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spk00: Greetings. Welcome to the Permafix Q4 and fiscal 2023 year-end 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 Wolfman, Investor Relations. You may begin.
spk01: Thank you, and good morning, everyone. Welcome to Permafix Environmental Services' fourth quarter and year-end 2023 conference call. On the call with us this morning are Mark Duff, President and CEO, Dr. Lou Senafani, Executive Vice President of Strategic Initiatives, and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing fourth quarter and 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 or 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. A reconciliation of 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.
spk06: All right. Thanks, David, and good morning. I'm pleased to report we achieved a 35.6% increase in revenue and 112.7% increase in gross profit for the fourth quarter. We also generated positive EBITDA and a positive net income for both the fourth quarter and the full year. We achieved these results despite significant investments in both our internal bidding organization as well as in research and development. As a result of these investments, I truly believe 2024 is shaping up to be a transformative year for the company, and in 2025, we're poised for a major breakout. As I'm sure most of our investors are aware, we are preparing for several large initiatives that we expect will begin to materialize in the second half of this year and set the stage for unprecedented growth. Let me begin by addressing some of our recent wins, and then we'll provide updates on some of the upcoming opportunities and specifically why we're so excited about the long-term outlook for the business. Within the services segment, we realized several new awards from the Buffalo Corps of Engineers, the U.S. Geological Survey, USGS, the U.S. Navy, and several commercial clients. We've also developed teaming relationships for several large bid procurements. In addition, our joint venture received full award of the Joint Research Council project to the European Union and the ISPRA Italy facility, which represents a total of up to 50 million euros over the next seven years. Overall, we finished the year with several strategic wins and accomplishments that we believe will support our long-term growth and help us fully diversify our revenue stream. Within our treatment segment, we witnessed an increase in volume with steady improvement in waste receipts early in the quarter This included increased waste shipments within the commercial sector, along with steady sales from our industrial waste programs. While we do not typically provide and do not plan to provide quarterly guidance, I believe it is important to share a more detailed discussion of what we expect in 2024. We consider this year to be a transitional year based on the business environment and investments we have made over the past several years. This is what we believe will be an exciting 2025. Beginning in the fourth quarter of 23, we started facing certain headwinds that we believe were temporary but will have an impact on the first half of this year. First, as previously disclosed, during the fourth quarter of 23, we completed our two largest service projects at the Princeton Plasma Physics Lab and the McKee Ship Decommissioning Project for the Navy. Both these projects were very successful with strong safety records, and we achieved our anticipated margins and outstanding client ratings throughout the projects. That said, with these two projects now complete, we have not yet secured all the replacement revenue in the services segments due to the timing of the awards and opportunities we're waiting on. The gap in work, which we anticipate will last about four months, has resulted in challenges and weaknesses that will be reflected in our results for the first half of 2024. In addition, due to the inability of Congress to pass a federal budget, the government has been operating under a continued resolution, which has contributed to delays in procurement, project starts, and waste shipment, since government clients are holding back budgets due to the uncertainties and the potential of a shutdown the last five months. January is also a tough month with weather impacts, closing two of our facilities for a week and delays in project production in the field as well, that said. February and March have shown some positive trends in both segments. As a result, the next two quarters will be weaker than we've anticipated due to the timing of contracts, as well as delays relating to the passage of the 2024 federal budget. However, as things have normalized, we remain confident in getting back to our, in surpassing our business-based goal of $25 million in revenues per quarter. In addition, we anticipate that the 2024 budget approved last week will provide increased opportunity for Permafix as the enacted budget reflects about a 9% increase over 2023 at the Department of Energy alone. As I mentioned earlier, we remain particularly optimistic about the second half of the year and could not be more excited about the outlook for the business in 2025 given the magnitude of the projects we're currently working towards. As we've discussed previously, We are rapidly advancing several initiatives that we believe will significantly enhance our revenues and long-term backlog, beginning in the second half of 24 and potentially much more in 25. I'd like to briefly discuss each of these initiatives to provide our investors an overview of the vision for next year. First, we're benefiting from an increased bidding opportunities within our services segment, including both the government and commercial sectors. We're positioned for large ongoing procurements within the DOE and the Navy, as well as other midsize procurement initiatives for both DOE, DOD, and EPA. These large procurement opportunities include proposals to be submitted over the next two quarters. We've been able to secure strong teaming relationships for potential awards anticipated throughout 2025 that would potentially represent substantial increases in sustainable revenue over the next five to ten years. Second, we're extremely well positioned to provide waste treatment services to support the DOE's Hanford closure strategy, including the treatment of effluent from the DF Law Facility once it commences vitrification operations, which should provide vitrification services to about 40% of the tank farm at Hanford. In January of 23, DOE signed a record of decision, a ROD, to treat the effluent waste streams from the DF Law Facilities to include our local Permafix Northwest facility, for at least the first 10 years of its operations. We remain optimistic about reports coming from DFLAW in regard to startup of these melters at the vitrification plants and the supporting systems, which continues to progress