Perma-Fix Environmental Services, Inc.

Greetings. Welcome to the Permafix fourth quarter and fiscal 2024 business update conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the former 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 Wallman, Investor Relations at Permafix. David, you may begin.

Thank you and good morning everyone and welcome to Permafix Environmental Services fourth quarter and year-end 2024 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 fourth quarter 2024 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 year of that bear upon forward-looking statements. In addition, today's discussion will include references to non-GAAP measures. ParmaFix 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. Thank you, David, and good morning, everyone. As we close out 2024, we acknowledge that it was a challenging year, primarily due to ongoing yet temporary delays in project starts, procurement cycles, and waste receipts. largely driven by the continued resolution for the federal budget. These headwinds persisted into the fourth quarter, leading to revenue shortfalls. However, it's important to emphasize that these challenges do not reflect our long-term outlook. Towards this end, I'm pleased to report that we're already seeing improvement in Q1. Our waste treatment backlog is strengthened, and we expect a meaningful increase from Q4 levels. Waste volumes are improving, and we have added plant operating shifts at key facilities to meet rising demands. This progress, combined with improving project visibility, positions us for a return to growth and profitability in 2025 with particularly strong second half as key programs ramp up. One of the most significant contributors to our expected growth is the direct-feed low-activity waste program, also known as DFLAW at Hanford, which remains on track to begin initial tank waste treatment operations this summer. DOE has reaffirmed its legally binding milestone of August 1st. when waste treatment activities are expected to commence, which would mark a major milestone for the industry. Our PermFix Northwest facility is well positioned to support effluent treatment from Hanford's vitrification process. We've already initiated design and planning activities to ensure we can meet DOE's requirements as waste volumes scale up. The long-term opportunity associated with this program projects to support up to 8,000 cubic meters annually, with ramp-ups expected in phases over the next two or three years. Additionally, we continue to pursue subcontracting opportunities under the Integrated Tank Disposition Contract at Hanford, also known as the ITDC, a multibillion-dollar project with significant small business participation requirements. As DOE finalizes its broader tank waste remediation strategy, we believe Permafix is well-positioned to play a key role in supporting these efforts. We're also beginning to see the results of our expansion in the industrial waste market under the leadership of our Permafix Florida facility. This focus has included broadening our client base to larger government contracts for industrial hazardous materials and waste streams within the southeast region that could benefit from our experience and treatment and the disposition. On the government contracting side, while federal budget delays impact procurement cycles in Q4, We remain well positioned for upcoming DOE and DOD opportunities. One of our most significant recent wins is our role in DOE's West Valley Demonstration Project, a 10-year multi-billion dollar contract which began its transition in Q1. This project aligns with our expertise in radiological protection and waste management. We expect revenue contributions from this project to scale through 2025 as the project is further defined and work transitions into execution which is expected to be completed and be operational in early Q3. In addition, our USSX Enterprise decommissioning procurement bid submitted in January remains a highly competitive opportunity, and we anticipate a decision by mid-year. We're also pursuing pipeline opportunities anticipated to be awarded in 2025 at DOE's Y-12 facility, at Lawrence Livermore and Lawrence Berkeley National Lab facilities, and other DOD sites, which would contribute to a robust multi-year growth pipeline. While procurement cycles remain impacted by federal budget uncertainties, we remain optimistic about our positioning for these projects as funding stabilizes. To navigate ongoing federal budget uncertainties, we've proactively implemented cost reduction measures within our nuclear services segment. These actions are designed to align our expenses with our revenue backlog while ensuring flexibility as procurement cycles stabilize. While uncertainty remains in regards to the budget adjustment that may impact some of our larger DOE and DOE clients, we remain confident that these impacts will have limited effect on the DF law effluent waste receipts due to the commitment for DOE to maintain the tri-party agreement scheduled for this summer to begin operations. In addition, The likely adoption of a continued resolution through the rest of this year by Congress, existing budgets are anticipated to remain steady at least through Q4 and limit the impact on waste receipts overall in 2025. As part of our long-term strategy to diversify revenue, we continue expanding our presence in the international market with particular progress in Canada, Mexico, and Europe. The JRC project remains – the JRC project, which is the one in Italy, remains on track with final permit and program documents submitted in December to support treatment operations beginning in late 26. I'd like now to turn to our PFAS destruction technology, which represents one of the most promising areas of growth for Permafix. Over the past four months, our Permafast system has operated at a commercial scale, successfully meeting performance expectations as we continue to optimize operations and refine the engineering parameters for the design of a larger system. We are now beginning to focus on the development of the second generation permafas unit, which we expect will triple processing capacity and incorporate chemical recycling capabilities to improve overall efficiency. Currently scheduled for deployment in late Q3, this unit will have the capacity to process nearly 2,000 gallons of high concentration PFAS liquids daily. Unlike many existing solutions that only concentrate PFAS waste, our permafas PERMAFAST system permanently destroys these compounds in an economical and environmentally friendly manner, creating a clear differential from other approaches. In parallel, we're expanding our R&D efforts to develop PFAS treatment solutions for contaminated soil and filter media, with pilot scale demonstrations planned for Q2. While we're highly optimistic about the long-term potential of this technology, it's important to point out that our PFAS initiatives have required substantial investment, impacting our financial results. However, we believe these efforts are critical to positioning Permafix as a leader in PFAS destruction. On one final note, I'm pleased to announce that Permafix has strengthened its executive leadership team with the recent appointment of Troy Eshelman as our Chief Operating Officer, effective January 23, 2025. Troy brings extensive experience in nuclear and environmental services, and its leadership will be instrumental in optimizing our operations and executing our growth strategy. Looking ahead, we expect a return to growth and profitability in 2025 driven by a solid backlog, improving project execution, and key initiatives gaining momentum. Again, these several factors that support this outlook include strengthening backlog and improved waste treatment volumes, the ramp-up of the DF Law Program at Hanford, expansion of our PFAS treatment capabilities with the Gen 2 Permafast deployment in late Q3, key contract wins including West Valley and multiple DOE-DOD opportunities, and ongoing cost discipline to reduce our cost of goods sold, ensuring flexibility in navigating federal procurement cycles as well. So to wrap up, we're entering 2025 with strong fundamentals and improving revenue trajectory and major opportunities ahead. With our improving backlog, expanding market presence, and innovative technology solutions, we're confident in our ability to drive profitable growth and long-term value for our shareholders. With that, I'll turn the call over to Ben Naccarato to discuss our financial results in more detail. Ben?

