PERMA FIX ENVIRONMENTAL SERVICES INC — Call Transcript 2026

Speaker 1: Good day, ladies and gentlemen, and welcome to the Perma-Fix Fiscal First Quarter 2026 Earnings Conference Call. At this time, all participants are placed on a listen-only mode, and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. And please note, This conference is being recorded. I will now turn the conference over to your host, Mr. David Waldman, Investor Relations. Sir, the floor is yours.

Speaker 2: Thank you and good morning, everyone. Welcome to PermaFix Environmental Services First Quarter 2026 Conference Call. On the call with us this morning are Mark Duff, President and CEO, Dr. Lou Zenofani, Executive Vice President of Strategic Initiatives, and Ben Naparado, Chief Financial Officer. The company issued a press release this morning containing first quarter financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212 6711020. 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 statements 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 of the U.S. Securities and Exchange Commission, as well as this morning's press release. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events, or circumstances after a date hereof thereupon forward-looking statements. In addition, today's discussion will include references to non-GAAP measures. Perma-Fix believes 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 review on our website. Now I'd like to turn the call over to Mark Duff. Please go ahead, Mark.

Speaker 3: All right. Thank you, David, and good morning, everyone. Thank you for joining us today. As you saw in this morning's press release, the first quarter was a transitional period for PermaFix. While our financial results were weak, this was not unexpected. Many of the factors that impacted the quarter were consistent with what we discussed on our year-end call in March, including seasonal softness, lower waste receipts, the timing of achieving revenue milestones, and the deliberate steps were taken to prepare our facilities, workforce, and infrastructure for higher activity levels beginning in the second quarter. Importantly, the first quarter should not be viewed in isolation. We used the quarter to position the company for the next phase of activity. This included the deliberate processing and reduction of existing waste inventories, particularly at our PermFix Northwest facility so we could maximize capacity ahead of anticipated Hanford-related waste receipts. In addition, we completed treatment of several lower-margin waste streams during the quarter, which further positions our facilities to improve mix and higher-value activity as new receipts begin to ramp up. We also continued investing in personnel, training, facility improvements and operational readiness to support additional shifts and higher production expectations beginning in Q2. These activities impacted near-term financial performance, but we believe they were necessary to prepare PermaFix for what may be one of the most important growth opportunities in the company's history. The centerpiece of that opportunity remains Hanford. As we've discussed for some time, the DWE Hanford's cleanup mission represents one of the largest and most complex environmental remediation programs in the United States. PermFix Northwest is located just outside the Hanford site, and we believe it's uniquely positioned to support multiple Hanford-related waste streams over the coming years. A key milestone in our preparation for this opportunity was the December 2025 renewal of the permit for our PermFix Northwest facility, which significantly expands our permitted liquid mixed waste processing capacity to approximately 1.2 million gallons annually. and authorizes treatment of up to 175,000 tons of waste through macroencapsulation. Combined with our investments in automation, facility upgrades, and workforce expansion, this enhanced permit materially strengthens our ability to support increased volumes from Hanford and other de-emission objectives as activities ramp up. We are now beginning to see the opportunity move from preparation towards execution. Our PermFix Northwest facility began receiving ETF waste from Hanford in mid-April, which we believe can support sustainable revenues of more than $4 million per quarter as the waste stream continues. We're also working closely with DOE contractors on the anticipated start of the additional DF law-related dry waste and EMF effluent waste streams, which were delayed due to regulatory document extensions. Based on current activity, we believe Q2 represents an inflection point for the company with Permafix Northwest on track to deliver stronger revenue contributions as Hanford-related waste receipts and other customer activities increase. While the exact timing and pace of these activities for these receipts remain dependent on DUE and contractor schedules, we remain highly encouraged by the directions of the activity and the role Permafix can play in supporting the Hanford cleanup mission. In addition, DOE leadership continues to focus on advancing Hanford tank waste retrieval through grouting as a supplement path to DF Law using available commercial treatment capacity. We believe this is highly significant for PermaFix because of the PermaFix Northwest provides additional local capacity near the Hanford site and is positioned to support DOE's tank waste treatment objectives over the next several years. Beyond the near-term ETF and DFLO-related activities, we remain extremely focused on the broader grouting opportunities at Hanford. We believe Permit Fix Northwest is exceptionally well-positioned for this opportunity, given its proximity to the Hanford site, our expanded permitting profile, existing waste treatment capabilities, and investments we've made over the past several years to expand grouting capabilities to reach production