Perma-Fix Environmental Services, Inc.

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

Thank you, Jenny. Good morning, everyone, and welcome to Permafix Environmental Services' fourth quarter and year-end 2025 conference call. On the call with us this morning, Mark Duff, President and CEO, Dr. Lou Santafanti, Executive Vice President of Strategic Initiatives, and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing fourth quarter and 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 includes certain non-GAAP financial measures. All statements on this conference call, other than statements 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 the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. I'd now like to turn the call over to Mark Duff. Please go ahead, Mark.

All right. Thanks, David. And good morning, everyone, and thank you for joining us today. 2025 was an important year for Permafix as we focused on strengthening our operational foundation and positioning the company for the next phase of growth tied to the Department of Energy's Hanford cleanup mission. For the full year, revenue totaled approximately $61.7 million, reflecting stronger performance from in our treatment segment and improving waste volumes across several of our treatment facilities. While the timing of certain government programs affected activity levels during the year, we made significant progress preparing our facilities, workforce, and infrastructure to support the increased waste volumes expected as the Direct Feed Low Activity Waste, or DFLAW, program transitions into its operational phase. Throughout the year, we also made targeted investments in personnel, infrastructure, and plant capabilities to ensure we're fully prepared to support the next phase of activity at Hanford and across other DOE cleanup programs. As many of you know, the DF Law Program and the Hanford Tank Waste Program represents one of the most significant environmental remediation efforts currently underway in the United States. And we believe Permafix is uniquely positioned to support this mission given our specialized treatment capabilities and our long history of supporting DOE waste management programs. One of the most significant milestones in the year was the renewal of the permit for our Permafix Northwest facility. This permit significantly expands our permitted processing capacity to approximately 1.2 million gallons of liquid mixed waste annually, effectively tripling our liquid processing capacity, and also authorizes treatment of up to 175,000 tons of waste through macroencapsulation annually. Combined with our investments in automation, facility upgrades, and workforce expansion, these improvements meaningfully strengthen the role Permafix Northwest can play in support of multiple Hanford-related waste streams and other DOE mission objectives as activity ramps in the coming quarters. In a recent press release, DOE announced the need to extend the DFLAW hot commissioning phase. However, waste is expected to be received through the DFLAW liquid waste treatment processes beginning in May. at our Northwest facility, with dry waste expected to be received in April. The liquid waste streams are anticipated to grow above original estimates by as much as 20 percent as described by DOE based on changes made in the process flow, which will include grouting a portion of the effluent waste instead of using the effluent ventrication processes as originally designed. Irrigatory supplemental analysis is under review. That includes using Permafix Northwest grouting capacity to treat the effluent to enhance production levels at the DFLAW facility. The DFLAW facility has processed about 50,000 gallons of tank waste through February, and the melters remain hot, which produces steam, resulting in generation of waste to be included as effluent to Permafix Northwest. For investors trying to better frame the timing of the DFLAW opportunity, DOE planning documents indicate the system is expected to ramp progressively through a hot commissioning beginning, which began in October of 2025. And within 12 to 18 months of that start date, we plan to reach an operational phase at approximately 40% capacity before increasing towards 80% capacity as additional systems come online. And that's required to be done within three years based on the tripartite agreement at Hanford. We view this as an important indicator of the size and durability of the opportunity in front of us while also recognizing the exact pace of that ramp remains completely dependent on DOE execution and site operating conditions. Initial estimates regarding revenue potentials remain at about $1 to $2 million per month beginning in Q2 and ramping up through the year. At a recent waste management conference in March, DOE leadership said specifically addressed the importance of implementing a grouting program to supplement DF law towards meeting the Department's goals for achieving tank closures by 2040. DOE stated that this program is working towards treating up to 200 million gallons of waste by 2040 from the Hanford tanks through the DF law program and supplemented by the grouting program to be initiated in 2026. The number has grown from the original 56 million gallons estimated based on DOE expectations due to the fact that they'll be generating one to three gallons of wastewater from each gallon retrieved due to the need to add liquids to the tank to retrieve the waste. Over the past several months, Permafix Northwest has continued to make significant investments in automation and information systems and personnel training to ensure the facility can operate efficiently at high throughput levels and meet or exceed expected production rates as a broader range of waste streams begin to arrive. The Hanford remediation programs are expected to generate sustainable waste streams over time, which we believe can create consistent long-term treatment demand and recurring activity for our facilities. In addition to supporting the FLAW program, we expect to participate in several other Hanford-related waste streams and site programs that will generate additional treatment demand over time. These increases in receipts include providing solidification treatment support to high-volume contaminated water, from the Hanford site, as well as increasing our transuranic waste processing program by 100% beginning this month, supported by additional shifts at the Permafix Northwest facility. As waste receipts increase, we expect to utilize this expanded capacity to support a growing volume of treatment activity tied to both Hanford Mission and other DOE programs. Operationally, our treatment segments delivered meaningful improvement during the year. We saw higher waste volumes, improved plant through-foot, and stronger waste mix, which together drove significant year-over-year growth in treatment revenue. As a result, treatment revenue increased approximately 29 percent year-over-year, reflecting both higher activity levels and stronger pricing dynamics associated with the waste streams we processed. Importantly, our treatment backlog increased by approximately 51 percent year-over-year, to approximately 1.9 million in revenue, providing improved visibility as we enter 2026. This backlog growth reflects increasing demand for our specialized treatment capabilities across both government and commercial waste