Perma-Fix Environmental Services, Inc. (PESI) Q4 2017 Earnings Report, Transcript and Summary

Greetings, and welcome to the Perma-Fix Environmental Services Fourth Quarter 2017 and Business Update Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, David Waldman, with Crescendo Communications. Thank you. You may begin.

Thank you. Good morning, everyone, and welcome to Perma-Fix Environmental Services Fourth Quarter and year-end 2017 Conference Call. On the call with us this morning are Mark Duff, CEO; Dr. Lou Centofanti, Executive Vice President of Strategic Initiatives; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing fourth quarter and 2017 year-end 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 212-671-1021. I'd 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 a statement of historical fact are forward-looking statements that are subject to known and unknown risks, uncertainties and other factors, which could cause actual results and performance of the company to differ materially from such statements. These risks and uncertainties are detailed in the company's filings with the U.S. Securities and Exchange Commission as well as this morning's press release. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events or circumstances after the date hereof that bear upon forward-looking statements. In addition, today's discussion will include references to non-GAAP measures. Perma-Fix believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. I'd now like to turn the call over to Mark Duff. Please go ahead, Mark.

Thanks, David. 2017 was a transition year for the company, as we implemented a number of important changes and achieved a number of very significant milestones this year. First, from a cash flow perspective. We achieved $2.4 million of adjusted EBITDA for the year compared to just $575,000 for 2016. This improvement came primarily from our Treatment Segment. For the fourth quarter, waste receipts were up. However, our Treatment segment revenue recognition was affected by timing and the particular mix of waste we received. Importantly, our backlog is growing heading into 2018, as evidenced by a 46% increase in backlog at the year-end. At the same time, we are carefully managing expenses and continue to identify areas of cost savings. We're in the final stages of closure of our M&EC facility to be completed in Q1, which we believe will save an additional $4 million to $5 million of fixed cost annually. That said, we still have a lot of work to do to meet our goals at Perma-Fix. As stated in 2017, we've undertaken a major initiative to revamp our bidding process with the Services segment to increase the number of targets within our core competencies as well as maximizing our win probabilities through advanced proposal production capabilities. The impact of these changes has taken longer than anticipated, for which, coupled with delays and awards from the federal government due to funding uncertainties has resulted in lower revenues in our Services segment. But we are making good progress with continued growth in Canada, including radiological remediation services, which has resulted in several wins in the past two quarters in Canada. In addition, we see a number of opportunities in oil and gas markets in Western Pennsylvania that have allowed us to apply our unique capabilities and growing demand for the management of naturally occurring radiological material waste, also known as NORM waste. Within the NORM markets, we're completing several new partnerships with firms in the area to expand our services within the region and to service more clients. We have important procurements underway, and we are waiting for awards, which if selected, we should contribute - that should contribute to our revenue of Core Services segment in within the next few quarters. In the Treatment segment, we saw a 17% increase in revenue in 2017 versus '16 but expect to do better this year. As I mentioned earlier, waste receipts were up in the fourth quarter, as evidenced by our 46% increase in backlog at the year-end, and we believe '18 will be an improved year. But aside from growing our revenue, we also are diversifying our revenues, which should help mitigate some of the historical volatility we have experienced due to fluctuations in the industry. In particular, we're excited about our expansion programs ongoing at each of our treatment facilities that should quickly broaden our market base for waste receipts beginning in 2018. And I'll touch on a couple of those. Construction activities are underway at our Gainesville facility, it's a nuclear facility. To accept and treat more commercial waste, beginning in Q3 as well as expansion programs in the hazardous-waste processing markets in the Southeast particularly, with the recent wins in Northern Florida. At our DSSI facility in Eastern Tennessee, we're underway - construction is underway with expansion activities to relocate our treatment capabilities that we had at our M&EC facility are right down the road, and we currently anticipate completing those activities there in the first quarter. We anticipate completing closure activities in the first quarter. We're also excited about our recent partnership with Veolia Nuclear Solutions, which is providing its GeoMelt system that is being installed at our Perma-Fix Northwest facility. Upon completion of construction, installation and [indiscernible] testing of GeoMelt Vitrification system, where we used to treat waste drums containing sodium residual waste. The purpose of these initial tests is to define and verify performance parameters and this performance state will be used to support permit mods at the Perma-Fix facility to consider other radioactive and radioactive waste streams for government and commercial applications. This vitrification capability will provide the capacity to treat non-bulk sodium waste that have otherwise represented a waste stream with no path for disposition. This type of partnership with Veolia will provide an attractive niche market for Perma-Fix to leverage our existing permitted facilities to deploy new technologies. We're also seeing a number of new international opportunities that should contribute to our growth, especially waste streams that are very difficult to treat. Once treated at Perma-Fix, we will return these waste in a stable form for final disposal in the country of origin and we're continuing - but we're currently in the bidding process with initiatives in the United Kingdom, Mexico and Italy, in addition to our Canada business, which should be shipping waste to us at Perma-Fix in the second quarter this year. Finally, we are excited about our new treatment opportunities that may arise out of our recent waste treatability project for the tank waste at Hanford, Washington. These opportunities could be transformative for the business and Lou Centofanti will speak more about this project in a moment. He'll also be talking about our medical subsidiary. So to wrap up, our growth initiatives within the waste treatment sector are beginning to realize positive impacts on our revenue and our adjusted EBITDA, as evidenced by our growth in adjusted EBITDA, which increased more than threefold from 2017 over 2016. Our expansion plans ongoing at each of our facilities, coupled with our closure of M&EC in Q1, and anticipated award of a few of our services bid in Q2 should help advance our market growth objectives in 2018. Based on our current pipeline, we remain confident that we will see both top and bottom line improvement in 2018, and believe we have set the stage for a sustainable growth in our base business going forward, along with additional projects that could significantly move the revenue needle and potentially transform the business when they materialize. I will now turn the call over to Lou Centofanti. Lou?

