Good day, and welcome to the Perma-Fix Fiscal First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to David Waldman, Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to Perma-Fix Environmental Services First Quarter 2024 Conference Call. On the call with us this morning are Mark Duff, President and CEO; Dr. Louis Centofanti, Executive Vice President of Strategic Initiatives; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing first quarter 2024 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 the conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and include certain non-GAAP financial measures. All statements on this conference call other than a statement of historical fact are forward-looking statements that are subject to known and unknown risks, uncertainties and other factors, which could cause actual results and performance of the company to differ materially from such statements. These risks and uncertainties are detailed in the company's filings with the U.S. Securities and Exchange Commission as well as this morning's press release. The company makes no commitment to disclose any 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 a consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. I'd now like to turn the call over to Mark Duff. Please go ahead, Mark.

All right. Thanks, David, and good morning. As discussed in our year-end conference call, our financial performance in the first quarter of 2024 was impacted by several temporary headwinds, which had a significant impact on the first quarter and, to a lesser extent, the second quarter. However, we believe these challenges were one-off impacts and are largely behind us now. As a result, we're regaining our momentum with improving Q2 performance and we anticipate a strong second half of 2024. At the same time, we continue to invest in our 2025 vision, which we believe has the potential for significant growth and even transformative performance. The weakness we experienced in Q1 was due in part to delayed project starts, as previously discussed during the fourth quarter of 2023. We completed our 2 largest service projects at Princeton Plasma Physics Lab and the ex-McKee project for the Navy. These 2 large projects have completed all field work now. However, they were not replaced in time by new projects due to delays in mobilization activities until late April. We also experienced challenging weather conditions during the first quarter of 2024, which resulted in the closure of 2 of our facilities for a week, including delays in waste shipments to support backlog. In addition, due to the inability of Congress to pass the federal budget on schedule, the government had been operating under a Continuing Resolution, which contributed to delays in procurements, project starts and waste shipments since government clients were holding back budgets due to uncertainty and the potential of a shutdown last year -- last March. However, we used this period for equipment replacement and repairs, treatment program and operational enhancements and testing to support permanent expansion and broader market penetration. We believe these headwinds are now largely behind us. And…

Thank you, Mark. Let me start with revenue. Our total revenue from continuing operations for the first quarter was $13.6 million compared to last year's first quarter of $20.1 million, a decrease of $6.5 million or 32%. Revenue decreased in both our operating segments as treatment was down 885,000 as a result of lower volume of waste treated as well as lower average price to -- lower average prices related to the waste mix. In the Services segment, our revenue was down $5.6 million, primarily due to the 2 large projects which were effectively completed at the end of 2023 and were not replaced by similar sized projects due to the timing of contract wins and delays in start-up of new projects, partly in part from Continuing Resolution impacts. Our gross profit for the quarter was a negative $620,000 compared to $3 million of gross profit in Q1 of 2023. In both segments, lower revenue had a significant impact on our gross profit with a cumulative total of approximately $2.1 million. And in addition, lower-margin waste/project mixes also impacted gross profit by about $1.7 million. As we've previously disclosed, especially in the Treatment segment, we carry significant fixed costs, which have a big impact on our gross profit when revenue is low. Our G&A costs for the quarter were $3.5 million, which is higher than prior year by $58,000. This modest increase in cost was a result of higher business development costs, which offset lower legal fees and utility expenses. Our net loss for the quarter was $3.6 million compared to last year's net loss of $411,000. Total basic and diluted loss per share for the quarter was $0.26 compared to a loss per share of $0.03 in the prior year. EBITDA from continuing operations for the quarter, as defined in this morning's press release, was negative $4 million compared to EBITDA of $171,000. Turning to the balance sheet. Cash on the balance sheet was $2.4 million compared to $7.5 million at year-end 2023. Our current liabilities were down $1.3 million, reflecting decreased costs associated with production as well as the timing of vendor payments. Our waste backlog at the end of March was $10.6 million, up from $8.7 million at the end of last year and up from $9.4 million in March 2023. Our total debt for the quarter is $2.7 million, excluding our debt issuance costs, most of which is owed to PNC Bank. Finally, I'll summarize our cash flow activity for 2024. Our cash used by continuing operations was $4.4 million. Our cash used by discontinued operations, $159,000. Cash used for investing in continuing operations was $244,000, and that relates to capital spending. Cash used for financing was $125,000. This is representative of our monthly payments on our term and capital loans of $259,000 and payments to our finance leases of $75,000, offset by receipts from option and warrant exercises of $209,000. With that, I will now turn the call over to the operator for questions.

