Perma-Fix Environmental Services, Inc. (PESI) Q1 2012 Earnings Report, Transcript and Summary

Greetings, and welcome to the Perma-Fix Environmental Services First Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Waldman of Crescendo Communications. Thank you. Mr. Waldman, you may begin.

Thank you. Good morning, everyone, and welcome to Perma-Fix Environmental Services First Quarter Conference Call. On the call with us this morning are Dr. Lou Centofanti, Chairman and CEO; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing first quarter 2012 financial results, which is also posted on the company's website. If you have any questions after the call or would like additional information about the company, please contact Crescendo Communications at (212) 671-1020. I'd also like to remind everyone that certain statements contained within this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements on this 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 with the U.S. Securities and Exchange Commission. 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. I'd now like to turn the call over to Dr. Lou Centofanti. Please go ahead, Lou.

Thank you, David, and welcome, everybody. Let me begin by saying that we achieved strong revenue during the quarter. Our adjusted EBITDA also increased by over 80%. Treatment Segment, as you look at the segment, profitability was up. In this quarter, with SEC, our acquisition, profitability lagged due to several contracts we had inherited. I would point out to everyone to remember that we did dramatically reduce the purchase price due to these contracts. And we'll continue to see some negative effects on our earnings from these contracts until they're over, over the next several quarters. Meanwhile, the acquisition of SEC is progressing well, and we are more active on the bidding front than any point in the company's history. I guess, our bidding activity is best illustrated by the cleanup agreements we were recently awarded at Los Alamos National Laboratory. We are 1 of just 3 winning teams for each project that were awarded the right to bid on an aggregate of approximately $450 million of task orders over the next 3 years. As a reminder, these are Master Task Order agreements. The final task orders have not yet been issued, so it's too early to determine how much of these contracts will be specifically granted to Perma-Fix. But we feel very well positioned. With the acquisition of SEC, we have dramatically expanded our service capabilities. And we are positioned to bid on a much broader scope of work. I'd like to take a moment to provide a little more detail on specific steps we have taken to improve our bidding organization. Most importantly, we hired and are continuing to add people in business development and sales. We have assembled a thorough database on projects throughout the nuclear service industry. And we have completed a series of strategic alliances that gives us resources to grow our Service business and gain market share. As a result, the sales force has been extremely active, and we expect to begin to realize some of the benefits of these initiatives in the coming months. The biggest issue we face in 2012 is one of budget and timing. As we previously disclosed and discussed on our prior conference call, our Hanford Plateau Remediation Contract temporarily scaled back in 2012; that leaves a big revenue hole for us in '12. At the same time, many other projects have been delayed. Even though we know our contract pipeline is very robust and we know we have the opportunity to gain significant market share, the big question for us is timing and when these contracts will be awarded. On the high end, we could see adding as much as $60 million of new incremental contracts in 2012, although since we're already in May, some of that could push into '13. On the low end, it could be significantly less. Without this visibility, it's impossible for us to give guidance at this time. Given the slowdown at DOE, we would not be surprised to see many of these contracts delayed until later into this year. That said, we're in a very different position than 3 years ago when we were slowly relying on our Treatment Segment. We were completely dependent on the DOE budget cycles. The difference here is on-site work needs to get done and we're extremely confident we'll grow the business, gain market share in any environment. That reason, we remain confident we can and believe we can grow to a $200 million to $300 million company over the next several years. In the meantime, we're managing our expenses carefully, and we expect margins in the Service Segment to improve as we progress with the integration of SEC. And that is due both to increased revenue and reduced cost in the second half of the year. Changing the subject. We are also moving forward now with our new medical isotope production process. Not much new to report since our last conference call, except that we are continuing to accelerate our development work in advance of submitting the technology for FDA approval. The project is going well. And once we apply for FDA approval, we'll have much better visibility on timing of the commercialization process. So to wrap up, revenue increased, the integration is progressing and we expect to do much better in the second half of the year, as was in the case in 2011. Though our backlog diminished in the first quarter, we expect sales to ramp up in the second half and our balance sheet can remain healthy. At this point, I'd like to turn the call over to Ben, who will then go into more details on the numbers, and I'll be back to answer some questions at the conclusion of our formal remarks.