Thank you, Mark. As Mark alluded, we have successfully completed the first phase of the demonstrating project for tank waste at Hanford. The deal we recently announced at its Office of Environmental Management Office of River Protection in Richmond, Washington coordinated a shipment of approximately three gallons of low-activity tank waste to Perma-Fix Northwest. We subsequently treated and stabilized the waste from our facility for transportation and permanent disposal at the Waste Control Specialists, Federal Waste Disposal Facility in Andrews, Texas. For those of you that have been following the company for some time, participating in this project has been a long-term vision and goal of our company. This is the first time that EM has commercially treated, stabilized and shipped low-level waste derived from Hanford tank waste off-site to a commercial facility for disposal. This effort in part completes the initial phase of the plan three-phase DOE EM test bed initiative study. The process utilized for [indiscernible] was developed to reduce the complex cost for processing this waste stream based on our proven principles to treat the waste to meet disposal criteria. Now that we've completed the first phase of the demonstration, we are focusing our attention on the next phase of the test bed initiative, which requires a treatment of approximately 2000 gallons. And finally, on one final note, we have shifted our strategy within our medical subsidiary. Specifically, we are focusing our efforts around a new partnering strategy, which we believe will be much more cost effective and mitigate the need of waste capital near term at the subsidiary level. Raising capital now, as we have seen, will significantly dilute Perma-Fix's interest in subsidiary. But if we can hit certain milestones first, then raise capital, we believe we'll be able to do so much more under favorable terms. I'm happy to report since implementing this strategy, we're working with several groups, one in Canada, one in Italy and third in Poland that we've - is presently working under our Polish grant. They've indicated willingness to fund development and with regulatory costs in the respective markets. This strategy will help mitigate our short-term capital requirements, while providing further validation, accelerating our path to commercialization in international markets and helping streamline the path for eventual approval in the U.S.. The advantage of initially focusing our efforts in Europe and Canada as we believe is more streamlined, lower cost regulatory process. Once we have hit certain milestones, we'll then turn our attention back to the U.S. where we believe we can this markup [indiscernible] Negotiate a partnership for ourselves on much better terms. On that note, I'd like now to turn the call over to Ben, who will discuss the financial results in more detail.