towards hot commissioning in 2025. As stated in several of the past quarterly calls, we're well-positioned to treat all of the effluent waste from those operations as defined in the 2023 Record of Decision by DOE, which estimates specifically to generate up to about 8,000 cubic yards of waste annually upon the hot startup of the vitrification plant. As I've mentioned in the past, the volume of this waste would more than double the production of all of our plants combined on an annual basis. Third, the DOE at Hanford has formally recognized the importance of grouting relative to the overall closure strategy as a preferred supplement to the current DOE strategy for vitrification of the 57 million gallons of tank waste stored at Hanford. The Hanford Systems Rev. 10 document, published in January, and developed over the past three years by DOE, defines a new preferred scenario for the Hanford site closure that specifically includes vitrification at DF Law for the east side of the tank farms and the west side to be treated through commercial grounding technology. The Systems Rev. 10 document is currently being implemented to include two new tank removal systems to be installed and operated in late 25 and early 26. One of these removal systems will be built, installed, and operated to support the DFLAW facility, while the other one will be dedicated to removal of tank waste for shipment to commercial grounding facilities or for disposal offsite. Both the specs for these removal systems include performance parameters of 3.5 million gallons per year for throughput for pulling waste out of those tanks. Permafix maintains and operates our growing facilities today at the Permafix Northwest facility, which is permitted and outfitted to safely and compliantly grow out up to 30,000 gallons per month, with the ability to expand that capacity to well over a million gallons annually. while dramatically reducing cost, risk, and schedule compared to the vitrification alone. It's important to note that our facility at PermFix Northwest offers the only local or regional option for grounding tank waste near the Hanford site and uses rail to ship treated waste for off-site disposal. This is a much safer option than shipping untreated tank waste by truck out of state for grounding and disposal, which is specifically designed as a higher risk in the NEPA document, including the environmental assessment, as well as the WEIRD document developed by DOE. So, when looking at both treatment of effluent from DFLAW and grouting, DOE is making significant progress at Hanford and the other cleanup locations, and Perfect is strategically well-positioned with technologies to provide increased value towards those objectives. Fourth, we're expanding our waste treatment offering within the commercial and international markets, including Europe, Mexico, and Canada. These opportunities will generate sustained Proceeds beginning in 2025, providing combined revenues estimated over $10 million annually, which we expect to begin to be realized in late 2024. The award of the JRC program in Italy, coupled with our expanding international clients, represents continued growth opportunity based on the market for advanced, permitted, and efficient waste treatment to provide stable waste forms that minimize long-term storage costs. The JRC project supports our expansion program in Europe, including existing IDIQ contracts held by Permafix in the UK and the application of our treatment technologies in other European markets. Fifth, we continue to invest in our facilities and capabilities. Specifically, we're implementing several upgrade activities at our DSSI facility in eastern Tennessee. It will include a multimillion-dollar expansion project to allow a broader treatment of reactive waste for our clients, including advanced safety and security systems to address the growing inventory at several client locations. Additionally, we're investing in soil sorting technology to include fabrication of a second soil sorter and potentially a third to be deployed by the end of second quarter 24. Sixth and finally, we've made important advances in new technology to treat PFAS contamination. While we look forward to fully unveiling our technology and strategy in the coming months, I want to give you a glimpse into what we've been working on. For those of you unfamiliar with PFAS, which is an acronym, P-A-F-A-S, which stands for polyfluoroalkyl substances, which are a synthetic chemical compound, the market for the treatment and disposal of PFAS is exploding due to the hazards associated with these, what they call, forever chemicals. Thousands of sites across the world have large inventories of chemicals, not to mention all the sites within the PFAS contamination that require remediation as well. Estimates for this market vary widely. However, the opportunity to provide services and treat PFAS contaminated waste for government as well as municipal and commercial clients is estimated to be or exceed over $10 billion over the next 10 years, according to the Environmental Business Journal. In fact, PFAS destruction represents one of the largest potential markets for environmental cleanup over the past several decades. Our new technology includes five patents that have been filed to support the complete destruction of PFAS with no off-gas or no toxic effluent in its emissions. Permafix co-founder, Dr. Lucina Fani, and his team of engineers and chemists have spent countless hours developing and validating this new technology. While we know that there are many firms in pursuit of PFAS remediation, we're confident that our complete destruction technology, coupled with our existing network of generators and clients, will support rapid expansion of systems to be deployed at each of our plant locations in 2025. We've already received PFAS from customers and recently completed bench-scale testing of our new technology, supported by independent verification, which demonstrated non-detectable presence of contaminants after treatment. Our engineers recently completed design of a proof of concept system that will be tested later this month. It was actually being tested as we speak, followed by the fabrication phase for our prototype systems currently scheduled for testing and operation in the second quarter of 2024. We'll be spending the coming months conducting system optimization studies to maximize destruction effectiveness while reducing operational costs before we launch our service into the market, at which point we expect to begin generating revenue later this year. Given the low cost as well as the technological and environmental advantages of our new process, we're already witnessing significant interest from major potential customers as well as regulatory agencies. Our estimate for revenues in 24 is approximately about $2 million at the end of the year. However, once in production and