PESI - NASDAQ

Greetings. Welcome to the Perma-Fix Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, David Waldman, Investor Relations at Perma-Fix. You may begin.

Thank you, Paul. Good morning, everyone and welcome to Perma-Fix Environmental Services second quarter 2023 conference call. On the call with us this morning are Mark Duff, President and CEO; Dr. Lou Centofanti, Executive Vice President of Strategic Initiatives; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing second quarter 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 are 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 revision 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. Perma-Fix 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. I'm pleased to report that we are back on a solid growth trajectory and have returned to profitability following the impact of the COVID-19 pandemic. We continue to realize improvements in our performance and are regaining the momentum we had prior to the pandemic. As evidence of our turnaround, we achieved a 28.7% increase in revenue to $25 million for the second quarter of '23 versus 19.5% for the same period last year. Importantly, we've also achieved sequential growth of revenue to 24.5% compared to the first quarter of '23. Revenue increased both year-over-year and sequentially. With our Treatment and Services Segment together, the growth in revenue reflects the initiation of several new projects won in the early part of '23 that support the backlog in both segments and provide growth opportunities into '24. In addition to our revenue growth, gross profit increased by 56.6% and gross margin increased from 14.8% to 18%. Within the Services Segment, we were recently awarded 2 new contracts that are expected to start in the third quarter of '23 and we believe further -- and will further expand our backlog. The combined value of these awards is estimated to be over $8 million for the next few years but are front-loaded over the next 18 months with opportunities for expansion along the way. These awards include a task order project from the U.S. Army Corps of Engineers in support of their Facilities Reduction Program, as well as an award as a team subcontractor in support of the Los Alamos National Lab for Department of Energy. Both of these awards leverage our core competencies, including characterization, remediation and disposition of hazardous materials and waste management. We also commenced work on awards granted earlier this year that have now begun to generate revenue and have helped to offset the Princeton and McKee projects which will begin to wind down in the fourth quarter. We also continue to develop new proposals and have realized significant increases in activity within both segments, including the U.S. Navy and the U.S. Army Corps of Engineers as well as several activities at DOE sites and ongoing initiatives with our international and commercial clients. Within our Treatment Segment, we witnessed an increase in volume with strong waste receipts during the second quarter which provides us a solid backlog for our plants and improved visibility for the balance of '23. This was a result of increased waste shipments from DOE to our EWOC facility here in Oak Ridge throughout the second quarter, along with steady sales from our industrial waste programs as well. We expect to a see steady improvement in waste receipts and an increase in project work from existing contracts, new contracts and bids submitted in both segments that are still waiting for award announcements. At the same time, we're rapidly advancing several initiatives that we believe have the potential to significantly enhance our revenues and our long-term backlog. Despite a few delays in award announcements, these growth initiatives have remained on track. The $3 billion DOE operations and site mission support contract referred to simply as the OSMS is tied to the recent Portsmouth D&D award and is due to be announced any day. The ITDC contract -- tank contract closure -- excuse me, the ITDC tank closure contract, have seen quite an unusual procurement cycle, including an award to our competitor with a later determination ruling that the awardee was ineligible for the competition due to non-compliance with the government's systems for award management requirements, commonly referred to as the SAM.gov system. As a result, DOE has 2 primary options which could include awarding a project to our team or rebidding the contract for a third time through a new procurement. We anticipate learning more about the DOE decision for this initiative in the third quarter of this year. The JRC award in Ispra, Italy is due to be announced in the third quarter of '23, soon after the European folks complete their August holidays and get back to work which we're anticipating, I think, something in the September time frame. Receipt of this award will provide a foundation for long-term growth within the European markets and open several opportunities to support existing IDIQ contracts held by Perma-Fix in the U.K. and strengthen our relationships for waste treatment in both Germany and Croatia. These opportunities are expected to provide sustained receipts beginning in the next several quarters providing a combined annual revenues estimated in the $10 million to $20 million range. The Test Bed Initiative or TBI program, also known as the low-level waste off-site disposition project in support of the DOE Hanford tank waste disposition mission continues to progress. The submittal of the RD&D permit from DOE to the state of Washington regulators was completed in the second quarter. And following their upcoming public comment period and the approval by the state will allow DOE to begin to extract the 2,000 gallons of waste from the tanks for the Phase 2 grounding demonstration anticipated to be later this year. The TBI program is recognized by DOE as a potential supplement to the vitrification mission to provide a solution for the 59 million gallons of tank waste stored on the Hanford site. Perma-Fix maintains these grounding capabilities today in our Perma-Fix Northwest facility in Richland which is permitted and outfitted to safely and compliantly grout up to 30,000 gallons a month with the ability to expand that capacity to well over 1 million gallons annually, while dramatically reducing cost, risk and schedule as compared to the vitrification program alone. It's important to note that our Perma-Fix Northwest facility offers the local or regional option for grouting as the only the only one -- only option for regional or local grouting for tank waste versus other options to ship untreated waste out of state for grouting and disposal which is defined as the higher risk alternative in the recently approved environmental assessment and the recent WIR documents. In the meantime, we've progressed over the past two quarters in our strategy to maximize the value of our waste treatment offering in support of the Department of Energy's Hanford closure mission. Towards that end, we recently entered into an alliance with the Local 598 Pipefitters Union in the Tri-City to provide a labor support for a grouting offering for the tank program. We believe this partnership increases the value of our offering to the DOE through our labor availability and our labor stability for the grouting program when it reaches an operational level, while providing a treatment option that can accelerate the reduction of the environmental liability in the region. We consider this as a big opportunity with the Local 598 as the waste receipts increased on all of our Hanford waste programs, including the DFLAW program which appears to be on track for the late 2024 start-up of the vitrification plan. It's worth noting that the DFLAW facility achieved a major milestone last week when it successfully heated to 2,100 degrees Fahrenheit in its testing phase. The waste that will be produced from the DFLAW facility is estimated by DOE to be over 8,000 cubic meters annually and will begin to be received at Perma-Fix facilities upon a hot start-up of the plant, like I said, currently projected for late 2024. As I've mentioned in the past, the volume of this waste would more than double the production of all our plants combined on an annual basis. Overall, we continue to see slower than usual procurement cycles and difficulties with government clients in getting projects awarded despite funding levels that remain unspent. However, the return of workforces across the DOE and other government agencies, we see optimism that these procurements will continue to increase in activity that we saw at levels prior to COVID-19. Turning back to our financials for a moment; EBITDA in the second quarter of '23 improved to an income of $1.5 million compared to a loss of $0.4 million for the same period last year. We also returned to profitability after climbing back from the pandemic over the past 3 years and we achieved a net income of $474,000 in the second quarter of '23 compared to a net loss of $1.4 million in the second quarter of last year. At the same time, we continue to invest in our capabilities and facilities. We have built a solid foundation for growth and a highly scalable infrastructure. As we continue to increase revenues, we expect to benefit from this predictable cash flows from our Services Segment and the high incremental margins within our Treatment Segment. So to wrap up, we remain optimistic that 2023 will realize continued growth in both segments as we expand our market base and develop strategic teams to optimize win probabilities for upcoming procurements. While we continue to realize impacts due to labor shortages, we're heavily focused on increasing productivity and reducing cost to maximize our margins. Our growth strategy includes also expansion of our waste services in Europe and with commercial power generators as well. We believe that we will see a growth in receipts in both these groups in the next few quarters. Overall, we remain confident in our ability to maintain the growth and stability we experienced prior to the pandemic and we're encouraged by the market outlook, given our solid sales pipeline with a number of important contracts expected to be awarded over the next few quarters. On that note, I'll now turn the call over to Ben, who will discuss the financial results in more detail. Ben?