Thank you, Lou. I'm going to begin with revenue and our total revenue from continuing operations for the fourth quarter was $12.6 million compared to last year's fourth quarter of $13.4 million, a decrease of $800,000 or 6%. Our Services segment was relatively comparable to prior year, with revenue modestly down by $171,000 or 4%, while our Treatment Segment revenue was down $692,000 or 7.3%. Our Treatment Segment's waste shipments were consistent with prior year but both timing and the waste mix resulted in lower production, while leaving more available in backlog for this year. The drop in services revenue was project related, when we compare projects completed with new projects won this year. For the year ended 2017, our revenue was $49.8 million compared to $51.2 million in 2016. Revenue from the Treatment Segment exceeded prior year by $5.5 million as our waste receipts for the year increased by $6.9 million over 2016. On the Services Segment revenue was down by $6.9 million as a large contract concluded in late 2016 and temporary delays in certain projects in '17 resulted in lower revenue. Turning to our cost of goods sold. Our total cost of sales was $10.8 million in the fourth quarter compared to $10 million in the prior year, that's an increase of $763,000 or 7.6%. Our Treatment Segment costs increased by $602,000 compared to prior year and this was due to $850,000 increase in our closure cost reserve at our M&EC facility. As our disposal cost estimates increased as we are getting closer to completion. Our costs of sales in our Services Segment were up $161,000, and this was primarily from project-related incremental expenses. On the gross profit line for the quarter, we were at $1.8 million compared to $3.4 million in 2016. Of this $1.6 million shortfall, $850,000, as I mentioned, was due to the increased closure reserve at M&EC, while lower revenue and mix of waste treated and services offered accounted for the remainder of this shortfall. For the year ended 2017, our gross profit was $8.6 million compared to $7.1 million in 2016. Revenue mix, again, was the primary driver for the gross profit improvement for the year as we received more revenue from our higher-margin Treatment Segment, which offset a decrease in our lower-margin Services segment revenue. 2017 and 2016 gross profit both included charges of $1.4 million and $587,000, respectively, related to the M&EC closure. Our total G&A costs for the quarter were $2.8 million compared to $2.6 million last year. That's an increase of $202,000. Lower legal expenses and public company expenses were offset by a bad debt [indiscernible] expense settlement of $364,000 related to a government audit going back to 2014. For the year ended 2017, our G&A costs were higher by $377,000 due again to the bad debt expense, booked in the year, which offset our lower payroll and public company expenses. Conversely, in 2016, we had a bad debt pick up of $364,000 which contributed to the experiment. Our net income from continuing operations, net of taxes for the quarter was $340,000 compared to income of $218,000 last year. Net income attributable to common shareholders for the quarter was $260,000 compared to last year's net income of $226,000. These net income results for the quarter were impacted by a tax adjustment related to tax reform, which provided a pickup of $1.7 million. This positive tax adjustment was also included in our year-to-date office, for both continuing operations and attributable to common shareholders. In addition to asset impairment charges and closure reserve adjustments related to our M&EC closure at our location and that totaled approximately $2.1 million. Our total income per share for the quarter was $0.02 compared to income per share of $0.02 in the prior year. Our adjusted EBITDA from continuing operations for the quarter, as defined in this morning's press release, was $328,000 compared to $1.9 million last year. And for the year ended 2017, our adjusted EBITDA was $2.4 million compared to $575,000 in 2016. Turning to the balance sheet. Our cash balance improved by $900,000 as a result of the closure bond transition in our second quarter, which allowed the company to free up $5.9 million of cash, which we used to secure alternative bonding and pay down our entire revolver balance which was about $3.8 million last year. Our accounts receivable collectively were down $977,000 and that was due to the timing of a large receivable at the end of '16, which was collected early in '17. Our unbilled receivables, current and long-term, were up $1.6 million, again a timing related to unbilled in our Treatment Segment, which was billed early this year. Our assets were up 900 - our other assets were up $946,000 related to a tax receivable, related to tax reform of approximately $400,000 and other receivables related to our grants and some unclaimed property, which totaled about $463,000. Our intangibles and other assets were down $5.9 million related to the cancellation of the closure policy, at Perma-Fix Northwest which freed up the restricted cash. Our current liabilities were up $2.8 million, primarily due to the inclusion of the entire closure reserve at M&EC, which increased by $1.4 million in 2017. Our waste backlog was $7.7 million compared to $5.2 million at the end of 2016. Our long-term liabilities were down $4.9 million as a result of the full payoff of the revolver and the reclassification of our closure reserve at M&EC from long-term to current. Our current debt, including debt [Technical Difficulty] which is consistent with prior year. Our total debt at year-end was $4 million, which is entirely owed to our primary lender, PNC Bank. Our working capital was a negative $2.3 million compared to a negative $2.1 million at the end of 2016. The M&EC closure accrual insurance is $2.8 million and was $2.2 million in 2017 and - '16 and '17, respectively. Finally, I'll summarize our cash flow activity in 2017. Our cash provided by continuing operations was $1.1 million. Our cash used by discontinued ops was $647,000. Our cash provided by investing activities was $5.4 million, which is net of $439,000 used for capital spending. Our proceeds from the sale of discontinued operations property was $69,000 and our cash used for financing was $5 million, which consisted of $1.2 million payment on our term note and $3.8 million pay down of our revolver. With that, operator, I'll now open the call for questions.