Thank you, Lou. Beginning with revenue. Our total revenue from continuing operations for the first quarter was $38.1 million compared to last year's first quarter of $23.6 million, an increase of $14.5 million or 61.2%. Revenue from our Treatment Segment increased by $507,000 or 4%. The increase in revenue was primarily due to higher volume of waste processed and disposed of, which offset lower revenue from incoming receipts. In our Services Segment, the revenue increased by $14 million or 123%. Revenue from Safety and Ecology acquisition totaled $18.6 million, which was offset by reductions from the Hanford contract of $4.7 million. The dropoff at Hanford relates primarily to lower headcount, as this is a planning [ph] materials contract. Turning to our cost of goods sold. Our total cost of sales was $33.8 million in the first quarter compared to $20.6 million in the prior year. Our Treatment Segment costs were down $1.3 million despite the increase in revenue as our disposal and transport costs were lower compared to prior year. Our cost of sales from our Services Segment were up $14.4 million from prior year, and our costs related to the SEC acquisition represented $18.3 million of those costs, while the Hanford costs were down $3.8 million, primarily due to lower labor costs, as discussed. Our gross profit for the quarter increased by $1.3 million coming in at $4.3 million or 11.3% of revenue compared to last year's $3 million or 12.8%. Gross profit in our Treatment Segment increased by $1.8 million and gross margin was 21.2% compared to 7.8% in the prior year. The waste mix in our Treatment Segment was -- primarily was the reason for the higher margin through higher margin waste streams, as well as reducing our fixed costs due to a reduction in force we implemented in the second quarter of 2011. In the Services Segment, our gross profit was below prior year by $490,000. Lower revenue at the Hanford contract resulted in reduced gross profit, which more than offset the increases in gross profit from our technical services group and our SEC acquisition. I do want to note that included in the gross profit at SEC was the impact of accounting for fair market value contract, which resulted in approximately $495,000 of net expense. Our G&A costs for the quarter were $5 million or 13.2% of revenue, up from $3.4 million or 14.3% of revenue last year. Costs associated with SEC totaled $1.3 million, while incremental corporate expenses related to the acquisition increased $160,000. Loss from continuing operations for the quarter were $856,000 compared to the loss of $533,000 last year. Loss applicable to common shareholders was $1.1 million compared to last year's net loss of $321,000. Our total loss per share for the quarter was $0.02 compared to a loss per share of $0.01 last year. Adjusted EBITDA from continuing operations for the quarter was $1 million compared to $548,000 last year. Turning to the balance sheet. Our total cash was down $9.4 million, primarily due to a reduction in cash from operations of $8.2 million. Increases in our accounts receivable, decreases in our restricted cash and unearned revenue and accounts payable were the main reasons for this cash reduction. Capital spending was $206,000. Our finite risk sinking fund increased by $1.9 million, and our balance now sits at $21.2 million. I'd like to note that these payments were the final scheduled payments required by our closure policy, which is set and in place until 2028. Our backlog fell by $6.8 million, finishing the quarter at $7.8 million. This decrease, of course, was the result of processing more waste in this quarter than was received. Total debt was down $1.1 million to $17.9 million. Of this debt, PNC, our credit facility makes up $15.2 million of the debt. Our working capital dropped by $1.9 million, ending the quarter at $9.7 million. Finally, I'll hit a couple of cash flow numbers. As I mentioned, cash used by continuing operations was $8 million; cash used by our discontinued ops was $187,000; cash used for capital of $206,000; cash received from the SEC acquisition escrow account was $1.5 million; cash used for our finite risk closure policy was $1.9 million; and cash used in financing was $587,000. Operator, I'll now open the call to questions.

[Operator Instructions] Our first question is from the line of Al Kaschalk with Wedbush.

Lou, just to clarify, your comment about revenue outlook, is that suggesting you're no longer providing revenue guidance for '12? Or is the plus $160 million number that I think you had in the transcript from Q4 is no longer valid?

No. That is still our goal, and that is still what we're shooting for. And when you look at our pipeline, we should be able to do that. It is -- there is some uncertainty on timing. That was what I was trying to get to. But right now, we still believe we can do the $160 million.

Okay. But have you seen the change from your own internal expectations of -- generally, you walk us through this timing issue and concerns about it as a structural issue with the DOE. But are you seeing a difference in your ability to forecast or the health of the business that would suggest that you're now less optimistic?