Thank you, Mark. I'll start with revenue. Our revenue -- our total revenue from continuing operations for the second quarter was $25 million compared to last year's second quarter of $19.5 million, an increase of $5.5 million or 28.7%. The increase in revenue was attributable to both our operating segments as our Treatment revenue was up $4.4 million and the Service segment was up 1.1%. The increase in the Treatment Segment was primarily volume related as all our facilities processed more waste and the increase in the Services Segment was driven by both increased project work -- or by increased project work on our two large contracts. Year-to-date through June 30, our '23 revenue increased over prior year by $9.8 million or 27.6%. And again, revenues up compared to prior year at both segments. As with the quarter, high volumes at the waste treatment contributed to the increase in revenue. In the Service segment, the 2 large projects have been in full production for the entire 6 months of '23, while they did not begin full production until close to the second quarter in '22. Looking at gross profit for the quarter, we had $4.5 million compared to $2.9 million in '22. As with revenue, both operating segments contributed to the improved total gross profit of $1.6 million. In the Treatment Segment, higher revenue drove the improvement although there was an offset from the mix of waste for lower margin waste streams as well as higher fixed costs at the plants. Service segment gross profit improved as a result of higher revenue as well as better margins realized on our project work. Again, for 6 months ended June 30, our gross profit was $7.5 million compared to $4.5 million in the prior year. This $3 million improvement was from both segments as the Treatment Segment revenue increase was partially offset by the impact of the higher fixed costs and the lower margin waste mix. In the Service segment, similar to the quarter, increased revenue and improved margin realized on the projects contributed to the higher gross profit. Turning to SG&A, our costs for the quarter were $3.6 million, representing 14.2% of revenue compared to $3.7 million or 18.9% of revenue. Our SG&A costs were lower due to lower audit fees and payroll-related expenses and they were offset by higher expenses related to stock options and higher outside service costs related to financing efforts. For the 6 months ended June 30, our G&A sits at $7 million or 15.6% of revenue compared to $7.1 million or 20.1% of revenue last year. Again, lower audit fees were the main contributor to this small reduction and they were slightly offset by higher outside fees related to financing. Our net income for the quarter was $474,000 compared to last year's net loss of $1.4 million. For 6 months ended June 30, net income sits at $63,000 compared to a net loss last year of $2.8 million in '22. The basic earnings per share for the quarter was $0.04 compared to a loss per share of $0.11 in the prior year and the year-to-date basic income per share is at 0 compared to losses last year of $0.21 per share. EBITDA from continuing operations, as we defined in this morning's press release, is at $1.5 million compared to a loss of $403,000 last year and EBITDA year-to-date stands at $1.7 million compared to a loss of $1.8 million in '22. Turning to a few balance sheet items; our cash on the balance sheet was $4.8 million compared to $1.9 million at year-end which reflects our positive cash from improved operations. Our current receivables and liabilities were up approximately $3.6 million and $3.2 million, respectively, as a result of increased operations and the timing of collections and payments. Our waste backlog for the end of June was $8.9 million which is close to the $9.2 million at year-end and up from $7.2 million a year ago in June of '22. Our total debt at the quarter end was $854,000 which excludes debt issuance costs which is primarily due to our lender PNC Bank. And finally, I'll summarize some cash flow activity for the year. Cash flow from continuing operations provided was $4.8 million, cash used by discontinued operations was $336,000, cash used in investing, continuing operations was $1 million and it's primarily capital spending, cash used in financing was $290,000 which represents our monthly payments on our term and capital loans of $273,000, payments-related finance, leases and liabilities of $118,000 and proceeds from option exercises of $101,000. And then finally, I'm pleased to report that on Monday, July 31, this week, we amended our loan agreement which, among other things, extended the maturity date of our credit facility for an additional 3 years or to May 15, 2027. As part of this amendment, our lender provided a new term loan of $2.5 million which will further support the company's liquidity position and will be used for general working capital needs, facility capital and maintenance. Perma-Fix is now banked with PNC for over 25 years and this extension underscores the strength of this relationship which has endured through many highs and lows. With that, I will now turn the call over to the operator for questions.