based on discussions with our customers, we're hopeful we'll achieve multiples of this revenue in 2025 as we have the ability to ramp up production rapidly with high margin potential. And one final note regarding PFAS, to put the market opportunity in perspective, I'd like to quote Time Magazine, which headlined, and I quote, 3M's historic $10 billion forever chemical payout, is just the tip of the PFAS iceberg. So the market's very strong and very well documented. So to wrap up, the investments we're undertaking in the first six months of 2024 should position Permafix for solid growth in the second half of the year and should position us very well in 2025. At the same time, we're making significant investments, as illustrated by the fact R&D is up 67% in 2023 over last year across all of Permatex. We believe these and other investments will allow us to reap the rewards of years to come. Meanwhile, we remain focused on increasing backlog and productivity while reducing operating costs to maximize our margins in 2024. I'm very proud of our team that we've assembled, which now includes top-notch business development and sales team members, as well as experts from across the industry with expertise in chemistry, waste engineering, health physics, and field operation. As a side note, and from a macro perspective, 2024 is bringing greater attention to our industry as we're seeing increases in nuclear power throughout the new plant, as well as SMR or small modular reactors, which with a renewed emphasis on long-term solutions for radioactive waste management. So on the first half of 2024, Looks to be below our performance objectives with a few temporary headwinds. We believe that we're well positioned for a second half of growth of the year with very high hopes for 2025. I can't emphasize this point enough, and we're more encouraged than ever by the long-term outlook for the business with a number of potentially company-changing opportunities in the near-term horizon. Okay, so on that note, I'll now turn over the call to Ben Naccarato, who will discuss our financial results in more detail. Ben?
spk09: Thank you, Mark. I'll start with revenue. Our total revenue from continuing operations for the fourth quarter was $22.7 million, compared to last year's fourth quarter of $16.8 million, an increase of $6 million, or 35.6%. The revenue improvement... which was supported by both operating segments, came from our treatment segment, increasing revenue by $1.6 million, or 19%. And that came from increased volume and was offset by slightly lower average pricing. Our services segment increased by $4.3 million, or 53%. And this came from increased scope from our one of our larger projects, and the startup of several smaller projects. For the year ended 2023, our revenue finished at $89.7 million compared to $70.6 million last year. As with the fourth quarter, both our operating segments had substantial increases, with the treatment segment increasing by $10.1 million, or 30%, and the services segment increasing by $9 million, or 24%. Again, consistent with the fourth quarter, these improvements were volume-related in the treatment segment and the result of increased project work in the services segment. Turning to our gross profit for the quarter, our gross profit was $4.3 million compared to $2 million in 2022. The treatment segment gross profit improved by $564,000 from improved revenue and lower fixed facility expenses This was offset by higher variable costs related to revenue mix. In the service segment, gross profit improved by $1.7 million from higher revenue and improved margin on our project work. And this was slightly offset by higher indirect payroll related expenses. For the year ended 2023, our gross profit was $16.4 million compared to $9.6 million in 2022. Both our operating segments gross profit improved with treatment segment improving by $1.6 million, and that's from higher revenue offset by higher variable costs and increased facility expenses. The service segment gross profit increased by $5.1 million from higher revenue and improved margin on its projects offset by higher indirect payroll related expenses. SG&A for the fourth quarter was 4 million compared to 3.6 million in the fourth quarter last year, while our SG&A for the full year finished at 15 million compared to 14.7 million last year. SG&A in the quarter were higher primarily as a result of higher employee incentive expenses booked in the quarter. Similar to the quarter, SG&A expenses were up for the year from employee incentive expenses, and other payroll-related expenses offset by lower audit, legal, and other consulting expenses. Our net income for the quarter was $81,000 compared to last year's net loss of $1.7 million. For the year ended December 31, net income was $485,000 compared to a net loss of $3.8 million in the prior year. Our basic and diluted net income per share for the quarter was one cent compared to a loss per share of 13 cents in the prior year. Income per share for the year ended December 31, 2023 was four cents a share compared to a loss per share of 29 cents in the prior year. Adjusted EBITDA for continuing operations for the quarter as defined in our this morning's press release was $434,000 compared to a loss of $1 million last year. For the year ended 2023, adjusted EBITDA was $3.3 million compared to a loss of $3.3 million in 2022. Turning to the balance sheet, our cash on the balance sheet was $7.5 million compared to $1.9 million at the end of 2022, reflecting improved cash from operations and the reload of our term loan by $2.5 million in July of 23. Our unbilled receivables were up $2.4 million, reflecting increased year-over-year revenue, December revenue, primarily in the services segment. Our current liabilities were up $3.2 million from the timing of payments and increased expenditures, particularly in the services segment. At December 31, our waste treatment backlog was $8.7 million plus an additional $2 million of unearned revenue for a total of $10.7 million, which is up from $9.2 million at the end of 22 and $9.6 million at September. Total debt at the year end was $2.9 million, excluding our debt issuance costs, which is mostly owed to PNC. Next, I'll discuss cash flow activity for 23. Our cash provided by continuing operations was $6.7 billion. Our cash used in our discontinued operation was $597,000. Cash used for investing of continuing operations was $1.7 million, all related to cap spending. Cash provided for financing was $1.7 million, which represents proceeds from the reload of our term loan of $2.5 million and proceeds from various option warrant exercises of approximately $300,000, offset by our monthly payments to the term and capital loans of $709,000 and payments related to finance, lease, liabilities, and other debt of approximately $364,000. With that, operator, I'll turn the call over to questions.