No. There's always an uncertainty in the first quarter. What we find consistently is a -- going through the first quarter, we always see a slowdown in activity, not only at DOE but throughout the industry. We've seen it this year again, we see it coming out as we sit here, which is the usual timing. So as we said, that we do see timing issues with some of these contracts, that we do need to win a set amount of them. We have a pretty good number in the bag, but we still have to win a few to get our $160 million. So as we sit today, we're sticking with the $160 million.

Okay. On these master task agreements or the MTOs, what can you share with us in terms of expectations for the 3 teams that are on them in terms of timing of some potential initial award?

Well, we were hoping that they would have already been issued. LANL is the -- they experienced in the past -- this time of year, they are a little slow, so we'll see, but we're expecting any day. I think as we look at it, we see we have a team that is highly qualified to work on the kind of problems they have there in terms of true waste and the waste offshoot needs they have. So we feel very optimistic that if anything is awarded, we have a very good shot. The other team I can't really -- as we look at it, we're pretty optimistic when they do order -- issue some of these task orders.

But it's fair to say that the task orders are already funded, which is critical, even if they are a little bit slower?

Yes. Some of them are funded.

Okay. And then finally -- I'll hop back in queue. Could you talk a little bit about -- well, historically, we haven't talked a lot about gross margin. But it seems with the shift in revenue mix that there's either some onetime or acquisition-related adjustments in the cost area. But I was just wondering, specifically, on the gross margin side, is that a function of just the lower volume mix that relates to Treatment? Or is this structurally, given the mixing of the service revenue, that we should see a little bit lower gross margin and then we get some pull-through on the bottom just because of the lower cost structure?

I can help with that, Al. On the Treatment side, the margin was a little on the low side because of volume, because of typical first quarter volume. Had we seen high sales receipts come in, that usually has a very positive impact to drive that margin up. So it was a little bit lower though significantly higher than last year when we came out of the gate with pretty low backlog. As far as expectations, you are going to see a pull-down of the Service -- of the margin from the Service side. It was significantly down in the first quarter for -- as Lou mentioned, some of the anomalies of GAAP accounting for contracts, where these couple of contracts that we are completing are actually being recorded in a negative margin. So it's pulling the number down significantly. When we start to win contracts and they're kind of accounted for out of the gate from the beginning, you should start to see that gross margin on these contracts push back up into the probably 15% range, which of course, when mixed with the higher Treatment margins, we should start to see consistently in the 20% kind of average, depending again on the weight. If we start to see a lot of Service revenue versus Treatment, then it goes either direction.

To that point though, is there -- you've been doing a fair amount of bidding activity. Some of that would suggest that there's some elevated costs, rightfully so. But how much on a go-forward basis should we see, either dollar amount or some aspect of a metric on revenue potential that we see some of that SG&A cost come down?

Well, we're still working on the SG&A. First quarter was a very busy month on the integration side, combining systems, duplication of financial staff, et cetera. So we're not there yet on seeing the savings. We think our G&A number, our kind of target G&A number is to be 10% to 12% of revenue. And of course, if we start to spike the revenue, it wouldn't grow incrementally, we'd hope it would come back down. So our model is for G&A to flatten out. Now having said that, the Service business usually requires more G&A support than our traditional Treatment side. So you might see less back-office accounting support, but you might see more clerical-type personnel. Now having said that, if it's directly related to the revenue generation or certain projects, you might see that up in positive [ph] as well, which is why the margins are a little lower than what you see at Hanford. So a long way to say, yes, we still see some upside in reducing our G&A costs.

Our next question is from the line of James Fronda of Sidoti & Company.

Most of my questions have already been answered. But in terms of the sales reps, I guess, could you give us an exact number and, I guess, where they stand now and what you're looking to -- how many more you're looking to add?

Commercial, nuclear 3. And then on the DOE, about 4. So you add 1 or 2, that's a pretty significant increase. And then business development and Service side, we have another 2.

Yes. And James, just the bidding and development side for all the proposals, there's support staff for that as well then.

[Operator Instructions] Our next question is from the line of Walter Schenker with MAZ Partners.

Actually, I have a couple of questions. Did you indicate that you adjusted for approximately $495,000 in this quarter expected losses on the continuation of some of the SEC contracts?

No, Walter. What I had said was within that lower gross margin that you're seeing, there's approximately $495,000 of amortization of these contracts. So it's an expense going forward that's pretty much reduced.

I'm sorry. This is an amortization of goodwill-type expense?

