Perma-Fix Environmental Services, Inc. (PESI) Q4 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Perma-Fix Environmental Services Fourth Quarter and Fiscal 2019 Business Update Conference Call. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host for today, Mr. David Waldman. Sir, the floor is yours.

Thank you. Good morning, everyone, and welcome to Perma-Fix Environmental Services Fourth Quarter and 2019 Conference Call. On the call with us this morning are Mark Duff, President and CEO; Dr. Louis Centofanti, Executive Vice President of Strategic Initiatives; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing fourth quarter 2018 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 and include certain non-GAAP financial measures. All statements on this conference call other than the 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. Now I'd like to turn the call over to Mark Duff. Please go ahead, Mark.

All right. Thanks, David, and good morning. 2019 was a successful year for Perma-Fix, which can best be described as a year of solid execution that resulted in the transformation of our company, setting the stage to achieve even a higher performance over the long term. This transformation has been realized through the integration of our Treatment Segment with our Services Segment and has positioned Perma-Fix to provide a unique offering for radioactive waste management to all our clients. This performance is reflected in nearly 50% increase in revenue for 2019. And at the same time, we're staffing up to support our anticipated growth, including the addition of strong industry leaders and additional technical talent. Let me take a minute to recap some of the financial highlights from the fourth quarter relative to the same quarter in 2018, and later, Ben will discuss the financial results in a little more detail. Overall revenue increased 88% to $22 million over the fourth quarter last year. Services Segment revenue increased 340% to nearly $12 million. Our Treatment Segment revenue increased 13.5% to $10.3 million. We generated an adjusted EBITDA of $1.7 million compared to a loss of $167,000 for the same period last year. And lastly, we achieved net income attributed to common shareholders of $930,000 or $0.08 per share for the fourth quarter of 2019, compared to a loss of $2.4 million or a loss of $0.20 a share for the same period last year. Sharpening our focus within the Services Segment, we delivered growth from $13.3 million in '18 to $33.1 million in '19, which is an increase of 149% increase for the year. While this accomplishment is very exciting to our management team and our employees, our company views this as only the beginning based on our sales pipeline, backlog and our new client relationships over the past year. Over the past few years, the Perma-Fix management team has reconfigured the company around a new growth strategy that has established a solid backlog of contracts that we believe will provide sustainability, while increasing our opportunities for new contracts and market expansion. This multiyear process, which delivered these results, has also shaped our 2020 business plan in order to provide the optimal services and technologies to meet the needs of our clients in our overall waste management market. The focused execution of this business strategy has resulted in strong financial and operational performance over the past 2 years and is expected to continue into 2020. More specifically, both segments performed well in '19, contributing to a year of strong organic growth with an adjusted EBITDA increase of 162%. Notably, most of this increase came in the second half of the year or the last 2 quarters. It is also important to note, we achieved this performance despite a slowdown in waste receipts within the Treatment Segment due to the government continuing resolution and shortened work months due to the shutdown of the projects and treatment plants around the holidays. This temporary weakness in the Treatment Segment did not continue so far in 2020 as we expect improved performance in Q1. However, we're also monitoring the potential impacts of COVID-19, which I'll discuss more in just a moment. Meanwhile, we continue to identify new opportunities to reduce the cost, schedule and safety risks that radioactive waste impose on our clients through the application of new and innovative engineering and the use of technology in a cost-effective manner. A recent example is the start-up of our newest facility located outside Oak Ridge, Tennessee, called the Environmental Waste Operations Center or EWOC. The EWOC facility received its radioactive -- Radiological Materials license in February of this year to support receipt of radiologically contaminated equipment materials and waste for processing, packaging and shipment to permanent disposal facilities. The new facility is highly synergistic with our existing operations and allows us to add new capabilities in high demand among our customers, including the ability to handle and dismantle large components such as turbines and other reactor equipment as well as receiving demolition ruble for handling prior to final landfill disposal. Specifically, the EWOC facility is configured to handle very large equipment that will support size reduction and shipping directly to landfills using our both rail access we have at the facility as well as trucking. In addition, the EWOC facility is located near the DOE Oak Ridge reservation, which has a cleanup mission expected to support sustainable waste generation for many years. This facility is ideally situated with an adjacent rail spur, making low-cost transportation alternatives convenient and efficient. While we are not yet able to define the anticipated revenues for EWOC for 2020, we have submitted several bids already to support near-term processing objectives. Importantly, unlike our other facilities, EWOC is not designed to treat hazardous or mixed waste at this time, and therefore, we believe we can ramp up our throughput in a very low cost and efficient manner with limited initial capital investment required. In addition, an additional example of our ability to apply the newest technology to meet the needs of our customers' waste management challenge is our Perma-Sort system. This latest technology will be applied to removing radioactive soils following dewater operations and dredging applications. This is a strong backlog of similar