by Permafix in the U.K., and the application of our treatment technologies in Germany, Croatia, and other markets in Europe. These opportunities will generate sustained receipts beginning in the next several quarters, providing a combined annual revenue that is estimated in the $10 million to $20 million range, which we expect will begin to be realized in late 2024. At the same time, the Testbed Initiative, or TBI, also known as the Low-Level Waste Offsite Disposition Project, continues to progress in support of the Hanford Tank Mission, although at a slower pace than anticipated over the last few months. The TBI initiative, which is based on grouting technology, will continue to be a focus of Permafix as a means of saving tens of billions of dollars in taxpayer dollars, as well as eliminating several carbon emissions and reducing schedules for Hanford cleanup actions. Grouting has been recognized as a preferred supplement to the current DOE strategy for vitrification through the direct feed, low activity waste treatment plant, what we refer to as the DF law, for the 59 million gallons of tank waste currently stored at Hanford. The TBI program continues to move forward following the submittal of the RD&D permit from the DOE to the state of Washington regulators, which was done in the second quarter. We're currently awaiting the approval of the RD&D permit from the Washington Department of Ecology, which is the regulator, which will allow DOE to begin to extract 2,000 gallons of waste from the tanks for the Phase II grouting demonstration. Given the ongoing delay by the state in review of the permit application, we expect an official reset of the schedule, which will include public comment on the permit, followed by approval, extraction of the waste, and treatment of 2,000 gallons, which is expected to be in the second half of 2024 now. Permafix maintains these grouting capabilities today at our Permafix facility in Northwest or in Richmond, Washington, which is permitted and outfitted to safely and compliantly grout up to 30,000 gallons a month with the ability to expand to well over a million gallons annually while dramatically reducing cost, risk, and schedule compared to vitrication alone. It's important to note that our Permafix Northwest facility offers the only local or regional option for grouting tank waste versus other options to ship untreated waste out of state for grouting and disposal, which is defined as a higher risk in the NEPA environmental assessment, as well as the recent WEIR documents. Another critical component of the Permafix growth strategy hinges on the startup of the DFL facility I mentioned in Hanford, which will provide vitrification services for about 40% of the tank waste volume on site. In January of 23, DOE signed a record decision to treat the effluent waste streams from the DFLAW facility at our local Permafix Northwest facility for at least the first 10 years of the DFLAW operations. We remain optimistic about reports coming from DFLAW in regards to the startup of the melters and supporting systems, which continues to progress, while several steps remain before startup DOE has not announced further delays in commissioning, which is currently scheduled for the late 2024 timeframe. The waste that would be produced at this facility is estimated by DOE to be about 9,000 cubic meters annually. We expect that would begin to be received at the Permafix facility upon hot startup of the vitrification plant itself. As I've mentioned in the past, the volume of this waste would more than double the production of all our plants combined on an annual basis. In regards to our treatment facilities, our Florida and Washington plants have begun to realize the budgeted performance goal we haven't seen since pre-COVID times, as labor and pricing impacts are beginning to be in the rearview mirror at this point in time. At our DSSI facility in eastern Tennessee, we have implemented several expansion and upgrade activities that have been underway for the past few months, which we expect will result in a broader offering of our treatment capabilities beginning in the second half of 24. Importantly, we continue to invest in our capabilities and our facilities. We've built a solid foundation of growth and highly scalable infrastructure. As we continue to increase revenues, we expect to benefit from the predictable cash flows of our services segment with high incremental margins within our treatment segment. So to wrap up, we remain optimistic that the remainder of 23 and 24 will realize continued growth in both segments as we expand our market base and develop strategic teams to optimize wind probabilities for ongoing procurements. We're heavily focused on increasing productivity and reducing costs to maximize our margins along the way. Overall, we remain confident in our ability to maintain the growth and stability we experienced prior to the pandemic, and we're highly encouraged by the near-term market outlook for the business based on our growing backlog, our sales pipeline, and number of important contracts expected to be awarded over the next few quarters. So on that note, I'll turn the call over to Ben. who will discuss the financial results in more detail. Ben?