Thanks, Mark. Starting with revenue, our total revenue from continuing ops from the fourth quarter was $14.7 million compared to last year's fourth quarter, $22.7 million. That's a decrease of $8 million, or 35.2%. The treatment segment was down $1.4 million, while the services segment was down $6.6 million. In the treatment segment, the shortfall was attributed to lower volume as well as lower average pricing of our waste. The reasons for this impact varied from hurricanes in Florida lower margin waste mix throughout the plant, our investment in the NR&D efforts on our PFAS technology, as well as certain waste receipts and shipments that were rescheduled into 2025. The services segment revenue drop was consistent with the rest of the year, which was lack of large projects to replace the larger ones that came to an end in 23. For the year ended 2024, our revenue was $59.1 million compared to $89.7 million in 23, that drop of $30.6 million or 34.1%. The drop in revenue at treatment was $8.5 million and services revenue was down $22.1 million. So again, as with the quarter, both our reporting segments had substantial revenue decreases with the treatment segment revenue being impacted by poor weather, prolonged effects of the continuing resolution, equipment maintenance issues, and the R&D in our PFAS technology. The services segment, again, continued to feel the effects of continuing resolution as many procurement awards expected to happen in the year were delayed or postponed. Turning to our gross profit, For fourth quarter, our gross profit was $594,000 compared to $4.3 million in 2023. Our gross profit in the treatment segment decreased by $1.9 million due to the lower revenue and higher labor and regulatory expenses at the plants. Our services segment gross profit was below prior year by $1.8 million due mostly to the lower revenue and also lower margin projects offset by lower fixed costs related to labor reductions. For the year ended 2024, our gross profit was down 16.4 million, both reporting segments. Gross profit were impacted by lower revenue, as well as lower margin waste and projects. Our fixed costs were up at the plants, primarily from labor costs, but partially offset by lower labor costs in the service segment. Our G&A costs for the quarter were $3.9 million compared to $4 million in the fourth quarter last year, while our G&A for the full year was $14.5 million compared to $15 million in 2023. G&A expenses for the quarter were down slightly from lower trade shows, sales commissions, incentives, bank charges, and travel. These overall lower costs were slightly offset by higher marketing salaries, and other general expenses. Similar to the quarter, our G&A costs were down for the year from lower sales-related expenses, incentive expenses, legal fees, and offset by higher wages and general expenses. Our net loss for the quarter was $3.5 million compared to last year's net income of $81,000. For the year-ended December 31, 24, our net loss was $20 million compared to net income of $485,000 in the prior year. Note that our 2024 net loss included approximately $8.2 million of income tax expense related to our full valuation allowance established against our U.S. deferred tax assets, which of course is non-cash. Our basic and diluted net loss per share for the quarter was 22 cents compared to income per share last year of 1 cent. Our loss per share for the year ended 12-31-24 was $1.33 per share compared to income per share of 4 cents in 2023. Our EBITDA for the continuing operations in the quarter as we defined in this morning's press release was a loss of 3 million compared to income of $434,000 last year. And for the year end of 2024, EBITDA loss was $13.8 million compared to income of $3.3 in 23. Turning to some balance sheet items compared to last year's, our cash on the balance sheet sits at $29 million compared to $7.5 million year end 23. This increase, of course, is primarily from our net proceeds received from the equity raises in May and December of 24. Our receivables and unbilled receivables collectively were down $1.6 million due to lower revenues in the service segment compared to last year, offset by higher accounts receivable that are expected to be, have been or are expected to be collected in 25. Our net property and equipment was up $2.1 million from cap spending, which included the construction of our PFAS reactor. Intangibles and other assets were down $3 million, primarily due to the full valuation allowance established against the company's deferred tax asset. Our current liabilities were down $4 million from timing of payments and decreased operating costs. As of December 2024, our treatment backlog was $7.9 million, which is down from $10.7 million at the end of 2023. Our total debt for the quarter is $2.5 million, excluding debt issuance costs, and that's mostly owed to our P&C Bank. Our working capital sits at $28.2 million compared to $4.5 million last year. Finally, I'll summarize cash flow activity. Our cash used by continuing operations was $14.1 million. Our cash used by discontinued operations was $597,000. Our cash used for investing of continuing operations was $4.1 million, primarily for cap spending and permits. Cash used for investing in discontinued operations was $51,000. Cash provided by financing was $41 million. This represents the proceeds from the two equity raises of $41.9 million, receipts from options and warrant exercises of $292,000, less payments to our term and capital loans of $832,000, and payments to our finance, leases, and other debts of $364,000. With that, I'll now turn the call over to the operator for questions.