Certainly. [Operator Instructions] Your first question is coming from Howard Brous with Wellington Shields.

Mark, Ben, Louis, first of all, congratulations on creating a myriad of opportunities that we're looking at. So congratulations. The Hanford settlement, the state of Washington Department of Ecology, DOE, EPA, Mark, what you were referring to, I've certainly read the documents. I need for you to confirm my understanding that this is a legal binding agreement amongst all these parties. Is that a correct statement?

That is a true statement, Howard. It is a legally binding document. It has taken a long time, as I mentioned, almost 5 years with a mediator to come to these conclusions and there's a lot of give and take between the regulators and DOE. There's a lot of funding considerations that go into it, schedule considerations. So the commitments in there are really written in stone. However, do keep in mind, it's a draft document. It's going to be coming out for public comment. I can't remember when it comes out, but soon for 60 days. And I do believe it's going to be very well received. I'm sure there'll be many comments, but the reason it's going to be well received is unlike some of the prior agreements between the tri-party, this one has a lot of action in it. And I know I'm talking to DOE that, that was their intent is to be able to show real progress, meaningful progress, beginning with this administration and to show that there's an end state or end goal that's defined in a way to get there that recognizes what the technologies they've selected will do. In other words, what vitrification can actually do plus grouting. So to answer your question, yes, it's a legally binding document once it gets to public comment, then it will be commitments on all 3 parties.

One comment in the document. The parties agreed that the Settlement Agreement is not subject to public comment. And that clearly means that this is effectively locked in stone. And if I refer to -- first of all, the ROD that was put out in January 2023, the other documents that was put in January of '23 and the most recent Settlement Agreement, it basically locks in, first of all, the ROD locks you in Perma-Fix for 10 years. But DFLAW and the affluent will be treated from 2025, the latest August possibly earlier to 2060. I know you don't have a contract, but other than the ROD, but effectively, is there any competition in treating the affluent?

So your question is, to make sure I understand. Howard, your question is, is there -- is what's the competition associated with the treating the effluent from DFLAW?

Right.

Yes, right now, the ROD does commit to 10 years and upon start-up. And the reason is less competition for pretty much any of the other opportunities in Hanford relative to waste management is because the waste gets disposed of after we treat the waste or anyone who treats the waste, it gets disposed of at the Hanford landfill locally. So it would not make any sense to have anyone outside of the area of the region, ship to and ship it back, while we're just 10 miles down the road from the actual sites themselves. So yes, it'd be very difficult, as I've mentioned before, for someone to get a permit. It takes an upwards of 10 years to get a permit. It also takes significant investment in the facility itself and citing it and licensing it and going through all the processes to get it commissioned. So it's very solid for 10 years. And most likely, I don't see any or very limited risk the DOE would decide to build these facilities on their site as long as we're providing value and doing the job efficiently.

So effectively, you're going to be treating the affluent for the next 35 years starting no later than August of next year. Is that basically a fair statement?

It's true. Again, I can't comment beyond 10 years, but it would be a very high probability that they'll be supporting that plant through the life of the plant, which is 2060.

In addition, on the settlement, they also discuss other opportunities, certainly, with the high-level waste, they plan on building a second vitrification plant. So it's not just the split between -- and I hope I get this correct. The East tank is supposed to be -- East tanks are supposed to be vitrified. The West tanks are supposed to be grouted. Do I have that correct?