work in our industry, which can benefit from this technology over the next several years, and our engineers and health physicists are developing applications through the procurement process. As the Department of Energy continues to release large site cleanup procurement, Perma-Fix has been successful in providing innovative solutions that discriminate our team within the waste management missions of the scopes of work within those procurements. This is particularly relevant to ongoing procurements at Hanford, Savannah River and Idaho that may include on-site services for waste management as well as the potential for providing waste treatment off-site using our proprietary technologies that represent significant value. Perma-Fix has realized sustainable growth in several important nuclear services markets that should continue to generate backlog over the next several quarters. Specifically, we've seen growth in supporting several national laboratories including cleanup missions directly associated with the revitalization initiatives and legacy contamination cleanup. These labs include the Lawrence Berkeley Lab, Lawrence Livermore, both in California and Los Alamos as well in New Mexico as well as the Canadian Nuclear Laboratory in Ontario [Audio Gap] Our growth strategy has not only involved our Services Segment as we've continued to realize strategic progress in our treatment segment as well. For the full year, our Treatment Segment revenue increased 11% as we continue to identify new waste streams that require innovative and -- technologies to obtain disposition, while leveraging our engineering team to provide additional value to our clients. As an example, in the past few quarters, we developed a solution to stabilize lithium hydride shields in Oak Ridge to passivate uranium traps from Paducah and continue to treat radioactive water from sources throughout the country. Each of these waste streams have been the result of our strategy to provide more comprehensive solutions to our clients in the disposition of their most complex waste problems. This innovation will support further growth with strong margins in concert with our services offerings. As we approach the end of the first quarter of 2020, we've been fortunate to secure several new contracts that will support a similar trajectory of growth through 2020, assuming the impact of the COVID-19 is only temporary. Once we return to normalcy, we anticipate 2020 will be rich in new opportunities within both the Treatment and Services Segment, which will further enhance our backlog and provide stability for the company. And even though we have seen minor budget reductions in the president's budgets for 2021, our largest waste management client or largest waste treatment client, which is the Department of Energy Environmental Management Division, the impact of waste shipments should only be limited in 2020 with minimal impacts the following year. Our Nuclear Services segment has limited exposure to the EM budgets within DOE with less than 5% of our revenues coming directly from EM in '19. The majority of our Nuclear Services funding is through projects within DOE from the Office of Science and from the NNSA divisions to support their infrastructure improvement missions and -- which should counter any impact that we see on the EM side of the house. On one final note, as I mentioned earlier, I'd like to discuss the potential impact related to the COVID-19 pandemic. It is our desire, Perma-Fix and our clients, to maintain safe working environments while minimizing impact to our operations within our nuclear facilities. Within our Nuclear Services segment, we are beginning to realize suspension of several projects as our federal clients have halted on-site operations at government facilities. And as a result of these impacts, we will likely realize reductions in revenues for Q2. The magnitude of these impacts will be directly dependent on the duration of the suspensions. However, the loss of revenue in both the waste treatment and the services projects will likely be recognized in Q3 and Q4 if these suspensions are lifted later this spring. Within our Waste Treatment Segment, our treatment plants have seen some impacts to shipments to include some delays in waste from Q1 -- or the end of Q1, the last couple of weeks, into Q2. But again, these could increase depending on the client shutdowns and other impacts as they're realized going forward. To date, our plant operations have not been impacted by the COVID-19 virus as we have not seen any cases of the virus amongst our staff. So production has been maintained so far. Our backlog within each plant is good right now with approximately 2 to 3 months of waste inventory for processing within each plant. If we begin to realize changes that will materially impact Perma-Fix, we'll be sure to keep our investors informed. While Perma-Fix has directly benefited from government stimulus packages in the past, it's premature to speculate if that would be the case again this year. But we will continue to monitor every aspect of the COVID-19 as it's evolving and to find ways to best respond. Most importantly, Perma-Fix is a safety-driven organization with lots of experience in unusual environments. We're committed to the safety of our employees and we'll stay on top of the situation as it unfolds. I'd like -- I'd also like to extend our best wishes to our shareholders and citizens across the country that have been impacted by the virus. As Americans, I'm certain we'll pull through this and emerge stronger as a nation. So to wrap up, 2019 was an exciting year for the company as we more closely aligned our nuclear services and waste treatment capabilities, and we are realizing the benefits of our business development initiatives. This is best illustrated by the fact that we've been awarded over $65 million of new contracts since the beginning of 2019. At the same time, we're advancing a number of significant opportunities to leverage our fixed waste treatment facilities, providing innovative treatment options for a variety of nuclear waste streams that will broaden our market base. Overall, we're extremely encouraged by the outlook for our business. We've continued to enhance our balance sheet and have a solid backlog to help sustain us in the event of a temporary disruption. On that note, I'll now turn the call over to Ben, who will discuss in further detail the financial results. Ben?