[Operator Instructions] The first question today is coming from Howard Brous from Wellington Shields.

First of all, congratulations to all 3 of you on what is a very good quarter. So as a shareholder, I'm rather pleased about that. I've got a few questions that I want to focus on. First, last quarter on the conference call, you mentioned close to near-term opportunities in Slovenia, Croatia, Mexico, Canada, U.K. and Germany. You mentioned a couple of them on the call just before. Have we lost any of those opportunities? That's the first question. And secondly, if not, when would you expect to see some of those awards? And could you talk about the total size of what we're looking at there?

Sure, Howard. No, we have not lost any awards. They have -- they've moved with the U.S. government, they move quite slowly. We'll start with Croatia. We have 2 procurements that we're supporting right now, one for treatment of resins which we're likely going to move into an R&D phase with them on that which will be quite small initially but with an opportunity if technology proves successful to expand. But the other one at Croatia is around a $20 million project that's due to be awarded in the September time frame. The second round of the RFP just came out here and is due, I think, next week. So that is still in play. And we have a very -- an innovative offer for that project and we remain optimistic about it. So that would also impact Q4 if we were successful. The JRC contract I mentioned, obviously, has not been awarded yet. And -- but we did have discussions with the client and they said as soon as they get back from vacation, there should be an announcement. So that's, again, early September. Several other ones are still brewing, particularly Germany. We're working with a broker agency to support the decommissioning of about 12 reactors over there right now. That's moving forward rapidly. We're hoping to be able to -- so supporting that waste treatment process in fourth quarter or Q1 time frame. We do continue to get waste from the German commercial firms that we've been working with for quite some time now on a quarterly basis. And then in the U.K., we're also working on several initiatives there. Again, we still have our agreement with Westinghouse that if we're successful in JRC, that we will move forward with that new plant. We also -- I'm not sure if we ever talked about it but we do have a couple of other IDIQs that we won with the U.K. government for waste treatment and we continue to get task orders out from that to treat the waste over here with a new plant in Springfield with Westinghouse. We'll be able to treat over there. I mean, much, much more competitive. And that IDIQ continues to be active. So lots going on over there; there's a couple of other initiatives that are going on as well in earlier stages but looking for real momentum in the next two quarters over there and big impacts for next year, particularly. And to answer the last part of your question, we anticipate when all these things are clicking, with a couple of these awards that we should be able to assume the $10 million to $20 million a year revenue stream internationally which will ramp up in the next year or two.

Let me continue on. There's been a lot of discussion about the dismantling of the aircraft carrier. I hope I have the right one, Enterprise which is docked in Washington State. And in the process of dismantling the nuclear reactors, they plan on encapsulating them and transferring them to, of course, Hanford -- that magical name. Can you discuss the opportunity there?

Sure, Howard. That's a big one for us. The Enterprise is the next ship slated for decommissioning. They just finished the final EIS. I believe, it has been signed last quarter and the final EIS completion is the trigger to move into procurement. We're expecting the draft RFP to be out in the fourth quarter, early fourth quarter, like October timeframe. That aircraft carrier is actually sitting at the Norfolk naval shipyard in Virginia. I believe it's at the Huntington Ingalls facility there. And we are just completing our team advances for that that we go through and signatures for these agreements are waiting on the draft RFP. It's estimated, Howard, to be in the $800 million to $1 billion -- $800 million to $1 billion of total revenue. I'm not sure what the final RFP is going to look like. And how much risk we have to take that will dictate really how close to $1 billion that project gets. The other exciting thing that we're anticipating is that the RFP will include a 20% small business set aside. The last several that have come out have included that small business set aside. We're expecting this one too as well. And that kind of gives you a sense of where we'll likely be in total revenue for a project like that.

That's quite a large opportunity. Over the last several quarters, we've talked about uranium and the EPA settlement with the Navajo Nation. Where do we stand on that? Because I believe there was a contract 1.5 years ago of $220 million to a consortium that started with a Navajo Nation company and you were involved, Perma-Fix was involved. Where do we stand on that, please?

