Good morning ladies and gentlemen and welcome to the Perma-Fix Third Quarter 2022 Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Mr. David Waldman. Sir, the floor is yours..

Thank you and good morning everyone. Welcome to Perma-Fix Environmental Services third quarter 2022 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 third quarter 2022 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 maybe 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 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. 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..

Alright. Thanks David and good morning. We are very proud of our managers and staff that have worked extremely hard in the past few quarters to continue our journey to reach the growth that we established before COVID and position the company for the growth trajectory our shareholders expect.

Specifically, we continue to realize improvements in our performance as the pandemic impacts continue to subside, which was evidenced by our results over the last two quarters. I am pleased to report we achieved a 17% increase in revenue to $18.5 million for the third quarter of 2022 versus a $15.8 million quarter for the same period last year.

In addition to our revenue growth, gross profits increased by 38% and gross margins increased from 14% to 17%.

Turning first to our Services segment, we reached full operational status on several projects that have been delayed due to the impacts from the pandemic, which contributed to our revenue growth within our segment – our Services segment in the third quarter of ‘22.

As we stated previously, the federal government agencies, including DoE, DoD and EPA have been slow to procure new task orders due to the pandemic. However, these projects have not gone away. In fact, the Federal government has begun announcing new projects that had been on hold.

As a result, we realized an increase in procurements in September of ‘22, which we believe will continue in the fourth quarter of ‘22. And moreover, we are encouraged by the bidding pipeline with many of these contracts expected to be awarded over the next few quarters.

Specifically, we have over $100 million in defined opportunities targeted to be released in the next few quarters that directly align with our core competencies. And this is on top of the $39 million in funded nuclear services contracts already in place, which bodes well for the balance of this year and the following year.

There is significant pent-up demand and we expect to benefit from improved budgets and carryover spending from the last year as well. Turning to our Treatment segment, our revenue remained stable despite delays in waste shipments from certain customers at our Florida facility due to Hurricane Ian, 15% in the third quarter of ‘22.

In addition, we are seeing improvement in all our waste receipts overall, including our new clients in both the commercial and international waste markets, which has increased 46% overall to $9.1 million. In addition, our waste treatment backlog is approximately $7.1 million.

We are also seeing strong demand for waste treatment capacity as evidenced by a steady increase in requests for proposals.

More RFPs received for bidding within the waste treatment segment, with over 80 bids requested – excuse me, for over – we received over 80 bid requests in the third quarter of ‘22 alone compared to 60 in the first quarter of ‘22 this past year.

This is a result of our efforts to broaden our client base in the commercial utilities, the oil and gas industry as well as other industrial markets. Another example is our new vacuum thermal desorption system, where we completed startup in Q2.

We’re now starting to see strong demand for this system and services with receipts from several new clients, including government and commercial clients within the oil and gas industries.

At the same time, we remain highly encouraged by the outlook of the Test Bed Initiative, or TBI, also known as the low level waste offsite disposal project, in support of the DoE Hanford tank disposition mission.

The TBI initiative, which is based on grouting technology, will continue to be a focus of Perma-Fix moving forward as a means of saving tens of billions of dollars in taxpayer dollars as well as eliminating significant carbon emissions and reducing the schedules for Hanford cleanup actions.

Grouting has been recognized as a preferred supplement to the DoE strategy which is currently based on vitrification of tank waste at Hanford through their new facility called the Direct Feed Low Activity Waste Treatment Plant, or DFLAW, which continues to experience delays in its startup.

Our TBI program continues to move forward, albeit much slower than anticipated, despite continued pressure on DoE from the U.S. General Accounting Office, GAO, to make progress.

As stated in the GAO report recently published, the near-term reduction of the tank waste inventory through grouting could accelerate tank closures and save the government tens of billions of dollars while reducing the risk to the environment. And we can do this grouting today with our existing capabilities.

Moreover, the National Academy of Sciences continues to request the DoE to expedite initiatives for grouting as well. As it stands now, DoE stated in a September industry conference in D.C.

that their intention is to submit the RD&D permit to the state, is currently planned within the next 6 months of this government fiscal year or by the end of our first quarter. This submittal will trigger review and approval by the state of Washington and support shipment of the 2,000 gallons as well.