levels of over 4 million gallons of tank waste receipts per year. This is why we're still bullish on Hanford. It's not simply one waste stream or one contract opportunity. It's a long-duration remediation mission with multiple potential waste streams, multiple program phases, and the potential to support recurring treatment demand over an extended period. While timing will always be subject to government program execution, appropriations, and regulatory requirements, along with customer schedules, we believe the scale and duration of the opportunities are significant. We also recently completed several large proposal initiatives, including opportunities right to the hand for tank routing, large project services for the U.S. Army Corps of Engineers and DOE at Y-12, and a proposal revision to support the USS Enterprise aircraft carrier decommissioning project for the Navy. While these opportunities remain subject to award timing and customer decisions, they reflect the breadth of our pipeline and the alignment of our capabilities with large, complex government remediation and decommissioning and other waste emissions. In addition to Hanford, we're also seeing renewed momentum in our services segment. During the quarter, we were awarded a two-year master task agreement valued at approximately $24 million by the Lawrence Livermore National Security Site for demolition and disposal of a building at the Lawrence Livermore Laboratory. This project mobilized and began supporting work in early April. It draws directly on our expertise in complex radiological and hazardous waste handling and facility decontamination, along with demolition and nuclear waste management. We view this award as an important validation of our nuclear services capabilities and our long-standing relationship with the Livermore Lab. More broadly, we've mobilized on several additional smaller projects that have the potential to grow through the summer, and we continue to see a meaningful pipeline of project opportunities across nuclear services for demolition, remediation, decontamination, and other government-related fieldwork. This is important because renewed services segment activities strengthens our broader PermaFix platform by leveraging our integrated capabilities across project execution, waste management, transportation, treatment, and disposal. We also continue to make progress with our PFAS destruction platform. As we announced in March, we successfully completed a PFAS treatment project for Four Rivers Nuclear Partnership, the DUE contractor responsible for environmental cleanup activities at the Paducah site. We received approximately 1,500 gallons of PFAS contaminated liquids and successfully treated the material using our patented pending permafast destruction technology. This is an important precedent application for our technology supporting DOE cleanup activities and meeting the strict quality control programs as required by the department. PFAS contamination continues to represent one of the most significant environmental challenges facing both the government and commercial clients. Our approach is designed to permanently destroy PFAS compounds rather than simply transferring them to another medium. We believe this Distinction is important as customers increasingly look for solutions that can reduce long-term environmental liabilities. During the quarter, PFAS receipts slowed, but activity resumed in May, supported by several new wins at regional airports and continued work through partnerships with generators and industry leaders focused on the destruction of PFAS liquids. We're also continuing to... continuing the installation of our Gen. 2 unit at our EWOC facility in Oak Ridge, which is designed to add approximately 2,000 gallons per shift of additional treatment capacity to support our existing operations. While construction experienced some supply chain and fabrication delays, assembly activities are moving forward, and we expect the system to meaningfully expand our capacity once it's operational. Taken together, we believe PFAS represents a compelling long-term growth opportunity that complements our core nuclear and mixed waste treatment capabilities. We are still early in the commercialization curve, but the market need is real, regulatory and customers' attention continues to increase, and we believe our destruction technology gives PermaFix a differentiated position. Stepping back, the broader message is straightforward: Q1 was difficult, but it was also preparatory for us. We're now beginning to see the transition we've been preparing for begin to materialize across the business. At Hanford, ETF waste receipts began in April and additional DF law-related streams are expected to follow. In nuclear services, the Livermore project has mobilized and our project pipeline is improving. In PFAS, we've demonstrated our technology in the field, secured additional opportunities and continue to expand capacity. In the Permit Fix Northwest, our expanded permit and the facility investment position that we made position us to support the long-term waste receipts and longer-term grouting opportunities. We believe Perfix is at a clear inflection point. The investments we've made over the past several years in permits, people, infrastructure, automation, treatment capacity, and technology were all designed to prepare the company for the type of opportunity set now that is developing in front of us. Although quarterly results may continue to vary based on the timing of customer shipments, government programs, and project mobilizations, we believe the company is increasingly well positioned to deliver improved in performance beginning of the second quarter through the balance of 2026 and over the long term as these opportunities continue to scale up. With that, I'll turn it over to Ben to review the financial results in more detail. Ben.