[Operator Instructions]. Our first question comes from the line of Tristan Barr from MTB Asset Management.

I was wondering if you can go into some of the bidding opportunities that are out there on the Service side. In particular, I believe, there are two large contracts coming up for bid at Hanford at the end of the year.

Yes, this is Mark. I guess, we have a hot list of bidding opportunities, 30, 40, opportunities long. We have a number four, five along at any given time. We are currently positioning to support those bids, and we're [indiscernible] DOE has announced that they are expecting drop our fees out this summer. So we don't have those in our forecast, but we're certainly positioned very well for those based on where Lou mentioned, that we were on the processing side, should that scope of work be in those bids, which we anticipate it will. So yes, we're preparing for those. The other bids that we're working on, I won't get into too much detail for supporting the Corps of Engineers, we have a number of going out there, we have a number going out that are already out in Canada, and we have several with second-tier subcontracts with DOE sites as well.

The Plateau Contract, the last time around was quite sizable. As I know that the tank contract was as well. I assume that you guys feel that you are even better positioned this time around, given both the test bed initiative's success and the recent partnership with Veolia?

Yes. Again, we haven't seen the scope of work, but we do feel like we're - when - we already met with those firms, the primary firms that are bidding on those, and we have more meetings scheduled. So to answer your question, yes, I do feel like we're in a better position this time. We have a lot to offer and it's very strategic and timely, where we are with test bed initiative. So we do anticipate having very strong positions on those bids with better speculation at this point.

[Operator Instructions]. Our next question comes from the line of Joe Brown, a Private Investor.

I'm curious about your Medical project. I wonder how you got - you advanced to a certain point when you had that partnership before. And I just wonder, quantitatively, how far have you gotten as far as proving it to be feasible? In other words, is there some - how far - how long are you and how - at what level are you, if you can put some kind of number or some kind of quantification on it.

The progress was we have demonstrated in our labs that we could produce commercial quantities or acceptable quantities of tech 99 for use in Medical Imaging. The problem we ran into when we got low on funds was that we really couldn't progress any further than that, and really use it in a demonstrated in a generator that was running in a medically approved - under medically approved conditions. The advantage we're doing now with these partners is they all operate or have facilities that are approved for - by FDA or the appropriate country. So what we expect to get out of that is a step forward at being able to demonstrate how many units - the goal is, how many units can we produce that could be used medically out of a - out of our system. So that's really the next step and our progress is to try to demonstrate what the numbers would be and using our system. We think, at least from all those data we've seen in our labs, that it should help us tell exactly what those numbers are, which we can then show to people, which will increase confidence, we think, of both partners and funding.

So are you running the tests, are you saying that you are. Go ahead.

Your question probably would be are we running tests today? We are supporting these other groups that are running the tests.

Yes, but I'm saying, are you running tests, you mentioned-- it sounds like you're running tests in Italy, Poland and Canada. I mean, are there three different facilities running these tests or one in each different country, how does that work?

Yes. The way it works is the - they're being, as we said, run in Poland with - POLATOM has been a long-term partner with us and that's being funded by a grant from the Polish government. We are presently working with a Canadian company that we've discussed in the past. It's running tests in one of their labs using our raisin technology. And the Italians, which we announced a month or so ago, are - will be running tests in the very near future using our system and an upgrade of their existing reactor, which allows them to use our system. So we got two going on today, and one is about to start. We are considering using it.

Yes, so how long do you think these tests will take? I'm - first of all, I'm curious, are you putting - are they doing - I mean, are you putting money into this, some money? I know, you're probably - I'm sorry most of the cost, I'm not sure but how - what are you putting into it? What are we getting out of it? What are they going to get out of it if the thing is validated? And how long will it take for them to conclude their testing, do you think to where you can...

We have, with all three various agreements, at this point. They are running these tests at their costs, and if satisfactory, we will then negotiate with each of them some - and again, it's undefined at this point, but some sort of licensing agreement that they could then use our technology in their appropriate market, which - the example would be the Canadians, they would - what we have tentatively agreed to is that if they are satisfied with our resonate and our works, and they think they could use it, then we will finalize a licensing agreement that allows them to use it in Canada. So at the front end, we wanted to see if it works, if it make sense for your market and then let's work out an agreement.