No, it's not goodwill. What they do is add acquisitions, they take the present value of cash flows -- to get a little more detailed than I want to. But they take the present value and then they apply it to the real expense.

Let me ask the question -- let me talk to Ben. This will continue for how long?

Until about the third quarter.

Of this year?

Yes.

So the next 2 quarters will have it?

Yes. When the contracts complete, the 2 contracts that we assume that we're in loss position, then it will go away.

And x those contract losses -- or including those contract losses, in total, SEC is on -- with its own overhead losing money or breaking even?

Losing money.

So the acquisition actually turns out, at least in the short term, not to be neutral or accretive but to be dilutive?

On a book basis, yes. But remember, this is an offset to the significant price reduction we got. And this is the way to kind of...

Well, the price is the price. It is dilutive to earnings, whether you got it for free or if you paid a lot of money for it.

Yes.

Correct? Okay. And in your prospects, Lou, to what extent is the political environment, if this does starts pushing out, at risk? Or these are projects where Patty Murray, for example, has a -- or the courts have a commitment to get some of this work done?

What we're seeing is a fairly stable DOE budget. What you've seen is the ending of ARRA and the budget is stable. Now what happened -- what happens is like, in Hanford, is the one project at Hanford, the vitrification plant received more money, but they took that money from our project. So for the next -- when they did that a little over 1.5 years, they said, "We've got to use these funds over here." So in a sense, what we're seeing -- and this is fairly typical of DOE moving money around among the various projects to try to keep everything on schedule. So as it sits today, even though they've slowed us down, our project is on schedule in terms of compliance with the state and for the -- and WTP, the waste treatment plant, is on schedule. So their view is with the State of Washington for the next year, they are on schedule to meet their compliance agreement with the state. So now come the end of the year, and as we said, we don't see how they can continue to hit that schedule, then that will have to be a negotiation or some court action by the state or between the 2 parties there. And all the sites are facing that. They're all on schedule, as far as I know, but they're juggling a lot of bolts to try and keep them on their compliance schedules.

And just one last question. On the last quarterly call, you had indicated as look to 2012, given how strong the treatment year was last year at Hanford, you expected Hanford to have a less good year -- it may not be the right words exactly, in 2012, but the other treatment facilities to do much better and largely offset. I hope I'm not putting too many words in your mouth.

No. That was pretty much exactly what I was trying to get across. What we see is that the plateau will slow down because of the cut in funding for the next -- '12 and part of '13, and then -- but we're seeing other projects at Oak Ridge, at Portsmouth, at Los Alamos and Savannah River, making up for that. And that's what we're seeing this year. We're seeing the other sites becoming more active.

Okay. So the Treatment is still expected in rough terms to be roughly comparable to last year? Different mix to get there but roughly comparable?

Different mix and a big timing issue. Right now, we're struggling with timing.

Our next question is from Ellen Wittmack [ph] of Forest Capital [ph].

Can you give us some further sense for where you're at and the next steps on the medical isotope project?

Yes. We are -- right now, where we are is we're in -- we've convinced ourselves that the process works very well for producing technetium from moly, irradiating moly and producing it. We're in the -- we are look -- as we go today, we're working very hard on the final steps of convincing ourselves that there is -- we can pass all the FDA tests, which are the sort of final step. And also, about to begin looking -- we would like to have a partner in this project who understands the medical business. And so we're beginning to open discussions with other players in the medical arena. So probably the most critical next step, and I hate to set a time line on this because I have and I've already missed it, was the -- is submitting to the FDA. Once we do that, we'll have convinced ourselves -- now as we sit today, we are convinced we can meet their standards. But we have a major effort to make sure there's nothing unknown there that we don't -- we haven't seen or don't know about. But once we submit to the FDA, we'll be in a very confident position. At that point, we'll also accelerate in discussions with other potential partners.

Our next question is from Steve Rudd of USIP.

Two questions, Lou. And I just figure it to come out as directly as I can. First, on the isotope process, it seems to me that, by now, we should've had a partner in this. I mean, it's long-standing and from the -- on the acquisition side, quite frankly, it's beginning to look a bit like a flop. I mean, I just don't know why we haven't reduced costs more. This has so improved the top line, I understand the accounting issue that was just described. But I'm just beginning to think that maybe it's time for the company to get some outside advisers to help you guys along with evaluating what's the best thing to do with the business because I think we're failing. I mean, quite frankly, I just feel we're failing. And I don't really see a way clear of that. And I just would like you to talk about how you can evaluate that, not you evaluate it, but get some just interested, meaning impartial, third parties to take a look and say, "Hey, this is what you're doing wrong and here's how we can really maximize shareholder value." And I think it's high time, don't you think so?