spk00: Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Your first question for today is from Howard Browse with Wellington Shields.
spk04: Thank you. First of all, Mark and Lou, congratulations on the beginning of a great turnaround. There was an article in Barron's this past Saturday that indicated that the markets for PFAS was about $100 billion, not $10 billion. You missed a comma there, Mark.
spk07: Okay. I thought we said 100.
spk04: Okay. $10 billion. Let me start with the first question about opportunities. We know about OSMS. Are there other very large opportunities like OSMS in the foreseeable future? If you could be a little granular, we'd appreciate that. That's my first question.
spk06: Sure, Ben, or Howard. I appreciate your question. Yeah, we're always sensitive to discussing ongoing procurement, but, you know, are participating in the rebid of the West Valley project in New York, which has been submitted. So we're on a team for that. That's about a $3 billion project over 10 years. We're a teaming partner, so we're not primed on that. That's anticipated to be awarded in the Q4, Q1 time frame. And also, we have a very good team that we intend to participate on the Enterprise decommissioning project. Enterprise is the aircraft carrier that the Navy will be decommissioning. And we expect that to be awarded in the proposal. We expect the proposal to go in later this summer and award in May of 25. So those are just a couple of the big bids that we're playing with. three major roles in. We are still waiting on OSMS. They have gone out for what they call final proposal revisions, where they ask bidders to answer some questions and provide some feedback. So we are in that process, and it's very difficult to project when they plan to award that, but word on the street and speculation is they expect to to award that a little bit later this summer with transition to be completed at the end of this government fiscal year, which is end of September. So still no word on the award for that yet. There's a couple other we're negotiating teams on right now, but that's generally where we are on the big bid.
spk04: All right, thank you. Let me focus on the DOE document that you referred to earlier. Can you confirm that they've adopted scenario number two?
spk06: Yeah, you're referring to the Hanford Systems Document, Rev. 10, they call it. Yeah, which is a 400-page document that includes two primary scenarios for their closure strategy. And that's a pretty dramatic change for DOE over the last three years. They put that every three years. The first scenario is specifically what they've been moving towards for the last 10 or 15 years, which is vitrification of all of the tanks in some form. In other words, they'd have to get DFLOL running, and then they were going to build a new or second DFLOL type of plant, treat the other half. What they've done is they've abandoned that capital project in the scenario two, where basically they're saying, half the tanks will go to the afloat plant and the other half of all the tanks will go towards grouting, specifically commercial grouting. In other words, DOE does not at this point intend to build a grouting plant, but they plan to outsource it. There's not an official document that says they're implementing scenario two, but DOE has publicly stated that they are adopting scenario two. In fact, they are procuring the waste treatment removal systems that I mentioned as the first step. So those are to be awarded here in the next couple quarters and are to be implemented for pulling waste out of the tanks, as I mentioned, in the late 25, 26 time frame. And those design bases are about 7 million gallons a year to be pulled out of tanks. with both of those combined, half going to the airflow and the other half going to the grounding program.
spk04: That said, if you subtract a high-level waste, which is six, eight million gallons, you're left with 48 million gallons. And in the document you're referring to, the comments strongly made is they would split it, as you indicated, which ultimately means 24 million gallons of vitrification and 24 million gallons to be grouted. That's one, my understanding, and two, therefore the rod that was talked about in January of last year talked about 10 years when effectively at a million gallons a year of vitrification, you're talking about 20, 25 years or generational long. Is that a fair comment?