You have that correct. It's confusing, though, Howard. I am glad you brought it up. Yes, there was originally 3 vitrification plants planned. The first one which is getting rolling up that's designed to do 1 million gallons a year and that was to do the first 40% on the East tank farm. Then there was going to be one for the West tank farm that was going to be constructed. And then there's one that's already started construction, which will do the other 20%, which they're viewing as the high-level waste. High-level waste, if I remember correctly, is supposed to be commissioned or start up in 36 or 34. And that's a whole different ballgame. We're not sure how much we're participating in anything you can do with that yet. It's premature to speculate. So those 3 plants, the tri-party agreement, or excuse me, the Settlement Agreement which was just approved changes that 3 vitrification plant approach to 2 and they take 40% or 50% just about of the West tanks and grout those.

So effectively, if I understand high-level waste is about 6 million to 8 million gallons and they're going to split between the balance 24 million gallons to be vitrified and 24 million gallons to be grouted. Is that a correct understanding?

It's pretty darn close. That's right, Howard.

So if there's 24 million gallons of low level, plus possibly the high-level waste, this effectively will go on for the next 30, 40 years?

That's right.

Your next question is coming from Ross Taylor with ARS Investment.

And Mark, I would second Howard's comment about setting up a tremendous array of opportunities pushing forward. A couple of things I want to get into. You've mentioned Central Europe, the opportunities there. We all know that Germany basically, I think, pulled down their fleet of nuclear reactors. Can you give us an idea of both timing and the magnitude, both size, dollar-wise, but also time horizon that you expect to see those programs run? And when do we start to see money -- revenue come from them? And how long -- once it starts, how long do you think it lasts?

Yes. The way they're working things in Germany, Ross, and thanks for the kind words. But the way it works in Germany is one central organization is managing the waste that's generated from the decommissioning process. And that's who we're working -- one of the entities we're working with over there is to provide the treatment technologies we have here in the U.S. to reduce the volumes of waste they generate by a significant amount, 75% to 90% and put them in a position where they can be stored in the new Germany or German storage facility called the Konrad facility. And the Konrad facility is going to provide radioactive waste storage for the whole country. It's going to be very large. And what they're basically doing is defining the waste acceptance criteria or the criteria to store there now and everybody who would plan to ship to them has to meet that criteria now. We've already been through this process with a larger client in Europe -- in Germany, which requires a review of the -- by the German regulators of our facilities and the way we treat waste and they do walk-downs. There's all kinds of paperwork and permits and plans. It's all been approved. We're applying for the same things for these -- for the decommissioning program as well. So that's where we are in the process. So to answer your question, I think it will start off slow. Everyone's moving very slowly over there as we're getting through this permitting process and everything goes along with that and the agreements we have to get in place. So we anticipate starting to see a reasonable increase in German waste to the tune of about $5 million or $6 million a year in the late '24 time frame. And once we get the plant that we're proposing in the U.K. up and running, we see that number at least doubling and because it's so much more efficient and economical with the plant over there. So it's really difficult to define since we don't have hard and fast contracts in our hands at this point, but we know the ways they've got. We know the volumes they have. They're very, very large volumes. They have very fast or accelerated timelines. They have to implement to remove their waste from storage, put it in stable forms and then get it in the Konrad facility when it's up and running, which I think is '28 or '29 time frame. And there's a real sense of urgency for that. So we see that really increasing in Q4 and through '25.

Your next question is coming from Aaron Warwick with Breakout Investors. [Operator Instructions]

I wanted to ask a little bit more about this PFAS opportunity. I wanted to begin just by -- I mean, I've been seeing a lot about it lately in the news. Some other companies have been talking about it as well. Just wanted to get a sense of -- and obviously, you mentioned enormous TAM. What is the competition out there for you guys in that market?