streams. Another area of progress during the year was international activity. Revenue from foreign entities increased approximately 163% year-over-year to approximately 6.4 million reflecting growing global demand for our specialized waste treatment services. Our international markets continue to represent an attractive growth opportunity for us as many countries face similar challenges related to complex nuclear and hazardous waste management, and we continue to see an expanding pipeline of potential treatment projects in Canada and other international markets. Turning to projectivity more broadly, we have seen a number of encouraging developments over the past several months that we believe support our growth outlook for 2026. These include opportunities tied to soil sorting work for a commercial uranium mine client, additional treatment work related to Canada and other international markets, weapons production-related waste treatment programs, and remediation work supporting a major university laboratory environment. Some of these opportunities are already moving into execution, while others remain in final award and startup phases, and together they reinforce our confidence in improving activity as we move through the year. We also want to set expectations appropriately for the first quarter. While Permafix does not typically provide formal guidance, it's important to recognize that factors are expected to make the first quarter softer than the stronger activity we tend to expect beginning for the second quarter. These factors include recent delays in the DF law effluent receipts, which shifted expected waste receipts out by several months, also normal seasonal weaknesses in field activity during January and February, and ongoing efforts at Permafix Northwest to process stored waste to prepare all of our resources for the increase in Hanford-related activity expected later in the coming months. While the Q1 numbers are not finalized, losses in Q1 will likely exceed $4 million in negative EBITDA on about $13 million in revenue. Despite those near-term impacts, we've seen stronger activity in March and believe the second quarter should represent an inflection point as additional waste receipts and project activity begin to ramp. The focus on stored waste I mentioned has resulted in timing related shift in revenues from Q1 to Q2 due to applicable revenue recognition rules resulting in a movement of approximately $2 million in revenue generated at Permavix Northwest to be recognized in Q2 while they're actually processed in Q1. We also continued advancing the development and commercialization of our PFAS destruction technology. During the quarter, our engineering team focused on completing construction and installation of our new Generation 2 2.0 PFAS destruction system at our Oak Ridge facility. The upgraded system is designed to increase our PFAS destruction capacity by up to three times our current rate while incorporating engineering improvements intended to reduce operating costs and improve reliability and production rates. PFAS continues to PFAS contamination continues to receive increasing regulatory and environmental attention worldwide, and we believe technology is capable of permanently destroying these compounds will play an important role in the future remediation efforts. We also continue to see strong interest in our technology as an alternative to incineration, with our PFAS permafast system providing permanent destruction of PFAS compounds at a lower total cost while avoiding air emissions. We believe the ability to permanently destroy PFAS compounds and eliminate long-term environmental liability represents a compelling advantage for our customers evaluating alternatives to traditional disposal methods. Over the past several months, we've secured several field projects supporting PFAS remediation at regional airports and continue to see additional airport-related opportunities currently moving through procurement processes. More broadly, we're continuing to develop strategic relationships with companies involved in PFAS remediation and and AFFF removal as we work to expand the deployment of our technology across both government and commercial markets. Taken together, we believe these developments position our PFAS platform to support increasing demand for cost-effective, permanent PFAS destruction solutions as remediation activities continue to expand. In our services segment, revenue declined during the year primarily due to the timing of project mobilizations and procurement cycles, including delays earlier in the year associated with the transition to the new administration and related policy adjustments. The partial federal government shutdown in October also impacted procurement for timing of government-related customers. In addition, we've seen the normal seasonal timing efforts of weather and delayed project mobilizations during the first quarter. Importantly, our services business remains project-based, and therefore quarterly activity levels can vary depending on project timing, and scopes. Nevertheless, we continue to see opportunities in this segment tied to nuclear services, decommissioning work, and government remediation programs, and we believe the progress we've made during the year positions us well as activity levels increase. In fact, I'm pleased to report we've won over $30 million in new services backlog and submitted over $40 million in new bids just during Q1. We look forward to providing further updates on our bid pipeline in the future. Finally, I want to highlight what we believe is one of the most significant long-term opportunities in front of the company. In December, the Hanford tank contractor issued an RFP tied to the tri-party agreement to retrieve 22 tanks over approximately the next 12 years for commercial grouting and off-site disposition of the waste as part of a long-term remediation effort tied to the retrieval and stabilization of tank waste at the Hanford site. The RFP estimated that this contract will begin in January of 2018 for a volume of tank waste up to 50 million gallons to be grouted at commercial facilities. Permavix Northwest is exceptionally well positioned for this opportunity, given its location within a mile of the Hanford site, its current permitting profile, and its expanding processing capability currently available. While this opportunity is not expected to begin until later in the development cycle, we believe it underscores the scale of the long-term duration of Hanford-related work and is now taking shape and that strategic advantage permits can provide and is recognized by DOE. So when we step back and we look at the broader picture, we see the recent delays in DF law effluent receipts from hot commission activities as relatively modest in relation to the size of the opportunities in front of us. Between the DF law ramp, additional Hanford-related waste streams, the grouting program now in development for up to 200 million gallons of waste, to be treated, expanding international work, a growing treatment backlog, and advancing PFAS and remediation opportunities. We believe the opportunity for Permafix to deliver meaningful growth and improved profitability beginning in the second quarter and continuing into the coming years has never been stronger. Thank you, and I'll now turn the call over to Ben for the financial discussion.