spk06: Yeah, Howard, there's a couple things missing from that comment. Yes, you're correct, about 25 million gallons in total would be a good estimate. But keep in mind that when you pull a gallon of waste out of a tank, you're typically adding two to three gallons to that waste to slurry it out, to get it out, because it's largely dry or, in the best case, peanut butter kind of. So you've got to add water to it so you expand those gallons significantly as you're pulling it out. But generally, you're right. The duration is quite long. I mentioned the 7 million gallons a year that the capacity they're pulling out, they don't have the capacity to treat that much. So I'm assuming that 7 million gallons a year as design capacity would not be really attainable. It would be something less than that when you consider downtime and changing out the resident columns and those kinds of things that have to happen in an outage quarterly. So it'll be a little bit less than that generated, or quite a bit, actually. But it's a significant amount of waste over a significant amount of time that will span multiple careers of people.
spk04: So last comment to put a bow on all of this. They specifically in this document talk about half-grouted and half-vitrified. And the half to be grouted is to be shipped to Permafix, all of it. And then once it's grouted, shipped to, I think it's Andrews, Texas, WCS. That's my understanding after reading the document. And it's a long document.
spk06: Yeah, it is. I think it may be a bold prediction. We have a contract, obviously, to support the rod for DF law. And the grounding of the tank farms, which is obviously a second component of the overall strategy, hasn't been defined specifically for us. They're trying to... find other folks to compete with us, which is obviously in the best interest of the taxpayer. Again, as I've mentioned, we've talked many times, we are the only regional opportunity to do that, and we have agreements with the local unions to use their services as well. We're excited about that. And the alternative, as we've mentioned before, is to ship the untreated waste via tank or truck to off-site facilities that are not in the region. It does take a long time to get a permit from the state and 10 years plus is estimated. So we feel like we're in a really good position to provide the lowest risk approach as well as the most efficient approach. And we're looking at advanced technologies for the grouting process and designing the most efficient means of grouting that large volume as we expand our plant and as the volume increases as delivered to our plant over the years. So we feel like we're in a great position. That seems kind of like a no-brainer, but Dewey's got to meet their objectives as well. But we're pretty confident we'll get the majority of that waste as it starts to be generated from the tank farms.
spk04: Well, one of the issues is shipping through Umatilla Tribe. sacred lands, and they said no. And my understanding, based on the treaty that they have with the United States government, that supersedes the ICC and the ability to ship it over their territory. So shipping it to Clive, Utah, I don't see that, based on the evidence and the comments, I don't see that happening. What about Andrews, Texas?
spk06: Yeah, the Umatilla tribes have been very vocal about shipping untreated tank waste. through the reservation, which is required largely to ship a tanker off of the reservation and goes out through Oregon. And they continue to, the tribe continues to be vocal about that. That's a political issue that DOE will have to address, but it certainly makes it very difficult and difficult for DOE to use that as an option. uh which uh you know we've gotten good support and letters have been written supporting uh on our facility to do the grouting ship on solid waste forms by rail which have been supported it's much more stable and safer way and if you do the accident scenarios for that number of trucks the statistics are a lot different than by rail so we're pretty confident that the comment you just made will assist in uh
spk07: in recognizing the value that Permafix is providing to DOE with our local facility.
spk04: Last question, and I'll rejoin the queue. When you talked about 2025 and PFAS, what kind of multiple, if you're doing a couple of million dollars this year, how do you foresee this developing in 2025, and do you have the capacity to do it?
spk06: Well, that's a really tough question, Howard.
spk04: All right. Sorry.
spk06: Yeah, it's okay. I'm not prepared to give a lot of detail. I knew, I knew we'd get these questions about what does it really mean to us in 25? It's really tough to nail it down because we don't know our throughput yet. Uh, we, we are just finishing, uh, treating, uh, what they call firefighting phone with a triple F in drum quantities right now in our pilot plant. Uh, and, um, We're nailing down the parameters for the unit, in other words, how fast it can go, what the mixtures need to be to optimize the system. And as I mentioned, we are getting very meaningful results. In other words, we're meeting and demonstrating that we're meeting just about any regulatory limit that's been proposed out there. So, in other words, we're seeing total destruction of the PFAS where most of our competitors have a waste stream coming out. either an effluent or air emissions or some other type of effluent. So we're very excited about that. We don't know what that really is going to mean to us next year. As I mentioned, our goal is to develop a plant for treating this AFFF at each of our locations. AFFF we view as the lowest hanging fruit of the market. People have hundreds and thousands of drums of AFFF stored at their facilities all across the country and literally all across Europe. And basically every Air Force base and airport has trained with firefighting foam, which has been one of the bigger causes of the contamination. So we're focused on those first. We're still trying to define what the market will bear in regards to a cost where we can charge per gallon. on this versus what our costs are. So it's really difficult for me to address that with a specific number, Howard. I will say this. As we get, we're going to be having press releases come out in the next, in the coming months and defining this more and more and more as we get these results. It's moving very, very quickly. We have a lot of people working on it and it's all been We've been checking all the boxes for the parameters we need to meet up to this point, so we're excited about it. And every day that goes by, we're more and more confident that we'll really hit the ground hard running when we get through our final test.