Thank you. At this time, we'll 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. And the first question today is coming from Aaron Spichella from Craig Hallam. Aaron, your line is live.

Yeah. Hi, Mark and Ben. Thanks for taking the questions. You know, maybe first for me, just on, you know, with the federal, you know, impact, you kind of touched on it in the near term, but with, you know, the budget delays and potential, you know, this weekend, some progress there. Can you just Can I talk about how you see that impacting the near term? If we see another CR and then just some of these larger opportunities, sounds like West Valley on the services side can still move forward and also optimistic on Hanford. So if you could elaborate on the federal picture, that'd be great.

Sure. Aaron, appreciate your question. This is a very complex answer. But let me start with... the potential for a shutdown, a government shutdown. Right now, just to kind of make sure everyone's aware, our position is if there's a shutdown, it'll be very limited impact to a Permafix if it's less than two weeks, which it usually is. And that's because we have a good enough backlog. We have very little revenue associated on government sites. We do have some cleanup projects that could have a limited duration of impact, but For the most part, it's minor. If it's more than two weeks, we still have a very strong backlog for quarter on the waste treatment side, and we might see some more impacts on procurements and those types of things if it's over a couple weeks. But we generally feel like a shutdown would not have a dramatic impact on us if it's as long as they usually are. As far as the CR goes, CRs are not good for us. A lot of times the government puts things on hold and those types of things. One thing good about a CR in this situation is there's no budget cuts in the CR, or not likely to be, and there's a couple plus-ups here and there that we're expecting at several different sites, depending on which bill gets considered in the final in regards to the different funding of different sites and projects. But most of the projects we're chasing on the services side are funded, and we just had a Our annual waste management conference this past week in Arizona, I met with many of our clients, and three out of the five projects that we expected to see this summer are still moving forward irrespective of the budget or the CR. So we expect a limited impact. There's always some from CRs, but we don't expect a lot. We do have some uncertainty associated with what 26 looks like. We are confident, as I mentioned in the notes, that the DF law program and the Hanford closure program as a whole would see very little impact to our scope of work. There will likely be some reductions in force across the board, as it will everywhere. But as far as the commitments that DOE has made in the tri-party agreement, which is that agreement that DOE signs with the state and EPA, the legally binding agreement, and was mentioned at the Secretary of Energy's Chris Wright's Senate hearings, and he gave a commitment to maintain those milestones and strategy. I do expect that to have a very limited impact to the budget for 26. So, again, that's speculation based on our discussions with DOE and the contractors in Hanford, but it certainly lines up with the overall priorities here. of the DOE program. So overall, we don't have any idea, again, what the reductions might look like as far as they trickle down to projects. One thing we do know is that from the meetings last week is that the DOE said in several different conferences and meetings publicly that this administration, particularly in the environmental management side of the house and in the NSA side of the house, which is the weapons program, very much a bias towards execution. and doing things cheaper and commercialization, which is what we offer, is a big part of that. So we're excited about where it's going. Again, as you've seen on TV many times, there may be some disruption along the way, but right now we are excited to see a bias towards execution, which typically means waste generation. Did I get all your hands and your foot?

