Perma-Fix Environmental Services, Inc. (PESI) Q1 2015 Earnings Report, Transcript and Summary

Greetings, and welcome to the Perma-Fix Environmental Services First Quarter 2015 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. David Waldman with Crescendo Communications. Thank you. You may begin.

Thank you. Good morning, everyone, and welcome to Perma-Fix Environmental Services' First Quarter 2015 Conference Call. On the call with us this morning are Dr. Lou Centofanti, CEO; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing first quarter 2015 financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020. I'd also like to remind everyone that certain statements contained within this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 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, everyone. As we've indicated in our last call, expecting a small EBITDA loss in the first quarter and that's what we've seen. However, when you compare the first quarter financial results same period last year, it did provide for improved revenue and significant cost reductions. More importantly, our visibility heading into the second quarter is much better than we've seen in the last several years, when we anticipate a strong second quarter and even a stronger second half. As a result, we are comfortable providing guidance for both the second quarter and the full year. Second quarter we anticipate adjusted EBITDA in the range of $2.5 million to $3 million. And as I mentioned, this is shaping up to be a very good year. We currently expect adjusted EBITDA of $6 million to $7 million, with positive earnings for the full year. And in fact, we feel this guidance is somewhat conservative in that we could achieve these numbers without any large project wins in the Services segment. If we do secure some big wins in the Services segment, there could definitely be upside. As I've mentioned in the past, we are currently bidding on some very large contracts that we believe we're in a strong position to win. Our overall revenue was up in the first quarter '15. Revenue in the Treatment segment increased 27.1%. Revenue in the Services segment increased 34.1%, compared to the same period last year. At the same time, our gross margin increased 10.9% in the first quarter versus 0.9% the same period last year. We attribute the increase in our gross margin to higher revenue and reduction in certain fixed costs. On the Treatment side of our business, we continue to see Department of Energy shipping waste and our sales pipeline continues to improve. In the Services segment, we are bidding on several large sizable projects, some of which are not factored into the guidance, but can be quite significant in their own right. In addition, the Services segment helps feed the Treatment segment, as we have greater visibility into the waste streams when our staff are on site and overseeing the clean-up effort. Also, as I have mentioned in previous discussions, we've continued to advance our patented process to produce Tc-99m. Our process enables production in -- of this essential medical isotope for diagnostic imaging procedures in a way that is cost-effective and does not require the use of uranium for the production of tech 99. We continue to view this as an exciting and very significant opportunity for the company. As we've discussed in the past, we believe we've developed a disruptive process that allows us to dominate this market. We have conducted additional tests of the technology with one of our strategic partners that has helped us further validate our process at higher curie levels. We'll be disclosing more on this front in the near future. We currently meet necessary standards, industry requirements to supply tech 99 in emerging markets as -- and as we move to higher curie levels, we're confident our process will be extremely well-received in both North America, Europe, after FDA and CE Mark [indiscernible]. We are pleased to report the grant we were rewarded earlier this year, we have now formally accepted. The grant award for the consortium we formed was $2.8 million, of which Perma-Fix Medical, our Polish-based subsidiary, will directly receive approximately $800,000. We have scheduled a shareholder meeting for Perma-Fix Medical in Poland for June 2. At this meeting, they will be voting on the approval for the Digirad stock acquisition and also a new management team. In terms of Digirad, following the shareholder meeting, we expect to close on the $1 million strategic investment. We are pleased to have developed a strong working relationship with Digirad, one of the largest national providers of in-office nuclear cardiology imaging services. Additionally, following the shareholder meeting, we look forward to announcing the new senior management team that will help run Perma-Fix Medical. We have assembled a team of leading experts with proven track records in their respective areas of expertise to help accelerate our activities going forward. So to wrap up, we are encouraged by the outlook for 2015, given our sales pipeline within the Services segment and our improving outlook within the Treatment segment. Looking ahead, we expect significant improvements in the second quarter, positive EBITDA for the first half of the year and a second half of 2015 that is much stronger than the first. We again appreciate your support and dedication of -- support of our investors and dedication of our employees. At this point, I would like to turn the call over to Ben, who'll go into more details on the numbers, and I'll be back to answer questions at the conclusion of the formal remarks. Ben?