And you don't know what the time line for getting potential results are yet.

No, all of them are different, they are all at different stages and there's different drivers in every case. It's fairly hard for me to give you any - very little guidance at this point where something might be of value coming out of it.

But it sounds still like, in Canada, for example, if it proves out, it sounds like they could jump right into using this.

Well, they'll have to go through regulatory approval. So in every case, there is a regulatory barrier that would be the next step after we - if they demonstrate that it may [indiscernible]

Okay. I had another question about - you mentioned the oil and gas field. Fracking is a very expanding field. I'm just wondering what kind of potential do you see as far as cleaning up in natural gas area, for example, if you're trying to get into that. What - it seems like, I'm not sure exactly what you're doing there but the field itself, natural gas is - has a tremendous future, there is demand all over the world. We have a ton of it. I just wonder what's your potential revenue there.

Well, Joe, the answer for the question, we have a very small expertise in the and protection fields, and we're applying that to literally Marcellus shale, natural gas markets up there in Western Pennsylvania, West Virginia and Ohio. And basically, what we're doing is, we're being the waste management experts and my protection experts. We are providing solutions to companies for a manager of their naturally occurring radioactive material, which we call NORM, which are generated basically, when you frack, you inject very large amounts of waters somewhere between 2 million and 20 million gallons of water into the well and then you pull it back out and you have to treat that water before you can dispose of it. And when you treat it, you basically generate a concentration of that NORM material. And that's where we come in to assist and managing and compliance efforts, raise detection, those kinds of things. And that's where the market is. So we're working with several different companies up there, we're getting ready to sign agreement with a new one. We have 20 Master Services Agreements now in place with the natural gas clients. Some of the Big 5 in Pennsylvania. Right now, our revenue is probably in the $400,000 to $500,000 range a year. So it's pretty small, just consulting here and there. If some of these agreements go through, then we'll have a much bigger equity stake in some of the operations and hope to grow that through 2018.

I mean, they have been fracking for a long time. Is that - they've obviously had to treat this water. Are there new regulations covering that, which they are stepping up their efforts or is it...

Yes, it is changing, Joe, all the time. And basically, they are moving largely from settling ponds, which are very difficult to get permitted now and the states are requiring remediation to more of the water treatment systems, which very aggressively and quickly filter out, so to speak, or treat the water for reuse and disposal. Yes, things are changing all the time. And it is obviously, a very growing industry for Western Pennsylvania.

Okay. I also finally, had a question about the tank waste. You did - was it the three-gallon demonstration, and now you're moving into thousands of gallons. So I don't know, you started that yet and how long do you think that test will take to complete?

Well, we really put out a nice press release, in December I believe it was, or in November, that we did treat the three gallons that were disposed of at WCS in Texas. And we're working with the DOE to move to the next level, as Lou mentioned, which is 2000 gallons. And that's basically that - the next stage is simply defined in a - an agreement or proposal we had in the DOE. Things could change along the way to be a lot more or delay it or accelerate it. So we're working with DOE on that right now. And we're generating a final report to DOE in regards to the results of this test. But they are all positive, obviously, because we were able to meet the requirements for disposal in Texas. So we are moving forward with it.

So are they funding that, I mean, that experiment?

Yes, DOE is funding it through their positive account [indiscernible]

So that doesn't cost you any money?

No, it's a contract we have with the Department of Energy.

Okay. So all right, that's basically, all my questions. We're almost done with the first quarter, so you must have a pretty good idea that this will be a strong quarter [Technical Difficulty] I mean, we're almost at the end of March here. I don't know what, I guess, you made some general forecasts, I'm just wondering the way things are going.

Yes, we're still in the process of evaluating where waster receipts are for the quarter, so we're not ready to make a claim at this point but it is looking well.

You are optimistic?

Of course.

Our next question comes from the line of Bill Chapman, a private investor.

A little about four months ago, I read an article that the Department of Energy still had a considerable number of positions that weren't filled yet they were empty desk and with this rumor, speculation that Rick Perry is going to go to the Veterans department. Is DOE better staffed right now, and if he does make a move, will that hamper the progress you guys are trying to make for Phase II on the testing at Hanford?