Thank you, Mark. Starting with our revenue. Our total revenue from continuing operations for the fourth quarter was $22.1 million compared to last year's fourth quarter of $11.7 million, an increase of 10.4% -- $10.4 million or 88.1%. Our Services Segment increased by $9 million compared to prior year as the company continued to operate on numerous projects in both the U.S. and Canada. In the Treatment Segment, our revenue increased by $1.3 million in the quarter compared to prior year primarily from improved pricing related to the mix of waste we processed. For the year ended 2019, our revenue was $73.4 million compared to $49.5 million in 2018. Service Segment revenue increased by $19.8 million or 149.4%, as again, our projects won in the first half of 2019 began to produce revenue in the second half. Our Treatment Segment revenue increased over prior year by $4.1 million or 11.3% as a result of the higher average pricing resulting from our mix -- our waste mix. Our cost of goods sold for the quarter was $17.4 million compared to $10.5 million in the fourth quarter of prior year, an increase of $6.9 million or 66.5%. Our Treatment Segment cost of sales increased $773,000 compared to prior year, primarily due to a $1 million reduction in our closure expense at M&EC, which closed in the second quarter of 2019 -- as I might have said increased, they decreased $773,000. Cost of sales from our Service Segment increased $7.7 million as a result of the significant increase in revenue compared to the prior year fourth quarter. Our gross profit for the quarter was $4.7 million compared to $1.3 million in 2018. The Treatment Segment gross profit increased $2 million due to the improved waste mix and the elimination of the closure expenses at our now closed M&EC facility. Our Service Segment gross profit improved by $1.4 million, primarily as a result of increased volume of project work. For the year ended 2019, gross profit was $15.6 million compared to $8.5 million in 2018. The Treatment Segment earned $5.1 million, more gross profit than the prior year, primarily due to higher revenue and lower closure-related expenses at M&EC. The Service Segment gross profit increased by $2.1 million, primarily from the higher volume of project work. Total SG&A cost for the quarter were $3.3 million compared to $2.7 million last year, an increase of approximately $634,000. Higher employee-related expenses for wages, incentives and outside consulting and also higher bad debt expense were offset by lower commission and legal costs. For the year ended 2019, SG&A costs were $11.9 million compared to $10.7 million in the prior year. As with the quarter, employee wages and incentive expense were up as were travel, consulting, audit fees and bad debt. And these were partly offset by lower commissions, legal expenses and relocation of office expenses. Our research and development expenses for the quarter were down $555,000 and $620,000 for the year, respectively, as the company wrote down certain assets in its medical segment in the fourth quarter of 2018. Our income from continuing operations, net of taxes for the quarter, was $1 million compared to a loss of $2.4 million last year. Included in last year's loss was $1 million of additional closure reserve recorded at M&EC, the continuing operating expenses at M&EC of $308,000 and the write-off of certain medical assets -- assets in the medical segment of $465,000. Net income from continuing operations net of taxes for the year ended 12/31/19 was $2.7 million compared to a net loss last year of $1.1 million. Our net income attributable to common shareholders for the quarter was $930,000 compared to last year's net loss of $2.4 million. For the year ended 12/31/19, our net income attributable to common shareholders was $2.3 million compared to a loss of $1.4 million in the prior year. Our total income per share for the quarter was $0.08 compared to a loss of $0.20 in prior year, and our income per share for the year ended December 31, '19 was $0.19 a share compared to a loss per share of $0.12 in the prior year. Adjusted EBITDA from continuing operations for the quarter was, as defined in this morning's press release, was $1.7 million compared to a negative $167,000 last year. And for the year ended 2019, our adjusted EBITDA was $5.2 million compared to $2 million last year. Some balance sheet items compared with the end of 2018, our current receivables and unbilled receivables collectively were up $10.3 million, primarily from the increased revenue in the Services Segment. We had an operating lease right-of-use asset of $2.5 million, which represented the present value of our operating leases as a result of implementing ASC 842 this year. Our intangibles and other assets were down $4.6 million, representing the release of $5.5 million of restricted cash previously held as collateral under our closure policy tied to the closure of our M&EC facility. Our current liabilities were up $3.6 million, primarily due to increased operations in the Services Segment. Waste backlog was $8.5 million compared to $11.1 million at the end of 2018. Our long-term liabilities were $2.4 million, up primarily from the inclusion of our long-term operating lease liability which, again, relates to the implementation of ASC 842, of which $2.3 million represented the present value of our operating lease liability. Current debt, including capital leases and excluding debt discount and debt issuance costs, was $2 million with $427,000 due to our primary lender, PNC Bank. Total debt at year-end was $5.2 million, including capital leases, excluding debt issuance and debt discounts, with $2.2 million of that due to our primary lender, PNC Bank, $2 million due on the loan from a private lender received in May 2019, and $937,000 from other debt. Our working capital was $26,000, a $6.8 million improvement from the working capital deficit at the end of '18, $6.8 million. And finally, I'll give some cash flow information. Our cash used by continuing operations was $4 million. Our cash used by discontinued operations was $660,000. Cash used for investing was $1.5 million, of which most was for [ cap spending ]. Proceeds provided from discontinued was [ $121,000 ], which was primarily from the sale of certain discontinued operations property. Cash provided by financing was $992,000, which represents our monthly payments to our term loan of $824,000, net payments to the revolver of $318,000, $2 million representing the note received from a private lender net of payments made, and $133,000 from option exercise. With that, operator, I'll now turn the call over to questions.