Well, one, I assume you're talking about the company, not the project. What are you talking about?

Well, yes, I would say company-wide, yes. Well, 2 parts. First is when you say we've convinced ourselves that the isotope process is viable, as an investor, I mean, quite frankly, these share price will tell you not one investor is convinced of that at all because the share price is telling you that. If the investors believed it, the share price would be a multiple of where it is today. So nobody believes that. It sounds like just maybe you and a couple other guys there believe it. And then -- so yes, that unique issue of the isotope process, I think we need an evaluator or somebody who'd say, "Is this really worth what we're doing here?" And then secondly, company-wide, we made this very large acquisition. Okay, we were all hopeful for it. We all understand that if you increase revenues and basically keep fixed costs under control, you should have more to the bottom line, and lo and behold, we don't. And so that brings to mind that things are dismally failing from ministering to the company or managing the company. And so yes, it's both narrow and broad.

Let me answer that. There's 2 questions there. One is the isotope project. And it was impossible to talk to partners until we submitted and applied for the patents. We have a very unique product. The weakness in everybody's attempts in the past to make technetium was the inability to have a resin that's held moly-99 and released technetium. We have that material. Absolutely critical that you have proper intellectual property coverage on that in terms of patents. And the final patent submissions were submitted 1 month ago. So we now have that. Impossible to talk to anybody until you have proper patent coverage. The second part is that there, we have gone to outs [ph] in terms of the isotope project. And I know -- I've gotten this from many investors is, "What do we know about isotope production, what do we know about the medical field?" Even though we take a lot of medical waste from the same clients that we're trying to sell this isotope project to, so we have gone to outside experts. We presently have a relationship with the largest producer. 20, 30 years ago, technetium was made from moly-99. We presently have a relationship with the past producers of that who reviewed our process, reviewed our information and have given us recommendations on what to do and how to do it. We think it has tremendous value. And you're right, it's -- everyone we've talked to thinks it has tremendous value in the industry. Now I think most -- I guess, the investors look at it as a negative. In fact, we're probably penalized for that process at this stage more than it helps the stock. Now in terms of the overall company, we don't control the stock. And clearly, there's an overhang concern related to the government cycles. The other real leader in this industry is not doing well at all, and all that has sort of hurt what we see is our valuation. The DOE cleanup activity, nuclear utility activities in terms of their refueling and the work they do, the medical nuclear work is not going away. Our move in to the Service side -- it's unfortunate with the new GAAP accounting rules, what we've got to go through with these contracts, it's hurt our numbers, but it is what it is.

But Lou, I mean, shouldn't we be getting at this point...

Yes. We completed this acquisition 3, 4 months ago, 5 months ago. Before we closed, we saw problems there and with it we got a large price reduction. We thought it was really important to have an infrastructure on the Service side to be able to bid jobs, service those jobs. Without a resume, without expertise, it's an extremely hard road to build a service company. And the Service side is 100 times larger than the Treatment side. So what we saw was an opportunity to grow the company. We think it still makes sense. When you look at 2011, we had a best year ever. EBITDA increased 60%, over $17 million, record income of $14.1 million, $0.25 a share. And when we announced it, the stock went down. So we're confident we can build this company $200 million, $300 million over the next several years. So that's sort of where we are. I...