Thank you, Lou. I'll begin with revenue. Our total revenue from continuing operations for the quarter was $13.6 million, compared to last year's first quarter of $10.5 million, an increase of $3.1 million or 29%. Our improved revenue was the result of increases at both our operating segments, as increased volumes in our Treatment plants resulted in approximately $2.1 million increase in revenue, while our Services segment revenue increased approximately $1 million as a result of more project work. Turning to cost of goods sold. Our total cost of sales was $12.1 million in the first quarter, compared to $10.4 million in the prior year. Our Treatment segment costs were up $952,000 or 12.6% compared to last year. Variable expenses increased by $1.1 million as a result of the higher volume process, but were offset by a reduction in fixed costs of $158,000, primarily from lower health care and depreciation-related expenses. Our cost of sales from our Services segment were up $720,000, compared to prior year, or 24.9%. Our incremental project costs related to the increased revenue were offset by lower operating costs -- fixed operating costs resulting from reductions in our overhead, support labor costs. Our gross profit for the quarter was $1.5 million, compared to only $94,000 in 2014, an increase of $1.4 million. Our gross profit in the Treatment segment increased by $1.1 million compared to prior year. Increased volume of waste and lower fixed operating expenses were offset by slightly lower margin waste processed. Gross profit from the Services segment was $243,000, compared to a loss of $17,000 in 2014. And again, our increased revenue and improved project profitability, along with our lower fixed overhead costs, all contributed to the improvement. SG&A costs for the quarter were $2.9 million, down from $3.2 million last year. Lower labor costs were partially offset by higher consulting expenses as we continue to focus on administrative cost efficiencies. Our loss from continuing operations for the quarter was $2 million, compared to $3.7 million last year. And included in this loss are costs of approximately $395,000 and $134,000 related to our medical isotope development project for Q1 2015 and Q1 2014, respectively. Loss applicable to common shareholders was $2.1 million, compared to last year's net loss of $4 million. Again, the loss included costs of $395,000 and $134,000 related to the medical isotope for the 2 quarters, respectively. Our total loss per share for the quarter was $0.18, compared to a loss in prior year of $0.35. Our adjusted EBITDA from continuing operations, as defined in this morning's press release, was a loss of $441,000, compared to a loss of $2.1 million last year. Turning to the balance sheet. Our cash was down $2.5 million, primarily from the losses incurred in the quarter and as well as a reduction of our deferred revenues built up in prior quarters. Last -- our waste backlog was $6.4 million, compared to $9.2 million at the end of the year and $6.5 million in March of 2014. Our current debt was $3.7 million, which is consistent with prior year -- or year end. And our debt -- total debt for the quarter stands at $12 million, with approximately $10 million coming from our credit facility PNC and $2 million from our shareholder loan. Finally, a quick summary of our cash flow activity. Our cash used in continuing operations was $2.7 million, and our cash used from discontinued operations was $232,000. Cash used by investing was $128,000, of which $121,000 represents cap spending. And our net financing cash flow provided was above $586,000. With that, I will now turn the call over to the operator for questions.

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

I want to focus first on the Treatment and the Services revenue here. Very good performance in the top line, but the margin, the gross profit margin dollars, look to be a little disappointing. One, was it disappointing relative to your forecast and plan? And two, what was the -- despite the higher revenue in Treatment, it looked like it was a little bit low on the gross profit contribution. Could you talk to that, please?

Yes, you know, Al, as you know, we do a lot of our treatment in batches. And so really, it depends on the waste stream or the waste mix that we process. Fourth quarter, for example, we did not turn on the boilers out in the Northwest facility, which is where we burn a lots of the lower level wastewater type work. So what you're seeing in the margin is higher volume, a little bit lower margin activity. We can't just bleed it through -- we sort of tried to do this as efficient as possible and firing up the boilers, for example, can be expensive. So we do it when there's enough volume. So it's really a mix issue. What you'll see then is that waste coming into the first quarter, which is a higher margin waste, will just push into second. So it kind of factors into the year, but on a -- as you know, at a quarter basis, it looks a little bit low.