Bill this is Mark. There's some speculation we saw that in the Wall Street Journal this morning, which was, we were taking a backfire as well because there has been a lot of communication in the headquarters in the last several months in regards to our test bed initiative. They are close, apparently, to confirming an assistant secretary, and we think that once that happens, we'll have a significantly increased focus on these types of initiatives. I know there will be hundreds of things that the new nominee will have to address. This will be one of them, and we hope that we can get some time with the nominee to accelerate some things with this TBI. But yes, to answer your question, all these people are confirmed, things are moving forward. Certainly, if Rick Perry had left, there could be an impact but things are really more visible at the, kind of, the mid-level, lower levels at this point. So I wouldn't anticipate that to slow anything down.

Our next question comes from the line of Stephen Fine, a Private Investor.

My first question is on your bidder. How much of that in the $2.4 million consists of the add back from what you spent on Medical, plus maybe, I'm reading this wrong, on your $1.7 million tax thing?

Well, the EBITDA is exclusive of tax. So it does add that back. Yes, in our earnings release, we do reconcile it from the income. So you'll see the usual characters of depreciation, interest and tax, and then the one sort of unusual or why we call it adjusted, is the Medical, which is about $194,000 and the closure costs at M&EC of $850,000.

Wasn't - the Medical for the year, how much was the Medical?

$1.1 million.

Yes, and that's what I didn't understand, because I mean, I've only been a stockholder since some time last year but there was a statement that the year before, you did about $2 million and that was going to be significantly cut back. But I mean, you're still over $1 million. So then, the next question is, is that going to go down?

Yes. I think you probably - if you're only a recent shareholder, the reduction started about midyear of '17 so we anticipate significantly lower costs until we find financing for that project.

All right, fine. My second question is, when you - some - I don't know, it was low - when you were talking about the - when you started talking about the medical isotope, I thought I heard him - Lou say the better approach is for us to go with these foreign folks, because we're giving up too much, relative to if we go with other investors. Does that imply that you've spoken to venture capitalist firms and they want too much?

The idea was there was that we wanted to limit what we spend, and we saw this as a very good way to not have to raise money. I mean, we've talked to a variety of firms about financing it and it's in very early stage. So yes, the money would be very expensive. In terms of where...

[Indiscernible].

Yes, so by getting a little further down the road, it could make financing easier and cheaper.

But no one's answering the question on time lines on that. I mean, so you cannot - can you quantify that when we're going to see some dollars from this or when this is going to be really talking one year, five years, whatever?

No, no. In it the place we are today, it's even - it's less clear because we're not in control of how they operate and what they do. So at this point, it's very hard to see what a time line would be. But I think it's impossible to give you any kind of realistic numbers.

Okay, all right. Well, I'll let that go. I just - so we could be sitting here five years from now with the same story.

I don't think the board will let us live here five years from now and have the same story.

All right, let me shift gears. The Veolia thing, whatever that involves, if that works out in Hanford, is that something that can be moved to other plants? In other words that you can set up the processing capability in other plants?

Well, yes, the Veolia deal with the GeoMelt you would likely not want to do that. But you could to answer your question, we could move it to other plants. I think the important thing here, Steve, is that is the process that we're implementing, which is leveraging our very valuable permitted space for new technologies. For example, you can transport waste to Richland that would may otherwise not be financially attractive to put it in another facility, better off to transporting it. However, if there was a situation where we wanted to put it as much as we would, and we're pursuing similar types of deals like that right now, with other technologies to leverage this kind of partnerships.

All right. So then the question is - then the logical question is, presuming you evolved into the subsequent phases of the deal with Hanford, does the existence of the Veolia then impact on your capacity of things to handle Hanford if you got all Hanford?

That's a great question. No, not at all. It's a different building, different parking lots, there's plenty of space. No impact whatsoever on the whole TBI and tank waste processing at all.

Okay. Am I also correct, I read this somewhere, that if you do get Phase II, you get $15 million for Phase II albeit not being yours?

Yes, I think the contract, let me guess, the contract sealing, Steve, that's not necessarily - but if its fund - it could be funded up to that. But that's basically when you put out a contract in place that we're funding level of $15 million on it and now, they're going through different stages up to that level. But that is the level of approval for the contract vehicle itself.

Up to Phase II?

Correct.