[Operator Instructions] We'll go first to Bill Nasgovitz at Heartland Advisors.

Congratulations on a good year. It's nice to see a profit. So could you talk a little bit -- you mentioned $65 million worth of new orders this year. Could you -- maybe I missed this, I came on late. But what our backlog is in Treatment and Service?

Yes, Bill, that $65 million represents the wins we got in '19 that are pretty much rolling from '19 into 2020. That does not include some of the joint ventures that we've been in, pretty much just one joint venture. So that that's just we're prime and it's very pretty much PESI alone. So you can add another $5 million to $10 million in 2020 on top of that. So that represents the project backlog we've got going into 2020. We're already starting to chew on that through the first quarter. And hope to add to that in the next 2 quarters as additional field projects are awarded. So we submitted a significant amount more this year that we're waiting to hear on and projects to be awarded. So I think right now, we probably have about $40 million in projects that we're waiting to hear on. So that represents our Services backlog. On the Waste Treatment backlog, it's about $10 million overall. As I said, it's about 2 to 3 months of backlog if we receive no more waste receipts as a result of the virus issue. So we're feeling pretty good for a couple of months with nothing more received and certainly hope that it's not going to extend much more beyond that. And we feel really fortunate to have that kind of backlog right now.

Bill, just let me clarify real quick. It was 8.5 at the end of the year. Mark's $10 million in Treatment he's talked about is kind of where we are today.

That's correct.

Okay. And then Service a year ago, the backlog was only -- was it around $20 million? I can't remember.

No, probably lower...

Oh, it's a lot less.

Yes, it was less than $20 million, less than $15 million, I think.

Yes, I was going to say $12 million or $13 million, Bill.

Okay. And then you've got a service backlog today of $40 million, is that what I heard?

Coming into the year, yes. Coming into the year, about that amount. Yes.

Okay. So could you -- Mark, you also mentioned trying to broaden up the service sector. What type of deals are you working on? Or I mean just broadly speaking, in terms of broadening the business?

Yes, the 2 specific ones I'm most excited about, which I mentioned very briefly, was the EWOC. The EWOC facilities provides a real unique service here locally in Oak Ridge for high-volume transfer of waste. And that's just getting along. Just got our license in February. We're waiting to hear on a couple of bids before we really get it up and running to full speed. That has a real potential to be transformative for us, Bill. The soils order I mentioned, I talked about that like 2 years ago, you might remember. We had several bids out for that. And then it got real quiet because we lost a couple, but then we actually won a few. And that's really starting to kick up now. We're going to be doing some operations in San Diego to support some dredging that's going on. They're finding some radioactive soils, and we'll be separating those. And that has a real potential to grow over the next couple of years and be a very sustainable revenue stream for us. So we're excited about that. We're also excited about these big DOE bids that we talk about every quarter. We've been able to hire some really good waste engineers that are very seasoned at solving complex problems and what we're being able to do is to find solutions for each one of these sites in association with their waste management challenges and get on teams with the larger companies, the Tier 1 companies, to provide specific solutions to them, to the overall project. So those are exciting for us. It's much like the tank closure job, not quite as large as that is for us, but certainly, transformative and could add some good chunks of sustainable revenue for over a 10-year contract. So exciting things going on.

So Mark, when you say large or big DOE contracts, what size are you possibly talking about?

These are the large DOE M&O type procurements. Like Savannah River and Idaho. I think Savannah River is in the $20 billion range for 10 years, and Idaho is in the $10 billion. Those big, large 10-year contracts that we won't prime, we'll be a critical subcontractor or a team partner on. So at a much, much smaller level.

5% to 10% or something less?

Probably a little bit less, depending on the project. But still, when talking numbers that big, significant.

[Operator Instructions] We'll move next to Avi Fisher at Long Cast Advisers. Avram Fisher;Long Cast Advisers;Founder;Portfolio Manager: We've seen some significant growth in the G&A side. How sticky is that? Is that sort of year-end bonus stuff or is this 3.3, above 3 the new norm?

I think the year-end bonus is a pretty healthy chunk of that year-over-year. You have kind of cost of living increases as well. But we saw some offset costs. So it was probably the incentives, some of the employees are going to get a well-deserved bonus this year. Avram Fisher;Long Cast Advisers;Founder;Portfolio Manager: On a sort of a normal run rate basis, excluding this crisis, pandemic, what's the right way to think about G&A? Is it back under 3? Or are we sustainably over 3?

Over 3, percent or million? Avram Fisher;Long Cast Advisers;Founder;Portfolio Manager: Million.

For the quarters, you mean? Avram Fisher;Long Cast Advisers;Founder;Portfolio Manager: Yes, on a quarterly basis.

For the quarter. I think it will be coming down as revenue goes up. Our target is to try to be in the 10% to 12% range for the year. So a little bit less than -- probably 3 is a good starting point, though. Avram Fisher;Long Cast Advisers;Founder;Portfolio Manager: And then just a second question, I don't have -- we don't have the segment details here yet, but can you just -- and this is more of a general question. In the past, and I say years ago, the Services business had some issues in terms of getting under water on contracts. And I believe we press released the promotion for someone who was running the Services business back in 2011. I'm just trying to get a sense of your estimators -- I mean this business, the Services business makes profit on how good you estimate a project and how good you manage the project. Just the numbers of estimators and project managers you have now compared -- how many of them were running the business also in 2011 when you had these issues? How do we make sure that these project managers and estimators are comped on project profit, not just project revenue? Any color you can provide around that would be helpful.

Yes, we have completely -- not complete. We have several people from 2011 from the SEC group that are very seasoned and experienced project estimators and we do have a lot of new ones as well that are supporting the team. So we have a team of folks that develop a proposal. It's not just project estimators that result in a project being successful. It's implementation. It's contract terms. It's leadership of the project. It's change conditions and client reasonableness. There's a lot of things that go into it. Certainly, estimating is one of them. But we've implemented a different QA program that we had back then, so that we have very stringent, what we call, green team reviews of our cost before we send them in. We have risk committees that look at the different risk each project takes on. And unlike 2011, we have a lot fewer fixed-price contracts. Most of our contracts right now are T&M. From a percentage basis of a $50 million revenue stream, it's less than 20% will be a fixed unit rate or fixed price, which obviously have various degrees of risk associated. So 80% of our Services group is T&M, which is a much lower risk level associated. And we do have some smaller fixed-price contracts with DoD, those just ironically are the projects that have not been affected by the virus and continue to be ongoing at military bases. And so they're running very well. And just to kind of give you a sense, Avi, overall, we do our project reviews every month, and we have 12 or 13 services projects. And our Executive Vice President, Andrew Lombardo, and his team spent a lot of time going through each project. And we are generally at proposed margins on 12 of the 13 projects. In other words, we may have 1 or 2 projects that slip below the margin that we bid and the rest are pretty close to being right on. So overall, I'm real proud of our Services group and how they've been tracking the margins and, to your point, how we're estimating these margins in the proposals. So I think it's a strong point for the company. You can have a bad project any time, I don't want to say we're never going to have one because they are complex and you can miss things here and there, but I think our QA program and our estimating has been very strong. Avram Fisher;Long Cast Advisers;Founder;Portfolio Manager: What's the sort of average or normal duration of a services project? Is it in the months or years?