Yes, so from an operating perspective, though, this is consistent with practices. In other words, there's not a -- is there some timing or seasonality change in the waste stream that you're seeing that would affect how we think about this going forward? I think I hear the answer is no, but maybe you guys can answer that.

Yes, I think the answer is no, Al. That's -- our pricing is holding up. Our -- and it's more a mix issue in terms of what you're seeing in the first quarter.

Yes. And we -- you know, Al, we get liquids like this all the time, and it's always blended in a full year. Even lower margin cost, sometimes when other volumes are down, chews up fixed cost. So it is part -- there's no reduction in pricing and there's no deterioration of our overall margins.

Okay. So should I view that the higher margin -- there wasn't much of a pickup in the -- or receipt of higher margin waste streams in the first quarter but -- or in -- at the end of 2014 into the first quarter. But you're going to see that pick up in the second and third quarter.

Correct. Yes, we had -- not as much of the higher margin material coming in, in the first quarter, but we expect a -- or -- and we're already receiving significant amount [ph] of that, so...

Okay. And then just the second part -- a second question is, I was intrigued by you providing a range of financial guidance. One, do I have to hold yourself accountable now for some operating numbers that stray? But two, is that a function of what you literally said on the release on visibility and confidence? What -- sort of why now? And why are you putting yourself there for the accountability, which we applaud, but maybe you could just talk a little bit about the composition of that number?

Well, I -- the -- actually, the reality is that we have very good visibility at the moment. Usually, you have 1 or 2 quarters. But with the work we see coming, we have very good visibility throughout the year now. So as we look at it, if -- so in terms of visibility, it's pretty good. So it's probably better than we've had in a long time. And this goes back -- we're now almost back to 2, 3 years ago, when we could see ahead -- we could see the waste coming in far in advance. And so we have visibility now with materials coming in.

[Operator Instructions] Our next question comes from the line of Bill Chapman with Morgan Stanley.

I was going to ask, do you have your own hot cell installed in Poland yet?

Actually, we're install -- in Gainesville, Florida. We're installing a hot cell in Florida. We are in the process of disassembling. We've purchased one, and we're going through, presently, decontamination of it and disassembling to move it to Gainesville, so we're still in the process.

Okay. And this, I assume, will accelerate the testing on the generator designs to try to move this -- to accelerate this process?

Yes, it will significantly allow us to run tests at our own facilities at higher activities, much more rapidly and efficiently.

Okay. And is the process on the generator testing -- you're going -- I'm not quite sure how -- I'm not clear on how you're doing this. Are you going from, let's say, 1 to 1.5 curies, you go to 2 curies and 3? Or is it just a process trying to get to 5 to 6 curies, a building process?

Yes, it's -- we're slowly working our way up. We're doing a variety of basic tests on the process to build a strong foundation and then move up the activity level. And we're doing that through other means right now, not at our facility, but at other facilities. So those tests are going on as we sit.

Okay. For future partners, this will more than likely be companies that have a use of isotopes, the Technetium-99s?

Correct.

Or will it be just general investors coming in this?

I'm sorry, with respect to what now?

For future partners, will it be more investors just going in? Or more likely companies that have a need for the tech 99?

Well, the Digirad is -- was an early partner in helping guide us. And so it's -- we're completing that, where they also were very interested in investing in the technology. So that should occur -- the -- in June. We're hoping to be able to close that in June after the shareholder meeting in Poland. From this point on, we -- most of our focus is on strategic partners at this stage. We have no plans to -- we're in pretty good shape from a cash point of view in terms of where we need to go and what we need to do when you factor in the cash we have raised and the grant from the Polish government. So between the 2 of them, it puts us in a good position for the remainder of the year to get to our goals here. So we have no plans for any other financing at this point. Now to get to the end of FDA approval, we will -- we may need to do something, but we have a variety of options that we're exploring there.

Okay. Do you still -- if all goes well, do you still anticipate FDA filing before the year is up?

It's a hope. We'll see how all this testing goes. It's our goal. But it'll depend on the series of testing we do and where we go and...

Okay. And you still have consultants that have had -- can guide you on how to make the application then? Is that still accurate?

Yes. Yes, we have several FDA consultants we've been working with on the best way to do this.

Okay. Is anything changed with the Chalk River being closed down next year?