Right. No, it does. It does. Thanks for the call there, Mark. And then maybe, you know, second for me, just on DF Law, good to hear and see kind of progress towards that legally obligated startup by August. Can you just kind of talk about, you know, how you kind of see the potential startup there in phases and just how you're preparing the business there, you know, at the Richland plant and what you're doing kind of operationally to get ready?

Sure. Right now, The DFLAW facility is going through what they call an operational readiness review, which is a very stringent review by engineering experts, independent experts in most cases, where they come through and they just check absolutely everything. They've already done similar reviews already, so this is not the first time they're going through that, but this is the final one. The operational readiness review will generate a list of findings, and once all those findings are addressed, sufficiently for the team, then they'll move towards a startup. And we expect that, again, to be on track. DOE has made, in several cases, has said that it is on track, so there's no reason to believe it is not. We haven't heard any feedback about the ORR and what the findings might be looking like as they come up. Most likely it will be towards the end of when it's completed, which will be in the next several months. So it seems to be on track, and DOE had mentioned again in these conferences this past week that it's among their highest priorities to keep Hanford moving forward with the investments they've made there over the long term. So as far as how it's phased in, there's no official document that says we're going to be getting a certain amount of waste on a certain date. From talking to engineers informally, they're expecting it to start to begin at like a 40% of its design capacity. It may be a little bit more, maybe less. I would expect it to be a little less than that, but it'll start off a little bit slow. And then they have three years legally to ramp up to full capacity. Their intention is to ramp up much faster than that. They have about a million gallons of backlog, which is one full year of full operations if they're running at full capacity at all times. So they've got the backlog in a tank ready to go, and we would expect it to go faster than that overall. We're not sure how much of each waste we will be receiving in regards to quantity and value and those kinds of things, but we do expect it to start receiving waste in mid-Q3, certainly sometime in August, September. So it seems to be on track and moving forward overall. And, again, what happens between now and the end of the year is still a lot of uncertainty. I'm waiting to see how it works out, but it seems to be on track.

Understood. And then maybe just an update on investments, you know, at the plant from an operations and kind of equipment standpoint.

Yeah, so we are upgrading the plant in several different ways with new equipment on the radiation protection side of the house. We're currently in the final design phases for the upgrades we need to make to address some of the different waste streams. particularly with liquids. And we've hired a number of people to assist with that, to make sure we've got the personnel in place to be able to handle it as well and finish those upgrades. So we have not spent a lot of capital at this point, but we will be here through the next 12 months. And as we see what types of waste streams we're going to be getting and how much of each, we do have the capacity to handle a good bit. of what we expect to receive, at least when it starts up. So we don't see an impact for the summer as far as what we have, our capacity is now. We can go to multiple shifts if we need to to address it, and we don't see that as being an issue for the waste streams we initially anticipate receiving. So we are making progress, and we've had some, again, brought the resources on we need to start implementing.

All right. Thanks for that. And then maybe last for me on PFAS, you know, can you just kind of talk about what the costs have been, you know, kind of thus far, how you see those trending in 2025 and just kind of how that growth shapes up for this year and into 2026 as you develop that second generation unit. And I know you've talked a little bit about potential partnerships. So if you can maybe just elaborate there, please.

Yeah, I'll let Ben address our costs and then and where we're heading in the next couple quarters, and then I can talk about where we are with the partnerships in a little more detail on that. Ben, you want to address the cost?

Yeah, so in 24, we probably used about $3 million, which translates from $2 million of cash for the reactor and about $1 million and change for R&D. Projections are much higher for 25 with Gen 2, We forecast around $5 million, which would include both the R&D and cap spending. So that's kind of the financial impact of where it's going, and I'll push back to Mark on production.

Okay. Yeah, as far as production goes, we do continue to operate. It's important to understand that while it's commercially viable and it is generating revenue, we are operating slowly. As Lou mentioned, Senafani continues to remind me it is continuing to be an R&D program where every batch we're taking extensive analytical sample analysis on, and so we understand performance. We're also having to define the parameters for the wide variations of PFAS itself, different concentrations, but more importantly, all different types of other constituents in the waste that we're receiving, the liquid waste we're receiving. So we continue to upgrade our facility. We have a world-renowned partner on now helping us with improving our design. And the back end of our Gen 1 system that's operating, what we call the distillation unit, that same company is helping us with the final design of our Gen 2 as well. So we are receiving lots and lots of samples from different companies, partners, potential partners, and working through those. A couple we're particularly excited about are large volume generators that would have sustainable waste streams. We're working through their samples now with Gen 1 with all kind of focus on Gen 2, again, as I mentioned, being running in Q3 to be able to handle a large quantity of waste and keep up with significant backlog. So, We do continue moving forward every day on it. And as I mentioned, we are generating revenue. It's not dramatic at this point because it's so methodical and there's so much data associated with the analytical side of the house and reports and reporting on how we're performing. But we are making significant progress and gaining new clients all the time. We expect to be getting waste here in the near term from DOE. as well as we've gotten samples from DOD as well, and about a dozen different, maybe 15 large companies on the commercial side, along with some smaller ones. So we continue moving forward with the program with the objective of getting to a more operational state in the next quarter.