I probably should have talked about that in the notes, Howard, because that's a really important project for us. We did win a contract with the Abandoned Uranium Mine program through the EPA with -- or Prime, as you said, is a local Navajo firm and a few other teaming partners as well. We mobilized into the Nevajo Nation into Cove, Arizona for the actual first Abandoned Uranium Mine remediation project through that very large program which is funded well over $1 billion right now. And we are in the process of finishing cleaning up that site. It's a quick turn. I want to say a couple of months total. So we've been out there for a few weeks. I was out there last week with our executive vice president and our technical folks to tour. I met with EPA and they're very excited about how our soil-sorting technology is working. It's cleaning up to very, very low levels of radioactivity and meeting expectations. And we're anticipating, though not final but that project will continue to expand and the system we have in place out there middle of nowhere in Arizona will continue to operate beyond that project and move right into the next one. And we're working with EPA to make that happen right now. So that project is going very well. It generates about $1 million a month or portion and the project itself is very well operated and with our teaming partners and very efficient. So EPA was quite supportive and pleased with the project to date and more to come on that as it continues to expand.

Let me address the ITDC contract. There's currently an appeal that's existing. When does that period end? That's the first question. And the second part of it is, assuming that BWXT has lost the contract, is it a fair comment, there's a high likelihood that Atkins gets that award after the appeal period is over? What are your thoughts?

The appeal period -- I should say, we're in an appeal period right now. I'm not sure the exact date, Howard. It was a 60-day period and my recollection was that would take us to like end of next week kind of thing; so in that range. And then DOE -- we'll have -- we'll move forward with their decision process. And as the judge said in the ruling, there's only -- there's basically 2 options to either award -- to make an award to the other team -- and again, there's only 2 teams or move forward with a new procurement. I can't speculate on the probability of any direction they might go. It's really difficult to understand. It's been very, very quiet while they're waiting for this appeal period to be over. But it is the third time -- it would be the third time if they go through a procurement process. There is some urgency associated with what's happening at the site over the next couple of years with the law coming online and the tank program really changing. So we'd like to be optimistic about it but we really have no intel and really no understanding of what DOE is going to do at this point. Hopefully, we'll learn something in the September timeframe.

Let me get to the last, probably the most important question. So the smelters worked for the vitrification plant up to 2,100 degrees and that then leads to the likelihood of that plant starting in end of Q3 2024. Is that a correct comment based on what you're hearing from the Hanford people?

Generally, yes, Howard. The melter has -- the first smelter -- two melters, I understand and they're quite complex piece of equipment. The first one did operate as planned from what we've read and that they're moving forward with the other testing of the other systems associated with that which obviously is a very large complicated facility. But they're making good progress. DOE continues to report in their press releases as they click over milestones that they're on track for the second half of '24, basically a year away and the things are going well. So there's an increasing optimism about their schedule about the facility coming online. Getting that melter operational was a big deal and a big accomplishment by Bechtel and the other contractors along with DOE. So obviously, we're really big fans of that Vit Plant and hope to be able to provide support through our new arrangement or agreement with them that's reflected in the ROD. And right now, we would expect to be hot testing with real waste at the end of '24.

Based on a full operational, can you confirm again that on that basis that for 2025, we still could be looking at just in this one area? Roughly $3 in earnings?

I really I can't address the earnings at this point. There's a lot of variables in this calculation. It seems like a reasonable estimate. But it depends on the mix of waste that we receive, the quantities of each type and that type of thing. I would expect that their estimate is 8,300 cubic meters a year and that would assume full capacity, both melters running full blast for a 12-month period which would likely take a year or two to get to that kind of level. But I do expect this to ramp up to a point where we could definitely tune those numbers and get an understanding of how much capital we have to invest in it which we anticipate to be quite limited at this point. But it seems like a reasonable estimate overall, Howard.

And congratulations, Mark, Ben, Lou. Great quarter.

Thank you.

[Operator Instructions] The next question is coming from Brian Russo from Sidoti.

Just to follow up on the DFLAW facility. Outside of the second melter and the temperature testing, are there any other major milestones that we should be monitoring to make for the DOE to maintain that second half of 2024 at start?

There's a number, Brian. I don't have this in front of me. But sort of with any facility like this, there's a lot of safety systems, the readiness reviews, other milestones like that that will occur as they get closer to next summer. So I would expect that other melter we've tested here in the near term and then they'll start going through their operational readiness milestones and checklists and those types of things and report on those most likely as they are successful. And I would -- I can get to this to you. They should be on their website, at least several of them and there are some agreements in place with the regulators and the DOE in regards to what these milestones are and we can track that along the way. So if they are available at the DOE, I just have to pull them up the website.

Great. And just remind me on the Washington State Ecology permit for the 2,000 gallons. Is that in the -- is there a public comment period that we're currently involved in? And how soon after when that permit is granted to the DOE can the 2,000 gallons be shipped?

Yeah, the permit -- RD&D permit is for -- it gives DOE the ability or approval to extract the waste from the tanks. They came out with questions for DOE, I want to say this past Tuesday. So 2 days ago. In this questions, they had some technical questions in regards to how the waste is going to be extracted and what they're going to do with equipment after it is extracted and that kind of stuff. And said that when DOE provide the response to these questions that they'll go out for public comment and move towards approval. So that public comment has not happened yet. I would speculate that it will be 30 days and it would likely be probably a month from now before we've seen anything, because DOE has got to respond to this question, they got to address them and everything else. And then, DOE would be -- once that approval is completed, DOE could start extracting waste in the early fourth quarter. Once it's extracted, it won't take long to treat it. And once they finish that demonstration, then DOE is in a position to move towards an operational phase which we're hoping will be sometime in '24 period. So again, we're not -- there's not a date or a specific approach associated with the operational phase. It's really DOE will tell you they have a road map that includes going to operational phases with the grounding program. And that's really what we're focused on is that. Obviously, 2,000 gallons is pretty small. It's a demonstration and we're looking forward to the operational phase where we really begin to treat large volumes and make real progress on tank closure. So, again, we're expecting that sometime in late '24.