Also, we have seen a continued support by Congress, including a bill recently introduced by Senators Paul and Hassan in September of this year to push DoE into making progress on grouting, and specifically the off-site, low-level waste disposal program.

Perma-Fix maintains these grouting capabilities today at our Perma-Fix Northwest facility, which is in Richmond, Washington right near Hanford and is permitted and outfitted to safely and compliantly treat up to 30,000 gallons per month with the ability to expand to well over 1 million gallons annually while dramatically reducing the cost compared to vitrification.

In addition to the TBI initiative, our teams continue to work very hard on securing transformative opportunities and wins that could lift Perma-Fix to a new level of revenue and income.

These opportunities include participation in large procurements such as the $45 billion integrated tank disposition contract and the operations and site mission support contract valued over $3 billion. Both of these opportunities are Department of Energy procurements that we are participating in as a team member.

However, both of these are completely aligned with our strengths and our innovations in radiologic protection and in waste management. We are well positioned for several additional upcoming procurements and initiatives as well, with the U.S. Army Corp of Engineers, as well as the U.S.

Navy ship decommissioning program at several other DoE sites that are going to be procured in the next few quarters. Turning back to our financials for a moment, adjusted EBITDA improved to a loss of $374,000 compared to a loss of $798,000 in Q3 of ‘21 last year. We believe we weathered the worst of the storm due to COVID-19.

We expect improved activity from the Federal government after procuring new task orders as well very soon. To further enhance our competitive position in the market, we have made several adjustments to our budgets for the next year to trim general and administrative costs and to lower our overall indirect costs.

These adjustments will reduce our overall operating costs while continuing to meet our ESG objectives and increase our competitive edge.

Overall, we’ve witnessed a solid year-over-year revenue growth and saw a meaningful improvement in gross margins based on current backlog and our identified opportunities over the next several quarters that we basically remain optimistic that we can achieve these growth goals and stability that we’ve realized prior to the pandemic.

At the same time, we continue to invest in our capabilities and facilities. We built a solid foundation of growth in a highly scalable infrastructure. As a result, we believe we’re in a great position to take advantage of the pent-up demand.

And as we continue to increase revenues, we expect to benefit from the predicted cash flows within our Services segment and high incremental margins within our Treatment segment. Additionally, qualifying for the employee retention credit helped with offsetting some of the losses incurred from the pandemic.

As a result, we believe we’re well positioned for the balance of ‘22, and we believe we are sufficiently capitalized to execute our business strategy in order to achieve profitability and positive cash flow in ‘23.

We believe this foundation, coupled with expansion of our treatment capabilities, increased bidding opportunities and improved federal budgets, will continue to support our ambitious growth objectives. On that note, I will turn it over to Ben, who will discuss the financial results in a little more detail.

Ben?.

Thank you, Mark. I’ll start with revenue. From our continuing operations for the third quarter was $18.5 million compared to last year’s $15.8 million. That’s an increase of $2.7 million or 17%. The revenue improvement came from the Services segment, with our 2 large projects finally being fully operational.

At this time last year, they were just beginning to ramp up. In the Treatment segment, revenue was flat to the prior year. However, last year’s third quarter included a onetime request for equitable adjustment or REA, totaling $1.3 million. When you exclude that, it provides for a $1.3 million increase year-over-year in the Treatment segment as well.

So we saw growth there as well, year-to-date, through September 30, revenues below prior year by $1.2 million or 2.2%. This drop in revenue comes from the Services segment, as revenue was down $1.9 million versus last year.

And you will recall the first couple of quarters of this year were down due to the delays in the two large projects and that was the main reason for the shortfall. Our gross profit for the quarter was $3.1 million compared to $2.2 million in 2021.

This improvement came – this improvement, which totals about $846,000, came from $1.4 million improvement in the Services segment, resulting from both increased revenue and increased profitability on the projects compared to last year. Offsetting this was a reduction in treatment segments gross profit of 520.

