Perma-Fix Environmental Services, Inc.

Good morning everyone and welcome to the Permafix fiscal third quarter 2025 earnings conference call. At this time all participants have been placed on a listen-only mode and the floor will be open for questions following the presentation. If anyone should require operator assistance during the conference please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, David Waldman of Crescendo Communications. David, the floor is yours.

Thank you, Jenny. Good morning, everyone. Welcome to Permafix Environmental Services' third quarter 2025 conference call. On the call with us this morning are Mark Duff, President and CEO, Dr. Lou Senefani, Executive Vice President of Strategic Initiatives, and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing third quarter 2025 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 and 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 of 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 related after the date hereof that bear upon forward-looking statements. In addition, today's discussion will include references to non-GAAP measures. Permafix believes that such information provides an additional measurement and consistent historical comparison of its performance, a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures available in today's news release on our website. I'd now like to turn the call over to Mark Duff. Please go ahead, Mark.

All right. Thanks, David. Good morning, everyone, and thank you for joining us today. We're pleased to report another quarter of solid financial and operational progress for Permafix, a revenue increase to $16.5 million compared to $16.8 million in the same period last year, while gross profit more than doubled to $2.6 million up from $1.3 million a year ago. Gross margin expanded to 14.6 percent from 7.9 percent, driven primarily by higher waste volumes and a more favorable mix within our treatment operations, partially offset by increased fixed cost. Gross margin also increased by 38% from Q2, reflecting continued operational progress and a stronger overall mix. We also achieved a meaningful improvement in EBITDA versus the prior quarter, reflecting stronger throughput and continued execution discipline. Overall, these results demonstrate consistent progress in margin expansion, backlog growth, and positioning Permafix for long-term sustainable growth across our treatment, PFAS, and nuclear services programs. Our treatment segment continued to deliver strong performance. Segment revenue increased 45% year-over-year to $13.1 million, up from $9.1 million in Q3 of 24. While segment gross margin improved, to 17.3% from 4.5%. The improvement was driven up by higher waste volumes, higher input at our plants, and solid execution across both commercial and DOE projects. Waste sales totaled $14.6 million, up from $8.4 million in the same period last year, a 74% increase. Our treatment backlog ended the quarter at $15.4 million, up from $7.9 million a year ago, providing a strong visibility through year-end and into 2026. Automation, digital scheduling, and plan optimization initiatives are all improving productivity and throughput while maintaining safety performance overall. We're now realizing the full benefit of these investments, contributing to higher throughput and sequential margin improvement. We also continue to support international waste shipments, which remain on schedule and are expected to continue into the first half of 2026, adding backlog, stability, and revenue diversity. We continue to process waste streams from Europe and North America and are evaluating new shipment requests tied to upcoming 2026 European Union programs. Turning to Hanford, this is one of the most significant and long-term growth opportunities in our company's history. The Department of Energy's direct-feed low-activity waste facility, also known as DFLAW, initiated hot commissioning in early October ahead of the October 15 tripartite agreement milestone. MELTA-1 is now converting tank waste into stable glass, marking a major milestone in DOE's environmental cleanup mission. Under DOE's record decision for the Hanford DFLAW program, Permafix Northwest is the designated commercial treatment pathway for secondary waste streams generated during the vitrification operations. These include processed liquids and solid residues that require off-site treatment at licensed facilities. This designation establishes the opportunity for a multi-decade, high-volume revenue storm fix as DFLAW meets the objectives for the cleanup of Hanford over the next several decades. We expect to begin receiving effluent waste shipments from DFLAW later in Q4, early Q1 of 2026, following DOE's initial production phase and associated waste characterization. Although DOE's tri-party agreement allows up to three years to reach design capacity for throughput, internal DOE goals indicate an earlier ramp-up, and PermFix Northwest is fully prepared to meet that. Earlier this year, we completed the union transition under our UA local 598 agreement in the Tri-Cities region for our Permafix Northwest plan. This has improved labor stability, increased hiring efficiency, and allows multi-shift operations to meet DOE throughput requirements while maintaining excellent safety performance. Taken together, the Record of Decision Designation, DOE progress, facility upgrades, and a workforce stability position puts Permafix in a position as a critical commercial link in the DOE's waste treatment chain. a role that provides long-term recurring revenue as DOE's cleanup mission advances. Our PFAS destruction initiative continues to advance both technically and commercially. At our Florida facility, the first-generation permafast system operated reliably through the quarter, achieving complete destruction of PFAS compounds at a 10% to 20% cost advantage to incineration and with zero air emissions. System performance improved month over month following Q3 upgrades and increased throughout throughput.

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