All right. Thanks for the color. I'll turn it over. Okay. Thanks, Aaron.

Aaron. Thank you. The next question will be from Ross Taylor from ARS Investments. Ross, your line is live.

Thank you. I'd like to follow up on some of what Aaron was asking you guys about. First, you talk about the idea of needing about $5 million additional to build out the Gen 2 PFAS. What do you see the economics being on Gen 2 PFAS? You were talking about the number of gallons you'd be able to deal with and the kind of on a dollar, if I'm going to model this, what kind of money should I expect? What do you see getting a gallon? What kind of operating margin do you expect to get on a per gallon basis?

Yeah, thanks for the question, Ross. Yeah, our goal in our design of Gen 2 has been to ensure that we can easily define our revenue at about $5 million a quarter. And so, again, we're still in going through different scenarios, whether we have one reactor or two reactors, and how fast it can go, can it go multiple shifts, those types of things. But our goal, to answer your question, is to get to $5 million in revenue a quarter as a baseline. And again, like the rest of our waste treatment programs, our goal is to be able to maintain a similar type of 70% margin incrementally above fixed as we do with some of our other waste streams. So That's generally where we are. The money that Ben talked about will be for fabrication of that new system as well as installation. Installation is quite expensive as well with the power requirements and the permitting and facility upgrades we need to do to install it. That's all expected to be completed, as we said, in the Q3.

Okay, and that's all in that $5 million cash earned or cash investment you expect in the PFAS project for this calendar year?

That's correct. At the same time, we are spending money on other things as well. For example, Gen 1, the upgrades, we actually call it Gen 1.5. So Gen 1, we are working with this design company to make it better. It will be operating as well, so it's not like it's just an R&D unit. Once we make the upgrade to that this summer, it will continue operating at about 650 gallons a day. And Lou and his team, which is a substantial team of Ph.D. chemists, continue to work on the soils and GAC filtration media to provide continue moving the ball forward with those applications and design for a unit that we can fabricate sometime in 26.

So are you going to, as you move forward with Gen 2 for a market use, are you going to use Gen 1 as basically your laboratory?

As much as it takes to get to a Gen 2 that's operational to meet the demands we need, you I've said on these calls and investor meetings that Gen 1 is up and operating. It's running 100 miles an hour. It's going great. One thing that's been determined is the technology works very well. But there's so many engineering parameters that go into this in regards to the chemistry and the heating processes and the pressure, how long do we cook versus how low do you want to get in concentrations. All the analytical requirements go along with this, a lot of variables. And so, yes, to answer your question, our goal is to learn from this Gen 1, but we are getting nearer to the end of the R&D portion of that where we should be able to get to more sustainable throughput here in the next few months once we can document and verify the performance based on analytical. So, To answer your question, I always kind of see this being a test unit that we'll try new things on, but we are improving it all the time as well, and we do see it being a contributed revenue in a bigger way beginning the second half of the year.

With regard to Hansford, you talked about the idea that You know, you got kind of a million-gallon-a-year kind of full-rate run rate out of DF Law, and you think you start about 40% of that, which would be around 33,000, 34,000 gallons a month. If you get a chance, if you're running at the rate you expect on DF Law at your end, is that enough on its own to get the company to cash flow break even, free cash flow break even?

Yeah, let me make sure you understand, and it's a common misunderstanding, is the waste you're going to be getting from the FLAW is not all liquid. In fact, it's probably less than 25 liters. There's a lot of solids, a lot of other things besides the liquid program, which they typically refer to as brine. But to answer your question as far as getting cash-positive, We do expect to be very close to cash positive once it starts rolling. We haven't budgeted to 40%. In other words, we budgeted much less than that. We've assumed much less than that to get started. So if we can get 40% of the 8,000 cubic meters a year, you know, as far as an annualized throughput, we'll be doing great. So we've assumed internally that it's going to be a little bit lower than that. and we should be fine with that. We're also starting to get other waste streams in larger volumes from Hanford right now. There's a certain increase from other programs at Hanford. As I mentioned, the new contractor that took over the ITDC contract is working very closely with us to increase our role there. And so between that and the FLAW, we're very confident we should be cash positive by the end of Q3.