No, we -- they have -- Chalk River, they've announced they will stop making tech 99 with uranium. They have not applied for a new license for the reactor. So the reactor in '18 will be permanently closed. There will be a short period while they continue to do other research on the reactor. And they have announced -- they did say that in case of a true emergency in the supply that they might consider redoing it. But that will be somewhat difficult with what they're going through. So at this point, we still see that probably 1, 1.5 years from now, the NRU reactor will be shut down.

And the FDA will still have a mandate to possibly fast track your application if you -- when you make one?

A mandate with the FDA?

Well, I guess -- yes.

Maybe that's a nice -- we'll see, yes. They've said that, but they have -- they do have a rigid process they go through, so. And we're working with our partners to look at various ways that we can accelerate our process also, so...

Our next question comes from the line of Paul Luca [ph], a private investor.

I had a quick question, I was encouraged to hear the confidence about the Technetium-99 development. But my basic understanding of the process is that it allows a higher concentration of moly 99 to be held. And my basic understanding is it would even be beneficial to the current process, the current source of molybdenum-99 and extending the delivery times for hospitals. Do you, and even with potential competing technologies being developed, could you explain a bit more about how your generator could benefit -- fits into the processing -- would it be beneficial [indiscernible]?

The -- probably the key points are that one, you -- number one, you don't start with uranium. So therefore, you -- it's a much simpler process. You don't have issues with proliferation. You don't have the tremendous radiation fields caused by when you irradiate uranium. And the other is, you don't need a large robust reactor. You could use just about any research reactor in the world. So it -- it -- you could -- you would end up with a much more decentralized system. The -- would be one of the great advantages. And you would not end up with large volumes of high level of nuclear waste that's weapons-grade. So it solves many social issues. It, because of the -- in terms of cost point of view, all the studies we've done, it's very cost competitive and should be even cheaper than uranium systems. It would -- uranium systems do carry some tremendous subsidies with them, because of the waste and the production of highly enriched uranium. So the main -- so our -- we have tremendous advantages from a cost, social, distribution point of view. And where we are in the process, we've demonstrated it at lower activities. It's a little low for the North American and European markets that we're presently in the process of -- scaling the process up to produce larger generators that can carry much more moly 99 and release much more tech 99, so that the present pharmacies and hospitals would be more -- would more easily fit into the present scheme of how the chain works. So with all that, that's -- it's -- that's basically what we have. We have a very unique system that solves the problem. You start with moly instead of uranium. And we think this could have a fairly dramatic effect on the supply chain that occurs -- with the tech 99. I don't know if that answers your question, but that's sort of a quick overview of what we have.

Yes, yes. So I understand, your generator is the part that is kept at the hospital and the companies deliver the moly to your generator -- to a generator at the hospital now. But your resin has more binding sites, so...

Yes, so we can hold much more moly in our generator. Therefore, it overcomes the -- when you irradiate moly in a reactor versus uranium, you don't get as pure and as concentrated a material. The advantage of the uranium process is that it produces a very pure, highly concentrated moly 99 material. So to overcome that, we had to develop a resin that will hold large amounts of moly compared to the existing resins, the existing resins, and we were able to do that. We made a resin that holds 10x to 20x as much moly as existing resins and that then allows us to overcome the uranium advantage.

Okay. And given that, I see your one competitor, NorthStar, is working on a method?

Yes, NorthStar, as I've mentioned, as you look around the field, there's a variety of people trying to solve this problem. The one who -- the one company that's probably the furthest along is NorthStar, which has developed a generator. We think in the end, our system is a very good system that could easily compete with theirs or whatever else is dropped before us.

Okay. So your generator, I guess, to -- one more final. Your generator would even be beneficial to the current process of using highly enriched molybdenum-99 [indiscernible] generator [indiscernible]?

Well, it might be. But there would be little advantage to using it in the uranium process, at least in the generator. So the -- at least at this point, we don't -- we could and in developing markets, we could. But I'm not sure what the advantage of that would be from a sales point of view. I think the -- because the present resins they use work real well for the uranium process.

Okay. I guess that was my -- the crux of my question was, have any advantage for the current process?

It -- probably not.

No, okay. Well, it seems like it's got significant enough advantages all around.