Speaker 4: Thanks, Mark, and good morning. For the first quarter, we reported revenue of $11.1 million. That's down from $13.9 million in prior year a decrease of about $2.8 million year over year. The decline was primarily driven by lower volumes and timing of processing activity as we focused on working through existing waste inventory and encountered delays in reaching certain key revenue milestones. Looking at the segments, in the treatment segment, revenue was down 1.3 million compared to last year. This was mainly due to lower volumes and a less favorable waste mix, which more than offset some of the modest pricing improvements. In the service segment, revenue decreased about 1.5 million year over year, and this was largely due to fewer large projects contributing to revenue compared to prior year, partially offset by contributions from new smaller projects. From a profitability standpoint, gross profit declined $3.5 million compared to prior year. This reflects the impact of the lower revenue and the higher variable costs in the treatment segment and higher fixed plant costs as we prepare for higher volume expected in the upcoming months. Project mix and lower revenue in the service segment also negatively impacted our gross profit. Our SG&A expenses were 4.3 million, up about 284,000 year over year, primarily due to higher labor expense, outside services, and marketing related costs. Turning to earnings, EBITDA from continuing operations was a loss of 7 million compared to a loss of 3.3 million last year. Our net loss was 7.5 million versus 3.6 million loss in prior year, a loss per share of 40 cents compared to $0.19 last year. On the balance sheet, cash ended the quarter at $6.7 million and working capital was $5.9 million, both down from prior year levels, reflecting operating cash usage and capital spending during the quarter. Our treatment backlog ended the quarter at $12.2 million, up slightly from $11.9 at year end, and up from the $10.2 we saw at the end of first quarter in 2025. From a cash flow perspective, cash used from operations was $3.6 million. Investing activities used approximately $964,000, primarily for capital spending and permitting related intangible assets. And our financing activities used approximately $227,000, mainly related to scheduled debt and lease payments. With that, operator, I will now turn the call over for questions.

Speaker 1: Thank you. At this time, we'll be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your lines in the question queue. And you may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question today is coming from Aaron Spachala with Craig Hallam. Your line is live.

Speaker 5: Yeah, good morning, Mark, Ben and Lou, thanks for taking the questions. Maybe first for me on Hanford, can you just kind of give an update on kind of the incremental waste streams that you're seeing, you talked about ETF and maybe $4 million a quarter, it sounds like, less Last call, there was some talk of a million or two a month. And so I just want to make sure we have those kind of incremental opportunities kind of straight as we look for DF Law to start up.

Speaker 3: Sure, Aaron. There's four primary waste streams that we're receiving at Hanford right now. There's a lot of other ones. They're smaller. but a few that are going to be showing up here this quarter. But the ETF is the big one. It's been showing up or been being received, as I mentioned, about the middle of April. We're getting regular shipments from them as scheduled. And it is between $1 million to $1.5 million a month in revenue, as expected. And it's going very well so far and is expected to go through at least through Q3 and into Q4 at a minimum, where they usually have an outage when it gets too cold. That is going very well, no expectations for any impacts from that. The EMF waste was the, as you probably remember from the press releases, was the blowdown waste from DF Law. That was scheduled to to complete its supplemental analysis process, which is a regulatory process, on April 24th. They extended that comment period for that NEMA process for 30 days to May 24th. We met with DOE last week at senior management levels. They said to expect to receive the first shipment in later June. And that will run at about $300K a month. for during hot commissioning and once we get to operational phases, that will increase by four times and will be anticipated to be received at those levels at a minimum through the operational period, which we're anticipating to be in the fall in regards to DFLAW. We also have the dry waste that we're beginning to actually start to communicate with them on. They've been storing them for a bit. We are working with them on receipts. We're still not sure what kind of revenue that's going to generate. I would say, you know, just an estimate that it's about 100K a month, maybe more, a little bit more than that. We don't know the total volumes that they're generating at this point because they've stockpiled. We don't know how much they, how linear it is to say that they're generating so much dry waste based on production levels versus just in high commissioning. That should start here in mid-May. And then we have the TRU waste that we've been getting from the on-site contractor for many years. We are increasing capacity there in an effort to get to double throughput. And we have our top management team. out there as we speak, working with them, adding additional shifts and capacity. We began training additional personnel in March and April to be able to expand that. So we see that increasing again in this past mid-April. So all four of those, actually it's five, are underway and they're rolling and we do expect These numbers increase once DFLAW gets to operational phases, and that will be hopefully in the next quarter or two.

Speaker 5: Okay, understood. Thanks for the color there. And then, I mean, just kind of stepping back broadly, you've kind of talked over the years, I think DF Law, potentially 70 million plus of kind of revenue. And I think lately it's been three to 6 million a quarter of that ramp. So it kind of sounds like in the fall, that sort of a timeline and is that opportunity still largely how you're thinking about it?