Okay, great. And will the Richland facility need a mod to do the operational phase which could be a 1 million gallons?

We're set to go with 30,000 gallons a month with our current permit and current facilities. We would have to do a minor mod. And I think to go from 300,000 gallon or -- yeah, 300,000 gallon to a million gallon and we'd not expect a problem doing that. And again, minor capital improvements to get there as well. But that would not be a significant delay in getting that in place to make that jump up if we got to those quantities.

Okay, great. And then, on -- what's the services backlog? You mentioned the treatment backlog but I think services was mark-to-market $30 million on your last call. Just wondering where that stands with the $8 million of new awards in the press release.

Some of that is not in there -- I don't have a current number. Our quarter end number was $22.6 million and that included about 4 of the 8. So probably about $26 million, $27 million of new award.

Okay, great. And then, just on the margins in each segment. Obviously, significant improvements year-over-year. Are you close to what would be considered normalized? The 22.7% of treatment is normalized, maybe a couple of hundred basis points higher to that based on the $100 million of annual run rate revenue and the services which was 16.6%. Is that at or near kind of the normalized margins?

Yes. I think the Services is -- Treatment is probably on the lower end for a reason. The new revenue that we're receiving at our new plant is going to be a little bit lower margin than sort of our core 3 plants. So that probably brought the number down a little bit. When we get into that sweet spot of $100 million a year, I would -- in our regular mix waste, I would have expected a little bit higher but the work we do at the new facility is a little less like the mixed waste treatment. So I think it's a good number and we could see it go up with a little better performance at our other plants.

And then lastly, just on the mix of that $100 million, it is kind of -- are you looking for maybe 60-40 Services, Treatment?

Yes, that's kind of the general, 60-40. Maybe even 55-45 because of the new facility depending on how it does.

The next question is coming from Ross Taylor from ARS Investment Partners.

Just a couple of quick things. One, the DFLAW situation opportunity is in no way really impacted by the unsettled nature of the other contracts?

That's a good question, Ross. The DFLAW operation is tied to a tri-party agreement between DOE, the regulator and EPA. So it is completely different or is not tied to that procurement. So DOE has an obligation to be up and running. I want to say there's a couple of slips because of COVID. I want to say that the milestone is going to say, August of 25, I believe, where there's potential for fines and penalties after that point. So DOE try not to get anywhere close to that. Again, it slipped from December of '23 because of COVID and is a very important milestone that DOE reports to Congress on and to the regulators on a regular basis. So it's not -- it's not tied to a procurement at all.

Okay. And so that -- and that's why you're confident that this is all about getting the melters up and operating. And once they're up and operating, they're going to push this through. They've been working on this for decades. And so that's where you're confident that, that income flow, whether it's $3 or around $3, whatever on a run rate basis. That's where that comes from. Second, Italy and Europe. I noticed some of the choice of words you used in Italy made me feel that you would be more surprised not to get the contract than if you got the contract. Is my read correct?

I hate to speculate on anything to do with procurement, Ross, because crazy things can happen. We've been optimistic for quite some time. The reason we're optimistic, Ross, is the way that it works in Europe is they down-select. So this procurement has been going on for 10 years and it started out with 6 or 7 bidders, maybe 9 and it gets down to 2. So your optimism goes up as you go down and we feel like we're in a good position, a really good position with our team. And I can't say that we've won or that we're more optimistic than we were before but just that we remain optimistic that we should hear in early September.

Okay. Well, we look forward to hearing that. Talking about Europe, it would appear you have a lot of opportunities there, a lot of things to come on. If you win the Italian job, for lack of better phrase, you have your relationship, you're going to build out a facility in the U.K. to treat. In the interim, you're going to treat in the U.S., any business that you get from Europe, be it Croatia, Germany or elsewhere?

Exactly, exactly. That's what we've been doing now is we've been shipping over from Europe to our Northwest facility to the incinerator units we have in Northwest which are very well suited for this kind of work. And it's a little different with out-of-country waste treatment because you have to commit to giving all of the residual back to the host country. And our incinerator units, we call BPUs, are designed to do just that. So we can -- very high-quality take a residual and package it and ship it back to them. And they get the stabilization value out of that as well as the significant size reduction value of about 90% overall for long-term storage over there. So it works well. And it's obviously higher transportation costs and that's what we've cut out if we had the same facility in the U.K. as planned.

So what happens with margins if you're able to move this business from treating it in the U.S. to treating in the U.K.? How big a boost on margins would that be?

Margin percentage will likely be lower because we're sharing those with Westinghouse and the JV that we put together with Westinghouse. So I would anticipate this to go down. It's difficult to really -- with the waste that we know that's in inventory in the U.K. and in Europe, where there's dramatic amounts of waste and inventory at every nuclear facility over there for the most part. And it's just -- it's difficult to say what the margins would be. It's not going to be as good as what we're used to over here but it should be much less. So I would anticipate 50% to 70% margins on the waste treatment over there.

Well, you talk about the number of opportunities and the sizing in the uranium mine, all the uranium mines, like in New Mexico in the Navajo projects. How big are those? How many are they? How long -- now that they're starting, how long do we think they actually will continue to run?