Yes, no, our advantage is the conversion to a simpler system.

Our next question comes from the line of Robert Manning, private investor.

I just want to be sure that I understand. NorthStar is mentioned as a competitor. But I understand NorthStar use low enriched uranium. They are not a competitor in the sense that they don't -- they don't do what we do, which is get the uranium out of the supply chain. Am I correct in that? Or is NorthStar doing something that also gets uranium out of the supply chain?

Well, NorthStar has taken a variety of paths and so it's not clear in the end where they will end up. They basically have -- can produce moly through a variety of sources. They then collect the tech 99. And it's a whole different process. What they do is they, in the central facility, they then separate the tech 99 and send it out. And that causes -- they got a very -- a much different generator that exists in the present today compared to the present generators. So it's a whole different approach. And they've gone down sort of parallel paths with several different ways to use it and make it.

So they do have a process they can get uranium out of the supply chain. Is that true?

Yes, they can produce tech 99 from natural moly and then take it to a central facility, concentrate it and send that out to the generators.

But if they're sending tech 99 out, then they've got this 6-hour or a half-life decay problem while it's in transit. Is that correct?

Well, and also while they're processing it back at their facility. And then there's a variety of issues with their system.

But my understanding is that currently, what's shipped to a hospital is moly 99, where you've got whatever it is, a 30-hour half-life. And that the 6-hour half-life doesn't happen until you get in the hospital. And it sounds like here they got a much bigger -- am I correct or not?

No, that -- they're a -- well, they're -- no, they -- and I hate to get into that. They've got a very complex technology that they use in their generator system that I'd hate to get into right now. One, because we're never been clear exactly how it's going to work, publicly, so -- but their system is very complex, what goes to the hospital.

Now have they applied for FDA approval yet?

Yes, about 1.5 years ago.

And that's with this complicated process and we're 1.5 years, and they haven't heard back from the FDA?

Well, they've heard back. I don't know what the [indiscernible].

But they haven't got approved anyway?

No, they have not been approved.

Our next question comes from the line of Joe Bond, private investor.

Yes, I have a couple of questions. You may have answered them, but number one, I have the impression -- I've had the impression that you're going to go to the market, to the European market with this first. And I mean, you've got this European consortium and you've got this Polish backing and so forth, research. So I'm guessing, I'm assuming that you're going to sell this product to Europe first and then to United States.

No, that hasn't been decided yet. As we are going down the path, we are -- we're going down parallel paths, the 2 approval processes are very similar. Our thought is probably to come back to the U.S. with the process first. But that decision hasn't been made. It's somewhat of a parallel path. As we're generating the information, we're on parallel paths here, both understanding what the EU's regulatory process is and what the U.S. North American process is.

Okay. And the other question I had is, you are trying to scale up this process, right? And I'm just wondering, that seems to be the biggest impediment right now. I mean, once you get past that hurdle, and once you scale it up to whatever scale that you need, I mean, after that it's pretty clear sailing. I'm just wondering, how far in the future -- what are you guys anticipating how long it will take for you to scale this up?

Well, the scale up is, as I've described it in the past, and let me just do this once more here so everyone understands, is that what we had found early on was that we had designed our process, our -- that initially that we demonstrated for about -- what an existing amount of resin in an existing generator. We -- so we had basically copied the existing units and said, we need about 1 gram of resin in the generator. And that's what we went through all our testing with and what we demonstrated with. Well, when Digirad got involved with this, they looked at it and said, that's wonderful, but you're going to have a hard sell in the U.S. and North America with that size generator. What you really need is something much larger. Well, the technology really is that, to get a 1, 1.5 curie generator, we needed about 1 gram of material. So to get a 2 curie or 3 curie generator, we need about 2 grams in that generator, which sounds -- so in one way, it's a kind of a simple scale up, just need twice as much material. And so of course, in these systems, nothing's ever simple. And what we're going through is there's several ways we can scale the unit up. And we're going through all the different ways to look at what effect that has and to then demonstrate a scaled up unit, which just means you have more resin and more moly 99 in that generator. And the issues just become because you then have a larger radiation field, therefore, is there any detrimental effects from the greater radiation field? We don't think there will be. And so that's what we're -- that's where the technology we're -- those are the steps we're going through today.