Speaker 3: It is. It's DOE's estimate. They haven't come off that estimate. In fact, several managers we've talked to have said that they're generating more filters than expected. The EMF waste I mentioned was significantly more than anticipated. There's a lot of other waste streams also to be addressed, which we don't have any clarity on at this point. They are, as I said, we just met with DOE last week. DFLAW was operational last week. It comes up and shuts down. As they test each melter out, they're still having problems with, you want to understand, with the feed system or emission system and tweaking those, getting them to design spec, design performance levels. But they're working through it. I think the important thing, Aaron, is the DOE is very dedicated to the success of that project. They're more and more optimistic. Every time we talk to them about its ability to perform, and they're working through the kinks and are optimistic that it'll be up and running soon at a higher level than it has been so far. And so a lot of upside there. And the other important talking point on that, Aaron, is that DOE places Hanford among their highest priorities for this administration. And it's very evident by the attention that the DUA headquarters gives to the site. They were out there last week. We had a chance to meet with them. And the local officials are all very action-oriented. They're plowing through hurdles and very focused on increasing the amount of tank closures they can have during this administration. And so they're getting creative on any way they can possibly begin to show retrieval of tanks during this administration and as fast as they possibly can within compliance and safety standards. So we're encouraged by that and very optimistic that, like I said, with this EMF hurdle that we had, they worked through it and keep things moving. And while there may be delay here and there, they are very sustainable waste streams, and we're very, very well positioned with our facility there.

Speaker 5: Thank you for the color on that. And then maybe just on that commitment from the DOE and just focus on increasing tank closures. On grouting, you've kind of talked in the past about that maybe being like a $40 million-plus opportunity for you. But I see the kind of commentary on potential supplemental volumes from from DF law. And it sounds like maybe a little more kind of support of kind of treating that waste in state versus shipping out of state. And again, kind of treating more kind of sooner rather than later. So can you just kind of broadly kind of give us an update there? Is that, you know, kind of size still somewhat reasonable or just maybe an update there would be great?

Speaker 3: Yeah. As you know, there's really two grouting programs. One is the west side grouting program, which has been part of the tri-party agreement where DOE and the other parties, the regulators, agreed to do 22 tanks by 2040. And that's to move forward with the design and installation of the infrastructure systems there on the west side. And the procurement that we responded to, as I mentioned in the last call, was a $4 billion contract for routing about 50 million gallons of that waste over that period of time. That RFP specifically said to be ready, the requirements were that the bidders need to be ready to start receiving waste on the west side in January of '28, so about 18 months from now. And we're ready to go on that right now. And we proposed in our proposal that we would do a contract mod, or excuse me, a permit mod, and install some additional equipment and infrastructure to be able to provide over 4 million gallons a year capacity to support that objective. So that's on track. We should see here an award announcement hopefully before the next earnings call in July. And based on our discussions with DOE, we remain extremely optimistic that we have the lowest risk, best value approach. We've focused on the fact that we have a local union representation at our plant and offer something that no one else can offer right now, which is the ability to grout locally and ship by rail out of state for a commercial disposal. that is very much a preferred transportation alternative, rather than shipping very large quantities of untreated radioactive liquids out of state, which is done all the time, but what, and we do it too, so it's not like it's unheard of, but these are very large quantities, and we're confident that DOE will recognize that we offer a lower risk approach by grouting locally and transporting by rail. The other component of grouting, to answer your question, was the east side. So basically, the east side is what feeds DF Law. DOE is working towards ways to consider grouting on the east side. I don't want to speak for DOE on where they are on that process. but they are working to make sure that they're closing tanks as fast as possible. Again, with DFLAW as the cornerstone of their strategy, grouting is supplemental to that. But they do have a tank full of about a million gallons, 800,000 gallons of pretreated waste that will go to DFLAW, that they could potentially begin to grout, and I know they're looking into that. We're hopeful that in the next six to 12 months, They'll be able to work out with the regulators' way of to begin grouting that as a supplement to DF Law so they can begin to close more tanks under this administration. So those two components together are making progress. Hopefully, we'll see something sooner than later, like this year, on grouting. There is a complicated regulatory framework they have to work through to be able to do that on the east side. I know they're spending a lot of time and resources to focus on that.

Speaker 5: Great. Thanks for all the color on that. Appreciate it. And then, you know, on services. I heard enterprise, it sounds like that might be back in play. Can you just kind of remind folks on the timing and potential size of that? And then just kind of second on that, you kind of highlighted the more services opportunities you see, kind of the more opportunities potentially for the rest of the business. Can you just elaborate on that a little bit more, please?

Speaker 3: Sure, we're pretty excited about the enterprise, just to kind of give you a little background, it was awarded last May to a company that we were not a subcontractor to. There was a protest. The protest went through the winter, and in the March timeframe, it was determined that the protests should be upheld and that the Navy needed to come back out with their RFP in consideration of the corrective actions associated with that protest. And it did, and what they call a final proposal revision, or they call FIPR, and there was a turnaround on that. These proposals were resubmitted April 24th, and the Navy is anticipating an award sometime in June. So, again, it was documented as three bidders on that, and we're very excited about our team and our position with that. We are a subcontractor to one of the teams, the primes, but have very significant scope and it's directly, you know, squarely in our core competency for decontamination and decommissioning of a ship and using our health physics expertise along with our waste management folks to provide support to that team. So hopefully we'll be talking about an award there again in this competition, but we'll hopefully hear an announcement here before the end of this quarter.