Okay, and so when we are looking at that, do you need any CapEx, anything else in Hanford to get Hanford to where it needs to be as they push this program into operation?

Ross, this is Ben. I think the answer to that is at this time, after the raise we did, and that includes upgrades at Hanford, in that number. So at this time, that would be a no.

Okay. Can I ask you a philosophical question? It's generally when companies have like a core business and you have, I kind of look at PESI as a core business and a bunch of call options hanging on it. You know, you've got DF, you've got, you know, DF Law and Bit, you've got Grouting, you've got, you mentioned today, you know, the enterprise is is potentially back alive. We've got Europe. We've got PFAS. You've got a lot of these kind of call options around it. Generally, you'd like to see a company operate its core business at breakeven or better. So it basically covers the cost of being a public company. You guys have struggled with that. What needs to be done to get that core business to where it doesn't pull capital out of the company, but instead you know, basically can keep the company at a capital level, you know, a constant capital level? Or, quite honestly, is there a thought at some point that you monetize that and just keep these other call-offs and aspects, which are financially, I think, what people own the stock for?

Yeah, Ross, this has driven the management team crazy, is that, you know, we had all these wonderful initiatives, and it was all based on somewhat a break-even approach base business, and that's what you're talking about. And as I've mentioned before, that base business really for us is $80 million a year, $20 million of quarterly revenue. And it's been a shock to us that we haven't been able to maintain that, and I don't think it's an industry trend. Certainly from the conference we had last week, no one else does either. It's just procurements have been delayed, waste receipts were delayed for a period of time. They're starting to pick back up. It somewhat has to do with leadership in Washington changing and just the slowness from people working from home, frankly, and that's Mark Duff's opinion. But the bottom line is that return to work has been very refreshing. Our federal clients are all back in the office for the first time in four years, and we have a lot more optimism. But the bottom line is that we have struggled. Again, we're running around $60 million in revenue. $80 is where we've got to be. We know that. We're doing everything we can to cut our costs while doing everything we can to grow, which is obviously a difficult challenge. But we're seeing improvements, particularly on the waste receipts side. Services side, there was optimism, but it's low. As I mentioned, we've cut a significant amount of G&A out of our services group until we can get that revenue backlog built back up. so it doesn't drain us, and we're hopeful that we can get back that $20 million a quarter in revenue beginning the second half of the year. We're very focused on your exact concept that you just brought up, and we put a lot of emphasis and time in the management team to get that revenue back up to $20 million, and if we can't, to get our costs low enough where we can at least be breaking even until these things start taking off that we've discussed.

Yeah, that would obviously be a huge step because it would remove the need and the threat. We had some pretty dilutive financings last year, and obviously that's been an area of great frustration. So it sounds like summarizing the year, you're seeing some positive trends or summarizing your outlook into this year. You're seeing some positive trends in your core business that you think should help you know, drive up that revenue line, whether it gets to the 20th quarter you need or not is an open question, but it should be getting better as we push forward. At the same time, you see moving by the end of the year, fourth quarter, we should be seeing perhaps Gen 2 PFAS in the marketplace operating at, you know, the levels you kind of talked about. And at the same time, also, and for a bit, you know, the DF law operating at, you know, introductory levels, initial levels, and the like, and ramping. So that's what you're seeing is that all that comes together by the end of this year. You expect to be not just producing earnings, but producing free cash flow as well. And then 26 should be a year that sees some huge wins in it.

That's right. That's right. You know, it wasn't long ago when we did have our base model. In 23, we did pretty good. You know, we did 4 or 5 million. It was around 4 million in EBITDA. So we know what it feels like, and we didn't expect this to happen, but it's certainly what we saw for 24. As you know, Ross, we predicted 24 to be kind of a rebuilding year, but we expect at least to break even through the year with these growth issues.

Okay. Well, you've got a lot on your plate. Let's hope that the Japanese thing goes to get 80% full.

All right. Thanks, Ross.

Take care.

Thank you. And once again, it's Star 1 if you wish to ask a question on today's call. The next question will be from Bob Goodwin from Larkspur Capital. Bob, your line is live.

Hi. It's Bob Goodwin. We at Larkspur invited you guys, I guess, 20 years ago, so we know Lou quite well. And the question I have is it relates to PFAS. And when the EPA put the eight chemicals on their list, we did a little bit more work and worked with the engineers reviewing various technologies to eliminate these forever chemicals. Basic comment was they loved the throughput turnaround time and they loved the low temperature. And we're heavily involved with geothermal, so we're talking to all the service providers to that end. I think your biggest market is frack, followed by fertilizer that's created by waste treatment plants. There's articles recently about forever chemicals causing problems. And the other thing is, can you create a mobile unit?

create a mobile unit?