They range dramatically. If we're doing some small projects at DoD facilities that are 300,000 or 400,000 that are literally in the field 3 or 4 weeks, and we have several right now that we're doing that are 18 months in duration and $20 million to $30 million. And then we have one that could be several years on top, in addition to that. So they really range. But between 3 months and 18 months generally. Avram Fisher;Long Cast Advisers;Founder;Portfolio Manager: By the way, Mark, and [ I just spoke with you, ] last year, in 2018, and just based on your segment breakout, about 80% of your services projects were T&M. But this year, year-to-date, Services T&M, which was 1Q to 3Q, 76%, 60%, 57%, so we're seeing a growth in fixed price work on the Services side, and that's what's really driving my questions. It's changing from that historical norm of 80% down to 57%.

Yes, there's some gray areas in there, Avi. For example, fixed unit rate contracts don't have the same risk that fixed-price contracts do. And we have a number of those that are in the fixed price category, but they're not fixed price. They're fixed-unit rates, which means your quantities can vary and you don't carry the same risk. But we've done a pretty good job, I think, of managing that risk and meeting our goals on the proposal side.

We'll go next to Sam Rebotsky at SER Asset Management. Sam Rebotsky;SER Asset Management;Portfolio Manager: Mark and Ben, it was nice meeting you in New York, and I'm happy to see that the profitability going forward and hopefully, once the corona gets straightened out, you could be consistently profitable. My question relative to the February 28 press release, could you talk about how much you're spending and what your expansion is? And what kind of sales this can produce and the cost, et cetera?

Sam, I'm not sure I understand your question. February 28 press release... Sam Rebotsky;SER Asset Management;Portfolio Manager: Okay. You said you announced a low level radioactive waste processing and treatment in addition of a highly specialized facility located in Oak Ridge. So you're making an expansion at Oak Ridge. What are you spending? What -- how much more revenue could it produce? And when do you expect that to be complete?

Okay. I understand now, Sam. Yes, so the EWOC facility is, right now, is in a very low capital requirement project. We have a lease-to-buy arrangement. And so we've kind of moved into that direction very, very slowly. But we are committed to this facility making it work. And basically, the overall revenue associated with what we can bring through that is not defined yet because we have so many bids we're waiting to hear on. I think as just a goal in my mind, that if we can do $10 million a year out there in coming years, that would be a good goal for it. But it could go up from there, depending on the role it plays at the Oak Ridge reservation itself. And right now, that requires a very limited capital investment. We've got our license -- our Radioactive Material license to get rolling. We have to make a number of improvements to be able to handle the waste streams we've just bid on, and we'll be making those improvements here in the next couple of months. So it's really -- it just depends on some of the procurements that are coming out of DOE here locally and whether there's an opportunity to process the waste to ship it out west. So it's still -- it's really still in the planning and development stages at this point. Sam Rebotsky;SER Asset Management;Portfolio Manager: And with your $65 million backlog and the other $40 million, it seems you have the ability to be profitable once the corona is straightened out. On a quarter-to-quarter basis, does that appear that based on the amount of revenue you could put through your facility, you could be profitable on a quarter-to-quarter basis?

Sam, it really depends on how long it goes, but we are hoping for that. If it's a 4-week impact or 6-week impact beginning last week or so then yes, I think we'll be fine and we may have a dip in Q2, but we'll make up for it in Q3 kind of thing. And we feel like we've positioned ourselves in regards to planning on our projects and in our treatment plants to withstand that 4 to 6 weeks without too much problem. If it goes much beyond 2 months, it will have more of an impact, like it will on everybody. And when I say beyond 2 months, that means that our facilities -- the DOE facilities are shut down or not operating. Again, we can make it 2 or 3 months with backlog on our treatment plants and our projects are working from home at this point and keeping projects moving forward so that when we can get back in the field, we can hit the ground running upon release. Sam Rebotsky;SER Asset Management;Portfolio Manager: Okay. Do we attribute the backlog, increased backlog, to better bidding process, more jobs available, the fact that we're better able to do what has to be done? And do we see more -- or what kind of job -- how many -- or is the DOE, is there more jobs they're putting out? What is the -- what would you attribute the increased backlog and how much more do we expect it to increase going forward?