Some unofficial numbers, Ross. There's 500 abandoned uranium mines in the country from what EPA has told us, 250 of those are funded for or slated for remediation. At least $1 billion of funding and close probably closer to $2 billion identified for this. But the contract that we have with our teaming partners is a $225 million IDIQ. So there's 2 other bidders, there are 2 other contingencies -- or excuse me, 2 other consortiums of companies that can bid on the task orders. And the value, that's $225 million which is just about, I want to say, 2 years left on it. And that kind of gives you a sense of the near-term revenue we're talking about between those 3 companies. Their intention is to get rolling in the field. There's enough work to go around for everybody. I'm sure they'll split it up and they'll make sure people stay in the field and keep going because these mines are everywhere. They're painful deal with them; difficult to work, very difficult, very remote, very hot, obviously, dry and difficult conditions. So once you're out there with your team and people, you don't want to keep moving in and out, you want to keep going. So that's our hope there. And that we see this whole program accelerate in visibility and funding and procurement wise, get more task orders out so we can keep going.

And same idea, you guys are currently finishing up a job with the Navy in Virginia. I think actually right next door to the Enterprise, if I recall correctly. And the Navy has obviously the Enterprise but it also has a number of other warships that need to be decommissioned in that. What would you be thinking not just we got obviously upcoming soon, the Enterprise, you wanted to queue on that? Is that kind of the same setup with all these other opportunities that the Navy has? And should we see more than just the Enterprise let out this year?

There's another building that we're bidding on right now, it's due next week I think at the Norfolk Naval Shipyard right next to the ship that we're decommissioning. So there's some other ones, other projects are coming out which reflect a new era with the Navy, where they used to just self-perform all this work, now they're outsourcing it commercially. And that really opens up the market for companies like ours. But to answer your question, the Nimitz is anticipated to be 1 year behind the Enterprise. And the GAO put a report out, I want to say, in '21 that said that there's 48 ships to be decommissioned by the Navy in the next 5 years. I think they kind of lost a couple of years because of COVID. Of those 48 ships, I believe there's about a dozen nuclear ones. So they have a list. And I haven't seen the other names below the Enterprise and the Nimitz. The Nimitz is also an aircraft carrier about the same size or as far as difficulty goes. And we expect the Nimitz to come out right after the Enterprise gets awarded.

Okay. Well, great. Congratulations. It looks to me like what you're really talking about is there's so much opportunity here. We're just sitting on a clock or a calendar front. It's really -- every day that goes by or a day closer to the tremendous earnings power you're talking about being unlocked. It's not really a question of this, it's just a question of can we be patient enough to get done in the next year or so.

That's exactly right, Ross. It's been a world waiting game. COVID has thrown a big wrench, as I've mentioned 100 times into the procurement process and there's a lot of waiting for procurement. Everything is funded or at least not everything of funded but the significant funding out there, a significant unspent funding out there way more than ever. And we anticipate that to continue and the missions are all very well defined. They just got to keep moving with goodness procurements out.

Okay. Well, you're doing a great job at company and it seems like it has really turned the corner and I congratulate you and your team on that.

Great. Thanks, Ross. Appreciate your support.

The next question is coming from Aaron Warwick from Breakout Investors.

I want to take you back on what Ross said on the congratulations and that future certainly looks bright. I wanted to also follow up on something you talked about, just to make it clear because there's been a lot of confusion, I think, among the investor community. But I just want to reiterate. It sounds like regardless of what happens with the DOE's decision as it relates to ITDC, they're under an obligation to get the vitrification plan up and running and therefore, at some point, getting the secondary waste to you guys. Is that accurate?

That's a true statement. Absolutely. The Bechtel has the job right now as a separate contract to get it up through hot testing and then they turn it over to the ITDC winner or something like that. And that's the current approach that could change and they continue to tweak it or add more time to Bechtel or something like that. But a mid-'24 time frame that needs to be -- one would assume that DOE would have a contractor on board to support that turnover once that plant is hot.

Right. That's what I was thinking too that -- so it seems likely they'll get this result without a third bidding process. But even if they do, they're on that time line for August 2025 at the absolute latest.

Yes.

Okay, good. Sticking with Hanford, I attended a public meeting. I think it was in late May, maybe early June, had all of the entities involved, the government entities involved with the Hanford project there. And it's quite surprising because I had always gotten the impression that...

Aaron, I think we lost you.

Like that was going to be part of their solution. Have you guys sort of seen this change as well and I'd assume you see that positively?

I'm sorry, Aaron. We lost a big chunk of your question there. Could you -- the last couple of sentences -- could you repeat that?

Oh, yes. Sorry about that. Yes. So at this conference, this public meeting, the Department of Ecology seemed to have changed their opinion on where they're extremely positive -- to be reluctant. Have you seen that change in position from them and I assume have received that positively?

You broke up again. I'm afraid, Aaron but I think what you're asking is how has the state of Washington evolved in regards to CVI and routing. Yes. Yes, the Ecology. They have come around. They had some detention in the past years but we've had some really good meetings with Ecology. I think this is just speculation on my part is the -- when we start looking at budgets and time frames and reality in regardless of how long it's going to take the cleanup Hanford, the numbers now are between $400 million and $600 million as defined in some different reports that something has to be done to address that budget requirement and the time frame that that's associated with. And I think the Ecology has come around that vitrification still is their preferred approach for treatment that grouting has to be in that mix. And I think they've embraced that. The meetings we've had with them have been very supportive and it does seem like it is making -- they're making progress in embracing that as part of the solution.