But beyond Phase III, then you start negotiating. I guess - Mark, I do commend you. I mean, clearly, you guys have - you're trying to offset the impact, the, I guess, the deltoid impacts of government into diversifying other areas, and I think that's fabulous. But I guess the issue is, and I understand the bidding processes, do we have some sense here? I mean, you're down from last year. I understand what's going on and the government is in a mess. But do you have what, let's say, 80% of correlation of an idea, where you could be sales-wise and revenues-wise this year, or is it we will be sitting here at the end of next year and we'll be in the same situation again?

Yes, I mean, what we've done is, we very methodically, have come up with a number of initiatives, as we've talked about in this script part that address a market expansion for us. It's very difficult to project your revenues in this business because, basically you're dependent on people shifting to you so you can get all the contracts you want but unless they shift it to you, you don't make any revenue. So the best way to reduce this volatility is to diversify and broaden what you can receive, what you can treat and the services side, you get broad as you can just to make sure you find as many opportunities as you can. All I can say is that we've won, very strategically, through three construction projects at three of our sites to add new capabilities and broaden the amount of revenue we can potentially make and the receipt that we can accept to reduce that risk and increase our revenue profitability. So we haven't had - I've only been here 1.5 years, almost two years, we haven't had a lot of construction going on at our facilities in many years. But there's a lot of activity going on and [Technical Difficulty] these construction jobs and projects are done, and we have these new capabilities. And we're highly optimistic that we'll be increasing our market share and in regards to competition in providing a lot more value on the commercial side, which we don't do a lot of right now. And when we finish this deal with Veolia and are treating sodium, that'll be the only sodium treatment capability in the country. And there's a lot of sodium out there. So there's a lot of opportunities associated with that. Again, we can't predict what the government's going to do, and what they are going to fund, and how much waste you're going to shift, but what we are doing is reducing our risk by increasing the amount of capabilities we have.

In the Florida facility, where you say you're constructing this hazardous - other hazardous type of capability, would the same paradigm apply there, wherein, you would ship stuff into there?

Yes, in Florida, we don't want to get into too much detail until we launch our marketing campaign on the capability because we don't - it has sensitivities to it. Hopefully, in the next call, next quarter, no, hopefully we will - in the next quarter, we'll get into detail on these capabilities. But yes, that facility is very focused on two initiatives: One, on the hazardous-waste market and becoming stronger and increasing our revenue there. We've seen dramatic increases over the last two quarters in hazardous waste in and on the right side, right side of the equation, Dramatic increasing - dramatic focus - increasing your focus on the commercial side. So taking a lot more waste on the commercial side and we have very high hopes that by July time frame, we'll be increasing the amount of commercial waste we get down there.

All right. And then, relative to - so say there's three initiatives going on in your plants to construct equipment to enable you to do different things, which is fabulous. So is that correct? There are I heard three.

That's correct. One of these...

So that's being internally financed, the construction of all that?

Mostly, yes.

And how much is that?

Small amounts, external right now, it's about $300,000 or $400,000.

Okay, all right. Well, you're moving forward. Look, I understand how slow this is, and it's very esoteric stuff. And clearly, I'm a supporter, as I've said to you guys, I just think you're in a very nice spot. And I just hope - I would just like the world to see, to know more about what you're about, and your uniqueness, that's all. And to get actualized in its proper perspective. Anyway, thank you for your time.

Thank you, Steve. And just to point out, we do have a new website and we're really starting to take it very seriously. So we are trying to pull a lot of press releases on there for the things that are changing, upgrades and hopefully, we can get that word out too.

And by the way, on your website, I think I wrote into your investment people. But on the website, that investor presentation that you have in there was wonderful. I mean, it encapsulates the company in a wonderful way with the people and the capabilities and what you can do. And I just - I guess if I were - I am an investor, but I guess, if I'm an investor, the thing - the bottom line is, you look at, all right, where are you going, what's your earnings going to be, what are you going to generate, when am I going to get stockholder things. And the faster that you guys can get to that point to somehow, even in a very generic fashion, give more information like that, I think the more it will benefit you. That's all. Anyway, thank you very much, and we look forward to - I look forward to a great '18 and '19. So thank you, bye-bye.

Our next question comes from the line of Chuck Dickinson, a Private Investor.