It's tough to project how it's going to increase going forward, Sam. But a couple of things. Number one, and what I failed to mention with Avi's question, was that we are being much more methodical on what we bid, which also takes the risk out of contract overruns and those types of things that Avi has mentioned with regards to fixed price. We're very focused on bidding projects that we have core competencies in, which is radiological component and waste management and making sure we have the staff that can do the jobs that we're bidding and do them well. So that's been putting us in position. So the ones we're bidding, we have high win probabilities. And we can do the job with high confidence and minimal risk. And to specifically answer your question, we're seeing a revitalization occur within -- particularly within the Department of Energy and with DoD as well, where both entities are removing facilities and legacy risks associated with containment facilities so they can build new infrastructure. So I see that continuing at all those DoD sites and the DOE sites. And when they do that infrastructure upgrade, they generate waste and provide opportunity to do the projects in the field. So both support our core competencies, and I expect that to at least be flat, if not increase again through the year. I do think there might be a blip from the virus here for the next month or 2, but I do expect to see a surge following that as waste begins to be generated again and operations get back to normal. Sam Rebotsky;SER Asset Management;Portfolio Manager: And further, are we beating out our competition to win these jobs when we weren't doing it before? Or there is less competition for the jobs?

I can clearly say the competition levels have been somewhat flat. So it's typically the same numbers we've seen in the past 2 years. I think we're doing a better job of bidding and preparing for the bids before they come out, and tying in some technology, where possible, to put that cost on the waste management side of the house, particularly. Sam Rebotsky;SER Asset Management;Portfolio Manager: So thank you. It was very nice to meet you in person with Ben and you're doing a good job. And hopefully, we could get a quarter-to-quarter consistency of earnings and sales that's not beyond our control. Good luck.

We'll go next to investor, [ Stephen Fine. ]

Congratulations on a great year. Presuming we didn't have this coronavirus thing in front of us, would it be reasonable to say that if things were all smooth and you didn't have disruptions, that $100 million this year would not be out of the question based on your backlogs and so forth?

That is a safe assumption, [ Stephen ]. And we projected the same type of performance we had for the last 2 quarters to flow right through the year with the backlog we have. And then -- and we're hoping that we could win a few more additional projects on top of that to see even growth higher than that. But yes, we -- that was the trajectory we were on.

Okay. When I looked this morning at your -- the numbers that came out, the one thing I saw on your balance sheet is that even though your current assets were up, your cash was down, but you had a tremendous amount of receivables at the end of the year, which I would expect. Can I ask the question that during the first quarter, has that smoothed out a bit so that you do have more cash on hand?

It has, Sam -- or Steve, excuse me. We -- the -- a particular contract had some work to be done, which we've resolved, and that was what sort of elevated at the end of the year. But yes, our cash will be improved from the year-end. It should be.

Okay. Fine. All right. Let's talk about the EWOC thing. Am I to understand that this is a separate facility that you've rented?

That is correct. We have a lease-to-buy on it. And it's a facility that was previously operated at the East Tennessee Technology Park by another company. And kind of been quiet, it hasn't been used in many years, that we saw some value in potentially deploying some new capabilities.

Okay. Great. So does the existence of that facility relative to the bids out puts you in a unique position?

It does, Steve.

Okay. All right. You've given us some ideas. I know after following you guys for 2 years, particularly you, Mark, I know you don't do things unless there's opportunity. So I'm just going to make the presumption that you see some business. Let's go to the big elephant. We've been talking about this, I'm talking about the tank closure. So I understand what's going out there. There's some contracts on appeal. But my understanding is that with the tank closure, that Perma-Fix is part of a consortium in its bidding. Is that correct?

That is correct, [ Stephen ].

Okay. So the question I have is, when we think about the tank closure, it has always been that you guys would treat. So the real question is, the question I have is, presuming at some time that that is -- the bid is awarded, do you guys -- are you guys a partner in that, wherein you would get revenue brought in, irrespective of whether you were treating in your own facility?

Yes, [ Stephen ]. It's an ongoing procurement, so I have to be careful about what we say about it. But let me just say this, we are a critical subcontractor, to answer your question. So we're on a team with team agreements and other agreements supporting that to provide value to that team in operation space. And we are part of the solution for what's proposed in that procurement for treating waste as well. So I just -- I'll leave it at that, is we're waiting to hear on it, and we're sensitive to our team and partners to keep that quiet until it's announced at this point. But I also want to mention, too, that if we were not successful on this procurement, that we would still remain very optimistic that if we don't win, that we will still be a part of the treatment solution for the Hanford tanks, irrespective of who it is awarded.

Well, I think that the -- that you guys should be congratulated because clearly, what you've done is you've diversified the business in an amazing way in the last year. And clearly, without what's going on right now in the world, there was -- seemed like you're unfettered and moving ahead and so forth. But I've always felt that the stuff out at Hanford, like the tank closure and so forth, should be like ice cream on the cake. And then even if you got it, your attitude should be its ice cream and then you complete on the diversification, because the one thing I'm observing is you never know where things are going. So I congratulate you on diversifying. All right. Okay. Let's talk about the coronavirus. Obviously, you mentioned it, Mark, and it's realistic. But I guess my real question is, because I'm in my 70s and I've never seen anything [Technical Difficulties]

Sorry, I believe we lost connection with [ Mr. Fine ]. We'll move next to investor, [ Jim Brown ].

I just had a couple of questions. First of all, with the things that the government is doing right now, is there -- and the way the interest rates have been going, is there any chance for you to refinance some of your debt to save money on interest costs?

We do look at that. We were in close communications with our credit facility and other opportunities. So that is something we do. We work closely with our audit committee as well. So there is that kind of an opportunity, yes.