spk04: Congratulations to your management team. Thank you. All right. Thanks, Howard.
spk07: Best of luck.
spk00: Your next question is from Walter Shanker with MAZ.
spk10: Thank you. Just one more point on PFAS, if that's how you pronounce it. People have mentioned it was nice to have Barron's article so we could understand a little more about the market. Simply, because I like simply, what you have developed is a methodology to burn, to destroy the firefighting foam as the lowest hanging fruit.
spk06: Is that like the kindergarten way of looking at it? No, not really, Walter. We're not burning it. Burning it has been largely banned, in other words, incineration, by DOE and DOD. And the reason they banned it was because of the potential for putting PFAS in the air and the amount, the difficulty in controlling that. Our approach is using chemistry. And there's a strong potential, and we're developing this now, and I'll let Lou jump in if he wants to add something here, that we can recycle some of the chemicals we're using in our system. That's kind of phase two of our technology demonstration that would literally pretty much eliminate all the effluent concerns that other technologies have. The heat and pressure will certainly accelerate the chemical reactions we need to occur, but there's no off-gas, which is what you'd get if you burned it. Lou, is there anything you want to add to that?
spk02: Yeah, it's a very simple process, basically done in a sealed container. Take the liquids, dump in our special materials. sit for a couple hours at some temperature, and everything's gone. Everything we've screened it on, every fluorocarbon we've screened it on, this system destroys it, even Teflon. So we're very excited about it. It has lots of potential applications. And like Mark has said, the number one application initially that we see the low-hanging fruit are the liquids. either from old material sitting out there or some of the separation processes that are starting to use for groundwater cleanup and that. So we see a very large potential market in several different areas, the first one being liquids, and then we're continuing to look at all the other potential applications of the system. We see a lot of applications, potential applications.
spk10: Thanks, Lou. By the way, hi, Lou.
spk08: Walter, how are you?
spk10: And therefore, since I was wrong the first time, this market is, again, potentially billions of dollars or tens of billions of dollars, and Permafix is a very small company, and it's nice to do a couple of million or even tens of millions, but that's almost insignificant against billions. Therefore, it is possible or likely on a longer-term basis that you could license this to one of the very large players?
spk02: We've kept every option open on how we grow this. The first one is real obvious since we have facilities that are licensed and permitted and all this. So the liquids one is a very simple starting point for us. where we can learn more about the technology and, uh, but we are looking at all the above. Um, there's a lot of onsite work that could be, this process could be used at, um, and, and we've talked to a variety of larger companies that, uh, might be interested in working with us, uh, especially with the onsite market. So yes, you're exactly, we, we, We're keeping all options open at the moment for how we apply this and what route we take. Okay, thank you.
spk07: Thanks, Walter.
spk00: Your next question for today is from Brian Russo with Sidoti.
spk05: Yeah, hi. I just wanted to follow up on the Rev 10 document and grouting. What are the next steps for the DOE or any milestones that we should look out for, you know, not in terms of Permafix's role because you have a very strong position, but just timing on when, you know, this scenario two could accelerate?
spk06: That's a good question, Brian. What it comes down to is my initial answer to that is, that the tank removal systems have to be procured and installed. And we met with a firm just yesterday that is one of the players in that market. And they're in competition now. I think the submittals for those proposals is within days of now. I'm not sure when exactly, but it's very, very soon. Then they'll make an award. I'm speculating on exactly the dates, but in the next several months, likely in our Q3. And then the milestones for fabrication, construction, and implementation of those removal systems will occur over the next year. So the milestones to use to track that is really when DOE will be capable of removing the waste. And the interesting part is, you know, The one removal system will feed the DF law, as I mentioned. There's an infrastructure of piping on the east side tank farms that will be used to feed the DF law plant. On the west side tank farms, which is just about 50%, as I mentioned, there's no infrastructure. So they'll pretty much move the system from tank to tank to tank and then start pumping into totes because there's no piping infrastructure, and those totes will be delivered to the treatment facility. So it's a lot simpler, more flexible, and can move very rapidly. So I see that the primary milestones associated with that tank removal system that we mentioned.
spk05: Okay, great. And can you just elaborate on the European expansion strategy? You mentioned the JRC earlier and the 10 million of waste shipments. that could ramp up, I think, later in 2024. Any more developments on the UK Westinghouse facility?