Well, I'm certainly not going to argue with that. But I would point out that as it relates to vitrification being their preferred process, they did mention that specifically that vitrification for on-site disposal is necessary but they seem to be pleased with the fact that the TBI would be taking the waste out of the state. So I think I'm not going to say that they favor TBI more than vitrification but they seem to be totally okay with that now. And I wonder how much of that -- I mean, perhaps has nothing to do with that at all. But it seems like another party that sort of come on board. It's, obviously, you have this partnership now with the labor union. So I mean, it seems to be that every government entities are now on board with TBI. Is that your sense as well?

Absolutely, Aaron. It's a good way to state it. Across the board, including DOE, DOE has had a tough time accepting as well. The NAS meeting you went to helped a lot. I think the congressional delegations have been very supportive. They've started to question DOE as to how they're planning to use grouting as a supplement to vitrification and requesting DOE to be accountable for it in recent congressional draft, congressional language in both the House and Senate. There's been a language that addressed that as well. So, I think overall, everyone is kind of planning on it more. There's been press releases recently that grouting has been part of the budget discussions to be included in there as an assumption for DOE as well in the near term. So I think that overall, everyone has grabbed a hold of it. But I think it also helps frankly that the vitrification plant is progressing forward and it looks like it's going to be able to be operational in the near term. So the whole road map that DOE refers to as is coming together and grouting is an important part of that.

Yes. And I know and we are -- whatever they refer to it as for the thing that came out here recently as it relates to grouting, there were 3 companies that were mentioned that could treat it. But it seemed at that meeting besides the Tribal Nations and Oregon DOE, I think it was, they seem to be heavily opposed to shipping any untreated waste out of Hanford and going through their territory. Is there any way even for them to get the waste out of Hanford and not go through any of those territories to the others that were listed in that final document?

Yes, it's exactly right. These documents have all defined 3 different options and Energy Solutions and WCS could both treat this waste at their facilities in Utah and Texas, respectively. And so there's always been an option. But at this point in time, to answer your question, they would have to truck it out, there's no rail access on site. So you have to truck it with a lot of shipments and a lot of shipments on the highways versus the approach that we're providing or the alternative we're providing which is to grout it locally and then rail the solidified, stabilized waste for disposal in a lot less transportation, a lot less risk. And we're and EA both have defined that approach, a local approach to this as being the least risk approach. Now, whether the DOE will consider those in their final strategy or not remains to be seen but these are options that they could consider. I'd have to believe that with the reduced risk of doing it locally as defined in the EA as well as the transportation risk and the less number of shipments and all the other things that are associated with doing it locally, I would have to believe that treating it at our facility would be the best value overall to the government.

Okay, final one for me then. It's just as it relates to Italy, the JRC and just trying to track some of that get a better idea of what's going on. Are you able to talk about any of the reactors that would be part of that contract?

The JRC job is just a very specific quantity of drums of waste that are currently buried at the JRC facility in Ispra, Italy. So it's just 6,100 drums of a very specific waste form. And that job is only for the waste located at the JRC site. So it could be more than just the 6,100 drums. It's open ended. But that's the base scope which we value now in the $45 million range. So, there's no other reactors or anything that's going to flow through there necessarily where that's currently defined flow through there. They could open it up for other facilities or other opportunities to ship waste out of Italy. But right now, that's the base scope. So that's pretty much it.

The next question is coming from Alan Denzer [ph]. Alan is a private investor.

Congratulations.

Thank you, Alan.

You done, did it. And hopefully, there's a profitable progression ahead. Let me just ask you about the next foreseeable future regarding the possibility of a government shutdown which seems to be more of a probability that a possibility at this point. How would that affect company? And what are you doing to prepare for its possibility?

Government shutdowns typically haven't had a significant impact on us. It could slow down some waste shipments and -- but most of the work that we do is referred to as essential that comes through the DOE budget. So CR would be a little bit of a threat because, as you know with the CRs, there are some restrictions on new projects. The government has to chisel about 20% of their budget for any given -- during the CR to allocate it for maintaining safety and that kind of thing. So CR has more of an impact on procurement and those kinds of things. Government shutdowns haven't had a big impact on us in the past. Typically, our waste streams are coming, they're funded and there's a safety component to it that need to -- you need to keep moving with it as opposed to store it. And the only real threat to me to answer your question or in my view is that some procurements may get may get delayed and new projects might get delayed but existing ones should be sustainable for the most part.

All right. Keep on doing what you're doing.

And the next question is coming from Stephen Fein from Sofein LLC.

Congratulations guys on your quarter. You mentioned the new agreement with the labor union. Do you expect the labor union to provide any political support in your efforts in Hanford?

There's an obvious political connection with a union like that. 598 has got a very large group of constituents in the Central Washington area. They have a beautiful facility with enormous training capacity and they're very politically connected. So I would -- there is a certain amount of ability to access different figures and managers in the area. We certainly have not entered into this agreement with that as our focus. We sincerely entered into the agreement because we really believe that their provision of labor with the training facility they've got and the tradition they have for running safe workers would give us the stability we need to ebb and flow with these large DOE waste contracts. So while there may be some political advantages to that, particularly associated with this administration, our objective really was to be able to provide that stability as the grouting starts as well as some of the DFLAW work that's also going to be coming up and making sure that we've got the people we need in a small town, the town of 250,000 to make sure we've got the people that we need to meet the obligations we're going to have.