However, if you exclude the impact of the REA I mentioned earlier, Treatment segment’s gross profit improved year-over-year by about $766,000. For 9 months ended September 30, gross profit was $7.6 million compared to $5.5 million last year.

As with the quarter, this increase came from the Services segment, with improved margin from projects offset slightly by lower gross profit in the Treatment segment, and again, due to the impact of the REA. As with the quarter, if you exclude the REA, Treatment segment showed an improvement of about $609,000.

Total SG&A for the quarter was $3.9 million compared to $3.3 million in the third quarter last year. This increase of $581,000 relates primarily to increased payroll, travel, audit fees and stock compensation. For the 9 months ended September 30, SG&A expenses were at $11 million compared to $9.6 million in the prior year.

Again, higher costs in marketing and payroll and benefits, audit fees, stock compensation and other general office costs were the main drivers. Our net income attributable to common shareholders for the quarter was $664,000 compared to last year’s net income of $1.4 million.

Included in this year’s net income is the employee retention credit Mark mentioned earlier, of $2 million. And included in last year’s was a tax benefit adjustment of $2.4 million related to the release of a tax valuation allowance. Our total basic income per share for the quarter was $0.05 compared to income per share of $0.11 in prior year.

And our year-to-date basic loss per share at this point is $0.16 compared to income per share of $0.27 in 2021. Our adjusted EBITDA from continuing operations for the quarter, as defined in this morning’s press release, was a loss of $374,000 compared to a loss last year of $798,000.

Adjusted EBITDA year-to-date stands at $2.2 million compared to a loss of $3 million last year. Turning to the balance sheet, our cash on the balance sheet was $1.9 million compared to $4.4 million at year-end, reflecting the current year’s losses, capital spending and debt maintenance.

Our waste backlog at the end of September was $7.1 million, which is consistent with $7.1 million at the end of the year and $7.1 million in September of 2021. Our total debt at quarter end was $1.3 million, excluding debt issuance costs, which is primarily owed to PNC Bank. Next, I’ll summarize our cash flow activity for the year.

Our cash used by continuing operations is $334,000. Our cash used by disc ops was $559,000. Cash used for investing of continuing operations was $922,000 and that’s primarily capital spending.

And finally, cash used for financing was $694,000, representing our monthly payments on the term loan and capital line of $375,000 and payments related to finance lease liabilities and other debt of $297,000. With that, operator, I will now turn the call over to questions..

Thank you. [Operator Instructions] Our first question is coming from Howard Brous with Wellington Shields. Sir, please go ahead..

Just a few questions.

Mark, Ben, Lou, I hope everybody is well with the family and with the firm, anything new with the EPA contract with Navajos?.

Yes, what you are referring to – well, good morning, Howard, it’s good to hear from you. The EPA contract you are referring to is the abandoned uranium mine contract and it’s an IDIQ. So it’s basically three bidders.

We submitted, I want to say in Q2, and we were told when we submitted that it was going to be a rapid turn on announcement and startup, it was a fully funded project and we have heard nothing from the EPA. And I wish I had a better answer for you.

This is falling into one of those many contracts that we have bid on that have just slowed dramatically from as I’ve referred to as the four lethargic procurement processes within the government.

So there is no indication plus or minus or anything about that whole procurement, but we are – it’s not canceled, it’s still happening, it’s just stuck in the procurement process, I’m afraid..

Alright.

Can you – you mentioned possible contracts with the Department of Defense, in particular the Navy, can you give us more granularity as to what kind of ships how big the contracts are, how long they last?.

Yes. There is a lot going on right there right now. They have been slow to define specific ships with one exception that is the Enterprise. The Enterprise, which most people have heard of, is a large aircraft carrier that they are going to have commercially decommissioned.

And they have laid that out in great detail in their EIS, Environmental Impact Statement, including their procurement approach. So we know that’s coming out.

We are meeting with team members right now in great detail and we are anticipating a draft RFP sometime in the early summer, probably a request for information maybe between now and then and then a final RFP within about a year. That project is – as stated in the EIS is valued at about $650 million.