spk06: We are still working towards that and working on the parameters of those agreements, as well as considering other options. In addition to that, we're putting the agreements together with several other countries in Central Europe that also include dramatically large backlogs of waste and inventory. One thing I've learned in the last two years is that basically every power plant over there has an enormous storage building of waste. And they've been sitting on it waiting for a treatment facility or for a long-term storage facility to be developed. And there's a big market in reducing this volume through incineration. and significant size reduction that would save them lots of money. In other words, their storage facilities are jammed full. So we're working with individual firms, doing partnering with others to build a backlog, and we intend to shift those waste to Permix Northwest in the interim and working right now with Westinghouse and other organizations over there to meet that need and thinking outside the box on how to do that. Certainly the technology we have at our Northwest facility is very applicable and there's a lot of interest from other companies in Europe now that are managing those waste for their commercial clients and had numerous meetings in the last two months trying to address that need. So it is a very expanding market And we continue to put bids together for other countries, as I mentioned before, Croatia, Slovenia, and Norway, and throughout the U.K. So it's a really growing market. And, again, I have a tough time defining what that really means to us in long-term revenue, but I do see that several of our agreements will be mature by Q4, and we'll start seeing shipments increase in 2025.
spk05: All right, great. And then lastly, could you share with us what the services backlog looks like as of December?
spk07: Yeah, about 14 million. All right, great. Thank you very much.
spk00: Thanks, Brian. Once again, if you would like to ask a question, please press star 1. Your next question for today is from Ross Taylor with ARS Investment.
spk11: Thank you. First, congratulations on a surprisingly good quarter. I honestly didn't think you guys would be able to, given all the back or headwinds from the government and the like, would be able to put together a quarter like this. Great job doing that. A couple of things. With this PFAS situation, is your process protected by patents or other intellectual property law?
spk07: We do have several patents. Go ahead, Lou. I'm sorry. Go ahead.
spk02: Yeah. I was going to say we have patents pending, as Mark said earlier, and we expect to be filing quite a few more covering the different applications as we further develop the data for the patents. So we... We think they are. You know, we're in the process. They're pending at the moment. And they cover the U.S. and Europe. The applications are all then set to date in stone for both the U.S. and Europe. And then we're looking at what to do in Asia.
spk11: Okay. And when you pursue the opportunities in that area, are you seeing this as permafix is going to people or an example, I mean, example, like, are you going to the DOD, which has obviously a huge problem, uh, in this area and, you know, trying to basically get a contract with them, or are you JV in this area? How do you see going to market with it from a permafix specific standpoint?
spk02: Well, it was, as Mark said, initially the, uh, the focus is on liquids, uh, whether they be, um, out of date products or coming out of fire foam systems today, or being generated by some of the, uh, uh, separation processes that are presently being used on, on drinking water and, uh, other waste waters. Uh, as we expand, uh, we're, we're somewhat open. There's, there's a market that, uh, The facilities give us a tremendous advantage. We already see PFAS liquids coming through our facilities. So it's a natural that we now would have a destruction process to destroy them. Okay.
spk11: Yeah. And so, as I said, that's where you're sitting with that. And I'm just trying to get an idea with the economics. Are these points being shared economics, or is this something that you actually believe that early stages you're going to be able to go out, your first few wins will be Permafix unique wins, where you'll be catching the whole of it, or will someone else be the prime in this? I mean, has the government and other major players actually already started to pursue these types of cures? So are you, you know, looking to get on teams?
spk02: Yeah, we're hoping to have demonstrations for, we're already in the process of discussing with DOE a demonstration project for some of their waste, and the same with EOD. So that's all going on right now. But again, mostly on the liquid side. The next phase will be focusing on the on-site opportunities that exist out there, and we're already starting to explore that with
spk06: We have some agreements in place. They're not formal JV agreements, but we're working with several companies as partnering that have access or support clients with large inventories. The process we're going through right now is we're receiving samples from different clients to run through a pilot and bench scale test to show them how well it works. That's kind of the first step is receiving samples from different people that have large backlogs of inventory and partnering with firms that we work with regularly that have clients with big backlogs. So that's kind of how we're hitting the ground running fast is building that base of inventory that will get us going.
spk11: Okay. Does this... process require you to have significant capital expenditures? Is it the type of situation where you would need to build something at each facility, or is it the type of approach that allows you to effectively almost create a mobile or a somewhat mobile capability that you can move from location to location? Or would you be putting it on your own locations and having the materials come to you?
spk07: Go ahead, Lou.