Speaker 5: Great. And then just one last one, if I could sneak it in, just on margins, you know, with all these opportunities and kind of incremental volumes set to start later this year and into next year, just how do you think about incremental margins as some of these opportunities come on and, you know, especially up in the Richland plant?

Speaker 3: Yeah, our Richland facility, you know, is Everything we do there is designed in regards to how we bid and how we price to maintain our margin targets that we've had for quite some time, which we've talked to investors about in the past. I can't get into the numbers now on the call, but they're within the margin targets we maintain regularly. We expect those to continue. On the services side of the house, it's a much less margin, much lower incremental margin overall on our bids. We have gotten aggressive recently on some of them and where the risk would allow us to. We don't take undue risks on things like fixed price tasks or projects, but on cost plus, which are lower risk, we can be more aggressive. But all I could say in regards to margin overall, to answer your question, Aaron, is that the technology that we've been deploying both for PFAS as well as Hanford and our other sites are all within or very close to the target margins we have for the rest of our waste treatment program.

Speaker 5: Understood. Thank you for taking all of our questions. I'll turn it over.

Speaker 3: Thanks, Aaron.

Speaker 1: Thank you. As a reminder, ladies and gentlemen, if you have any questions, please press star one on your telephone keypad. Our next question is coming from Howard Brous with Wellington Shields. Your line is live.

Speaker 6: Thank you. Excuse my voice. In terms of the timeframe for grouting and the volumes, can you be a little bit more specific in both?

Speaker 3: Sure, Howard, so for the East side, I think that if we had to speculate, and this speculation, Howard, is that if we were able to secure 300,000 gallons in the next 12 months, we'd be pretty excited about that. And that's kind of our target. DOE hasn't given us a number, but we know what they're looking at doing. It also depends on DFLaw. If DFLaw gets up and running quickly and they ramp up production, they'll be draining that storage tank a lot faster. But right now, the storage tank is kind of remaining idle and they want to start feeding it again with pre-treated waste. And there's an opportunity for them to grout some of that existing storage. So if we, again, 300,000 by the end of the year would be a great target for us. Again, I'm not speaking for DOE on this, but just an estimate for where we'd hope to see. On the west side, we really are not certain of what kind of ramp up DOE's considering relative to the requirement for January of '28 and getting started on grouting. We do know that the design capacity for the west side extraction system is right around 3 million gallons a year. And it may be expandable. I know that DOE leadership has said in several public hearings and meetings that their goal is to exceed 3 million a year and get closer to six. And that's possible through a couple of different approaches that would include more from the east side and west side. But right now, 3 million is kind of the target goal for what they plan to grout on an annual basis sometime after January 28th, which would likely be a year or so after that. So our goal has always been to make sure we get at least half of it and provide DOE with the best possible cost and lowest risk, as I mentioned, opportunity to make sure we get half and become a long-term sustainable waste stream for us and someone that DOE can rely on to provide a significant portion of the production they need to close those tanks.

Speaker 6: Thank you. Just one more. The enterprise, can you give us some details as to how meaningful this will be when it starts and how long it will take revenue?

Speaker 3: Yeah, I can't talk about the procurement at all, Howard, but I can say that the government estimate for The project was between $500 million and $800 million, and there was a requirement, I believe it was four years to have it done in four years, Howard, and it may have been four to five years, but I think it was four years it was supposed to be done, and the Navy was going to be intimately involved in it to oversee what's going on. It's going to be done on a commercial site, which is very unusual for the Navy to do that for a nuclear ship. They do it for non-nuclears all the time. And then that ship will go to scrap. So it has to be decontaminated and then torn apart for scrap. So it's quite a bit of decontamination to be done. There's eight reactors on the ship. And that's where we come in. We were the primary small business on the team, and there was a significant small business requirement in the contract or in the RFP. And so we expect to be able to grow that. We can't get in how much it would mean for us initially until the award is made, Howard, but it's between 20% and 30% is the small business goals for that, I believe, in the RFP.

Speaker 6: 20% to 30% of which number?

Speaker 3: Well, the government estimate, all I can say is between $500 and $800 million.

Speaker 6: Thank you. That's all I have.

Speaker 3: Okay. Thanks, Howard.

Speaker 1: Thank you. Thank you. Our next question is coming from Bernard Vavala, who is a private investor. Your line is live.