Well, let me just add this. And it's to be kind, it's not to be mean at all. I think there's a bit of self-delusion. And what I'm suggesting is the $200 million, $300 million story has been going on for a number of years. I think what -- you're an engineer or somewhat scientist by training. The approach has been historically to look at these as scientific or engineering problems when, in fact, you're a public company and these are financial problems. And the financial problem and the financial direction of the company needs to change. Now I just -- from an analytical point of view, and I want to appeal to your linear intellect, which is to say that if the path that you're on is continually getting wrong results, the wrong results dictated by the share price, then you ought to change your path. And given that you're the one who is directing that path, you need to get somebody from the outside by Q3 or Q4 if your performance isn't as stellar as you are believing it to be. So you're making, in effect -- although you haven't projected a number, but in effect, you're projecting a pathway, if that pathway deviates from what you believe it to be, as a scientist, you yourself has to say, "I better bring in some outside people to review what I'm doing." And I think you ought to make a commitment to yourself to do that by Q3 or Q4 if you see that deviation once again takes place because very clearly, you do get feedback and the feedback is negative, and therefore, it tells you your path is not correct. So if you're in that same spot by Q4, and I'm being as straightforward as possible, as a scientist and certainly, as a manager here, you have to just take a very big pause and say, "I need someone else to tell me what to do." So I just -- I'm putting it out there now since we are at the end of Q1 here. And I'll raise it again. Hopefully, there won't be cause for it. But you on your own by Q4 ought to say, "If we're in the same spot or we're underperforming that, boy, I need this." And not blame the market, and the market I think is valuing you generously based on performance, quite frankly. And that's okay because you tell a good story each quarter. But that's running a little bit dry. So think about it from a scientific perspective, and you'll see where your deviation is by 3 or 4. And if it's there, then go out and get an outside person to look at your -- how you are evaluating the data, the data being the performance of the company. Would you just keep an open mind to that? That's what I'm really asking.

Well, if you know me, you know I keep an open mind and also ask for all sorts of advice. And the one thing I'd point out over and over is that we have looked at all sorts of options. We've considered all sorts of things. I've got a board that says almost exactly what you said, and let's look at other options, let's look at everything. And in the end, the thing we control, the thing that makes sense in terms of the long-term value of this company is continuing down this path we're going.

Well, look, I would just say to you that when the board tells you the same things that I am saying and the investors are telling you the same things that I'm saying, I'm hoping your board will be more vigorous about it, come Q3 or Q4, and that the other investors will join in that and help move you forward.

The other -- I plead with you, as you know, we are very lumpy. We go through quarter-by-quarter and just continue to look at the full year, and it's what we are.

We have no choice, right? There's not a lot of buyers for our shares right now, so we don't have a choice. But look, this call is recorded, you'll play it back to yourself, Q3 or Q4, and I hope your board is listening and that they'll take a note, and all the other folks on the call, too, will remind you in Q3 or Q4 if we have another deviation because it's important. And I appreciate you hearing me out, too. I really do. I know you're an open-minded guy. You certainly hear what people are saying, but following it, I think, needs some greater work.

Well, I appreciate the comment. And my board does listen to the call and my competitors and my regulators.

Our next question is from Michael Potter of Monarch Capital.

Lou, I may have missed this towards the beginning of the Q&A session. With regards to Los Alamos, can you give us the -- you mentioned that nothing has been awarded yet under that blanket [ph] agreement.

That is correct. We're waiting for the first task order to come out of Los Alamos, and then the 3 teams, the various teams will bid on the appropriate task order. And we're pretty optimistic that we have a very good team and a very good position here.

Do you have any idea when it's going to be released? And what's the timing of the award?

If you had asked me 2 months ago, I would've said by now. But we are still waiting, any moment.

So that's what Los Alamos is telling you?

Yes.

Okay. And then can you go into our competitive advantage on -- with regards to the other teams that are out there and why you think we're going to get, I guess, a good portion of this award, if in fact we do?

We're going to get our -- I hope we get our fair share. But the big advantage, our team, we have tremendous experience, they have a lot of true waste, they have a lot of waste period. So with the team we've put together, we think we have a very good shot at being very competitive. Other than that, it's kind of hard to say much more than that until we see the task orders.

Okay. And then with regards to the medical isotope, when will you be submitting to the FDA? Is there a date?

No, I don't have a date at this point. We have a big final test coming up with some outside reviewers probably in July, August, where we'll actually bring outsiders in to evaluate the results.

That's going to be August?

Yes, it will be August, before -- and at that point then, we'll probably confident to submit to the FDA.

So this is really going to be a back half of the year?

Well, remember, submitting to FDA, that's a device that could take 1 year, 1.5 years.

I'm not looking for the approval time. I'm just looking for when you actually are going to be submitting to the FDA.

Yes, it will be the back half of the year.

Ladies and gentlemen, we've reached the end of our allotted time for question-and-answer session today. I will now turn the floor back to management for closing comments.

Thank you, all. I appreciate the time and support. And we'll look forward to the second quarter in the near future here. Thank you, all.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.