spk02: yeah initially it's it's the latter it's easy to put a facility in it's not expensive you're basically talking about tanks reactor tanks that pressurize tanks so step one is is do it ourselves at our facilities gain knowledge on the process and at the same time looking at how it can be applied to other applications okay
spk11: You talked about Europe. You talked about first what you see going on, you know, what the potential is out of Germany that I think they've shut down or will have shut down all their new capacity. And I would think that that would, you know, might be the biggest market available in Germany or in Europe or Central Europe. Can you just, am I right in that read? And when we look at this, the European and Central European opportunity, Are these where you're going to have a unique JV in each country? Is there someone in Europe who's, you know, like the leading player in this, and you'll work with them to pursue these opportunities? How does, once again, like your go-to-market approach in Europe?
spk06: Yeah, we're working, in fact, at a conference this week in Phoenix, working with several different entities in Europe that are here participating in the conference. There isn't a central organization. There is, and you're correct, Germany is pretty much the largest near-term market as they're decommissioning. I think they have 17 reactors. They're all in different phases of decommissioning, and they all are generating waste as they decommission, as well as having significant volumes of waste in storage. And, you know, Germany is building a very large long-term storage facility in a former iron mine in Germany that has a very specific acceptance criteria that they have to meet to get their waste into that facility. So what we're offering to different clients in Germany is the ability to treat that waste, reduce the volume, i.e. reducing the storage footprint they need to get it in, and making it stable to meet that criteria. So we're in the process of working with it. There's several organizations involved, and there's numerous waste streams, some that we wouldn't deal with, and there's a lot that we would. So we're working through that right now. In regards to JV, it'll be more like partnerships and agreements, and unlike the Westinghouse situation, which is a JV. But these are all part of the offering we have through Westinghouse and through other organizations as well, depending on what the waste stream looks like. And it's really kind of unfolding at this point, but all pointing towards early 25 to get rolling.
spk11: Okay. And just real quick, one last, just going back over and looking at DF law, what's the correlation between revenues for you and operations for the vitrification plant? Is You know, how quickly do you start to see cash flow from that once they start to get it up? Are they currently operating it at a low level? And are you seeing some process or some materials come through that? And kind of as it works, I think they have two melters. So the thought would be they start one melter and then they start the second melter at a point after that. Is that how it's going to play?
spk06: Yeah, they're going through with the cold commissioning right now, which is as opposed to hot commissioning. Hot commissioning, they'll use some radioactive surrogates to begin to run through the system. Right now, just to kind of give you a schedule, the schedule is not defined very well by DOE. They have a very hard and fast agreement that's really well-defined to have the plant operational, fully operational, I should not take it back, operational, which means they have to be vitrifying waste by August of 25. The union intends to beat that. They've said that publicly numerous times. And at that point in time, it'll be generating, depending on how many melters are going, the 8,000 yards a year that I mentioned. However, we fully intend that as they go through hot commissioning and start adding radioactive surrogates to the glass, that they'll generate waste on that as well. So we anticipate that to begin earlier in 2025 as they do the demonstration of the technology and the whole process overall. They'll start generating smaller amounts of waste in the scheme of things. So we see it ramping up through the year, and by the end of 2025, certainly we would expect both melters to be operating and be at the you know, annualized rate of, of the estimate, which is the 8,000 yards or actually three meters. Uh, okay.
spk11: So by the end of 25, you would think you'd be at, at run rate. There was some talk, I believe in the Seattle publication that you might see something, they might see something come out of that in, in late 24. Is that just a pipe dream?
spk06: I did see that too. And I don't know where this is getting his numbers from, but you know, it's very difficult. B is intentionally, um, avoids committing these things because it's like investing. You hate to commit because you've got to be held accountable for your performance. But the bottom line is that they're working very well. They're very excited about meeting the milestones. They're meeting with the melters. They're actually working as anticipated. But they do have a long ways to go before they get to full operations. They have to go through a lot of readiness reviews like any nuclear plant starting up, which takes a lot of effort and is very difficult. Having said that, Ross, I really believe that anything before the first quarter of 2025 would be shocking to me. But they might be able to get started, it's hard to say.
spk11: Okay. And I'll leave it with, once again, congratulations and the precast opportunity out of the blue, but really exciting. And just generally, as you said, it looks like we're setting up for a really not only exciting, but quite profitable 25. So the road's been longer than people hoped for, but it looks like you're well on your way on it. Thank you.
spk06: Yeah, we've been very nervous about it. launching the PFAS status until we got through our bench scale and had our results independently validated by a third party. And so, really, this is an exciting time for us to be able to mention it.
spk07: Thank you.
spk00: We have reached the end of the question and answer session, and I will now turn the call over to management for closing remarks.
spk06: All right. Thank you. I'd like to thank everyone for participating on our fourth quarter and year-end conference call. Hopefully, after this call, you share our enthusiasm and confidence in the outlook for the business over the next few years. We look forward to providing further updates as we continue to execute on our strategy. We appreciate the continued support and patience of our shareholders, and we look forward to providing further updates as developments unfold.
spk07: Thank you.
spk00: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.
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