Speaker 7: Hi. Good morning, and thank you for taking the question. I actually asked you in a specific way at the Gabelli meeting of this particular avenue, and today I'll ask it in a more general sense, but Permfix seems to me to be uniquely permitted to process the radiological material that will be generated by rare earth refining. And I just want to ask you, am I just kind of going off in the wrong direction on that? Or is that something the company has explored or is thinking about? And thank you for a response.

Speaker 3: Sure, yeah. I mentioned it, I think it was the last quarter, maybe the quarter before that, that we were participating on a procurement for mining, including rare earths and uranium. And We were able to secure that contract. It was, it's our first contract of that nature where we're actually sorting through our sewer sorting technology for a product as opposed to defined waste. That project is going into the field here, I believe next month in June, with our soil sorting technology. We're very excited about it. I can't, it's a confidential client, we really can't talk about who it is or what it is, but it is, in the mining industry, and we're excited about the opportunity to use this source ore in the mining industry itself. It's a large company with lots of other mines, so this is an important precedent for us, and we're hoping we can parlay this into a more broader application in the mining industry.

Speaker 7: I appreciate that, and I would just encourage, to the extent you can, as you go forward to shine a little bit of light on that, I think it would do a lot of good. Thank you so much.

Speaker 3: I appreciate that. You bet. Thank you.

Speaker 1: Thank you. Our next question is coming from Stephen Fine with Sofine LLC. Your line is live.

Speaker 8: Good morning, everybody.

Speaker 3: Morning, Steve.

Speaker 8: Hi. My first question is, What has been the how have you been impacted by the energy situation of the world?

Speaker 3: You know, it's a very interesting question, Steve. Where we've been impacted, I don't know if the investors on the call here have followed DOE a lot in regards to their reindustrialization mission. They've been hugely successful in reindustrialization at three of their primary properties, the Paducah site in Kentucky, the Portsmouth site in Ohio, and here in Oak Ridge. And what they've done is really reignited the nuclear market itself from fuel fabrication to all types of different energy SMRs and other energy-related initiatives for those sites. We've works pretty hard to try to get involved in that at this point. It's in the early stages as DOE loans have gone out at about $900 million to three different companies, but also in the fuel fabrication and other components of the industry, we've been able to provide some support in due diligence of the properties as well as in waste management. But the one we're particularly excited about is up at Portsmouth. And Portsmouth had a huge press release a few weeks ago that SoftBank has worked with DOE headquarters and commerce department as well for a big initiative up there to implement a 10-gigawatt natural gas capability. to support one of the, what they say is the world's largest data center there at the Portsmouth site. We fortunately have a contract there now. We're working with them on accelerating some of the cleanup there that's growing very well for us. And it just got started here a couple of weeks ago. And we're very excited about that. So to answer your question, most of the energy reindustrialization part of it that we've been able to support is in DOE-related types of initiatives. But we are seeing good growth there and acceleration at those sites, all the sites, as they prepare the properties for transition to commercial activities from the DOE activities. And we're seeing opportunities for accelerated waste management needs and getting the waste off-site, particularly some difficult waste, and accelerated closure for those as well.

Speaker 8: My understanding is that the vitrification plant or DFLAW, you know, whatever, you know, that process in Hanford uses diesel. Is that still using diesel?

Speaker 3: I believe it is, Steve.

Speaker 8: So isn't that, doesn't that, you know, we'll hear the stories about how every, how they're getting impacted on the West Coast. Doesn't that you know, impact the story there relative to the efficacy of the process there.

Speaker 3: Well, I can't speak to that, Steve. I can say that, you know, the plant's been in design and construction for over 27 years. So I think they kind of, you know, made the investment in that facility the way it is. So I wouldn't expect that to change any. They are expanding its capacity to get up to the 2 million gallons a year level for production, but I don't know if they have any thoughts at all on alternative energy sources for heating those melters.

Speaker 8: All right, so when you say they're getting up to, they're moving to getting up to 2 million, what type of efficiency would that be? would that be 35? Would that be 35, 40%? Would they be increasing their efficiency from the historical efficiencies of, you know, vitrification, which is in the 30 to 40 range, you know, 40% range?

Speaker 3: I'm afraid, Steve, I just don't know enough about the flaw to be able to answer that question.

Speaker 8: All right. What does EMF mean?

Speaker 3: The acronym escapes me. We've talked about the acronym so many times. It's an effluent... Basically what it is is the blowdown water for the emissions program. So it basically is scrubber water, but the acronym itself I don't know if Ben or Karen, you know off the top of your head, you can help me with that. Ben, you got it.

Speaker 4: Effluent Management Facility. Effluent Management Facility.

Speaker 3: The EMF is a facility that receives the load on water from DFLAW, and we get it, and they concentrate it and we get it from them.