Okay. And the other thing, it sounds like -- well, we're almost done with the first quarter. And based on what you've said, it sounds as though -- and obviously, you have a good handle at it. It sounds as though, at least in Q1, we're going to beat last year again, right? I mean [ it sounds like that ] in the first quarter.

Yes, we're definitely going to beat last year with Q1. We expect to see pretty similar trajectory, as we've said, from Q3 and 4 of last year into 2020.

Okay. All right. And then the other thing is you talked about hiring. And so we've got this -- I know you were in the process of hiring people. So now we've got this virus thing going, but are you -- what are you -- have you laid anybody off? Are you shifting people around? Or did you put a hiatus on hiring? Or exactly what are you doing with hiring?

That's a good question, Jim. We -- the point of the prior talk or discussion was, we hired about 150 people through the year. And with that 150 people, we were able to hire a lot of really strong leadership and technical talent that have made an impact to the company and really have transformed the company. When you win projects like that and get that kind of backlog, you can attract people that have an impact on the company, and it really snowball. And that's really the point of that. But along the way, as our services manager frequently says, we've also had some change of staff as well and -- which any good company would do along the way where folks leave and you replace them and you set your standards very high. As far as the virus impacts, we've demobilized several -- most of our projects at DOE sites that are slowing down. We have several projects in California and the Bay Area that are in lockdown. So basically, everyone's working remotely. Fortunately, most of those projects have not been mobilized for field activities yet. They're in the process of mobilizing. So we just pushed the hiring of the field workforce out a little bit. And we do have a couple of projects in Seattle and Canada that have mobilized, that were in the field. And we've done -- we've made the adjustments for the labor part of that along the way to support doing some training initially and -- which could eventually lead to a temporary layoff for some of the people. And for others, there'll be other work and reports that have to be done to -- that will fill the gap until they can remobilize it in the field. So to answer your question, we have not done a significant number yet of layoffs. And we have been able to take care of our staff along the way. If this drags on much more past mid-April, then we may have to do some along the way, but we have not today.

You have -- you're talking about working remotely, but is there a decent opportunity for shifting people around? I mean some areas of your operation I'm sure are not affected or very minimally affected. So I mean is there an opportunity to shift people around into areas that aren't affected?

We have done that, Jim, actually, and we've been able to shift some of the folks on the Seattle project to our treatment plant in Hanford. And we've also shifted several other people from different projects to support proposal development and other [ services ] we've had along the way this month. That will work for a while. And we hope it will work until this has died down and we can remobilize, and then we'll have much less impact on the company overall.

Okay. And I also had a question about, do you have any prospective or maybe impending or just prospective additional JVs in the pipeline? I mean some -- maybe some things you're potentially looking out for a JV with somebody? Joint venture?

Yes. At any given time, Jim, we have a hot list of bids that we're chasing at different various stages of when they'll come out. We may have a project that's due out in a year, and we're addressing source of salt request and doing a teaming dance at that point. So we probably have, at any given time, 30 bids that we're -- we have that are going to occur in the next 12 to 18 months. And we look at each one of those projects to determine what the optimal teaming relationship would be. In some cases, JVs work well in different types of profit sharing. You share best interest and success and those types of things, and you can combine your qualifications based on the procurement regs. So we have 2 or 3 of those along the way as well within those bids hot list.

I was thinking more of like a long-term, more or less permanent relationship, like you had with this company that brought some new technology to you and you put that into work in one of your plants. I was thinking more of a longer-term type of relationship.

Yes, and we do have several that are very similar -- I think you're speaking of the Veolia relationship for the GeoMelt process. Yes, we are looking at a couple of more similar types of deployments like that, and we can't really get into at this point. But we are -- that works so well and sort of mutually beneficial to both companies as well as to our clients, particularly DOE, that we are looking at doing that a couple more times to address specific waste management challenges. But we should be able to announce something, hopefully, by the end of this year, along the way, along that line.

[Operator Instructions] We will move next to [ Robert Manning ].

My question also was about the tank project at Hanford, and you answered a lot of it. I'm wondering if there's anything going on in the way of developing the capability to handle that waste. Or is everything kind of in abeyance, waiting for this next contract award, the prime contract? I recall a year ago, I think there was $9 million was in the budget, which I understood was to sort of further prove the concept. And I don't know if there's anything you can tell us about that or not, but if there is, I'd love to hear it.

Sure, Robert. Yes, what you're referring to is the Test Bed Initiative program, the TBI program, we talked about a lot, yes. And DOE stated publicly that they intend to move forward with the $10 million that Congress appropriated for the next phase of the TBI project. And they intend to do that this calendar year. And DOE, right now, as a status, is evaluating how best to proceed with the regulatory submittals that go along with that, along with the approvals for the next phase. And that next phase would be what we refer to as the 2,000-gallon phase where they were -- pulled 2,000 gallons out of the tank. We would process it at our Northwest facility and ship it to WCS in Texas for disposal. So DOE is moving forward with that the last time we heard from them in that regard. We're kind of at the back end of that. There's a lot of people that are involved in that as well. So we don't always have the most current information. But right now, that's what DOE has stated publicly, that they do intend to use that $10 million that Congress appropriated for this calendar year.

So if I understand your answer, the $10 million does not include drawing out that 2,000 gallons? The $10 million is basically preparing to do that and then another decision has to be made to go ahead and actually process the 2,000-gallon batch. Do I understand that correctly?