I would anticipate that it will be well over $1 billion with everything included. There is going to be a good bit of competition. But as you know, we are in this business in a big way, doing one of the few current radioactive or radiologically contaminated ship decommissioning projects right now at Norfolk. That project is going well.

We have good relationships with the client. We are making margin and we are very well positioned for being a key team member on the Enterprise when that comes out next year.

So as I mentioned, I think, on a few calls ago, the Navy had announced in a report, I believe it was a GAO report actually that they have 48 ships coming out for decommissioning in the next 4 or 5 years. 12 of those are nuclear. They have not defined what’s coming up next and outside of the Enterprise.

So I wish I had more detail for you, but I think the Navy is still working through the priorities on which ship is going to come out next..

Let me address the tank disposition contract. My understanding it’s to be released that $45 billion contract first quarter of 2023.

Is that a fair comment?.

That is a fair comment, Howard. In talking to DoE and also in a recent conference I referred to a few minutes ago in September, DoE said that they are shooting to have it done by the end of the year, but they – it maybe close. So we expect it late December, early January..

If I can be facetious at the end of this year as opposed to another year?.

It is. That’s correct..

We have been waiting and getting older. And also, my understanding about the vitrification plant and doing some interesting investigation. This is going to be fueled by diesel fuel to the tune of 6, 7 or 8 railcars everyday.

Isn’t that an EPA issue with the basically fuel oil being a dirty fuel?.

It is their design basis to heat and power those vitrification units with diesel, the way it’s been designed from the beginning. So, it is an issue. It’s obviously going to get much more expensive. It’s a significant carbon emission issue. There is all types of other considerations associated with that.

That’s more on a part of the selling point for grouting is that it is almost zero carbon emissions and there is no heating even involved. So there is a lot of advantages associated with that, that are real important. DoE has built a $15 billion facility. They want to see it operate.

Their position has been very vocal that they don’t want anything to distract them to get it operational. Right now, it is being delayed again.

We are optimistic that based on the GAO push as well as the Natural Academy of Sciences push, and as I mentioned in the notes, recently a Congressional push with the senators drafting a bill to push it, that eventually DoE is going to make it a priority to supplement the DFLAW facility with a grouting program.

I think Congress is going to want to start seeing progress as well and DoE could certainly start the closure of some of the tanks that they can right now in parallel with the DFLAW startup process. So we are putting a lot of pressure on for this, working our congressional delegations and everything we possibly can to get that visibility there.

And hopefully, DoE will be shipping the TBI waste and then following that quickly on an operational mode to start closing tanks..

Well, for discussion purposes, let’s assume the contract is let out the first quarter. There is a 30-day hiatus where the contract can be appealed.

Is that a correct statement?.

Yes, it’s not exactly 30 days. I think it’s a 10-day protest period or something like that. 10 days after debrief. So it depends on when you get your debrief, I think that’s how that works, but I am certainly not an expert on that part. But to answer your question, there is a debrief period and a protest period that has to transpire.

And if there is no protest, then you begin transition. So, one could assume that it would be several months before transition could be started, if there is no protest. And then all bets are off. If there is a protest in regards to how long it might take to secure the contract and start transition.

So, yes, we would expect that to happen in Q1, and probably into Q2..

Assuming that the contract is awarded, when would you, either winning or losing in terms of your team, have business in terms of revenue?.

One could assume that if it’s awarded around the first of the year that whoever wins would start generating revenue in probably the June timeframe, maybe May, in regards to transition. And then in transition, I can’t remember. However, I believe it’s a 120-day transition, and then you are full bore after that.

So, probably Q3, you would really be seeing the revenue for the winning team, if there is no protest..

Okay. Let me back away and come back after questions were asked. Thank you..

Let me just – if I could, Howard, let me just expand on ITDC a little bit. I did want our investors to know that our growth plans, our infrastructure, our budgets and expectations are all – have all been developed irrespective of that award for the tanks.