Right now, there are competitors out there. We've seen press releases from some of the big firms that are going to do incineration which does not necessarily destroy everything and is not preferable for a lot of organizations, particularly the DOE and DOD, which have said they are not allowed to or prohibit consideration as a treatment method. And there's deep well injection, which is largely Texas, which are deep or injecting very, very large quantities, millions of gallons a year into 4,000, 5,000 feet into the ground, into the bedrock. Those are both in play. And our options now. There's also filtration, which does not apply to a lot of different waste streams because your filters get gummed up too fast. But those are the kind of the existing technologies now that are in place. The ones that are coming up that are total destruction technologies, we've been -- been able to identify about a half dozen that are coming up that you can see on the Internet plus other colleagues we know. They all have very innovative approaches. We have not seen anything that has our discriminators, which are specifically lower temperature processing with lower pressures. Also with the speed, we can do that. But most importantly, the simplicity of our unit. Our unit is so simple that relies on chemistry and some engineering in the process, but is an inexpensive unit. Once we get this thing fine-tuned, we can have it mobilized and to be operated at much higher levels than we're starting with. And also, as I said before earlier, will translate to soil. So as far as the competition goes, there are several start-ups that you can read about out there, but each one describes their technology has something that we don't have in regards to economic and simplification of process. Louis, do you have anything you want to add to that?

No. Yes, we haven't seen anything that economically, one, that has really destroys the PFAS, just doesn't separate it and does it in such a simple system that we have. So we're very optimistic of where we can go with this process in terms of competition.

As I mentioned, Aaron, the real -- our competitors -- and we've talked to most of them or a lot of them. The significance of the EPA press release we had yesterday and the EPA announcements from last week are really significant in that it sets the foundation for the market and the timing of the market, not just that everyone's got PFAS knows what's going on or at least has a sense. But now with -- it's on the doorstep of being promulgated into regulation that will include time-critical requirements as well as acceptance by EPA and more importantly than anything else enforcement. And once that starts, then the fire will be lit under everyone to get moving. And we see the market really taken off and it's going to be critical for us to have our systems deployed so we can start handling the volumes that come out from that.

What sort of independent entities, if any, have verified that your process works besides just what you've mentioned on the call yourself?

Well, we've used 2 universities for testing and a variety of private companies. Now again, because of the proprietary nature of the technology being so unique, we haven't had white papers done on how it works and what's going on here. So we have filed a variety of patents and we'll be filing a lot more because the further we go with this technology, we see a variety of markets where it could be of value.

So what is the expected timeline on when those would be granted those patents before you start trading in September, October time frame?

Well, no. We filed the patents. Patents are pending. At this point, patent review, especially on this -- these are very fundamental chemistry patents and they will take some time. Our experience with patents or we could see a year or 2 of review on these patents, especially because of their significance.

Right. Makes sense. So I mean you mentioned there is some competition even though they can't do what you say you can do. But my understanding was that kind of what got you on this track to begin with of the R&D on this PFAS treatment is that you already have some customers. Is that an accurate statement that you already have some people that you -- that are ready for this treatment to proceed once you get the plant up and running?

We do, Aaron. We don't have contracts for significant volumes in place is what we have several clients that we deal with on a regular monthly basis that have very defined inventories and are waiting for us to get the system up and running. So when we get closer to operations, we'll be moving towards those contracts. Some of them were actually taking samples from now to make sure that we can perform the way we say we are. And that's been strategic for us. And some of the larger folks that have bigger inventories, they're shooting us or sending us a liquid samples for us to run in our pilot scale testing. So yes, we do have some locked in. We shouldn't say locked in. We have some defined that will be locked in, in the next couple of weeks and some that we're also pursuing grants with to do demonstrations as well.

Wonderful. Last thing, I guess, for me would be any sort of partnership or licensing interest from any of these larger players in the space that you think could be additional source of revenue for you besides your own plant?

Yes. We see licensing to be an option. We have not pursued that we really had discussions about this specifically yet until we can show performance of our operational system. But we've talked to several companies that would align very well with that and have very far reach in regards to entering the market and have clients that have significant volumes or clients themselves that have the volumes, and that will be a step that we'll be looking to address in the January time frame.

There are no further questions in queue at this time. I would now like to turn the floor back over to management for any closing remarks.

All right. I'd like to thank everyone for participating in our first quarter conference call. As you can see, hopefully, we are quite confident in the outlook for the business over the next few years. We look forward to providing further updates as we continue to execute our strategy. We appreciate the continued support and patience of our shareholders, and we look forward to providing further updates as developments unfold. Thank you.

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.