You had mentioned that it's difficult to project the revenues, and yet, if you go back and look at the quarterly revenue trend, I mean, you have to go back many, many quarters to find a revenue figure that isn't in that roughly $12 million to $13 million range on a quarterly basis. And this encompasses just about everything in terms of the waste from the government, new bids that you put out, sequestration, and I don't think you have to go back, I think I will go back a couple of years, but I think you have to go back several years to find a quarterly number that doesn't fall in that $12 million to $13 million range. So I would say, revenues are really not that difficult to project. You are kind of stuck. You've done the work beyond that, obviously, below that line to save yourself up for some wonderful leverage. But on the top line, I guess, I see that you're doing things that I would want you to do, you're working to hit some singles here with projects and you also have a couple of home run opportunities. So I just encourage that sort of approach. I think that's the right way to go to build the base business, make that grow sustainably, obviously, and then hope that one of these transformative events takes place. The second comment I would make with regard to the isotope partners and all the potential for us now that they're involved, a lot of that's in their hands, we don't know what their time line is. Well, there is a time line requirement in terms of tech 99 availability that's going to be incumbent upon these partners that they're not going to be able to ignore. So while you can't project the time line for what they're going to do, how quickly they're going to move, it's going to be incumbent upon them to actually come up with some tech 99, given the shutdown of some of these reactors, principally the one in Canada. But one question that I have, has to do with regard to budgeting. A budget has not yet been sent - been set, but I think, we're now out of the continuing resolution phase and the earlier indication, I think, I don't know, six months, nine months ago, was that the budget was going to be, hopefully, or look like it might be favorable toward DOE spending, DOD spending on nuclear waste and other cleanup, that all has to take place. But it does seem that fall has been moved down the field a little bit in terms of the budgeting process. Can you give any color to how you see that taking shape, are you hearing anything out of Washington, do you think that when they actually set the budget, that you were in line as an industry for a budgetary increase or not? And has any of the personnel change, that's taking place in terms of people occupying new positions there within the industry that you had mentioned on the political side, going to advance that ball as well?

Yes, Chuck, well, I hope that we are referring to you in the next few - couple of quarters with the home run completed. So hopefully, we will be able to move that needle on the revenue a little bit more. To answer your question with regards to the federal budgets and our alignment with them. Under continuous resolution, as you know, a federal project or a federal site like the Corps of Energy site or Corps of Engineers site is restricted from starting new projects. So basically, you're not supposed to do any new line-item projects unless they are specifically identified in the budget and approved by Congress. So that limitation alone keeps a lot of projects than can generate waste from happening. So when a budget actually passed, new projects can begin, and I think a one of our project - cleanup project that generate waste that we will treat that definitely lines up with our ability to receive and handle more waste. And to answer your question, the DOE budget and on each version of it, I want to say, that although [indiscernible] these 5% to 10% increases over previous years. And so, if one of those does happen or it gets approved, we do anticipate an increased impact to or receive on the Department of Energy side, but more importantly, even on the Corp of Engineers side, we have numerous proposals that have been in place for months, almost a year, waiting for budget approval for them to make a war. So it doesn't mean we're going to win but that doesn't mean you can't even though we're going to lose until they make those announcements. And they won't make those announcements until the budget's final. So it does have a big impact on us, as most federal contractors, when you don't have a budget approved.

Right. So it sounds like you have a war with things that are preventing you from moving forward, just, kind of, you can almost feel are ready to go but you just need the next step to take place. So that's on the one side of it. Then the other side of it is going to be not relying solely on NAFTA looking to increase market share within whatever increase - hopefully, there is an increase, whatever increase there is. I assume that's a goal as well.

Correct. Absolutely.

Okay. All right, well, happy to see that the EBITDA so - the adjusted EBITDA is still positive. Keep that going.

All right, thanks, Bill.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to turn the call back over to Mark Duff for closing remarks.

Again, I'd like to thank everyone for participating on our fourth quarter and year-end conference call. As I mentioned earlier, we've achieved $2.4 million in adjusted EBITDA for the year ending December 31, 2017 versus $575,000 for 2016. We are excited about to be able to report a position positive net income and $0.02 per share earnings and look forward to continued performance in '18 and we see '18 being another year of continued growth and improved profitability. Importantly, we are making strides to improve our bidding organization within the Services segment and we continue to diversify revenue within our Treatment Segment, and we see a number of very exciting growth opportunities such as the treatment of NORM waste in the West Pennsylvania and new treatment processes in Florida and our juvenile facility in Northwest. So along with it are several new international opportunities as well. And above all, we are excited about the potential opportunities that may arise from the Hanford tank project. We appreciate everyone's continued support and look forward to providing additional updates in the near future. Thank you very much.

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