We have looked at that, Bob, as far as the mobile unit goes. We believe that right now it's not that big of a unit. It's a little bigger than a skid mount could support, but not that much. We could do a mobile unit. We need to work out a couple of issues with our distillation portion of it when it comes out as effluent. It's certainly something we've It's not far-fetched. If we look at our competitors, particularly supercritical water oxidation, it's a monstrosity of a unit. It takes enormous amounts of power and energy. Ours doesn't, as you mentioned. We can be supported by a mobile generator. But that's certainly in the plans. Lou, do you have anything you want to add to that?

Yes. Hey, Bob. Good hearing from you. Hey, how are you doing? Good, good. Yeah. No, we're... When we get to some of the media, especially like soils, it will be a mobile system. So on the liquid side, it can easily be put into a mobile operation as we now envision it. And that will all depend on the market and how much clients have and what it makes sense. But the soils one definitely will be a mobile unit. We will do it in our facility. We'll be able to do it in our facility. But in the long run, the better approach is go to the site, treat the soil, and leave it there.

Well, that's exactly right. And the geothermal data centers need gobs amount of power. So the best thing to do is put a data center next to the geothermal site. In your case, you've got... track water. And after the announcement, a lot of the track water has been put into 55 gallon drums on site because of the forever chemicals contained therein. And the fracking operation doesn't last that long. So that's why I thought a mobile unit, the extent you have it, could recycle that water.

Yeah, our thoughts when we look at that is when you've got clients that have stuff in drums, is it better to go to their site or is it better to take it to a fixed facility? And it will all depend on volumes. Very large volumes, it would probably be better to move a unit there. And our system can easily be put on a mobile unit when it's really getting to the second generation. But as we sit today... We're seeing a lot of smaller volumes coming from a lot of different clients, and that's growing fairly dramatically as we sit here. We've had great experience with clients looking at our system and saying, wow, that's the way to go.

Did you talk to the water treatment plants that create the fertilizer?

Yes, we're involved on biosolids. We've looked at it. We can treat biosolids. And that's a little more complicated. I think the soil systems at this stage are really what we see as the simplest approach to adapt our technology to. So the biosolids, the advantage we have is our reagents are all environmentally benign. So whatever you're treating, you put it back on the ground, it should not be a problem with our reagents. So they're not environmentally hazardous.

Yeah, one of the comments I got from, just to reiterate, I got from one of the big service providers, is if you use incineration, you can create other problems. They didn't like it. Then the throughput was the other thing. But I think the wastewater treatment that creates fertilizer, I think those are two huge opportunities for you.

No, we agree. We're doing a lot of work on not only using a mobile unit, but also the thoughts of trying to do in-situ treatment. But that, again, is much further down the road.

Yeah, that's a logistical financial analysis in terms of where is it better to do it. But I applaud your work on this.

Well, of all the technologies we've ever developed, I've never seen one that has such broad potential applications on so many markets. So we're drowning in opportunity.

And I think the... tracking, given what Trump wants to do, is going to only increase. So you guys are in a really good position. If you have any stuff you could send out so you could periodically keep me in the loop, I might be able to help you with some of my contacts. No, I sure will.

Thanks, Bob.

Great. Thank you.

Thank you. The next question is coming from Ron Richards. Ron is a private investor. Ron, your line is live.

Hi. I saw an article that came out yesterday that says the DOE is planning large-scale grouting at Hanford, and DOE managers at the Hanford site in Washington State are talking with commercial providers on whether grouting should be done locally, and they would make a decision by the end of the year. I was wondering if you had any comment on that article.

Well, Ryan, yes. I just saw that this morning. And DOE had an industry day in February in Richland, right near the Hanford facility, followed by a tour of the facility. There were four or five participants in the industry day, and then each participant had an opportunity to address the number of questions in a private session, presentation, as well as present your position. We presented ours as the only existing facility that could support this. We were able to address the fact that we could reach a 3 million gallon a year grouting capability within 24 months of notice proceed. In other words, right now we can do 400,000 gallons a day, excuse me, 400,000 gallons a year with current capacity and current permits. We'd have to modify our permit and add some additional capacity for storage and that type of thing, which would take about 24 months. So DOE is moving forward with the grouting program. As we've mentioned in prior calls, they are committed to doing 22 tanks to retrieve those tanks and then grout them commercially and dispose of them off-site, and to have all those 22 tanks done by 2040. So 2040 seems like a long ways away, but 15 years, when you look at 3 million gallons a year, that's a lot of capacity. We still feel like we're the strongest candidate. The alternatives are to build a facility on-site, which DOE has estimated to be in the hundreds of millions of dollars and take quite a long time to get through the permitting, as well as the construction by a federal government. And the other alternative is to ship the untreated liquid waste out of state to Texas and Utah. So, again, we still feel very strongly that based on this administration's common sense approach to permitting execution of projects that our existing facility right outside the gate of Hanford will be the optimal one to move forward with.