Okay, all right. So that was my next question because you did mention in your presentation initially that you're experiencing labor shortages. So am I correct that that would help the any labor shortage problem out in Hanford, being connected with that union?

Absolutely, that's exactly right. And we are having -- we're all struggling. I think Gold Town is because there's just not that many people. Hanford hired a lot of people and taken a lot of people from us because their benefits package is better and they're more competitive in regards to compensation than we are. We're commercial, so we have to compete with people. They don't have to. And it's a different environment. We have been able to replace people. But with the numbers we're talking -- the levels of the numbers we're talking about for these 2 projects -- the DFLAW and the TBI type of work, we're talking a couple of hundred people at max. And, boy, having the 598 working with us gives us confidence that we can meet these obligations.

How are you dealing -- if this is -- if labor shortage is consistent nationally and internationally, how are you dealing with that?

We've had a few issues at the other 2 plants but not quite to the extent we had at Hanford. We have had some issues with folks, just like everyone else in the country is having with labor. And we've been able to find folks. We had increased our rates or salaries, we've tuned in the margins a little bit because of that. And our rates will catch up to it in regards to what we charge. But we've been able to find people. We're almost fully staffed and we maybe have 5% to 10% availability or openings at the labor level at each site. But Hanford far and away has been the biggest impact because of the Hanford facility versus the original facility because of Hanford. The ones at Oak Ridge, to a lesser degree and the ones in Gainesville have even less. So we've been able to deal with it. But it has had an impact and we've been fortunately being able to manage it.

Has your productivity been impacted by climate change?

Our productivity has not been impacted by climate change at all that I can think of. Our productivity has been impacted only really by the labor issues we just discussed but not by the heat that I'm aware of.

Okay. If you were to build a plant in Great Britain with Westinghouse, how long would you expect that would take to build that plant?

Right now, we're estimating -- we've been working on design with Westinghouse at a very slow progression because we're waiting to hear about this award. But with where we are right now on permitting and design, we're looking at best about 18 months from the award date to 24 months but probably some place in between. But the current schedule is 18 months to answer your question.

With regard to Hanford and the opening of the vitrification plant, would the secondary was just come to you? Or would you have to be permitted or whatever?

We are permitted for it now. We can accept it now. We have a contract with the department for this kind of type of waste through an IDIQ that we use for most of the DOE sites. So rates have been provided. And they would -- when they generate the waste or are near generating waste, they'll most likely enter into a task order with us, task order or RFP, we'll respond to it and then they'll ship it. So that's typically the way it works.

With regard to the 2,000-gallon time test, there was a mention of a public comment period. Why would there be a public comment period if money has been legislated? And basically, what I've read, it's basically said this should happen.

The public comment period is for the RD&D permit that the state has to consider. And that's for extraction of the waste. So I believe it's -- I'm not sure if it's driven by a record or what it's driven by but there's an RD&D permit that's required for DOE to get permission to extract the waste. And I'm not sure if I address your question or not, Stephen?

Yes. I guess I'm confused because this has been going on. I mean, the money is there, you did the first part. And I guess the issue here is that this should be a more -- it would just seem to me it would be a more direct occurrence. Why should there be a discussion now with money legislated with et cetera and all the time it's gone by?

Yes. It's part of the process. I'm not sure exactly what the regulatory drivers are for that.

All right. And the last question is with regard to the ROD in January, I mean, the ROD clearly -- the spirit of that ROD clearly states that -- or infers or one would infer from it -- that DOE does not want to transport waste long distances. And therefore, you provide that for them. But in addition, there were 2 other things. One, they stated that all waste would be in small -- only small containers, drums or boats. And further, it was stated that the secondary waste would come back to Hanford. So, I guess I'm somewhat confused. I don't know where maybe I'm confusing the discussions that how can there be a conversation with any other suppliers wherein material would have to be shipped longer distances or not make sense in small quantities.

I think you get a little confused. The DFLAW plant as addressed in the ROD, as you said, it was just for treatment and disposal locally at Perma-Fix. And large reason for that is because it, as you said, in August, disposed off on-site at Hanford at their waste cell at Hanford. So it would not make any sense to ship anything out of state and then bring it back for disposal at their facility. What we were referring to or ROD is referring to in regards to alternatives was the environmental assessment for TBI for grouting. So for grouting, because it's not getting disposed off in state, had alternatives. Again, the increase with risk when you leave the state for the grouting part of it but that's where the alternatives come in.

All right. And again, yes, I guess I was not clear. But I guess what hits me if they put out a ROD and they underscore that, hey, we want to not travel a long distance, we want to only ship in small containers, how these other manufacturers wherein represent long distances to get the waste to them and I would imagine as a former chemical manufacturer that shipping in small containers would absolutely be very expensive and make no sense. Anyway, that...

It's anticipated that the DFLAW waste will go anywhere besides to us regionally or locally.

Well, I'm talking -- yes. Okay. All right. And again, congratulations on a great quarter.

There were no other questions at this time. I will now turn the call back to the management team for closing remarks.

Okay. Thank you. I'd like to thank everyone for participating in our second quarter conference call. As I said, we remain extremely confident in the outlook for the business. We appreciate the continued support of our shareholders and we look forward to providing further updates as developments unfold. Thank you.