While that award would obviously be extremely transformative to us, if we are not awarded that, we do have our plan set up assuming we haven’t. So, in other words, all of our marketing initiatives, all of our other growth initiatives are all moving along.

So, we are hopeful that irrespective of that win, we are going to be seeing the growth that we saw prior to the pandemic. And we have been very intentional on that, and we are very optimistic about that overall. So, hopefully, we are selected. There is only two bidders.

And – but I just wanted folks to know that we are well positioned if we don’t, to continue with that growth strategy, and we are making every effort to make that happen as well..

So, let me ask you to add on to this discussion. Assuming your team loses, is there not a significant number of pieces of the business that you will get over time, even if your team loses as a….

That’s exactly right, Howard. Specifically, for example, the DFLAW facility, which is – which will be operated by this contractor. So, when the DFLAW facility is up and running, it will transition from construction over to operations. The ITDC contractor will fire it up and operate it.

And it will generate, when it’s full capacity, several million gallons of waste a year – different types of waste. One of those is about 1 million gallons a year of effluent liquid that we would likely be the ones to treat. Now again, we don’t have a contract signed. However, it’s low-level wastewater, and that’s what we do there just off-site.

So, one could speculate we would be treating that waste, and there will be other waste as well from ITDC that we anticipate to be treating and have discussed those opportunities with the incumbent contractor now.

So, yes, to answer your question, we expect a significant amount of work from that operations as well as the other operations that are ongoing for the incumbent tank contractor or whoever wins the new one, irrespective of whether we are awarded or not..

Alright. Thank you. I will get back in line. Thank you. Best of luck. Mark, Ben and Lou, thank you..

Alright. Thank you, Howard..

[Operator Instructions] Our next question is coming from Ross Taylor with ARS Investment Partners. Please go ahead..

Thank you. Gentlemen, like to go over a number of kind of initiatives. When you talk about – obviously, the tank project, Hanford, is a huge opportunity for the company. But I would like to come back to that in a moment, and before that, talk about the various others scale-wise. You got – you are initiating in Europe. You have got the Navy.

You have got these other projects.

Dollar-wise, I don’t ask you to tell me how many dollars you are seeing each, but kind of in order of magnitude, how important are these others relative to each other and relative to Hanford?.

Yes. Ross, I am glad you asked that because I do want people to have a perspective of Hanford. While Hanford has a high visibility and a very quick impact, we do have a number of other initiatives that are following in line with that.

For example, we have just submitted a bid in Italy that will be between $40 million and $50 million – between €40 and €50 million over a 7-year period. We are waiting to hear on that, which should be announced in the next several months and will provide good solid backlog with good margins and really leverage our plants here in the U.S.

as well as potentially as we mentioned before, with Westinghouse in the UK and open some markets in Europe as well, that will come directly from that.

We have the Enterprise I mentioned, which I am just speculating, Ross, but that would probably be about a $100 million type of opportunity for us out of that $1 billion, and a very sustainable workload. As EIS says, they expect the Enterprise to be decommissioned from 2025 to 2029.

So, basically 4 years or 5 years beginning in ‘25, so, that process is going, and they are moving forward with that, and that’s just be something that will be awarded in the near-term. The other bid we put in for – as I referred to is OSMS, that’s also an ongoing procurement, so we can’t provide any details.

But we are providing a significant waste management solution to that, and that would add almost as much revenue as the tank closure would. And that one is, as I mentioned, ongoing in procurement right now, but should be awarded next summer or next Q3 timeframe.

So, we have about half a dozen other jobs that we are putting together right now in the $10 million to $20 million range. Some we have already submitted. Some we are working on right now with clients directly. We are making inroads on the commercial decommissioning side as well, which is a big opening market for us, which is just beginning to start.

So, I can’t speculate on what the values might look like in the next several quarters, but a lot of other opportunities that are coming along. DoE is going to be kind of flat for a while, but DoD is picking up. And the Corps of Engineers also has four big jobs coming out of Buffalo district. Those range from $10 million to $150 million.