Okay. All right. Thanks for the call on that.

You bet. Thank you, Ron.

Thank you. And the next question is coming from Stephen Fine from SoFine LLC. Stephen, your line is live.

Hi, guys. How are you?

Good morning, Steve.

Hi. You know, one point is on the other tanks where they would put it into containers. What's the expectation of when that would happen? I'm talking in Hanford.

Yeah. That's a difficult question, Steve. Right now, they're looking like a couple years to get through some regulatory documents, some NEPA documents, those kinds of things. But DOE, again, under this new contract, is looking to accelerate that. Right now, they haven't published an updated schedule in regards to grouting. The last time it was published was the Hanford Systems 10 document, which had a January 26 date in it. There's no way they're going to meet that. But in the next couple of years, there's an opportunity to begin this. And if it started out slowly, it could happen quickly, and it could get rolling quickly. But there's some regulatory requirements that the DOE has to get through and some discussions with some negotiations with the regulators as well in regards to permitting. But right now, I would estimate that they'll be loading these totes from the TISCR, the new TISCR, what they call the WARMS, W-A-R-M, And that's just a larger scale system to remove zygnesium and strontium, excuse me, and cesium so that they can transport it safely. And that will take a couple of years as well. So I wouldn't expect them to be transporting much along this line before 27th.

with the dilution of the tanks at Hanford, I mean, we're talking, what, 100 million to 200 million gallons that has to be processed versus the 56 million gallons that are there?

That's a real difficult calculation, Steve. Every tank is going to be different. But generally, yes. It's going to take two or three gallons of liquid to get every gallon out of the tanks. So generally, yes. That's right. But if you look at it that way, again, just off the cuff, 150 million gallons of actual waste would have to be treated between the DF law program and the grouting program and the high-level waste program. So, yeah, it takes a couple gallons to get every gallon out.

So where I'm going with that is that presuming, let's say it took them 8 to 10 years to build a grouting plan out there, they'd still need you. because there's so much. My last question is on PFAS, which is very, very exciting. Now, PFAS, let me make the analogy. I mean, obviously, I've been sitting here since 16, watching the paradigm of vitrification versus grouting, if you will. The PFAS does not have that it's an additive thing. In other words, it adds to the present situation. It's not in opposition to the existing way they do it now. It's totally new, and is it being accepted that way by your competitors? I'm not sure your question, Steve, as far as... Well, my question is, are your competitors accepting the PFAS as totally novel, totally additive, and something that would enhance their operations as opposed to it being a threat?

We're seeing a very... Our competitors are not our normal competitors. If you look at some of the companies that are starting up with technologies... they're either adopting supercritical water oxidation, which has been around a long time, or they have something new that they're developing and they're companies you've never heard of. And so we're not seeing the typical competitors we have with Energy Solutions or WCS and radioactive waste management business spending a lot of money on this. You do see Clean Harbors with their incinerator, and a few similar to that. But we're not seeing people looking at a really large swath of economical, high-volume ability to treat high-concentration waste. Now, what you are seeing is several firms building systems that can concentrate PFAS in liquids, which is important. That's something we don't do. So, in other words, A leachate that comes out of a landfill that might generate 100,000 gallons a day of water coming off the leachate that's PFAS contaminated. What they have capabilities of doing is concentrating those 100,000 gallons to 1,000 gallons in a matter of a day. It doesn't destroy it. Those are the clients that we're chasing right now. The companies that are doing the concentration who treat large quantities of water, but they're generating theoretically 1,000 gallons a day of high-concentrate PFAS liquids that we could sustainably treat for them on a regular basis. And then after you treat it, I'm sorry. Yeah, after we treat it.

After you treat it, where does it go?

It's viewed as an industrial wastewater. So it's not a hazardous waste. and it can be disposed of or deep well injected or sent to a landfill.

Thank you. Thanks.

Thank you. There are no other questions in queue at this time. I would now like to hand the call back to the Permafix management team for closing remarks.

Okay. Thank you. Thanks. As we move forward in 2025, we remain focused on executing our strategic initiatives. driving our operational efficiencies and expanding our market presence, the improvement in our backlog, the continued ramp-up of critical projects, and the advancements of our PFAS technology position as well for the long-term success that were planned. Despite broader budget uncertainties, we are confident that our core business remains resilient and well aligned with DOE and DOD priorities, and we appreciate the support of our shareholders and look forward to providing further updates on our progress throughout the year. Thank you for joining us today.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.