Speaker 8: Got it, got it, okay. So that's, okay, so anything you've got from DF Law would come from EMF? Or that's just one type.

Speaker 3: That's one waste stream, correct?

Speaker 8: Okay, all right. And when, what I don't follow is, if they're still in transition out there, then why wouldn't they be giving you the tanks that are sitting there? Because they can always make up more tanks and it would be at least something in progress.

Speaker 3: Yeah, Steve, it's the way the government works is they make, they define plans far ahead of time and they go through a lot of regulatory processes and agreements and public hearings. to nail down their plans, and when they want to change something, it takes a while to make changes in general. So they are making changes. Along the way, as I mentioned with the supplemental analysis for EMF, where they decided, hey, instead of putting the EMF back into the melters and making glass out of it, wouldn't it be better to ship it off for grouting? and be able to increase the throughput of the plant. That's a change. So those types of things, they have to run through those considerations, including public comment, and it just takes a while. So as far as the tanks go, you know, right now they're focused on getting the systems up and getting them operational, and there'll be other changes along the way, I'm sure, as they define efficiency opportunities.

Speaker 8: All right. So on the What is it, the west side, that's where there's no piping? That's the west side, right? Okay, so presuming you were awarded that contract, am I correct that the timelines between award and starting would be they have to set up structure there to be able to pull out of the tanks and then at this, is that what the time is about between the awarding and then starting processing that they don't have an infrastructure to handle the tanks.

Speaker 3: That's correct. They're building infrastructure as we speak, Steve.

Speaker 8: And is that, and are we talking a similar separation process that's being done on the east side with the east side tanks where they're separating, you know, low from high? So is that what the anticipation is there?

Speaker 3: That's part of the design is exactly right it's called okay right now they have to have a call they call it the Tisker the Tisker is doing that separation as you mentioned through ion exchange and you'll have a much more bigger larger more robust system on the west side but they're building one on the east side too in parallel to to supplement Tisker.

Speaker 8: Okay which could be beneficial for you if they have more yeah that's right yeah okay all right so then from your standpoint after you win How long is it going to take you to scale up your capacity?

Speaker 3: We have committed to have our capacity. If we receive an award in July, we have already, I'm glad you asked what I left this point out, we've already started working with the state to modify our permit. We already had several meetings with them. It's going very well. We've already completed our design, for the most part, for installation of our new grouting equipment that we'll be purchasing. And we'll have that in place, up and running, we've committed the DOE to have that 4.2 million gallons of capacity within 18 months. So we basically are committed to October 27 to be able to do 4.2 million gallons of waste once we receive or assuming that we received an award in July.

Speaker 8: And that 4.2 million is what, everything or just the west side?

Speaker 3: That would be our total capacity. And we may increase that as well. That's just kind of where we're targeting right now. And it would be for whatever ways DOE wants to send us, liquid waste specifically. Okay.

Speaker 8: All right, fine, fine. This month, has there been an improvement in April?

Speaker 3: We have seen improvement.

Speaker 8: In other words, we're reporting through March. So are you seeing a change in April or are we still looking forward?

Speaker 3: We've seen improvement in April. I can't get into details as far as April's numbers go, but we are seeing improvement, particularly with the ETF waste being received and working on some of the other waste we've got. We see a significant increase in our forecast for the next two months that puts the position to that we will see a significant improvement over Q1 for sure.

Speaker 8: Okay, good. What's going on with the European stuff?

Speaker 3: The ERC contract we have is going very well. They started remediation of drums in April and It's going a little slower than they thought once they started pulling drums out of the ground. Those are the drums they'll be sending to us to vitrify, or excuse me, to burn at our Northwest plant. And we continue to receive waste from Mexico and Germany as well as Canada. But the big contract in Italy is rolling. It was significantly ahead of schedule. It's probably back to close to original schedule now, because as they're pulling drums out of the ground, that it's going a little slower than they thought. Again, that's not our scope. Our scope is to take the drums they pull out of the ground, characterize them, and then ship them over to Northwest and treat them. That looks like it's still on track for Q1 of '27 for the first ship. And then once those begin, it'll be in the range of $6 million to $7 million a year of sustainable waste streams.

Speaker 8: Changing the subject again, you mentioned mining, which that's the first I really well, I've heard of that, but so I'm very where what's going on with rare earths and stuff like that. So what do you actually pull out of it when you do it? Are you just cleaning the waste or are you actually pulling out something of value?