Robert, it could be used for that depending on timing. Yes, it would cover removal of that waste. The equipment's been engineered, designed and fabricated and -- to remove the waste, and it could be used to draw that 2,000 gallons out of the tank for processing.

And again, we just don't really know. We're just holding our breath, and at some point, they'll say, "Hey, go ahead," but we don't have much idea of when that will be.

Yes. We're just not that well informed as to where it is in the process overall, Robert, at this point in regards to the regulatory status, particularly. We know where things are in the technology and equipment fabrication and that type of thing. But where we are as a company, ready for it, and it's really DOE's decision as to programmatically how it all fits together with DOE's objectives.

We'll move next to investor [ Chuck Dickinson ].

With regard to the TBI, just since I was just asked to follow up on that. There were a couple of articles in the recent past, it seemed to indicate that the regulators from the state of Washington itself may be more amenable to the idea of reclassification of that waste. Is that -- was my reading of that correct? Or am I off base on that?

Chuck, there's been a lot of discussion about what you're referring to as the reclassification based on DOE Order 435. I'm afraid I just cannot answer how that's lining up with the TBI initiative at this point. And because so much has happened over the last several months that we have -- we're not really aware of where it all lines up and how it fits together just [Audio Gap]

Okay. On the accounts receivable, I assume, looking at the allowance for doubtful accounts, it went up from a year ago, but of course, that's because the accounts receivable jumped a lot, which is a good thing. But given that most of your businesses with the government, I assume those receivables are pretty darn money good. And you indicated on the previous conference call, I think, that you have the ability usually to turn those fairly quickly. So you answered the -- generally, you answered the question that, yes, the cash levels are going to come up as those get turned, and that's been happening. But can we feel pretty close to 100% secure on those receivables, accepting the allowance for doubtful accounts?

Yes. I think the allowance is twofold. There's always the exception, but we do have a very low bad debt rate, generally speaking. And we do have sort of a formula-based bad debt allowance. So the higher your AR is, it does kind of move up and that corrects itself when collections are made. So yes.

Okay. What is your remaining -- a couple of more just bullet points, and I'll drop out. What is your remaining total availability under the revolver and other credit lines?

At the end of the year, it was about $8.7 million.

Is there any intent to start tapping those? Or is that a wait-and-see sort of thing depending on projects and other financing that you might look at or how the COVID-19 develops? In other words, is that money reasonably assured of being there should a situation developed where, let's say, this COVID-19 extends longer than anticipated?

Right. Well, that is all supported by our receivables. So it would either be availability or cash. So generally speaking, yes, that's not anything that -- that's a good number to be starting with going into this COVID issue.

And you're not anticipating taking any of it down for any reason at this point? I know that's kind of a double-edged sword. You take it down, you start incurring interest expense. If you -- but if -- you don't want to be in a situation where if something happens, you don't have maximum financial flexibility by having plenty of cash on the balance sheet. So there's no anticipation to tap that at this point?

Yes, it's generally for our working capital needs right now. Correct.

Okay. And the last question I have has to do again with this COVID-19. It sounds like you're in a little bit more secure position as regards to having some waste treatment backlog, as you said, to carry you through there for 2 to 3 months. Have you in place already or are you going to consider sort of a plan B where if this does extend beyond 2, 3 months, or if it goes away and then makes a reappearance in the fall or winter, as flu viruses tend to do, do you have a plan B in place to deal with that, with such things, not only as regards maybe downsizing staffing levels from projects to project if it gets delayed, but also trying to flange up your revenue stream so that you don't hit a situation where everything gets seized up at once, both on the treatment and the services side so that you have at least some stream of revenues even in a worst-case scenario?

Yes, that's a really good question, Chuck. And believe me, our Board is very sensitive to the answer to that question overall. But I will say this is we're meeting daily as a management team to revise and add detail to our plan. Our plan is for basically 3 phases, 2, 4 and 6-month impact, and what we would do and how we would react to protect ourselves and minimize the impact, not only financially, but also from a safety perspective when we have nuclear facilities. It's important to consider as well what the costs are, staying compliant and those types of things. So yes, to answer your question, we do -- we are planning that way and making sure that we have methodical approach to each one of those phases to minimize the impact and make sure that we are still viable and operating as much as we can, like you said, to keep revenue going as much as possible and reduce the impact to the employees as well. So it changes. It's amazing how difficult this has been. It just changes every morning and every afternoon. It seems like every 6 hours, there's new information, there's new considerations. Our clients being the federal government, and in many cases, are making decisions, as you know, associated with their plans. DOE is shutting some plants down. Others are not. DoD has not shut down any of the sites we're working on. So it does -- it just changes so much, it's difficult to do planning. But that's why it requires an enormous amount of communication and a lot of long hours to stay on top of it. But I do believe we have a good plan in place that we can protect the company through the worst-case scenario.

We'll move next to investor [ Howard Landis ].

Operator, it's been over an hour or so. I'll hold my questions for the next call. But good quarter. Thank you very much.

Thanks, Howard.

And with no other questions holding, I'll turn the conference back to management for any additional or closing comments.

Great. Thank you, Jess. I would like to thank everyone for participating in our fourth quarter and year-end conference call. As I mentioned earlier, our strong performance in the fourth quarter and 2019 reflects the success of our strategic and business development initiatives over the past 2 years. And based on our current sales pipeline and accelerating bidding activity and backlog, we're highly encouraged by the outlook for the business in 2020 as a whole. With that, I thank you for joining.

Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time, and have a great day.