So, a lot of other good jobs coming that are directly aligned with radiological waste management, which there is not a lot of players involved in that, so we should win our share of those. So, we are optimistic that we will have a good backlog outside of Hanford..

So, you walked me right to my next question, which is the competitive environment. When you are looking at things like the Enterprise or you are looking – I mean in Hanford, you are one of two.

How many legitimate competitors are there for what you would be doing, for example, in the Enterprise? How many other players are out there? And also, do you think the Navy – I mean they have got a lot of ships sitting around at this stage. They have decommissioned a fair number of ships, as you mentioned before, including nuclear ships.

How many ships do you think could or do they intend to be decommissioning on a run rate? You said 25 to 29 for the Enterprise. I would doubt that would be the only nuclear ship they would be decommissioning in that period.

So, looking at the competitive environment and the capabilities, how competitive is this? I mean are you competing against one or two other firms or are you competing against 35 other firms that compete in your space?.

Yes. Right now, the GAO report had defined about a dozen ships in the next 5 years, 48 months I think it was, and that was written a year ago, I think it was. So, the clock is ticking on that. So, there is a good backlog overall besides the Enterprise.

The Sam Rayburn is coming, I think it’s a sub, and there is a couple of other that they have mentioned are in the queue, but just aren’t procured yet. But to answer your question specifically, there is two other primary firms, they have done the two other ships that have been procured that are in this space.

However, firms that have done nuclear decommissioning in the past will be entering the market. We have met with several of them. There is a number of what they call ship breakers that are in this market, who do non-radiological ships for most of the time and scrap them.

They have done a number of aircraft carriers in the past down in Texas, and those ship breakers have done the ships for a dollar each and made good money off the scrap. So, there is a lot of competitors out there.

However, to answer your question specifically, there is a lot to a radiological ship in regards to how you do it, in decontamination, nuclear waste, radiological considerations, training and all kinds of other things, and facilities that might be required as well. So, that limits the overall market significantly.

So, to answer your question, in this total speculation, Ross, we don’t know since we haven’t been through – no one has been through this big procurement like this yet, but we would anticipate three to five teams putting bids together on this.

It will be – it’s anticipated, Ross, to be a fixed-price task, and so not everyone is going to have the stomach for a $1 billion fixed price decommissioning project. So, I am sure that will limit the folks as well, and everyone is going to want to dampen the risk overall..

Would you be limited to playing with only one team in this process, or are your skill sets and your capabilities unique enough that you might find more than one team wanting you on it?.

Yes.

Typically, it doesn’t work to be on multiple teams, particularly if you have an innovation or a skilled workforce and a project description like we do in this situation, where you are so intimately involved in the development of the bid and there is so much proprietary information relative to costing and technical approaches and that type of thing, that it is very – I won’t say never, but very seldom we see someone be “non-exclusive.” And so I would not anticipate that to be the situation..

Okay.

And so you said, basically, if you look at it, if you are in and there could be 12 ships in the next 5 years, including Enterprise, you are likely looking at the fact that there will be more than enough business in this area for every team?.

I would certainly anticipate that. It – there is a start-up here that has to start becoming very obvious that we haven’t seen a lot of yet.

And I don’t know if it’s a COVID issue or a priority issue within DoD, but I think once it gets rolling, then you will start to see them moving ships out for commercial decommissioning quickly, so, yes, to answer your question. I do think….

Could you talk a little bit more about how you see Europe coming together? It’s obviously a new area of initiative for you guys. It seems to be a pretty interesting one.

You have talked about Italy, but can you talk about the competitive environment? Who is doing what you guys do in Europe right now? And how big and how powerful can that market be for you?.

It’s still unfolding at this point. I will say the UK specifically has really started to move radiological waste out of storage and with the desire to stabilize it and destroy it for disposal. There is very few treatment plant and treatment opportunities – treatment capabilities in Europe as a whole.

And if there is, there is a few here and there that have that capability, but they are booked. So, that’s why it’s opened it up to us so much, is to have our capabilities over here that’s permitted. And we have built an infrastructure, which has been a big investment for us.