So it's not a question of can you do it. It's a question of how safely and how cost-effectively you're going to do it, right? You're trying to figure out the best...

Yes, it's actually a question of what's the geometry of the new -- of a larger generator with this kind of technology. So it's how do you put it together, how do you increase the size of the column. If we're -- our hope is, all you do is just double the size or triple the size and you have a larger generator.

So I mean, you're working on this right now. So what do you anticipate? When are you going to have some idea of how you're going to proceed?

We're hoping that we can talk to you in 3 or 4 months, that we've now completed work on a larger...

A scalable model.

Yes, a scalable model, right. Good words.

Yes. And -- okay. And so, again, once you -- this seems to be a major hurdle. Once you've passed this hurdle, it's fairly smooth sailing after that?

Nothing has been smooth sailing.

Well, no, I mean -- okay, I mean, that's your last major hurdle, right?

Yes, we -- well, there'll be a variety of then issues to deal with, which we think will be simpler dealing than with -- developing the data that the regulatory agents require, which is really -- which is where the grant comes in. It will be then the major vehicle to generate that. We'll be generating it in Poland, but it will be -- we'll be doing it under the kind of standards that North America and either the FDA could accept.

I was wondering why the Polish were so receptive to you and why you ended up over there and posting on their -- going on their stock market and...

[indiscernible] Yes, the [indiscernible] -- it's an interesting question. In fact, the Polish asked me the same question. There were a variety of reasons. Number one, we had been working with POLATOM, which is one of the largest reactors in Europe, that -- and they have a generator and they manufacture using uranium. So we have them as a partner to -- when we tried to raise money in the U.S. to spin this off, we had a very hard time. It was very early in the process. The medical field was, venture capital -- very, very difficult and almost impossible for us. And then on the grant side, there is pretty much a -- Congress did fund some companies to do this. But when they funded them, they said, we're, the U.S. government's not funding anymore. So they actually put a ban on the government providing any assistance for these technologies. So the opposite is true in Europe. Europe was very focused on biotech and doing work there. And so to be honest with you, we saw an opportunity there that -- and so really, went where the money was and the technical expertise in Poland.

Okay. My final question then. We heard about one competitor this morning. And then you just mentioned government funding for companies over here prior to you coming on. So we heard about one competitor. Are there any competitors that as -- are there -- I imagine there's other people working on this, but any of them that you know that are as far along in the process in their development?

No, the only one that -- NorthStar was funded by DOE. The -- I think, DOE gave them $25 million. The -- and they're the furthest along. We think our system is much simpler and will be more cost effective and more acceptable to the present chain. The others -- when you look at the others, there's no one who's made much progress. And most of them require a tremendous amount of money. There are people out there that are proposing to build new nuclear reactors in the United States to supply. So you can imagine how much money that's going to cost and how long it will take. And yes, and if they can even ever do it. And then the Canadian government's put a lot of money into cyclotron work, but I don't have a lot of faith that, that will ever really be a commercial process. And they haven't made a lot of progress. And there's other technologies that are like that, that require hundreds of millions of dollars worth of money. And there's really not been a lot of progress. But I only see one real potential competitor out there -- well, there's 2. One is the present suppliers are switching to lower-enriched uranium, but that still requires uranium. And it's much more expensive than the present process and produce lots more waste and still is the uranium process and the need for a specialized reactor. So those are the -- what we see going on in the market. We really only see NorthStar as a, you might say, a real competitor.

Does the DOT buy any of this stuff from you? I mean, is it -- is there government contracts involved in any of this?

Well, all of the government hospitals, yes, and they've given special pricing for non-uranium systems. So there is a pricing advantage at the hospitals on the government side.

What I was wondering about is whether the government might in the end approve both you and NorthStar? Or whether they would just go with the person that has the lowest, the most cost-effective [indiscernible]?

Well, I don't think the government -- this is a -- this will be a private decision. The government will not distinguish -- they'll approve anybody that meets the standards and really allow the market to decide who's best.

Mr. Centofanti, there are no further questions at this time. Would you like to make any closing remarks?

Well, I thank you all. We look forward to the next call. And I appreciate your support and confidence at the moment, so thank you very much.

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.