Speaker 3: Our process focuses on, it's very simple Steve, it focuses on segregation of radioactive components. So we can load a load of soil into our system which is a large conveyor system, goes into a hopper, it goes down on a conveyor belt at a very rapid pace, like 200 yards an hour, moves up the conveyor belt, and our detection technologies can separate the radiological components from the soil or debris at a very rapid and very accurate pace so that you can concentrate the radioactive component or in an remediation situation, you remove the good soil so you don't have to, you can reduce your waste volumes. In a mining application, you're segregating your radioactive component for processing and reducing your waste component and concentrating your source. So that's generally what we do.

Speaker 8: And that's unprecedented.

Speaker 3: It's not unprecedented, but the technology we have is advanced, and we don't know of anyone else that can do this the way we're doing it. It's largely a software application with the detection systems, and we have a very skilled couple of teams that run this unit very efficiently and inexpensively, relatively. So it's very high value. We haven't seen anybody else competing with us. There's other soil sorters out there, but not with the similar type of software technology and detection systems that we've got.

Speaker 8: My understanding of rare earth is that the real challenge there is the ability to refine. So what you're doing is before they start refining.

Speaker 3: Right. We're at the mine site. concentrating the source material that they're looking for. So in essence, this is just radioactive components at this point.

Speaker 8: Right. So your success makes the refining easier, in essence.

Speaker 3: Right. More efficient. In theory.

Speaker 8: All right. Turning to PFAS, what's happening with the arrangement you made with that non-PFAS fire company in Atlanta? that provides non-PFAS products.

Speaker 3: Right. We're working with them on several change-outs right now, along with several other companies. And that's where we're seeing a lot of our larger revenue streams coming in, as I mentioned, with airports, where we're proposing on several airports. We've just recently won one in Arizona. But we're working with several different companies, that's one of them, to replace the PFAS firefighting foam out of the airports and putting in new stuff, new foam that doesn't have PFAS in.

Speaker 8: It.

Speaker 3: That's one of our more exciting programs we're doing right now, contributing to our backlog.

Speaker 8: That I don't think, at least I, from earnings call, didn't understand this until someone told me, but basically you're, am I correct that your connection with this company, that basically their fire systems are, they have huge tanks, they're replacing huge tanks of the phone. Is that correct?

Speaker 3: That's correct.

Speaker 8: Okay, good. All right. And then the last question regarding PFAS is, the fact that the present EPA stopped the total ability of companies to use to have to deal with their PFAS situation, how does that impact you?

Speaker 3: Yeah, it hasn't helped, but what has helped is the states are promulgating their own policies and rules. And several states have taken steps in that direction. I think there's a dozen of them. And it would be optimal if this administration would promulgate some policies and designate as a hazardous waste, like under CERCLA or something like that, that would require accountability for managing their PFAS on-site and reporting on it and being enforced. That hasn't happened yet. We do think it will happen eventually, and we'll be ready when it does because that will change the whole market overnight. But right now, it's being driven largely by states and best management practices relative to liabilities for people getting contaminated with PFAS and industry recognizing the importance of removing PFAS from their facilities.

Speaker 8: All right. Well, keep on trucking. It's, you know, the number of opportunities I've never seen here. And thank you.

Speaker 3: Okay. Thank you, Steve.

Speaker 1: Thank you. Ladies and gentlemen, as we have reached the end of our Q&A session, I would like to turn the call back over to management for any closing remarks.

Speaker 3: All right, thank you, operator, and thank you to everyone who joined us today on the call. I want to close by reinforcing the main message from this morning's call. While the first quarter was challenging, we view it as a transitional period that health position permit fixed for a stronger activity beginning in the second quarter. We took deliberate steps to reduce existing waste inventories, prepare facilities for higher waste receipts. complete lower margin work, and invest in the personnel training and infrastructure needed to support the opportunities that are now developing across the business. More importantly, we believe the Hanford opportunity is beginning to move from preparation towards execution. ETF waste receipts have started. We continue to work with DOE contractors in addition for additional DFLAW-related waste streams, and our Perfect Northwest facility is well positioned to support multiple Hanford-related programs over time. At the same time, we're seeing renewed momentum in nuclear services, including the mobilization of a $24 million Livermore contract and continued progress with PFAS destruction, including our new winds and installation of our Gen. 2 system. Taken together, we believe PERFix is entering a strong phase. The investments we've made over the past several years in permitting, technology, people, facilities, and customer relationships were designed to prepare us for this opportunity set. While timing may vary quarter to quarter, we believe the direction of the business has improved materially, and we're increasingly confident in our ability to improve performance beginning in Q2 through the balance of 2026 and over the longer term as these opportunities begin to scale. We appreciate the continued support of our shareholders, our employees, customers, and partners, and we look forward to updating you on our progress in the coming quarters. Thank you.

Speaker 1: Thank you. Ladies and gentlemen, this does conclude today's call, and you may disconnect your lines at this time. And we thank you for your participation.