To ship over here, process and ship back requires a lot of permitting, a lot of logistic capabilities and partners. And we have proven that we can do it efficiently and safely and compliantly. So, as reactors are coming offline, as cleanup initiatives start moving forward, that we are starting to see that grow.

And it’s taken us a while to get our capabilities out there so that potential clients know who we are and what our capabilities are. We have made those investments, which has supported our growth.

And this year I think we will close the books probably around $2 million in international shipments, but that’s going up significantly for next year, particularly if we win that other job. But even notwithstanding that win, if we are selected, we do expect that number to go up by at least twice and maybe 3x.

So, it’s really starting to move based on where Europe is in their cleanup process, which is way, way behind the U.S., probably 20 years behind the U.S., maybe 25 years..

Interesting for them to be behind on an environmental issue..

Yes, it is..

Listening to all of this talk, I am really struck by the fact that you are talking about a lot of long-term programs, a lot of 4-year, 5-year type programs. Programs that are going to roll to be decades or longer, quite honestly, obviously, Hanford has the potential to be almost a perpetuity-type scenario.

Are we really waiting for something like Hanford to fall before we see consolidation in the industry?.

I don’t have a good answer for that, Ross. So overall, I think there are a few consolidation moves that are occurring here and there, but not much. And one reason is, DoE is demonstrating – this is just my opinion, is that they are spreading some of the wealth around as far as their awards.

If you look at the awards that have been made and the players that are involved, I think DoE sees it’s important to ensure there is a number of competitors.

Each one of the big boys that are bidding on these big jobs have something different to offer DoE in regards to key people and infrastructure and innovations and cultures and those kinds of things. I think DoE wants to maintain that, and obviously DoE doesn’t have any control over the overall market in regards to M&A and that type of thing.

But as long as they keep spreading it around here and there, I think that there will be four or five big players, I mean maybe six that are well positioned to play in the market and maintain the bench that you need to have to win these big jobs. So, I don’t see it changing a lot at the big level.

And at the smaller level, like our level, there has been some consolidation movement in regards to waste. And I think that, that will continue in the future with healthy companies..

Has anyone approached you guys?.

Well, we can’t talk about that specifically, but we are always for sale. We are a public company. And our focus has been squarely on getting our EBITDA back up into positive numbers after the COVID impact.

If you look at our ‘19 and ‘20 numbers, we grew by 50% revenue a year for 2 years, and we were looking really good for the remaining years and then COVID – COVID had a big impact on us. We are just now getting our feet back under us. We are expecting ‘23 to look a lot better and to get back on that track, and then I think we will be more attractive.

Certainly, it’s no secret that a $100 million market cap company has a difficult time with making the EBITDA you would have relative to being larger or being private or being a bolt-on to somebody else. So – but our focus clearly is just on getting our EBITDA back positive again..

And it does seem – first, anyone who knows me knows I take no comments as confirmed yeses unless otherwise denied.

But I think what I am hearing you say is that you guys that really the core business having been derailed, is – the train is being put back on the tracks, and really in the next year, we should have visibility to some really powerful top and bottom lines and free cash flow drivers that, they might not be generating free cash flow by the end of ‘23, but we should have a really good view on the power they are going to produce as we move into ‘24 and beyond, would that be…?.

I think it’s a safe statement, Ross..

Okay. And I think you guys are – it’s been tough.

You guys are doing a great job, and I think we are kind of sitting here with a market that is focused, kind of it’s staring at its toes and not looking out very far, but it strikes me as that if you look out much on the horizon at all, six months, nine months, you are going to see a totally different company than you see today..

I hope so..

Yes, definitely. Well, keep up the good work. Keep up the doing, you have done a great job opening up opportunities that weren’t there before, and it looks like pretty much you should be able to do nicely, given the setup I see. Thank you. Take care..

Thank you..

Thank you. Our next question is coming from Bill Nasgovitz with Heartland Advisors. Please go ahead..

Yes. Good morning, Mark. Congratulations on profitability..

Thank you, Bill. It’s good to hear from you..

Yes. And also increased sales, I might have missed the backlog.

