Perma-Fix Fiscal Third Quarter 2026 Earnings Conference Call - PERMA FIX ENVIRONMENTAL SERVICES INC

Explicit Guidance:

• FY2026 Q4 & 2027 Revenue/Margins: No specific numeric guidance provided for revenue, earnings, or margins. Management expects revenue from the Hanford Ventification Plant (DFLAW) effluent, previously delayed, to be recognized over the "next few months" (post-September 2026), with the expectation that volumes will grow as DFLAW ramps production.
• DFLAW Volume Projections: Management projects DFLAW will reach full capacity (2 million gallons/year) by 2028, with intermediate targets of 1 million gallons in 2027. EMF waste receipts are projected to increase from current levels (approx. 16,000 gallons/month) to potentially 40,000 gallons/month as the plant approaches full capacity.
• PFAS Capacity Expansion: The new "Gen 2" PFAS system is expected to be fully operational in the first half of 2027, at which point it is projected to triple PFAS processing capacity.
• Hanford Capacity Expansion: Upgrades to the Permafix Northwest grouting system (new mixers) are expected to be installed and operable by Q1 2027. Further facility upgrades to support DOE's 200 West Area objectives are expected to be complete in 2027 or late 2027.

Business-Segment Outlook:

• Treatment Segment: New pricing structures implemented in October 2026 are expected to favorably impact revenue and margins as they are reflected in new backlog. Treatment backlog grew ~25% in Q3 2026 to $19.6 million (up ~65% from end of 2025).
• Hanford (Permafix Northwest):
  • DFLAW Streams: Expected to increase in line with DFLAW production throughout 2027.
  • East Area: DOE announced permit modification requests (Class 2 & 3) for AP-106 tank waste; while no formal delay is acknowledged by DOE, management anticipates a delay of several months before initial receipts begin (post-Q4 2026), pending Ecology's review.
  • 200 West Area: DOE's 2025 Record of Decision covers ~32 million gallons of waste to be retrieved and grouted by 2040. Permafix is positioning to compete for these task orders and is expanding permit capacity to ~1.2 million gallons/year initially.
  • Master IDIQ: H2C awarded one of three Master IDIQ subcontracts (value ceiling $4.4B, volume 50M gallons) for pre-treated liquid mixed-waste low-level waste; task orders may begin January 1, 2027, through December 31, 2041.
• Services Segment: Driven by the $24M LLNL master task agreement and a steady flow of smaller awards. Backlog is currently extending through Q2 2027. Los Alamos project mobilization delayed to late September but operations have begun.
• PFAS Segment: Regulatory mandates in states like Florida are phasing out PFAS-containing firefighting foam over the next three years, expected to accelerate demand for destruction services in the coming quarters.

Market and Competitive Outlook:

• Pricing: Price increases on commercial and government waste streams are being fully deployed in October 2026 to offset rising labor, technology, and equipment replacement costs.
• Supply Chain/Operations: Thermal treatment systems in Florida and Kingston, Tennessee, completed maintenance upgrades in September 2026, now supporting large backlog receipts.
• Capacity Constraints: Current capacity at Permafix Northwest is being expanded to meet DOE's goal of grouting >9 million gallons/year by 2030.
• Competitive Positioning: Permafix Northwest is the only subcontract holder with a permitted facility adjacent to Hanford, allowing grouting and rail shipment of stabilized waste, whereas competitors must ship liquid via highway.

Macro / Industry Outlook:

• Government Budgeting: Anticipates a Continuing Resolution (CR) may persist through the current and potentially next fiscal year due to lack of appropriations, but views this as having limited negative impact on Hanford due to the "Glass Plus Grout" strategy being a high priority for the administration and the existence of unspent budget carryover from previous years.
• Regulatory Environment: Expect increased congressional and EPA emphasis on PFAS regulations, with a goal to have rules promulgated within two years, which would drive significant demand for PFAS destruction.
• Political Landscape: New congressional representation (e.g., Rep. Amanda McKinney) is perceived as supportive of new technologies and accelerating Hanford foreclosure, differing from prior congressional stances.
• Energy Sector Synergies: The Department of Energy (DOE) is seeing private sector commitments (~$650B) for Small Modular Reactors (SMRs) and data centers at sites like Hanford, driving a need for accelerated cleanup to free up capacity for these new tenants.

Strategic Initiatives:

• DFLAW Transition: Transitioning from construction contractor (Bechtel) to operations contractor (H2C) expected to complete by April 2027, anticipated to accelerate dry waste shipments and administrative coordination.
• Advanced Modular Pretreatment System (AMPS): DOE broke ground on AMPS (Oct 2025) with an online target of early 2028; this will pretreat 3.6M gallons/year of tank waste, creating demand for the Permafix IDIQ subcontract for disposal.
• Capital Expenditures (CapEx): Continued investment in Permafix Northwest (mixers, equipment) to increase grouting reliability and capacity to >10 million gallons/year. CapEx focused on treatment infrastructure and Gen 2 PFAS reactor completion.
• Financing: No immediate plans for another equity offering; management projects free cash flow generation in the coming quarters to fund operations, reducing reliance on external capital.

Risks and Headwinds to Outlook:

• Permitting Delays: Ecology's "incompleteness letters" regarding East Area permits could delay initial tank waste receipts by several months beyond the planned Q4 2026 start.
• Volume Uncertainty: Exact future volumes for dry waste from DFLAW remain unknown as the contractor transition and waste management program implementation continue.
• Regulatory/Contractor Dependencies: Reliance on DOE and H2C for waste characterization, scheduling, and shipping logistics; delays in their programs directly impact revenue recognition.
• Financial Visibility: Accounting "going concern" disclosures remain due to rigid standards applied to past losses and prior lack of visibility, though management asserts confidence in future operational funding.
• Waste Stream Mix: Profitability remains sensitive to the mix of waste processed and specific protocol approvals (e.g., Hanford effluent protocols required late August approvals).

Management Tone on the Future:

• Confidence Level: High confidence in long-term growth driven by Hanford and PFAS markets; describes Q3 as a "clear step forward."
• Trend: Positive shift from operational headwinds (downtime, delays) to inflection points (pricing effective, backlog up, systems fully operational).
• Hedges: Cautious on specific volume timelines for East Area and dry waste until permit reviews and contractor transitions conclude; acknowledges accounting standards force conservative "going concern" language despite optimism.
• Guidance Update: No formal numeric guidance issued; outlook is qualitative based on backlog growth ($19.6M), pricing deployment, and planned capacity expansions in 2027.

Miscellaneous:

• DFLAW Production Targets: DOE projects 300,000–400,000 gallons for 2026 (approx. 20% capacity), 1 million gallons in 2027, and 2 million gallons in 2028 (full capacity).
• AMPS Impact: DOE projects the "Glass Plus Grout" strategy will complete the 200 East Low Activity Waste mission 12 years sooner (by 2039 vs. 2051), saving taxpayers ~$12 billion.
• Financials: Q3 2026 revenue $17.9M; Treatment backlog $19.6M; Services segment operating income ~$200k (vs. $460k loss YoY); Cash on hand ~$14.7M.