Perma-Fix Environmental Services, Inc.

Good morning and welcome to the Permafix Fiscal Third Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. And we will open the floor for your questions after the presentation. If you wish to join the queue to ask a question at any time, you can press star 1. Should you wish to remove yourself from the queue, please press star 2. It is now my pleasure to turn the floor over to your host, David Waldman, Investor Relations, The Floor is Yours.

Thank you. Good morning, everyone, and welcome to Permafix Environmental Services' third quarter 2026 conference call. On the call with us this morning are Mark Duff, President and CEO, Dr. Louis Centofanti, Executive Vice President of Strategic Initiatives, and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing third quarter 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 Crescendo Communications has been the meeting of the Private Securities Litigation Reform Act of 1995 and includes certain non-GAAP financial measures. All statements on this conference call are then 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 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, David. Thank you, and good morning, everyone. Thank you for joining us. Our third quarter results improved meaningfully from the first half of the year. and we continue to make significant progress on the objectives that we believe will carry Permafix into the growth we've been planning for many years now. Revenue increased 39% from our second quarter to $17.9 million and consolidated gross profit returned to positive territory. Treatment backlog grew approximately 25% during the quarter to $19.6 million, which is up approximately 65% from the end of 2025. While our net loss reduced from the second quarter, we did not reach Our goal of breaking even this quarter and several factors held us back. The largest was a Hanford-related waste stream that we received through the second and third quarters. The customer directed changes in the treatment protocols for that stream, which required performance testing and final approvals. Those approvals were not provided until late August, and implementing the changes meant we didn't reach full operations until September. As a result, revenue from the waste stream was pushed out of the quarter and we expect to recognize it over the next few months. Second, we took scheduled downtime during the quarter to complete maintenance and upgrades on the thermal treatment systems at our Florida and Kingston, Tennessee facilities. That work was completed in September, and the systems are now supporting the large backlog of waste receipts we built over the summer. Third, receipts of liquid and solid waste shipments from DFLAW have been delayed, primarily due to the Hanford Vitification Plant's transition from construction and commissioning into operations. We've also made a significant change to the pricing structure in our treatment segment. Over the past several years, our costs have risen, particularly for labor, technology upgrades, and the replacement of equipment needed to support our safety and performance goals at each facility. We began implementing price increases in August. The increases on our commercial and our government waste streams began taking effect late in the third quarter, with complete deployment in October. We expect these increases to favorably impact our treatment segment revenue and margins. The new pricing is beginning to be reflected in our new backlog, and we're encouraged that our customers have been supportive of the changes, which allow us to continue providing the level of service and performance they expect. Turning to Hanford, Permafix Northwest has been receiving liquid effluent from DOE's DF Law facility since the start of the third quarter, and we're grouting that effluent today. We've also begun receiving smaller quantities of dry waste from DFLOL operations. We expect both streams to increase as DFLOL ramps up to higher production levels in the coming months, and we expect dry waste receipts to grow further as operations of the plant transitions from the construction contractor to the operations contractor to the fourth quarter and into the first quarter next year. Total DFLOL effluent volumes are still not known with precision as the plant continues to increase production to approximately 20%. by the end of 26. But we expect our receipts to increase roughly in line with the flow of production levels throughout the next year. We view this as a long-term role for Permafix Northwest. IDWIS 2023 amended record of decision identified Permafix Northwest to treat effluent waste from the flow operations estimated approximately 8,300 cubic meters a year on an interim basis expected to last approximately 10 years. In August, H2C awarded us one of three master IDIQ subcontracts for the treatment and disposal of pre-treated liquid mixed waste, low-level waste, from the Hanford site. Task scores may be received from January 1 of 27 through December 31 of 2041. The procurement provides for a maximum cumulative quantity of 50 million gallons and a maximum cumulative value of approximately $4.4 billion, which are ceilings shared among the three subcontract holders. We anticipate receiving initial task order requests beginning this quarter to support the ongoing grouting of the effluent at our Permafix Northwest facility. Of the three subcontract holders, Permafix Northwest is the only one with a permitted facility located adjacent to the Hanford site, which allows us to grout and stabilize the waste in Richland and ship it as a solid by rail to a licensed facility outside of Washington. The other two subcontract holders would need to ship the waste as a liquid in smaller loads over highways for treatment of their waste at their own disposal sites. We continue to invest in PermFix Northwest during this quarter, including the purchase of an additional mixer and supporting equipment to increase reliability and production levels for the growing DFL volumes and our other routing initiatives. We expect that system to be installed and operable by the first quarter of 2027. This upgrade is in addition to the purchase of two larger mixtures that have been ordered, which will increase our total capacity for grouting to over 10 million gallons per year. Both upgrades must be supported by permit modifications, which are currently underway with the Washington State Department of Ecology. We also want to update you on the East Area. In August, DOE submitted Class II and Class III permit mods requested to Washington State Department of Ecology tied to its plan to grout pre-treated tank waste from the AP-106 tank, which included a six-day public comment period. On October 8th, Ecology sent DOE letters requesting additional information Ecology needs from DOE to continue its review. Letters like these are typical when state regulators review permit modification requests, and Ecology said it remains committed to working with DOE to advance cleanup progress. The letters relate to DOE's request for the AP-106 waste and do not address the DF law waste streams we're receiving today or our own permit modification to expand grouting capacity at PermFix Northwest. DOE has not formally changed its prior schedule for east area shipments beginning in the fourth quarter of this year, but we believe the time needed to respond to ecology could delay initial receipts by several months. While DOE works through the permitting needed, to begin grouting 200 East Area Tank Waste. It continues to move its glass plus grout strategy forward. On October 30th, DOE announced that it broke ground on the Advanced Modular Pretreatment System, or AMPS, at Hanford. According to DOE, AMPS will be able to pretreat 3.6 million gallons of tank waste a year, three times the capacity of today's systems. That's before the waste is certified either at DF law or to be grouted. The H2C Master IDIQ subcontracts cover the treatment and disposal of this type of pre-treated waste, and DOE projects that the Glass Plus Grout strategy will complete the 200 East Low Activity Waste Mission 12 years sooner, by 2039 instead of 2051, saving taxpayers about $12 billion. And DOE has stated in public meetings that the AMPS is scheduled to be online in early 2028. Our strategy at Permix Northwest is to have permanent capacity in place to meet the total needs of DOE's Hanford Grouting and DF Law programs, which we believe offers the most economical and safest solution with the lowest environmental risk to the community. The 200 West Area is the largest and longer-term opportunity. DOE's October 2025 amended Record of Decision covers approximately 32 million gallons of West Area tank waste, from 22 tanks to be retrieved and grouted by 2040. And DBS notified Ecology that its near-term approach for that waste is to use off-site commercial treatment. Our master IDIQ subcontract position us to compete for that work under the task order request. To serve it, Permix Northwest continues to work with Ecology to expand our grouting permit capacity of 1.2 million gallons a year to levels that would support DOE's objectives for both the East and West Tank Farms. We're advancing the final design and procurement of the facility upgrades needed for that expansion capacity, which we currently expect to be complete in 2027 or late-27, subject to regulatory approvals. Turning to nuclear services, revenue grew 46% year-over-year to $6.3 million driven by projects awarded since the beginning of the year, including the approximately $24 million and the National Laboratory that we announced in the first quarter. Services gross margins improved to 12.2% from 6.7% and the segment generated operating income of approximately $200,000 compared with an operating loss of approximately $460,000 in the third quarter of last year. Monthly services revenue continued to grow through a steady flow of small rewards during the quarter, which is keeping our staff highly utilized and supporting a stronger and the rest of our staff. We have a backlog that extends through the second quarter of 2027. Customer-related delays pushed mobilization of our Los Alamos project to later in September, and we have since begun operations in the field at that project. Our other projects are performing to expectations. Much of our services work that is ongoing now also involves waste retrieval, which generates materials for our treatment facilities. On PFAS, the third quarter brought an increase with the first half of the year, including several wins for airport fire suppression system change-outs. States are also becoming more definitive on regulations. Florida is one of several states that have enacted legislation phasing out PFAS-containing firefighting phones subject to specified expectations with phase-outs over the next three years and civil penalties for noncompliance. These state requirements are expected to accelerate demand for PFAS destruction in the coming several quarters. Our Gen 2 system is primarily completed and is beginning commissioning this quarter, and we expect it to be fully operational in the first half of 2027. Once deployed, we expect it to triple our PFAS processing capacity. With that, I'll turn the call over to Ben to take you through the financials in detail. Ben?