Treatment backlog is $7.1 million and services is how much?.

$39 million at this point..

And what was it in the second quarter?.

$48 million? Is $48 million right, Ben? Ben can look it up real quick..

Yes. It was $48 million..

So, with all of this RFP action and bidding potential, how come our backlog is not growing on the service side?.

Well, we look at our last couple of quarters, Bill, and in regards to services, we have submitted – I don’t have the numbers in front of me – dozens of proposals. And there is a few that we submitted that were not necessarily radiological waste, for example, just decommissioning job or demo jobs that were not squarely in our core competencies.

And notwithstanding those, we haven’t lost much. We have submitted a bunch of bids. I wanted to say, we have almost $400 million in bids that we have submitted in the last year. Maybe it’s closer to $500 million. Now, some of those are skewed by Hanford. So, you take out the big Hanford jobs.

And I would say, it’s probably about 100 – I am estimating, $100 million in projects in our core competencies that have not been awarded, and that’s what’s been difficult. We haven’t won or lost projects in Q3, and – with the exception of those MATOCs I mentioned. And so we are waiting on a lot of procurements to be awarded.

That’s why our backlog hasn’t moved, and we haven’t been able to have a press release. Go ahead..

Okay. Well, so possibly, there could be tremendous upside here if, in fact, these contracts are ever let.

Is that a fair statement?.

Either let or ones we have already submit that are awarded, yes. So, either let by RP or awarded….

Okay, fantastic. So, Ben you also alluded to cutting costs and your focus on profitability, EBITDA and all that good stuff.

So, what’s the goal? How much – what do you expect to cut for the coming year, this year?.

Well, we – I don’t know how much we should get into. We are going to be careful because there is a competitive….

Well, let’s put it this way. Let’s put it this way. So, roughly for the quarter, you did – we did $9 million in service and we did $9 million in treatment, roughly, round numbers.

Is that a level that we can continue to make money on – at going forward?.

No, we have to grow. And our goal is to get to $10 million in revenue in the waste treatment segment and a total of $60 million in revenue for – annually for services. So, $100 million is our sweet spot. We make good money at $100 million. We did before. But to answer your question, in reductions of SG&A reductions, we have a very well-defined plan.

Let me just say, it’s to reduce several million dollars in SG&A costs through 2030. And that will put us in a position where even if we don’t grow, Bill, to $100 million, that we will see our EBITDA get quickly into the positive range..

Okay. And that’s by the end of ‘23 you are talking a couple of million dollars in SG&A costs..

Correct..

Is that what I heard you say? Okay, good. Alright.

So, do you think that – when do you expect service to get back up to roughly $15 million a quarter?.

Well, our goal is to make sure we are there by the end of the year, which is $25 million a quarter by the end of ‘23. But we – it’s difficult to say because it gets back to the….

By the end of ‘22 or….

No. But we expect to be tracking at $25 million a quarter by the end of ‘23. So, with that – but again, to answer your question, it depends on the award – to your first question, and it’s when they are going to start awarding these bids. So, like I said, we have got all these bids outstanding that have already been submitted.

Several have said that they plan on awarding for the end of the calendar year. Again, this is not the Hanford, but the other ones. So, if we are successful on just a few of those, we are there.

With $39 million in backlog, which will pretty much run through the year, then we need $20 million in awards there for revenue in ‘22, which if we can just win our share and they make the announcements, we should be there..

Okay, alright. Well, congratulations on a movement in the right direction, and certainly all shareholders are anxious to see sustained profitability. It’s been a long, long road..

It has. We appreciate your patience..

Okay. Thank you..

Thank you. Sirs, there appear to be no further questions in queue. So, I will hand back for any closing comments you wish to finish with..

End of Q&A:.

Alright. Thank you. I would like to thank everyone for participating in our third quarter conference call. We remain extremely confident in the outlook of our business. We appreciate the continued support of our shareholders, and we look forward to further updates and developments as they unfold to the next quarter. So, thank you..

Thank you ladies and gentlemen. This does conclude today’s conference call. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation..